Exhibit 10.63
LOAN AGREEMENT
Dated as of July 2, 2007
Between
ACADIA MERRILLVILLE REALTY, L.P.,
as Borrower
and
BEAR STEARNS COMMERCIAL MORTGAGE, INC.,
AS LENDER

 

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TABLE OF CONTENTS

                              Page I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION  
  1  
 
  Section 1.1   Definitions     1  
 
  Section 1.2   Principles of Construction     22   II. GENERAL TERMS     22  
 
  Section 2.1   Loan Commitment; Disbursement to Borrower     22  
 
  Section 2.2   Interest Rate     22  
 
  Section 2.3   Loan Payment     23  
 
  Section 2.4   Prepayments     24  
 
  Section 2.5   Defeasance     25  
 
  Section 2.6   Release of Property     27  
 
  Section 2.7   Lockbox Account/Cash Management     28   III. CONDITIONS
PRECEDENT     30  
 
  Section 3.1   Conditions Precedent to Closing     30   IV. REPRESENTATIONS AND
WARRANTIES     33  
 
  Section 4.1   Borrower Representations     33  
 
  Section 4.2   Survival of Representations     41   V. BORROWER COVENANTS    
42  
 
  Section 5.1   Affirmative Covenants     42  
 
  Section 5.2   Negative Covenants     51   VI. INSURANCE; CASUALTY;
CONDEMNATION; REQUIRED REPAIRS     56  
 
  Section 6.1   Insurance     56  
 
  Section 6.2   Casualty     60  
 
  Section 6.3   Condemnation     60  
 
  Section 6.4   Restoration     61   VII. RESERVE FUNDS     65  
 
  Section 7.1   Required Repairs     65  
 
  Section 7.2   Tax and Insurance Escrow Fund     66  
 
  Section 7.3   Replacements and Replacement Reserve     67  
 
  Section 7.4   Rollover Reserve     71  
 
  Section 7.5   Reserve Funds, Generally     72   VIII. DEFAULTS     72  
 
  Section 8.1   Event of Default     72  

2

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TABLE OF CONTENTS
(continued)

                              Page
 
  Section 8.2   Remedies     75  
 
  Section 8.3   Remedies Cumulative; Waivers     76   IX. SPECIAL PROVISIONS    
76  
 
  Section 9.1   Securitization     76  
 
  Section 9.2   Securitization Indemnification     78  
 
  Section 9.3   Exculpation     81  
 
  Section 9.4   Matters Concerning Manager     83  
 
  Section 9.5   Servicer     83   X. MISCELLANEOUS     83  
 
  Section 10.1   Survival     83  
 
  Section 10.2   Lender’s Discretion     83  
 
  Section 10.3   Governing Law     83  
 
  Section 10.4   Modification, Waiver in Writing     85  
 
  Section 10.5   Delay Not a Waiver     85  
 
  Section 10.6   Notices     85  
 
  Section 10.7   Trial by Jury     86  
 
  Section 10.8   Headings     86  
 
  Section 10.9   Severability     87  
 
  Section 10.10   Preferences     87  
 
  Section 10.11   Waiver of Notice     87  
 
  Section 10.12   Remedies of Borrower     87  
 
  Section 10.13   Expenses; Indemnity     87  
 
  Section 10.14   Schedules Incorporated     89  
 
  Section 10.15   Offsets, Counterclaims and Defenses     89  
 
  Section 10.16   No Joint Venture or Partnership; No Third Party Beneficiaries
    89  
 
  Section 10.17   Publicity     89  
 
  Section 10.18   Waiver of Marshalling of Assets     89  
 
  Section 10.19   Waiver of Counterclaim     90  
 
  Section 10.20   Conflict; Construction of Documents; Reliance     90  
 
  Section 10.21   Brokers and Financial Advisors     90  
 
  Section 10.22   Prior Agreements     90  
 
  Section 10.23   Joint and Several Liability     90  

 

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TABLE OF CONTENTS
(CONTINUED)

                              Page
 
  Section 10.24   Certain Additional Rights of Lender (VCOC)     90  
 
  Section 10.25   MERS     91  

SCHEDULES

         
Schedule I
  —   Rent Roll  
Schedule II
  —   Required Repairs — Deadlines for Completion  
Schedule III
  —   Organizational Chart of Borrower

 

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LOAN AGREEMENT
          THIS LOAN AGREEMENT, dated as of July 2, 2007 (as amended, restated,
replaced, supplemented or otherwise modified from time to time, this
“Agreement”), between BEAR STEARNS COMMERCIAL MORTGAGE, INC., a New York
corporation, having an address at 383 Madison Avenue, New York, New York 10179
(“Lender”) and ACADIA MERRILLVILLE REALTY, L.P., an Indiana limited partnership,
having its principal place of business c/o Acadia Realty Trust, 1311 Mamaroneck
Avenue — Suite 260, White Plains, New York 10605 (“Borrower”).
W I T N E S S E T H:
          WHEREAS, Borrower desires to obtain the Loan (as hereinafter defined)
from Lender; and
          WHEREAS, Lender is willing to make the Loan to Borrower, subject to
and in accordance with the terms of this Agreement and the other Loan Documents
(as hereinafter defined).
          NOW THEREFORE, in consideration of the making of the Loan by Lender
and the covenants, agreements, representations and warranties set forth in this
Agreement, the parties hereto hereby covenant, agree, represent and warrant as
follows:
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION.
          Section 1.1 Definitions. For all purposes of this Agreement, except as
otherwise expressly required or unless the context clearly indicates a contrary
intent:
          “Additional Insolvency Opinion” shall have the meaning set forth in
Section 4.1.30(c) hereof.
          “Affiliate” shall mean, as to any Person, any other Person that,
directly or indirectly, is in Control of, is Controlled by or is under common
Control with such Person or is a director or officer of such Person or of an
Affiliate of such Person.
          “Affiliated Manager” shall mean any Manager in which Borrower,
Principal, or Guarantor has, directly or indirectly, any legal, beneficial or
economic interest.
          “Agent” shall mean The Bank of New York Trust Company, N.A., a
national banking association, or any successor Eligible Institution acting as
Agent under the Cash Management Agreement.
          “Agreement” shall mean this Loan Agreement, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
          “ALTA” shall mean American Land Title Association, or any successor
thereto.
          “Anchor Tenant” shall mean J.C. Penney and T.J. Maxx.
          “Annual Budget” shall mean the operating budget, including all planned
Capital Expenditures, for the Property prepared by Borrower in accordance with
Section 5.1.11.(e) hereof for the applicable Fiscal Year or other period.

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          “Approved Annual Budget” shall have the meaning set forth in
Section 5.1.11(e) hereof.
          “Assignment of Leases” shall mean that certain first priority
Assignment of Leases and Rents, dated as of the date hereof, from Borrower, as
assignor, to MERS, as nominee of Lender as assignee, assigning to Lender all of
Borrower’s interest in and to the Leases and Rents of the Property as security
for the Loan, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.
          “Assignment of Management Agreement” shall mean that certain
Assignment of Management Agreement and Subordination of Management Fees, dated
as of the date hereof, among Lender, Borrower and Manager, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time.
          “Award” shall mean any compensation paid by any Governmental Authority
in connection with a Condemnation in respect of all or any part of the Property.
          “Bankruptcy Action” shall mean with respect to any Person (a) such
Person filing a voluntary petition under the Bankruptcy Code or any other
Federal or state bankruptcy or insolvency law; (b) the filing of an involuntary
petition against such Person under the Bankruptcy Code or any other Federal or
state bankruptcy or insolvency law, in which such Person colludes with, or
otherwise assists such Person, or causes to be solicited petitioning creditors
for any involuntary petition against such Person; (c) such Person filing an
answer consenting to or otherwise acquiescing in or joining in any involuntary
petition filed against it, by any other Person under the Bankruptcy Code or any
other Federal or state bankruptcy or insolvency law; (d) such Person consenting
to or acquiescing in or joining in an application for the appointment of a
custodian, receiver, trustee, or examiner for such Person or any portion of the
Property; (e) such Person making an assignment for the benefit of creditors, or
admitting, in writing or in any legal proceeding, its insolvency or inability to
pay its debts as they become due.
          “Bankruptcy Code” shall mean Title 11 of the United States Code, 11
U.S.C. §101, et seq., as the same may be amended from time to time, and any
successor statute or statutes and all rules and regulations from time to time
promulgated thereunder, and any comparable foreign laws relating to bankruptcy,
insolvency or creditors’ rights or any other Federal or state bankruptcy or
insolvency law.
          “Basic Carrying Costs” shall mean, the sum of the following costs
associated with the Property for the relevant Fiscal Year or payment period:
(a) Taxes, (b) Other Charges and (c) Insurance Premiums.
          “Borrower” shall have the meaning set forth in the introductory
paragraph hereto, together with its successors and permitted assigns.
          “BSCMI” shall mean Bear Stearns Commercial Mortgage, Inc., a New York
corporation, and its successors in interest.
          “Business Day” shall mean any day other than a Saturday, Sunday or any
other day on which national banks in New York, New York, or the place of
business of any Servicer are not open for business.

 

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          “Capital Expenditures” shall mean, for any period, the amount expended
for items capitalized under GAAP (including expenditures for building
improvements or major repairs, leasing commissions and tenant improvements).
          “Cash Management Account” shall have the meaning set forth in
Section 2.7.2 hereof.
          “Cash Management Agreement” shall mean that certain Cash Management
Agreement, dated as of the date hereof, by and among Borrower, Agent, Manager
and Lender, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.
          “Casualty” shall have the meaning set forth in Section 6.2 hereof.
          “Casualty Consultant” shall have the meaning set forth in
Section 6.4(b)(iii) hereof.
          “Casualty Retainage” shall have the meaning set forth in
Section 6.4(b)(iv) hereof.
          “Closing Date” shall mean the date of the funding of the Loan.
          “Code” shall mean the Internal Revenue Code of 1986, as amended, as it
may be further amended from time to time, and any successor statutes thereto,
and applicable U.S. Department of Treasury regulations issued pursuant thereto
in temporary or final form.
          “Condemnation” shall mean a temporary or permanent taking by any
Governmental Authority as the result or in lieu or in anticipation of the
exercise of the right of condemnation or eminent domain, of all or any part of
the Property, or any interest therein or right accruing thereto, including any
right of access thereto or any change of grade affecting the Property or any
part thereof.
          “Condemnation Proceeds” shall have the meaning set forth in
Section 6.4(b).
          “Control” shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of management, policies or activities of
a Person, whether through ownership of voting securities, by contract or
otherwise. “Controlled” and “Controlling” shall have correlative meanings.
          “Covered Disclosure Information” shall have the meaning set forth in
Section 9.2(b) hereof.
          “Debt” shall mean the outstanding principal amount set forth in, and
evidenced by, this Agreement and the Note together with all interest accrued and
unpaid thereon and all other sums (including the Defeasance Payment Amount, any
Yield Maintenance Premium and any Yield Maintenance Default Premium) due to
Lender in respect of the Loan under the Note, this Agreement, the Mortgage or
any other Loan Document.
          “Debt Service” shall mean, with respect to any particular period of
time, scheduled interest payments due under this Agreement and the Note.
          “Debt Service Coverage Ratio” shall mean a ratio for the applicable
period in which:

 

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  (a)   the numerator is the Net Operating Income (excluding interest on credit
accounts and using annualized operating expenses for any recurring expenses not
paid monthly (e.g., Taxes and Insurance Premiums)) for such period as set forth
in the statements required hereunder, without deduction for (i) actual
management fees incurred in connection with the operation of the Property, or
(ii) amounts paid to the Reserve Funds, less (A) management fees equal to the
greater of (1) assumed management fees of four percent (4 %) of Gross Income
from Operations or (2) the actual management fees incurred, (B) Replacement
Reserve Fund contributions equal to $0.18 per square foot per annum of gross
leasable area at the Property, and (C) tenant improvement and leasing commission
expenditures equal to $0.49 per square foot of gross leasable area at the
Property; and     (b)   the denominator is the aggregate amount of principal and
interest due and payable on the Note for such period utilizing an assumed thirty
(30) year amortization.

          “Debt Service Coverage Ratio Determination Date” shall mean the date
that Lender determines the Debt Service Coverage Ratio in accordance with this
Agreement.
          “Default” shall mean the occurrence of any event hereunder or under
any other Loan Document which, but for the giving of notice or passage of time,
or both, would be an Event of Default.
          “Default Rate” shall mean, with respect to the Loan, a rate per annum
equal to the lesser of (a) the maximum rate permitted by applicable law or
(b) five percent (5%) above the Interest Rate.
          “Defeasance Date” shall have the meaning set forth in
Section 2.5.1(a)(i) hereof.
          “Defeasance Deposit” shall mean an amount equal to the remaining
principal amount of the Note, the Defeasance Payment Amount, any costs and
expenses incurred or to be incurred in the purchase of U.S. Obligations
necessary to meet the Scheduled Defeasance Payments and any revenue, documentary
stamp or intangible taxes or any other tax or charge due in connection with the
transfer of the Note or otherwise required to accomplish the agreements of
Sections 2.4 and 2.5 hereof (including, without limitation, any fees and
expenses of accountants, attorneys and the Rating Agencies incurred in
connection therewith).
          “Defeasance Event” shall have the meaning set forth in
Section 2.5.1(a) hereof.
          “Defeasance Expiration Date” shall mean the date that is two (2) years
from the “startup day” within the meaning of Section 860G(a)(9) of the Code for
the REMIC Trust.
          “Defeasance Payment Amount” shall mean the amount (if any) which, when
added to the remaining principal amount of the Note, will be sufficient to
purchase U.S. Obligations providing the required Scheduled Defeasance Payments.
          “Disclosure Document” shall mean a prospectus, prospectus supplement,
private placement memorandum, or similar offering memorandum or offering
circular, or such other

 

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information reasonably requested by Lender, in each case in preliminary or final
form, used to offer Securities in connection with a Securitization.
          “Effective Gross Income” shall have the meaning set forth in the
definition of the term “Lockbox Trigger Event”.
          “Eligible Account” shall mean a separate and identifiable account from
all other funds held by the holding institution that is either (a) an account or
accounts maintained with a federal or state-chartered depository institution or
trust company which complies with the definition of Eligible Institution or
(b) a segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution or trust
company, is subject to regulations substantially similar to 12 C.F.R. §9.10(b),
having in either case a combined capital and surplus of at least Fifty Million
and 00/100 Dollars ($50,000,000.00) and subject to supervision or examination by
federal and state authority. An Eligible Account will not be evidenced by a
certificate of deposit, passbook or other instrument.
          “Eligible Institution” shall mean a depository institution or trust
company, the short term unsecured debt obligations or commercial paper of which
are rated at least “A-1+” by S&P, “P-1” by Moody’s and “F-1+” by Fitch in the
case of accounts in which funds are held for thirty (30) days or less (or, in
the case of accounts in which funds are held for more than thirty (30) days, the
long-term unsecured debt obligations of which are rated at least “AA” by Fitch
and S&P and “Aa2” by Moody’s).
          “Embargoed Person” shall have the meaning set forth in Section 5.1.23
hereof.
          “Environmental Indemnity” shall mean that certain Environmental
Indemnification Agreement, dated as of the date hereof, executed by Borrower,
Principal and Guarantor in connection with the Loan for the benefit of Lender,
as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time.
          “ERISA” shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and the
rulings issued thereunder.
          “Event of Default” shall have the meaning set forth in Section 8.1(a)
hereof.
          “Exchange Act” shall have the meaning set forth in Section 9.2(a)
hereof.
          “Exchange Act Filing” shall mean a filing pursuant to the Exchange Act
in connection with or relating to the Securitization.
          “Extraordinary Expense” shall have the meaning set forth in
Section 5.1.11(e) hereof.
          “Fiscal Year” shall mean each twelve (12) month period commencing on
January 1 and ending on December 31 during each year of the term of the Loan.
          “Fitch” shall mean Fitch, Inc.
          “GAAP” shall mean generally accepted accounting principles in the
United States of America as of the date of the applicable financial report.
          “Go Dark Cure” shall mean the applicable Anchor Tenant is in
occupancy, open for business for one hundred twenty (120) consecutive days
(subject to isolated closings due to

 

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force majeure) and paying full contractual rent with no free rent, credit or
right of offset, as evidenced by an estoppel delivered by the applicable Anchor
Tenant in a form reasonably acceptable to Lender.
          “Go Dark Trigger” shall mean if any Anchor Tenant ceases to
continuously occupy and operate its business at its respective premises at the
Property in a manner similar to the manner in which it operates its respective
business as of the date hereof; provided that, a Go Dark Trigger shall not occur
if the Anchor Tenant goes dark in connection with rebuilding following a
Casualty or Condemnation, for store remodeling or inventory or for tenant
improvements or isolated closings due to force majeure.
          “Go Dark Trigger Event Period” shall mean the period of time
commencing upon the occurrence of a Go Dark Trigger and expiring upon the
occurrence of a Go Dark Cure.
          “Governmental Authority” shall mean any court, board, agency,
commission, office or other authority of any nature whatsoever for any
governmental unit (foreign, federal, state, county, district, municipal, city or
otherwise) whether now or hereafter in existence.
          “Gross Income from Operations” shall mean, for any period, all
sustainable income, computed in accordance with GAAP, derived from the ownership
and operation of the Property from whatever source during such period,
including, but not limited to, Rents from tenants in occupancy, open for
business and paying full contractual rent without right of offset or credit,
utility charges, escalations, forfeited security deposits, interest on credit
accounts, service fees or charges, license fees, parking fees, rent concessions
or credits, income from vending machines business interruption or other loss of
income or rental insurance proceeds or other required pass-throughs and interest
on Reserve Accounts, if any, but excluding Rents from month-to-month tenants,
straight line lease adjustments or tenants that are included in any Bankruptcy
Action (unless such Lease has been affirmed by a non-appealable order of the
bankruptcy court) , sales, use and occupancy or other taxes on receipts required
to be accounted for by Borrower to any Governmental Authority, refunds and
uncollectible accounts, sales of furniture, fixtures and equipment, Insurance
Proceeds (other than business interruption or other loss of income or rental
insurance), Awards, unforfeited security deposits, utility and other similar
deposits and any disbursements to Borrower from the Reserve Funds, if any. Gross
income shall not be diminished as a result of the Mortgage or the creation of
any intervening estate or interest in the Property or any part thereof.
Notwithstanding the foregoing, Rent from Tenants having a long term credit
rating of “BBB” or its equivalent from each of the Rating Agencies that Go Dark
but are paying full contractual rent shall be included in Gross Income from
Operations.
          “Guarantor” shall mean Acadia Realty Limited Partnership, a Delaware
limited partnership.
          “Guaranty” shall mean that certain Guaranty Agreement, dated as of the
date hereof, executed and delivered by Guarantor in connection with the Loan to
and for the benefit of Lender, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
          “Improvements” shall have the meaning set forth in the granting clause
of the Mortgage.

 

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          “Indebtedness” of a Person, at a particular date, means the sum
(without duplication) at such date of (a) all indebtedness or liability of such
Person (including, without limitation, amounts for borrowed money and
indebtedness in the form of mezzanine debt or preferred equity); (b) obligations
evidenced by bonds, debentures, notes, or other similar instruments;
(c) obligations for the deferred purchase price of property or services
(including trade obligations); (d) obligations under letters of credit;
(e) obligations under acceptance facilities; (f) all guaranties, endorsements
(other than for collection or deposit in the ordinary course of business) and
other contingent obligations to purchase, to provide funds for payment, to
supply funds, to invest in any Person or entity, or otherwise to assure a
creditor against loss; and (g) obligations secured by any Liens, whether or not
the obligations have been assumed (other than the Permitted Encumbrances).
          “Indemnified Person” shall have the meaning set forth in
Section 9.2(b) hereof.
          “Indemnifying Person” shall mean each of Borrower, Principal and
Guarantor.
          “Independent Director” shall mean a natural person serving as director
of a corporation or manager of a limited liability company who is not at the
time of initial appointment, or at any time while serving in such capacity, and
has not been at any time during the preceding five (5) years: (a) a stockholder,
director (with the exception of serving as the Independent Director of Borrower
or Principal), trustee, officer, employee, partner, member, attorney or counsel
of the Borrower or Principal or any Affiliate of either of them; (b) a creditor,
customer, supplier or other Person who derives any of its purchases or revenues
from its activities with the Borrower or Principal or any Affiliate of either of
them; (c) a Person or other entity Controlling or under common Control with any
Person excluded from serving as Independent Director under subparagraph (a) or
(b); or (d) a member of the immediate family of any Person excluded from serving
as Independent Director under subparagraph (a) or (b). A natural person who
satisfies the foregoing definition other than subparagraph (b) shall not be
disqualified from serving as an Independent Director of the Principal if such
individual is an independent director provided by a nationally-recognized
company that provides professional independent directors and that also provides
other corporate services in the ordinary course of its business. A natural
person who otherwise satisfies the foregoing definition except for being the
independent director of a “special purpose entity” affiliated with Borrower or
Principal shall not be disqualified from serving as an Independent Director of
Borrower or Principal if such “special purpose entity” does not own a direct or
indirect equity interest in Borrower or in any co-borrower and if such
individual is provided by a nationally-recognized company that provides
professional independent directors. For purposes of this paragraph, a “special
purpose entity” is an entity, whose organizational documents contain
restrictions on its activities substantially similar to those set forth in the
definition of Special Purpose Entity in this Agreement.
          “Initial Rollover Reserve Deposit” shall have the meaning set forth in
Section 7.4.1 hereof.
          “Insolvency Opinion” shall mean that certain non-consolidation opinion
letter dated the date hereof delivered by Levenfeld Pearlstein, LLC in
connection with the Loan.
          “Insurance Premiums” shall have the meaning set forth in
Section 6.1(b) hereof.
          “Insurance Proceeds” shall have the meaning set forth in
Section 6.4(b) hereof.

 

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          “Interest Period” shall mean, in connection with the calculation of
interest accrued with respect to any specified Payment Date including the
Maturity Date, the period commencing on the first day of the prior calendar
month and ending on the last day of the prior calendar month.
          “Interest Rate” shall mean a rate of five and eight hundred
seventy-seven thousandths of one percent (5.877%) per annum.
          “J.C. Penney” shall mean the tenant under that certain Lease dated
January 27, 1997 between RD Merrillville Associates, L.P.,
predecessor-in-interest to Acadia Merrillville Realty, L.P., as Landlord, and
J.C. Penney Corporation, Inc., formerly known as J.C. Penney Company, Inc., as
Tenant.
          “Lease” shall mean any lease, sublease or subsublease, letting,
license, concession or other agreement (whether written or oral and whether now
or hereafter in effect) pursuant to which any Person is granted a possessory
interest in, or right to use or occupy all or any portion of any space in the
Property, by or on behalf of Borrower and (a) every modification, amendment or
other agreement relating to such lease, sublease, subsublease, or other
agreement entered into in connection with such lease, sublease, subsublease, or
other agreement and (b) every guarantee of the performance and observance of the
covenants, conditions and agreements to be performed and observed by the other
party thereto.
          “Legal Requirements” shall mean, all federal, state, county, municipal
and other governmental statutes, laws, rules, orders, regulations, ordinances,
judgments, decrees and injunctions of Governmental Authorities affecting the
Property or any part thereof, or the construction, use, alteration or operation
thereof, or any part thereof, whether now or hereafter enacted and in force, and
all permits, licenses and authorizations and regulations relating thereto, and
all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Borrower, at any time in force
affecting Borrower, the Property or any part thereof, including, without
limitation, any which may (a) require repairs, modifications or alterations in
or to the Property or any part thereof, or (b) in any way limit the use and
enjoyment thereof.
          “Lender” shall have the meaning set forth in the introductory
paragraph hereto, together with its successors and assigns.
          “Liabilities” shall have the meaning set forth in Section 9.2(b)
hereof.
          “Licenses” shall have the meaning set forth in Section 4.1.22 hereof.
          “Lien” shall mean, any mortgage, deed of trust, lien, pledge,
hypothecation, assignment, security interest, or any other encumbrance, charge
or transfer of, on or affecting Borrower, the Property, any portion thereof or
any interest therein, including, without limitation, any conditional sale or
other title retention agreement, any financing lease having substantially the
same economic effect as any of the foregoing, the filing of any financing
statement, and mechanic’s, materialmen’s and other similar liens and
encumbrances.
          “Loan” shall mean the loan made by Lender to Borrower pursuant to this
Agreement.
          “Loan Documents” shall mean, collectively, this Agreement, the Note,
the Mortgage, the Assignment of Leases, the Environmental Indemnity, the
Assignment of

 

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Management Agreement, the Guaranty, the Cash Management Agreement, and all other
documents executed and/or delivered in connection with the Loan.
          “Lockbox Account” shall have the meaning set forth in Section 2.7.1
hereof.
          “Lockbox Agreement” shall mean that certain Clearing Account Agreement
dated the date hereof among Borrower, Lender and Lockbox Bank, as the same may
be amended, restated, replaced, supplemented or otherwise modified from time to
time, relating to funds deposited in the Lockbox Account.
          “Lockbox Bank” shall mean Bank of America, N.A., or any successor or
permitted assigns thereof.
          “Lockbox Trigger Event” shall mean, (a) an Event of Default shall have
occurred, (b) a Material Action related to Borrower and/or the Manager, (c) a Go
Dark Trigger Event Period exists, or (d) that the ratio of (i) Net Cash Flow of
the Property for the preceding twelve (12) months to (ii) the annual Debt
Service payable under the Loan falls below 1.05 to 1.0, as determined by Lender.
For the purposes hereof, “Net Cash Flow” shall mean sustainable, underwritten
rent and other revenues using a maximum occupancy equal to the lesser of
ninety-five percent (95%) or actual occupancy (“Effective Gross Income”) less
operating expenses including a management fee of not less than four percent
(4.0%) of Effective Gross Income, annualized real estate taxes and insurance
premiums, structural reserves of $35,362 per annum and leasing commissions and
tenant improvements of $111,000 per annum.
          “Management Agreement” shall mean, the management agreement entered
into by and between Borrower and Manager, pursuant to which Manager is to
provide management and other services with respect to the Property, or, if the
context requires, the Replacement Management Agreement.
          “Manager” shall mean Acadia Realty Limited Partnership, or, if the
context requires a Qualified Manager who is managing the Property in accordance
with the terms and provisions of this Agreement pursuant to a Replacement
Management Agreement.
          “Material Action” means, with respect to any Person, to file any
insolvency or reorganization case or proceeding, to institute proceedings to
have such Person be adjudicated bankrupt or insolvent, to institute proceedings
under any applicable insolvency law, to seek any relief under any law relating
to relief from debts or the protection of debtors, to consent to the filing or
institution of bankruptcy or insolvency proceedings against such Person, to file
a petition seeking, or consent to, reorganization or relief with respect to such
Person under any applicable federal or state law relating to bankruptcy or
insolvency, to seek or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian, or any similar official of or for
such Person or a substantial part of its property, to make any assignment for
the benefit of creditors of such Person, to admit in writing such Person’s
inability to pay its debts generally as they become due, or to take action in
furtherance of any of the foregoing.
          “Maturity Date” shall mean August 1, 2017, or such other date on which
the final payment of principal of the Note becomes due and payable as therein or
herein provided, whether at such stated maturity date, by declaration of
acceleration, or otherwise.
          “Maximum Legal Rate” shall mean the maximum nonusurious interest rate,
if any, that at any time or from time to time may be contracted for, taken,
reserved, charged or received on the indebtedness evidenced by the Note and as
provided for herein or the other Loan

 

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Documents, under the laws of such state or states whose laws are held by any
court of competent jurisdiction to govern the interest rate provisions of the
Loan.
          “MERS” shall have the meaning set forth in Section 10.25 hereof.
          “Monthly Debt Service Payment Amount” shall mean an amount equal to
the interest accrued on the Loan for the related Interest Period for payments
1-60, and a constant monthly payment of $155,312.22 thereafter.
          “Monthly Rollover Reserve Deposit” shall have the meaning set forth in
Section 7.4.1 hereof.
          “Moody’s” shall mean Moody’s Investors Service, Inc.
          “Mortgage” shall mean, that certain first priority Mortgage (or Deed
of Trust or Deed to Secure Debt) and Security Agreement, dated the date hereof,
executed and delivered by Borrower to MERS, as nominee of Lender, as security
for the Loan and encumbering the Property, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.
          “Net Cash Flow” shall mean, for any period, the amount obtained by
subtracting Operating Expenses and Capital Expenditures for such period from
Gross Income from Operations for such period.
          “Net Cash Flow Schedule” shall have the meaning set forth in
Section 5.1.11(b) hereof.
          “Net Operating Income” shall mean the amount obtained by subtracting
Operating Expenses from Gross Income from Operations.
          “Net Proceeds” shall have the meaning set forth in Section 6.4(b)
hereof.
          “Net Proceeds Deficiency” shall have the meaning set forth in
Section 6.4(b)(vi) hereof.
          “Note” shall mean that certain Promissory Note, dated the date hereof,
in the principal amount of Twenty-Six Million Two Hundred Fifty Thousand and
00/100 Dollars ($26,250,000.00), made by Borrower in favor of Lender, as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
          “O&M Agreement” shall mean that certain Operations and Maintenance
Agreement, dated as of the date hereof, between Borrower and Lender given in
connection with the Loan, as the same may be amended, restated, replaced,
supplemented, or otherwise modified from time to time.
          “Officer’s Certificate” shall mean a certificate delivered to Lender
by Borrower which is signed by an authorized officer of the general partner or
managing member of Borrower.
          “Operating Expenses” shall mean the total of all expenditures,
computed in accordance with GAAP, of whatever kind relating to the operation,
maintenance and management of the Property that are incurred on a regular
monthly or other periodic basis, including without limitation, utilities,
ordinary repairs and maintenance, insurance, license fees, property taxes and
assessments, advertising expenses, management fees, payroll and related

 

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taxes, computer processing charges, operational equipment or other lease
payments as approved by Lender, and other similar costs, but excluding
depreciation, Debt Service, Capital Expenditures and contributions to the
Reserve Funds.
          “Other Charges” shall mean all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including, without
limitation, vault charges and license fees for the use of vaults, chutes and
similar areas adjoining the Property, now or hereafter levied or assessed or
imposed against the Property or any part thereof.
          “Other Obligations” shall have the meaning as set forth in the
Mortgage.
          “Payment Date” shall mean the first (1st) day of each calendar month
during the term of the Loan or, if such day is not a Business Day, the
immediately preceding Business Day.
          “Permitted Encumbrances” shall mean, with respect to the Property,
collectively, (a) the Liens and security interests created by the Loan
Documents, (b) all Liens, encumbrances and other matters disclosed in the Title
Insurance Policy, (c) Liens, if any, for Taxes imposed by any Governmental
Authority not yet due or delinquent, and (d) such other title and survey
exceptions as Lender has approved or may approve in writing in Lender’s sole
discretion, which Permitted Encumbrances in the aggregate do not materially
adversely affect the value or use of the Property or Borrower’s ability to repay
the Loan.
          “Permitted Investments” shall have the meaning set forth in the Cash
Management Agreement.
          “Permitted Release Date” shall mean the earlier of (i) the Defeasance
Expiration Date or (ii) the date that is the third (3rd) anniversary of the
first Payment Date.
          “Permitted Transfer” means any of the following: (a) any transfer,
directly as a result of the death of a natural person, of stock, membership
interests, partnership interests or other ownership interests previously held by
the decedent in question to the Person or Persons lawfully entitled thereto,
(b) any transfer, directly as a result of the legal incapacity of a natural
person, of stock, membership interests, partnership interests or other ownership
interests previously held by such natural person to the Person or Persons
lawfully entitled thereto and (c) transfers permitted pursuant to
Section 5.2.10(d) of this Agreement.
          “Person” shall mean any individual, corporation, partnership, joint
venture, limited liability company, 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.
          “Personal Property” shall have the meaning set forth in the granting
clause of the Mortgage.
          “Physical Conditions Report” shall mean, a structural engineering
report prepared by a company satisfactory to Lender regarding the physical
condition of the Property, satisfactory in form and substance to Lender in its
sole discretion, which report shall, among other things, (a) confirm that the
Property and its use complies, in all material respects, with all applicable
Legal Requirements (including, without limitation, zoning, subdivision and
building laws) and (b) include a copy of a final certificate of occupancy with
respect to all Improvements on the Property.
          “Policies” shall have the meaning specified in Section 6.1(b) hereof.

 

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          “Policy” shall have the meaning specified in Section 6.1(b) hereof.
          “Prepayment Rate” shall mean the bond equivalent yield (in the
secondary market) on the United States Treasury Security that as of the
Prepayment Rate Determination Date has a remaining term to maturity closest to,
but not exceeding, the remaining term to the Maturity Date as most recently
published in the “Treasury Bonds, Notes and Bills” section in The Wall Street
Journal as of such Prepayment Rate Determination Date. If more than one issue of
United States Treasury Securities has the same remaining term to the Maturity
Date, the “Prepayment Rate” shall be the yield on such United States Treasury
Security most recently issued as of the Prepayment Rate Determination Date. The
rate so published shall control absent manifest error. If the publication of the
Prepayment Rate in The Wall Street Journal is discontinued, Lender shall
determine the Prepayment Rate on the basis of “Statistical Release H.15 (519),
Selected Interest Rates,” or any successor publication, published by the Board
of Governors of the Federal Reserve System, or on the basis of such other
publication or statistical guide as Lender may reasonably select.
          “Prepayment Rate Determination Date” shall mean the date which is five
(5) Business Days prior to the date that such prepayment shall be applied in
accordance with the terms and provisions of Section 2.4.1 hereof.
          “Principal” shall mean the entity that is the general partner of
Borrower, if Borrower is a limited partnership, or member of Borrower, if
Borrower is a limited liability company (unless Borrower is a limited liability
company meeting all of the requirements applicable to a single member limited
liability company set forth in the definition of “Special Purpose Entity”).
          “Property” shall mean the parcel of real property, the Improvements
thereon and all personal property owned by Borrower and encumbered by the
Mortgage, together with all rights pertaining to such property and Improvements,
as more particularly described in the granting clauses of the Mortgage and
referred to therein as the “Property”.
          “Provided Information” shall mean any and all financial and other
information provided at any time prepared by, or on behalf of, any Indemnifying
Person with respect to the Property, Borrower, Principal, Guarantor and/or
Manager, including, without limitation, any financial data or financial
statements required under Section 5.1.11.
          “Qualified Manager” shall mean in the reasonable judgment of Lender, a
reputable and experienced management organization (which may be an Affiliate of
Borrower) possessing experience in managing properties similar in size, scope,
use and value as the Property, provided, that Borrower shall have obtained
(i) prior written confirmation from the applicable Rating Agencies that
management of the Property by such Person will not cause a downgrade, withdrawal
or qualification of the then current ratings of the Securities or any class
thereof and (ii) if such Person is an Affiliate of Borrower, an Additional
Insolvency Opinion.
          “Rating Agencies” shall mean each of S&P, Moody’s and Fitch, or any
other nationally recognized statistical rating agency which has been approved by
Lender.
          “Related Entities” shall have the meaning set forth in
Section 5.2.10(e) hereof.
          “Related Parties” shall have the meaning set forth in the definition
of Special Purpose Entity.

 

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          “Related Party” shall have the meaning set forth in the definition of
Special Purpose Entity.
          “REMIC Trust” shall mean a “real estate mortgage investment conduit”
within the meaning of Section 860D of the Code that holds the Note.
          “Rents” shall mean, all rents (including percentage rents), rent
equivalents, moneys payable as damages or in lieu of rent or rent equivalents,
royalties (including, without limitation, all oil and gas or other mineral
royalties and bonuses), income, receivables, receipts, revenues, deposits
(including, without limitation, security, utility and other deposits), accounts,
cash, issues, profits, charges for services rendered, all other amounts payable
as rent under any Lease or other agreement relating to the Property, including,
without limitation, charges for electricity, oil, gas, water, steam, heat,
ventilation, air-conditioning and any other energy, telecommunication,
telephone, utility or similar items or time use charges, HVAC equipment charges,
sprinkler charges, escalation charges, license fees, maintenance fees, charges
for Taxes, Operating Expenses or other reimbursables payable to Borrower (or to
the Manager, for the account of Borrower) under any Lease, and other
consideration of whatever form or nature received by or paid to or for the
account of or benefit of Borrower or its agents or employees from any and all
sources arising from or attributable to the Property.
          “Replacement Management Agreement” shall mean, collectively,
(a) either (i)a management agreement with a Qualified Manager substantially in
the same form and substance as the Management Agreement, or (ii) a management
agreement with a Qualified Manager, which management agreement shall be
reasonably acceptable to Lender in form and substance, provided, with respect to
this subclause (ii), Lender, at its option, may require that Borrower shall have
obtained prior written confirmation from the applicable Rating Agencies that
such management agreement will not cause a downgrade, withdrawal or
qualification of the then current rating of the Securities or any class thereof
and (b) an assignment of management agreement and subordination of management
fees substantially in the form then used by Lender (or of such other form and
substance reasonably acceptable to Lender), executed and delivered to Lender by
Borrower and such Qualified Manager at Borrower’s expense.
          “Replacement Reserve Account” shall have the meaning set forth in
Section 7.3.1 hereof.
          “Replacement Reserve Fund” shall have the meaning set forth in
Section 7.3.1 hereof.
          “Replacement Reserve Monthly Deposit” shall have the meaning set forth
in Section 7.3.1 hereof.
          “Replacements” shall have the meaning set forth in Section 7.3.1
hereof.
          “Required Repair Account” shall have the meaning set forth in
Section 7.1.1 hereof.
          “Required Repair Fund” shall have the meaning set forth in
Section 7.1.1 hereof.
          “Required Repair” shall have the meaning set forth in Section 7.1.1
hereof.

 

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          “Reserve Funds” shall mean, collectively, the Tax and Insurance Escrow
Fund, the Replacement Reserve Fund, the Required Repair Fund, and any other
escrow fund established by the Loan Documents.
          “Resizing Event” shall have the meaning set forth in Section 9.1.2.
          “Restoration” shall mean the repair and restoration of the Property
after a Casualty or Condemnation as nearly as possible to the condition the
Property was in immediately prior to such Casualty or Condemnation, with such
alterations as may be reasonably approved by Lender.
          “Restricted Party” shall mean collectively, (a) Borrower, Principal,
any Guarantor, and any Affiliated Manager and (b) any shareholder, partner,
member, non-member manager, any direct or indirect legal or beneficial owner of,
Borrower, Principal, any Guarantor, any Affiliated Manager or any non-member
manager (excluding existing limited partners of Borrower and/or Guarantor as of
the date hereof).
          “Rollover Reserve Account” shall have the meaning set forth in
Section 7.4.1 hereof.
          “Rollover Reserve Fund” shall have the meaning set forth in
Section 7.4.1 hereof.
          “S&P” shall mean Standard & Poor’s Ratings Group, a division of the
McGraw-Hill Companies.
          “Sale or Pledge” shall mean a voluntary or involuntary sale,
conveyance, assignment, transfer, encumbrance, pledge, grant of option or other
transfer or disposal of a legal or beneficial interest, whether direct or
indirect.
          “Scheduled Defeasance Payments” shall have the meaning set forth in
Section 2.5.1(b) hereof.
          “Securities” shall have the meaning set forth in Section 9.1 hereof.
          “Securities Act” shall have the meaning set forth in Section 9.2(a)
hereof.
          “Securitization” shall have the meaning set forth in Section 9.1
hereof.
          “Security Agreement” shall have the meaning set forth in
Section 2.5.1(a)(vi) hereof.
          “Servicer” shall have the meaning set forth in Section 9.5 hereof.
          “Servicing Agreement” shall have the meaning set forth in Section 9.5
hereof.
          “Severed Loan Documents” shall have the meaning set forth in
Section 8.2(c) hereof.
          “Special Purpose Entity” shall mean a corporation, limited partnership
or limited liability company that, since the date of its formation and at all
times on and after the date thereof, has complied with and shall at all times
comply with the following requirements unless it has received either prior
consent to do otherwise from Lender or a permitted administrative agent thereof,
or, while the Loan is securitized, confirmation from each of the applicable
Rating Agencies that such noncompliance would not result in the requalification,
withdrawal, or downgrade of the ratings of any Securities or any class thereof:

 

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     (i) is and shall be organized solely for the purpose of (A) in the case of
Borrower, acquiring, developing, owning, holding, selling, leasing,
transferring, exchanging, managing and operating the Property, entering into and
performing its obligations under the Loan Documents with Lender, refinancing the
Property in connection with a permitted repayment of the Loan, and transacting
lawful business that is incident, necessary and appropriate to accomplish the
foregoing; or (B) in the case of a Principal, acting as a general partner of the
limited partnership that owns the Property or as member of the limited liability
company that owns the Property and transacting lawful business that is incident,
necessary and appropriate to accomplish the foregoing;
     (ii) has not engaged and shall not engage in any business unrelated to
(A) the acquisition, development, ownership, management or operation of the
Property, or (B) in the case of a Principal, acting as general partner of the
limited partnership that owns the Property or acting as a member of the limited
liability company that owns the Property, as applicable;
     (iii) has not owned and shall not own any real property other than, in the
case of Borrower, the Property;
     (iv) does not have, shall not have and at no time had any assets other than
(A) in the case of Borrower, the Property and personal property necessary or
incidental to its ownership and operation of the Property or (B) in the case of
a Principal, its partnership interest in the limited partnership or the member
interest in the limited liability company that owns the Property and personal
property necessary or incidental to its ownership of such interests;
     (v) has not engaged in, sought, consented or permitted to and shall not
engage in, seek, consent to or permit (A) any dissolution, winding up,
liquidation, consolidation or merger, (B) any sale or other transfer of all or
substantially all of its assets or any sale of assets outside the ordinary
course of its business, except as permitted by the Loan Documents, or (C) in the
case of a Principal, any transfer of its partnership or membership interests;
     (vi) shall not cause, consent to or permit any amendment of its limited
partnership agreement, articles of incorporation, articles of organization,
certificate of formation, operating agreement or other formation document or
organizational document (as applicable) with respect to the matters set forth in
this definition;
     (vii) if such entity is a limited partnership, has and shall have at least
one general partner and has and shall have, as its only general partners,
Special Purpose Entities each of which (A) is a corporation or single-member
Delaware limited liability company, (B) has one Independent Director, and
(C) holds a direct interest as general partner in the limited partnership of not
less than 0.5% (or 0.1%, if the limited partnership is a Delaware entity);

 

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     (viii) if such entity is a corporation, has and shall have at least one (1)
Independent Director, and shall not cause or permit the board of directors of
such entity to take any Material Action either with respect to itself or, if the
corporation is a Principal, with respect to Borrower or any action requiring the
unanimous affirmative vote of one hundred percent (100%) of the members of its
board of directors unless two Independent Directors shall have participated in
such vote and shall have voted in favor of such action;
     (ix) if such entity is a limited liability company (other than limited
liability company meeting all of the requirements applicable to a single-member
limited liability company set forth in this definition of “Special Purpose
Entity”), has and shall have at least one (1) member that is a Special Purpose
Entity, that is a corporation, that has at least one (1) Independent Director
and that directly owns at least one-half-of-one percent (0.5%) of the equity of
the limited liability company (or 0.1% if the limited liability company is a
Delaware entity);
     (x) if such entity is a single-member limited liability company, (A) is and
shall be a Delaware limited liability company, (B) has and shall have at least
one (1) Independent Director serving as a manager of such company, (C) shall not
take any Material Action and shall not cause or permit the members or managers
of such entity to take any Material Action, either with respect to itself or, if
the company is a Principal, with respect to Borrower, in each case unless one
Independent Director then serving as a manager of the company shall have
participated and consented in writing to such action, and (D) has and shall have
either (1) a member which owns no economic interest in the company, has signed
the company’s limited liability company agreement and has no obligation to make
capital contributions to the company, or (2) two natural persons or one entity
that is not a member of the company, that has signed its limited liability
company agreement and that, under the terms of such limited liability company
agreement becomes a member of the company immediately prior to the withdrawal or
dissolution of the last remaining member of the company;
     (xi) has not and shall not (and, if such entity is (a) a limited liability
company, has and shall have a limited liability agreement or an operating
agreement, as applicable, (b) a limited partnership, has a limited partnership
agreement, or (c) a corporation, has a certificate of incorporation or articles
that, in each case, provide that such entity shall not) (1) dissolve, merge,
liquidate, consolidate; (2) sell all or substantially all of its assets;
(3) amend its organizational documents with respect to the matters set forth in
this definition without the consent of Lender; or (4) without the affirmative
vote of one Independent Director of itself or the consent of a Principal that is
a member or general partner in it: (A) file or consent to the filing of any
bankruptcy, insolvency or reorganization case or proceeding, institute any
proceedings under any applicable insolvency law or otherwise seek relief under
any laws relating to the relief from debts or the protection of debtors
generally, file a bankruptcy or insolvency petition or otherwise institute
insolvency proceedings; (B) seek or consent to the appointment of a receiver,
liquidator, assignee, trustee,

 

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sequestrator, custodian or any similar official for the entity or a substantial
portion of its property; (C) make an assignment for the benefit of the creditors
of the entity; or (D) take any action in furtherance of any of the foregoing;
     (xii) has at all times been and shall at all times remain solvent and has
paid and shall pay its debts and liabilities (including, a fairly-allocated
portion of any personnel and overhead expenses that it shares with any
Affiliate) from its assets as the same shall become due, and has maintained and
shall maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its
contemplated business operations;
     (xiii) has not failed and shall not fail to correct any known
misunderstanding regarding the separate identity of such entity and has not
identified and shall not identify itself as a division of any other Person;
     (xiv) has maintained and shall maintain its bank accounts, books of
account, books and records separate from those of any other Person and, to the
extent that it is required to file tax returns under applicable law, has filed
and shall file its own tax returns, except to the extent that it is required by
law to file consolidated tax returns and, if it is a corporation, has not filed
and shall not file a consolidated federal income tax return with any other
corporation, except to the extent that it is required by law to file
consolidated tax returns;
     (xv) has maintained and shall maintain its own records, books, resolutions
and agreements;
     (xvi) has not commingled and shall not commingle its funds or assets with
those of any other Person and has not participated and shall not participate in
any cash management system with any other Person;
     (xvii) has held and shall hold its assets in its own name;
     (xviii) has conducted and shall conduct its business in its name or in a
name franchised or licensed to it by an entity other than an Affiliate of itself
or of Borrower, except for business conducted on behalf of itself by another
Person under a business management services agreement that is on
commercially-reasonable terms, so long as the manager, or equivalent thereof,
under such business management services agreement holds itself out as an agent
of Borrower;
     (xix) (A) has maintained and shall maintain its financial statements,
accounting records and other entity documents separate from those of any other
Person; (B) has shown and shall show, in its financial statements, its asset and
liabilities separate and apart from those of any other Person; and (C) has not
permitted and shall not permit its assets to be listed as assets on the
financial statement of any of its Affiliates except as required by GAAP;
provided, however, that any such consolidated financial statement contains a
note indicating that the Special Purpose Entity’s separate assets and credit are
not available to pay the

 

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debts of such Affiliate and that the Special Purpose Entity’s liabilities do not
constitute obligations of the consolidated entity;
     (xx) has paid and shall pay its own liabilities and expenses, including the
salaries of its own employees, out of its own funds and assets, and has
maintained and shall maintain a sufficient number of employees in light of its
contemplated business operations;
     (xxi) has observed and shall observe all partnership, corporate or limited
liability company formalities, as applicable;
     (xxii) has not incurred any Indebtedness other than (i) acquisition
financing with respect to the Property; construction financing with respect to
the Improvements and certain off-site improvements required by municipal and
other authorities as conditions to the construction of the Improvements; and
first mortgage financings secured by the Property; and Indebtedness pursuant to
letters of credit, guaranties, interest rate protection agreements and other
similar instruments executed and delivered in connection with such financings,
(ii) unsecured trade payables and operational debt not evidenced by a note, and
(iii) Indebtedness incurred in the financing of equipment and other personal
property used on the Property;
     (xxiii) shall have no Indebtedness other than (i) the Loan,
(ii) liabilities incurred in the ordinary course of business relating to the
ownership and operation of the Property and the routine administration of
Borrower, in amounts not to exceed $525,000 which liabilities are not more than
sixty (60) days past the date incurred, are not evidenced by a note and are paid
when due, and which amounts are normal and reasonable under the circumstances,
and (iii) such other liabilities that are permitted pursuant to this Agreement;
     (xxiv) has not assumed, guaranteed or become obligated and shall not assume
or guarantee or become obligated for the debts of any other Person, has not held
out and shall not hold out its credit as being available to satisfy the
obligations of any other Person or has not pledged and shall not pledge its
assets for the benefit of any other Person, in each case except as permitted
pursuant to this Agreement;
     (xxv) has not acquired and shall not acquire obligations or securities of
its partners, members or shareholders or any other owner or Affiliate;
     (xxvi) has allocated and shall allocate fairly and reasonably any overhead
expenses that are shared with any of its Affiliates, constituents, or owners, or
any guarantors of any of their respective obligations, or any Affiliate of any
of the foregoing (individually, a “Related Party” and collectively, the “Related
Parties”), including, but not limited to, paying for shared office space and for
services performed by any employee of an Affiliate;

 

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     (xxvii) has maintained and used and shall maintain and use separate
stationery, invoices and checks bearing its name and not bearing the name of any
other entity unless such entity is clearly designated as being the Special
Purpose Entity’s agent;
     (xxviii) has not pledged and shall not pledge its assets to or for the
benefit of any other Person other than with respect to loans secured by the
Property and no such pledge remains outstanding except to Lender to secure the
Loan;
     (xxix) has held itself out and identified itself and shall hold itself out
and identify itself as a separate and distinct entity under its own name or in a
name franchised or licensed to it by an entity other than an Affiliate of
Borrower and not as a division or part of any other Person;
     (xxx) has maintained and shall maintain its assets in such a manner that it
shall not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any other Person;
     (xxxi) has not made and shall not make loans to any Person and has not held
and shall not hold evidence of indebtedness issued by any other Person or entity
(other than cash and investment-grade securities issued by an entity that is not
an Affiliate of or subject to common ownership with such entity);
     (xxxii) has not identified and shall not identify its partners, members or
shareholders, or any Affiliate of any of them, as a division or part of it, and
has not identified itself and shall not identify itself as a division of any
other Person;
     (xxxiii) other than capital contributions and distributions permitted under
the terms of its organizational documents, has not entered into or been a party
to, and shall not enter into or be a party to, any transaction with any of its
partners, members, shareholders or Affiliates except in the ordinary course of
its business and on terms which are commercially reasonable terms comparable to
those of an arm’s-length transaction with an unrelated third party;
     (xxxiv) has not had and shall not have any obligation to, and has not
indemnified and shall not indemnify its partners, officers, directors or
members, as the case may be, in each case unless such an obligation or
indemnification is fully subordinated to the Debt and shall not constitute a
claim against it in the event that its cash flow is insufficient to pay the
Debt;
     (xxxv) if such entity is a corporation, has considered and shall consider
the interests of its creditors in connection with all corporate actions;
     (xxxvi) has not had and shall not have any of its obligations guaranteed by
any Affiliate except as provided by the Loan Documents;

 

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     (xxxvii) has not formed, acquired or held and shall not form, acquire or
hold any subsidiary, except that a Principal may acquire and hold its interest
in Borrower;
     (xxxviii) has complied and shall comply with all of the terms and
provisions contained in its organizational documents.
     (xxxix) has conducted and shall conduct its business so that each of the
assumptions made about it and each of the facts stated about it in the
Insolvency Opinion are true;
     (xl) has not permitted and shall not permit any Affiliate or constituent
party independent access to its bank accounts;
     (xli) is, has always been and shall continue to be duly formed, validly
existing, and in good standing in the state of its incorporation or formation
and in all other jurisdictions where it is qualified to do business;
     (xlii) has paid all taxes which it owes and is not currently involved in
any dispute with any taxing authority;
     (xliii) is not now, nor has ever been, party to any lawsuit, arbitration,
summons, or legal proceeding that resulted in a judgment against it that has not
been paid in full;
     (xliv) has no judgments or Liens of any nature against it except for tax
liens not yet due and the Permitted Encumbrances;
     (xlv) has provided Lender with complete financial statements that reflect a
fair and accurate view of the entity’s financial condition; and
     (xlvi) has no material contingent or actual obligations not related to the
Property.
          “State” shall mean, the State or Commonwealth in which the Property or
any part thereof is located.
          “Successor Borrower” shall have the meaning set forth in Section 2.5.3
hereof.
          “Survey” shall mean a survey of the Property prepared by a surveyor
licensed in the State and satisfactory to Lender and the company or companies
issuing the Title Insurance Policy, and containing a certification of such
surveyor satisfactory to Lender.
          “Tax and Insurance Escrow Fund” shall have the meaning set forth in
Section 7.2 hereof.
          “Taxes” shall mean all real estate and personal property taxes,
assessments, water rates or sewer rents, now or hereafter levied or assessed or
imposed against the Property or part thereof.
          “Threshold Amount” shall have the meaning set forth in Section 5.1.21
hereof.

 

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          “Title Insurance Policy” shall mean, an ALTA mortgagee title insurance
policy in the form acceptable to Lender (or, if the Property is in a State which
does not permit the issuance of such ALTA policy, such form as shall be
permitted in such State and acceptable to Lender) issued with respect to the
Property and insuring the lien of the Mortgage.
          “T.J. Maxx” shall mean the tenant under that certain Lease dated
August 12, 1987 between Merrillville Plaza Associates, predecessor-in-interest
to Acadia Merrillville Realty, L.P., as Landlord, and The TJX Companies, Inc.,
as Tenant.
          “Transfer” shall have the meaning set forth in Section 5.2.10(b)
hereof.
          “Transferee” shall have the meaning set forth in
Section 5.2.10(e)(iii) hereof.
          “Transferee’s Principals” shall mean collectively, (A) Transferee’s
managing members, general partners or principal shareholders and (B) such other
members, partners or shareholders which directly or indirectly shall own a
fifty-one percent (51%) or greater economic and voting interest in Transferee..
          “UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial
Code as in effect in the State in which the Property is located.
          “U.S. Obligations” shall mean non-redeemable securities evidencing an
obligation to timely pay principal and/or interest in a full and timely manner
that are (a) direct obligations of the United States of America for the payment
of which its full faith and credit is pledged, (b) other non-callable
“government securities” as defined in Treasury Regulations
Section 1.860G-2(a)(8)(i), as amended, which will not result in a downgrade,
withdrawal or qualification of the ratings for the Securities or any class
thereof issued in connection with a Securitization which are then outstanding
(c) issued by an agency of the United States of America only if (i) the Rating
Agencies provide confirmation acceptable to Lender in its sole discretion which
will not result in a downgrade, withdrawal or qualification of the ratings for
the Securities or any class thereof issued in connection with a Securitization
which are then outstanding and (ii) a tax opinion provided by Borrower’s counsel
in form and substance acceptable to Lender in its sole discretion confirming
that, if a Securitization has occurred, the REMIC trust formed pursuant to such
Securitization will not fail to maintain its status as a “real estate mortgage
investment conduit” within the meaning of Section 860D of the Code or (d) other
instruments which, if a Securitization has occurred, the REMIC Trust formed
pursuant to such Securitization will not fail to maintain its status as a “real
estate mortgage investment conduit” within the meaning of Section 860D of the
Code and which will not result in a downgrade, withdrawal or qualification of
the ratings for the Securities or any class thereof issued in connection with a
Securitization which are then outstanding.
          “Yield Maintenance Default Premium” shall mean an amount equal to the
greater of (a) five percent (5%) of the outstanding principal balance of the
Loan to be prepaid or satisfied and (b) the Defeasance Payment Amount that would
be required if a Defeasance Event were to occur at such time (whether or not
then permitted) in an amount equal to the outstanding principal amount of the
Loan to be prepaid or satisfied.
          “Yield Maintenance Premium” shall mean an amount equal to the greater
of (a) one percent (1%) of the outstanding principal of the Loan to be prepaid
or satisfied and (b) the excess, if any, of (i) the sum of the present values of
all then-scheduled payments of principal and interest under the Note assuming
that all outstanding principal and interest on the Loan is

 

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paid on the Maturity Date (with each such payment and assumed payment discounted
to its present value at the date of prepayment at the rate which, when
compounded monthly, is equivalent to the Prepayment Rate when compounded
semi-annually and deducting from the sum of such present values any short-term
interest paid from the date of prepayment to the next succeeding Payment Date in
the event such payment is not made on a Payment Date), over (ii) the principal
amount being prepaid.
          Section 1.2 Principles of Construction. All references to sections and
schedules are to sections and schedules in or to this Agreement unless otherwise
specified. All uses of the word “including” shall mean “including, without
limitation” unless the context shall indicate otherwise. Unless otherwise
specified, the words “hereof,” “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. Unless otherwise specified,
all meanings attributed to defined terms herein shall be equally applicable to
both the singular and plural forms of the terms so defined.
          II. GENERAL TERMS
          Section 2.1 Loan Commitment; Disbursement to Borrower.
          2.1.1 Agreement to Lend and Borrow. Subject to and upon the terms and
conditions set forth herein, Lender hereby agrees to make and Borrower hereby
agrees to accept the Loan on the Closing Date.
          2.1.2 Single Disbursement to Borrower. Borrower may request and
receive only one (1) borrowing hereunder in respect of the Loan and any amount
borrowed and repaid hereunder in respect of the Loan may not be reborrowed.
          2.1.3 The Note, Mortgage and Loan Documents. The Loan shall be
evidenced by the Note and secured by the Mortgage, the Assignment of Leases and
the other Loan Documents.
          2.1.4 Use of Proceeds. Borrower shall use the proceeds of the Loan to
(a) acquire the Property or repay and discharge any existing loans relating to
the Property, (b) pay all past-due Basic Carrying Costs, if any, with respect to
the Property, (c) make deposits into the Reserve Funds on the Closing Date in
the amounts provided herein, (d) pay costs and expenses incurred in connection
with the closing of the Loan, as approved by Lender, (e) fund any working
capital requirements of the Property and (f) distribute the balance, if any, to
Borrower.
          Section 2.2 Interest Rate.
          2.2.1 Interest Rate. Interest on the outstanding principal balance of
the Loan shall accrue from (and include) the Closing Date to but excluding the
Maturity Date at the Interest Rate calculated as set forth in Section 2.2.2
below. Borrower shall pay to Lender on each Payment Date the interest accrued on
the Loan for the related Interest Period.

 

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          2.2.2 Interest Calculation. Interest on the outstanding principal
balance of the Loan shall be calculated by multiplying (a) the actual number of
days elapsed in the Interest Period for which the calculation is being made by
(b) a daily rate based on a three hundred sixty (360) day year by (c) the
outstanding principal balance as of the beginning of the Interest Period.
          2.2.3 Default Rate. In the event that, and for so long as, any Event
of Default shall have occurred and be continuing, the outstanding principal
balance of the Loan and, to the extent permitted by law, all accrued and unpaid
interest in respect of the Loan and any other amounts due pursuant to the Loan
Documents, shall accrue interest at the Default Rate, calculated from the date
such payment was due without regard to any grace or cure periods contained
herein.
          2.2.4 Usury Savings. This Agreement, the Note and the other Loan
Documents are subject to the express condition that at no time shall Borrower be
obligated or required to pay interest on the principal balance of the Loan at a
rate which could subject Lender to either civil or criminal liability as a
result of being in excess of the Maximum Legal Rate. If, by the terms of this
Agreement or the other Loan Documents, Borrower is at any time required or
obligated to pay interest on the principal balance due hereunder at a rate in
excess of the Maximum Legal Rate, the Interest Rate or the Default Rate, as the
case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate
and all previous payments in excess of the Maximum Legal Rate shall be deemed to
have been payments in reduction of principal and not on account of the interest
due hereunder. All sums paid or agreed to be paid to Lender for the use,
forbearance, or detention of the sums due under the Loan, shall, to the extent
permitted by applicable law, be amortized, prorated, allocated, and spread
throughout the full stated term of the Loan until payment in full so that the
rate or amount of interest on account of the Loan does not exceed the Maximum
Legal Rate of interest from time to time in effect and applicable to the Loan
for so long as the Loan is outstanding.
          Section 2.3 Loan Payment.
          2.3.1 Monthly Debt Service Payments. Borrower shall pay to Lender
(a) on the Closing Date, an amount equal to interest only on the outstanding
principal balance of the Loan from the Closing Date up to and including July 31,
2007, which interest shall be calculated in accordance with the provisions of
Section 2.2 hereof and (b) on each Payment Date commencing on the Payment Date
occurring in September, 2007 and thereafter up to and including the Maturity
Date, Borrower shall make a payment to Lender equal to the Monthly Debt Service
Payment Amount.
          2.3.2 Payments Generally. The first Interest Period hereunder shall
commence on and include the Closing Date and shall end on and include July 31,
2007. Thereafter each Interest Period shall commence on the first (1st) day of
each calendar month during the term of this Agreement and shall end on and
include the final calendar date of such calendar month. For purposes of making
payments hereunder, but not for purposes of calculating Interest Periods, if the
day on which such payment is due is not a Business Day, then amounts due on such
date shall be due on the immediately preceding Business Day and with respect to
payments of principal due on the Maturity Date, interest shall be payable at the
Interest Rate or the Default

 

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Rate, as the case may be, through and including the day immediately preceding
such Maturity Date. All amounts due under this Agreement and the other Loan
Documents shall be payable without setoff, counterclaim, defense or any other
deduction whatsoever.
          2.3.3 Payment on Maturity Date. Borrower shall pay to Lender on the
Maturity Date the outstanding principal balance of the Loan, all accrued and
unpaid interest and all other amounts due hereunder and under the Note, the
Mortgage and the other Loan Documents.
          2.3.4 Late Payment Charge. If any principal, interest or any other
sums due under the Loan Documents (including the amounts due on the Maturity
Date) are not paid by Borrower on or prior to the date on which it is due,
Borrower shall pay to Lender upon demand an amount equal to the lesser of five
percent (5%) of such unpaid sum or the Maximum Legal Rate in order to defray the
expense incurred by Lender in handling and processing such delinquent payment
and to compensate Lender for the loss of the use of such delinquent payment. Any
such amount shall be secured by the Mortgage and the other Loan Documents to the
extent permitted by applicable law.
          2.3.5 Method and Place of Payment. Except as otherwise specifically
provided herein, all payments and prepayments under this Agreement and the Note
shall be made to Lender not later than 11:00 A.M., New York City time, on the
date when due and shall be made in lawful money of the United States of America
in immediately available funds at Lender’s office or as otherwise directed by
Lender, and any funds received by Lender after such time shall, for all purposes
hereof, be deemed to have been paid on the next succeeding Business Day.
          Section 2.4 Prepayments.
          2.4.1 Voluntary Prepayments. Except as otherwise provided in this
Section 2.4.1 and Section 2.4.2, Borrower shall not have the right to prepay the
Loan in whole or in part prior to the Maturity Date. If for any reason Borrower
prepays the Loan on a date other than a Payment Date, Borrower shall pay Lender,
in addition to the Debt, all interest which would have accrued on the amount of
the Loan through and including the Payment Date next occurring following the
date of such prepayment. Notwithstanding anything to the contrary contained
herein, commencing after the Payment Date two (2) months prior to the Maturity
Date, or on any Payment Date thereafter (or on any date thereafter, provided
that interest is paid through the next Payment Date), Borrower may, at its
option, prepay the Debt in whole, but not in part without payment of the Yield
Maintenance Premium.
          2.4.2 Mandatory Prepayments. On the next occurring Payment Date
following the date on which Lender actually receives any Net Proceeds, if Lender
is not obligated to make such Net Proceeds available to Borrower for the
Restoration of the Property or otherwise remit such Net Proceeds to Borrower
pursuant to Section 6.4 hereof, Borrower shall prepay or authorize Lender to
apply Net Proceeds as a prepayment of all or a portion of the outstanding
principal balance of the Loan together with accrued interest through the end of
the related Interest Period and any other sums due hereunder in an amount equal
to one hundred percent (100%) of such Net Proceeds; provided, however, if an
Event of Default has occurred

 

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and is continuing, Lender may apply such Net Proceeds to the Debt (until paid in
full) in any order or priority in its sole discretion. Other than following an
Event of Default, no Yield Maintenance Premium shall be due in connection with
any prepayment made pursuant to this Section 2.4.2.
          2.4.3 Prepayments After Default. If following an Event of Default,
payment of all or any part of the Debt is tendered by Borrower or otherwise
recovered by Lender, such tender or recovery shall be (a) made on the next
occurring Payment Date together with the Monthly Debt Service Payment and
(b) deemed a voluntary prepayment by Borrower in violation of the prohibition
against prepayment set forth in Section 2.4.1 hereof and Borrower shall pay, in
addition to the Debt, an amount equal to the Yield Maintenance Default Premium.
          2.4.4 Prepayment Prior to Defeasance Expiration Date. If the Permitted
Release Date has occurred but the Defeasance Expiration Date has not occurred,
the Debt may be prepaid in whole (but not in part) prior to the date permitted
under Section 2.4.1 hereof upon not less than thirty (30) days prior written
notice to Lender specifying the Payment Date on which prepayment is to be made
(a “Prepayment Date”) provided no Event of Default exists and upon payment of an
amount equal to the Yield Maintenance Premium. Lender shall notify Borrower of
the amount and the basis of determination of the required prepayment
consideration. If any notice of prepayment is given, the Debt shall be due and
payable on the Prepayment Date. Lender shall not be obligated to accept any
prepayment of the Debt unless it is accompanied by the prepayment consideration
due in connection therewith. If for any reason Borrower prepays the Loan on a
date other than a Payment Date, Borrower shall pay Lender, in addition to the
Debt, all interest which would have accrued on the amount of the Loan through
and including the Payment Date next occurring following the date of such
prepayment.
          Section 2.5 Defeasance.
          2.5.1 Voluntary Defeasance. (a) Provided no Event of Default shall
then exist, Borrower shall have the right at any time after the Defeasance
Expiration Date and prior to the date voluntarily prepayments are permitted
under Section 2.4.1 hereof to voluntarily defease all, but not part, of the Loan
by and upon satisfaction of the following conditions (such event being a
“Defeasance Event”):
     (i) Borrower shall provide not less than thirty (30) days prior written
notice to Lender specifying the Payment Date (the “Defeasance Date”) on which
the Defeasance Event is to occur;
     (ii) [intentionally omitted];
     (iii) Borrower shall pay to Lender all sums, not including scheduled
interest or principal payments, then due under the Note, this Agreement, the
Mortgage and the other Loan Documents;
     (iv) Borrower shall use the Defeasance Deposit to purchase U.S. Obligations
in accordance with Section 2.5.1(b) below;

 

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     (v) Borrower shall execute and deliver a pledge and security agreement, in
form and substance that would be reasonably satisfactory to a prudent lender
creating a first priority lien on the Defeasance Deposit and the U.S.
Obligations purchased with the Defeasance Deposit in accordance with the
provisions of this Section 2.5 (the “Security Agreement”);
     (vi) Borrower shall deliver an opinion of counsel for Borrower that is
standard in commercial lending transactions and subject only to customary
qualifications, assumptions and exceptions opining, among other things, that
Borrower has legally and validly transferred and assigned the U.S. Obligations
and all obligations, rights and duties under and to the Note to the Successor
Borrower, that Lender has a perfected first priority security interest in the
Defeasance Deposit and the U.S. Obligations delivered by Borrower and that any
REMIC Trust formed pursuant to a Securitization will not fail to maintain its
status as a “real estate mortgage investment conduit” within the meaning of
Section 860D of the Code as a result of such Defeasance Event;
     (vii) Borrower shall deliver confirmation in writing from each of the
applicable Rating Agencies to the effect that such release will not result in a
downgrade, withdrawal or qualification of the respective ratings in effect
immediately prior to such Defeasance Event for the Securities issued in
connection with the Securitization which are then outstanding. If required by
the applicable Rating Agencies, Borrower shall also deliver or cause to be
delivered an Additional Insolvency Opinion with respect to the Successor
Borrower in form and substance satisfactory to Lender and the applicable Rating
Agencies;
     (viii) Borrower shall deliver an Officer’s Certificate certifying that the
requirements set forth in this Section 2.5.1(a) have been satisfied;
     (ix) Borrower shall deliver a certificate of Borrower’s independent
certified public accountant certifying that the U.S. Obligations purchased with
the Defeasance Deposit generate monthly amounts equal to or greater than the
Scheduled Defeasance Payments;
     (x) Borrower shall deliver such other certificates, documents or
instruments as Lender may reasonably request; and
     (xi) Borrower shall pay all costs and expenses of Lender incurred in
connection with the Defeasance Event, including (A) any costs and expenses
associated with a release of the Lien of the Mortgage as provided in Section 2.6
hereof, (B) reasonable attorneys’ fees and expenses incurred in connection with
the Defeasance Event, (C) the costs and expenses of the Rating Agencies, (D) any
revenue, documentary stamp or intangible taxes or any other tax or charge due in
connection with the transfer of the Note, or otherwise required to accomplish
the defeasance and (E) the costs and expenses of Servicer and any trustee,
including reasonable attorneys’ fees.

 

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          (b) In connection with the Defeasance Event, Borrower shall use the
Defeasance Deposit to purchase U.S. Obligations which provide payments on or
prior to, but as close as possible to, all successive scheduled Payment Dates
after the Defeasance Date upon which interest and/or principal payments are
required under this Agreement and the Note, and in amounts equal to the
scheduled payments due on such Payment Dates under this Agreement and the Note
(including, without limitation, scheduled payments of principal, interest,
servicing fees (if any), and any other amounts due under the Loan Documents on
such Payment Dates) and assuming the Note is prepaid in full on the Anticipated
Repayment Date (the “Scheduled Defeasance Payments”). Borrower, pursuant to the
Security Agreement or other appropriate document, shall authorize and direct
that the payments received from the U.S. Obligations may be made directly to the
Lockbox Account (unless otherwise directed by Lender) and applied to satisfy the
Debt Service obligations of Borrower under this Agreement and the Note. Any
portion of the Defeasance Deposit in excess of the amount necessary to purchase
the U.S. Obligations required by this Section 2.5 and satisfy Borrower’s other
obligations under this Section 2.5 and Section 2.6 shall be remitted to
Borrower.
          2.5.2 Collateral. Each of the U.S. Obligations that are part of the
defeasance collateral shall be duly endorsed by the holder thereof as directed
by Lender or accompanied by a written instrument of transfer in form and
substance that would be satisfactory to a prudent lender (including, without
limitation, such instruments as may be required by the depository institution
holding such securities or by the issuer thereof, as the case may be, to
effectuate book-entry transfers and pledges through the book-entry facilities of
such institution) in order to perfect upon the delivery of the defeasance
collateral a first priority security interest therein in favor of Lender in
conformity with all applicable state and federal laws governing the granting of
such security interests.
          2.5.3 Successor Borrower. In connection with any Defeasance Event,
Borrower shall establish a successor entity (the “Successor Borrower”) which is
acceptable to the Rating Agencies. Borrower shall transfer and assign all
obligations, rights and duties under and to the Note, together with the pledged
U.S. Obligations to such Successor Borrower. Such Successor Borrower shall
assume the obligations under the Note and the Security Agreement and Borrower
shall be relieved of its obligations under such documents. Borrower shall pay
One Thousand and 00/100 Dollars ($1,000) to any such Successor Borrower as
consideration for assuming the obligations under the Note and the Security
Agreement. Notwithstanding anything in this Agreement to the contrary, no other
assumption fee shall be payable upon a transfer of the Note in accordance with
this Section 2.5.3, but Borrower shall pay all costs and expenses incurred by
Lender, including Lender’s attorneys’ fees and expenses and any fees and
expenses of any Rating Agencies, incurred in connection therewith.
          Section 2.6 Release of Property. Except as set forth in this
Section 2.6, no repayment, prepayment or defeasance of all or any portion of the
Loan shall cause, give rise to a right to require, or otherwise result in, the
release of the Lien of the Mortgage on the Property.
          2.6.1 Release of Property.
          (a) If Borrower has elected to defease the entire Loan and the
requirements of Section 2.5 and this Section 2.6 have been satisfied, all of the
Property shall be released from the

 

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Lien of the Mortgage and the U.S. Obligations, pledged pursuant to the Security
Agreement, shall be the sole source of collateral securing the Note.
          (b) In connection with the release of the Mortgage, Borrower shall
submit to Lender, not less than thirty (30) days prior to the Defeasance Date, a
release of Lien (and related Loan Documents) for the Property for execution by
Lender. Such release shall be in a form appropriate in the jurisdiction in which
the Property is located and that would be satisfactory to a prudent lender and
contains standard provisions, if any, protecting the rights of the releasing
lender . In addition, Borrower shall provide all other documentation Lender
reasonably requires to be delivered by Borrower in connection with such release,
together with an Officer’s Certificate certifying that such documentation (i) is
in compliance with all Legal Requirements, and (ii) will effect such releases in
accordance with the terms of this Agreement.
          2.6.2 Release on Payment in Full. Lender shall, upon the written
request and at the expense of Borrower, upon payment in full of all principal
and interest due on the Loan and all other amounts due and payable under the
Loan Documents in accordance with the terms and provisions of the Note and this
Agreement, release the Lien of the Mortgage on the Property.
          Section 2.7 Lockbox Account/Cash Management.
          2.7.1 Lockbox Account. (a) During the term of the Loan, Borrower shall
establish and maintain an account (the “Lockbox Account”) with Lockbox Bank in
trust for the benefit of Lender, which Lockbox Account shall be under the sole
dominion and control of Lender. The Lockbox Account shall be entitled “Acadia
Merrillville Realty, L.P., as Borrower and Bear Stearns Commercial Mortgage,
Inc., as Lender, pursuant to Loan Agreement dated as of July 2, 2007 — Lockbox
Account”. Borrower hereby grants to Lender a first-priority security interest in
the Lockbox Account and all deposits at any time contained therein and the
proceeds thereof and will take all actions necessary to maintain in favor of
Lender a perfected first priority security interest in the Lockbox Account,
including, without limitation, executing and filing UCC-1 Financing Statements
and continuations thereof. Subject to Sections 2.7.1(c) and 2.7.2(a) hereof,
Lender and Servicer shall have the right to make withdrawals from the Lockbox
Account and all costs and expenses for establishing and maintaining the Lockbox
Account shall be paid by Borrower. All monies now or hereafter deposited into
the Lockbox Account shall be deemed additional security for the Debt.
          (b) Borrower shall, or shall cause Manager, to, deliver written
instructions (which shall be irrevocable for so long as the Loan is outstanding)
to all tenants under Leases to deliver all Rents payable thereunder directly to
the Lockbox Account. Borrower shall, and shall cause Manager, to, deposit all
amounts received by Borrower or Manager, constituting Rents into the Lockbox
Account within one (1) Business Day after receipt thereof.
          (c) Borrower shall or shall cause Manager to, obtain from Lockbox Bank
its agreement to transfer to the Cash Management Account upon the occurrence and
during the continuance of a Lockbox Trigger Event, in immediately available
funds by federal wire transfer all amounts on deposit in the Lockbox Account
once every Business Day. If no Lockbox Trigger Event exists, all amounts on
deposit in the Lockbox Account shall be disbursed to or at the direction of
Borrower.

 

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          (d) Upon the occurrence of an Event of Default, Lender may, in
addition to any and all other rights and remedies available to Lender, apply any
sums then present in the Lockbox Account to the payment of the Debt in any order
in its sole discretion.
          (e) The Lockbox Account shall be an Eligible Account and shall not be
commingled with other monies held by Borrower or Lockbox Bank.
          (f) Borrower shall not further pledge, assign or grant any security
interest in the Lockbox Account or the monies deposited therein or permit any
lien or encumbrance to attach thereto, or any levy to be made thereon, or any
UCC-1 Financing Statements, except those naming Lender as the secured party, to
be filed with respect thereto.
          (g) Borrower shall indemnify Lender and hold Lender harmless from and
against any and all actions, suits, claims, demands, liabilities, losses,
damages, obligations and costs and expenses (including litigation costs and
reasonable attorneys fees and expenses) arising from or in any way connected
with the Lockbox Account and/or the Lockbox Agreement (unless arising from the
gross negligence or willful misconduct of Lender) or the performance of the
obligations for which the Lockbox Account was established.
          2.7.2 Cash Management Account. (a) During the term of the Loan,
Borrower shall establish and maintain a segregated Eligible Account (the “Cash
Management Account”) to be held by Agent in trust and for the benefit of Lender,
which Cash Management Account shall be under the sole dominion and control of
Lender. The Cash Management Account shall be entitled “Acadia Merrillville
Realty, L.P., as Borrower and Bear Stearns Commercial Mortgage, Inc., as Lender,
pursuant to Loan Agreement dated as of July 2, 2007 — Cash Management Account.”
Borrower hereby grants to Lender a first priority security interest in the Cash
Management Account and all deposits at any time contained therein and the
proceeds thereof and will take all actions necessary to maintain in favor of
Lender a perfected first priority security interest in the Cash Management
Account, including, without limitation, executing and filing UCC-1 Financing
Statements and continuations thereof. Borrower will not in any way alter or
modify the Cash Management Account and will notify Lender of the account number
thereof. Lender and Servicer shall have the sole right to make withdrawals from
the Cash Management Account and all costs and expenses for establishing and
maintaining the Cash Management Account shall be paid by Borrower.
          (b) The insufficiency of funds on deposit in the Cash Management
Account shall not relieve Borrower from the obligation to make any payments, as
and when due pursuant to this Agreement and the other Loan Documents, and such
obligations shall be separate and independent, and not conditioned on any event
or circumstance whatsoever.
          (c) All funds on deposit in the Cash Management Account following the
occurrence of an Event of Default may be applied by Lender in such order and
priority as Lender shall determine.
          (d) Borrower hereby agrees that Lender may modify the Cash Management
Agreement for the purpose of establishing additional sub-accounts in connection
with any

 

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payments otherwise required under this Agreement and the other Loan Documents
and Lender shall provide notice thereof to Borrower.
          2.7.3 Payments Received Under the Cash Management Agreement.
Notwithstanding anything to the contrary contained in this Agreement or the
other Loan Documents, and provided no Event of Default has occurred and is
continuing, Borrower’s obligations with respect to the payment of the Monthly
Debt Service Payment Amount and amounts required to be deposited into the
Reserve Funds, if any, shall be deemed satisfied to the extent sufficient
amounts are deposited in the Cash Management Account to satisfy such obligations
pursuant to the Cash Management Agreement on the dates each such payment is
required, regardless of whether any of such amounts are so applied by Lender.
          III. CONDITIONS PRECEDENT
          Section 3.1 Conditions Precedent to Closing. The obligation of Lender
to make the Loan hereunder is subject to the fulfillment by Borrower or waiver
by Lender of the following conditions precedent no later than the Closing Date:
          3.1.1 Representations and Warranties; Compliance with Conditions. The
representations and warranties of Borrower contained in this Agreement and the
other Loan Documents shall be true and correct in all material respects on and
as of the Closing Date with the same effect as if made on and as of such date,
and no Default or an Event of Default shall have occurred and be continuing; and
Borrower shall be in compliance in all material respects with all terms and
conditions set forth in this Agreement and in each other Loan Document on its
part to be observed or performed.
          3.1.2 Loan Agreement and Note. Lender shall have received a copy of
this Agreement and the Note, in each case, duly executed and delivered on behalf
of Borrower.
          3.1.3 Delivery of Loan Documents; Title Insurance; Reports; Leases.
          (a) Mortgage, Assignment of Leases. Lender shall have received from
Borrower fully executed and acknowledged counterparts of the Mortgage and the
Assignment of Leases and evidence that counterparts of the Mortgage and
Assignment of Leases have been delivered to the title company for recording, in
the reasonable judgment of Lender, so as to effectively create upon such
recording valid and enforceable Liens upon the Property, of the requisite
priority, in favor of Lender or Lender’s nominee (or such other trustee as may
be required or desired under local law), subject only to the Permitted
Encumbrances and such other Liens as are permitted pursuant to the Loan
Documents. Lender shall have also received from Borrower fully executed
counterparts of the other Loan Documents.
          (b) Title Insurance. Lender shall have received the Title Insurance
Policy issued by a title company acceptable to Lender and dated as of the
Closing Date, with reinsurance and direct access agreements acceptable to
Lender. Such Title Insurance Policy shall (i) provide coverage in amounts
satisfactory to Lender, (ii) insure Lender that the Mortgage creates a valid
lien on the Property of the requisite priority, free and clear of all exceptions
from coverage other than Permitted Encumbrances and standard exceptions and
exclusions from coverage (as modified by the terms of any endorsements),
(iii) contain such endorsements and

 

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affirmative coverages as Lender may reasonably request, and (iv) name Lender as
the insured. The Title Insurance Policy shall be assignable. Lender also shall
have received evidence that all premiums in respect of such Title Insurance
Policy have been paid.
          (c) Survey. Lender shall have received a title survey for the
Property, certified to the title company and Lender and their successors and
assigns, in form and content satisfactory to Lender and prepared by a
professional and properly licensed land surveyor satisfactory to Lender in
accordance with the Accuracy Standards for ALTA/ACSM Land Title Surveys as
adopted by American Land Title Association, American Congress on Surveying &
Mapping and National Society of Professional Surveyors in 1999. The survey shall
reflect the same legal description contained in the Title Insurance Policy
referred to in clause (b) above and shall include, among other things, a metes
and bounds description of the real property comprising part of the Property
reasonably satisfactory to Lender. The surveyor’s seal shall be affixed to the
survey and the surveyor shall provide a certification for the survey in form and
substance acceptable to Lender.
          (d) Insurance. Lender shall have received valid certificates of
insurance for the policies of insurance required hereunder, satisfactory to
Lender in its sole discretion, and evidence of the payment of all premiums
payable for the existing policy period.
          (e) Environmental Reports. Lender shall have received a Phase I
environmental report (and, if recommended by the Phase I environmental report, a
Phase II environmental report) in respect of the Property, in each case
satisfactory in form and substance to Lender.
          (f) Zoning. Lender shall have received, at Lender’s option,
(i) letters or other evidence with respect to the Property from the appropriate
municipal authorities (or other Persons) concerning applicable zoning and
building laws, and (ii) either (A) an ALTA 3.1 zoning endorsement for the
applicable Title Insurance Policy or (B) a zoning opinion letter, in each case
in substance reasonably satisfactory to Lender.
          (g) Encumbrances. Borrower shall have taken or caused to be taken such
actions in such a manner so that Lender has a valid and perfected first priority
Lien as of the Closing Date with respect to the Mortgage, subject only to
applicable Permitted Encumbrances and such other Liens as are permitted pursuant
to the Loan Documents, and Lender shall have received satisfactory evidence
thereof.
          3.1.4 Related Documents. Each additional document not specifically
referenced herein, but relating to the transactions contemplated herein, shall
be in form and substance reasonably satisfactory to Lender, and shall have been
duly authorized, executed and delivered by all parties thereto and Lender shall
have received and approved certified copies thereof.
          3.1.5 Delivery of Organizational Documents. On or before the Closing
Date, Borrower shall deliver or cause to be delivered to Lender copies certified
by Borrower of all organizational documentation related to Borrower and/or the
formation, structure, existence, good standing and/or qualification to do
business, as Lender may request in its sole discretion,

 

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including, without limitation, amendments (as requested by Lender), good
standing certificates, qualifications to do business in the appropriate
jurisdictions, resolutions authorizing the entering into of the Loan and
incumbency certificates as may be requested by Lender.
          3.1.6 Opinions of Borrower’s Counsel. Lender shall have received
opinions from Borrower’s counsel (a) the Insolvency Opinion, and (b) with
respect to due execution, authority, enforceability of the Loan Documents and
such other matters as Lender may require, all such opinions in form, scope and
substance satisfactory to Lender and Lender’s counsel in their sole discretion.
          3.1.7 Budgets. Borrower shall have delivered, and Lender shall have
approved, the Annual Budget for the current Fiscal Year.
          3.1.8 Basic Carrying Costs. Borrower shall have paid all Basic
Carrying Costs relating to the Property which are in arrears, including without
limitation, (a) accrued but unpaid Insurance Premiums due pursuant to the
Policies, (b) currently due Taxes (including any in arrears) relating to the
Property, and (c) currently due Other Charges relating to the Property, which
amounts shall be funded with proceeds of the Loan.
          3.1.9 Completion of Proceedings. All organizational and other
proceedings taken or to be taken in connection with the transactions
contemplated by this Agreement and other Loan Documents and all documents
incidental thereto shall be satisfactory in form and substance to Lender, and
Lender shall have received all such counterpart originals or certified copies of
such documents as Lender may reasonably request.
          3.1.10 Payments. All payments, deposits or escrows required to be made
or established by Borrower under this Agreement, the Note and the other Loan
Documents on or before the Closing Date shall have been paid.
          3.1.11 Tenant Estoppels. Lender shall have received an executed tenant
estoppel letter, which shall be in form and substance satisfactory to Lender,
from (a) each Anchor Tenant, (b) each tenant leasing an entire building at the
Property, (c) each tenant paying base rent in an amount equal to or exceeding
five percent (5%) of the Gross Income from Operations from the Property occupied
by such tenant and (d) disregarding the area leased by those described in
clauses (a), (b) and (c), lessees of not less than seventy-five percent (75%) of
the remaining gross leasable area of the Property.
          3.1.12 Transaction Costs. Borrower shall have paid or reimbursed
Lender for all title insurance premiums, recording and filing fees, costs of
environmental reports, Physical Conditions Report, appraisals and other reports,
the fees and costs of Lender’s counsel and all other third party out-of-pocket
expenses incurred in connection with the origination and closing of the Loan.
          3.1.13 Material Adverse Change. There shall have been no material
adverse change in the financial condition or business condition of Borrower,
Principal, Guarantor or the Property since the date of the most recent financial
statements delivered to Lender. The income and expenses of the Property, the
occupancy thereof, and all other features of the transaction shall be as
represented to Lender without material adverse change. Neither Borrower,
Principal,

 

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Guarantor nor any of their respective constituent Persons shall be the subject
of any bankruptcy, reorganization, or insolvency proceeding.
          3.1.14 Leases and Rent Roll. Lender shall have received copies of all
tenant leases, which tenant leases shall be certified by Borrower as being true,
correct and complete and certified copies of all ground leases affecting the
Property, if any. Lender shall have received a current certified rent roll of
the Property, reasonably satisfactory in form and substance to Lender.
          3.1.15 Subordination and Attornment. Lender shall have received
appropriate instruments acceptable to Lender subordinating all of the Leases
designated by Lender to the Mortgage. Lender shall have received an agreement to
attorn to Lender satisfactory to Lender from any tenant under a Lease that does
not provide for such attornment by its terms.
          3.1.16 Tax Lot. Lender shall have received evidence that the Property
constitutes one (1) or more separate tax lots, which evidence shall be
reasonably satisfactory in form and substance to Lender.
          3.1.17 Physical Conditions Report. Lender shall have received a
Physical Conditions Report with respect to the Property, which report shall be
issued by an engineer selected by Lender and shall be reasonably satisfactory in
form and substance to Lender.
          3.1.18 Management Agreement. Lender shall have received a certified
copy of the Management Agreement with respect to the Property which shall be
satisfactory in form and substance to Lender.
          3.1.19 Appraisal. Lender shall have received an appraisal of the
Property, from an appraiser selected by Lender, which appraisal shall be
satisfactory in form and substance to Lender.
          3.1.20 Financial Statements. Lender shall have received a balance
sheet with respect to the Property for the two (2) most recent Fiscal Years and
statements of income and statements of cash flows with respect to the Property
for the three (3) most recent Fiscal Years, each in form and substance
satisfactory to Lender.
          3.1.21 Equity Contribution. Lender shall have received evidence of the
required contribution of cash equity by Borrower, which evidence shall be
satisfactory in form and substance to Lender.
          3.1.22 Further Documents. Lender or its counsel shall have received
such other documents and further approvals, opinions, documents and information
as Lender or its counsel may have reasonably requested including the Loan
Documents in form and substance satisfactory to Lender and its counsel.
          IV. REPRESENTATIONS AND WARRANTIES
          Section 4.1 Borrower Representations. Borrower represents and warrants
as of the date hereof and as of the Closing Date that:

 

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          4.1.1 Organization. Borrower has been duly organized and is validly
existing and in good standing with requisite power and authority to own its
properties and to transact the businesses in which it is now engaged. Borrower
is duly qualified to do business and is in good standing in each jurisdiction
where it is required to be so qualified in connection with its properties,
businesses and operations. Borrower possesses all rights, licenses, permits and
authorizations, governmental or otherwise, necessary to entitle it to own its
properties and to transact the businesses in which it is now engaged, and the
sole business of Borrower is the ownership, management and operation of the
Property. The ownership interests in Borrower are as set forth on the
organizational chart attached hereto as Schedule III.
          4.1.2 Proceedings. Borrower has taken all necessary action to
authorize the execution, delivery and performance of this Agreement and the
other Loan Documents. This Agreement and such other Loan Documents have been
duly executed and delivered by or on behalf of Borrower and constitute legal,
valid and binding obligations of Borrower enforceable against Borrower in
accordance with their respective terms, subject only to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and
subject, as to enforceability, to general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
          4.1.3 No Conflicts. The execution, delivery and performance of this
Agreement and the other Loan Documents by Borrower will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance (other than pursuant to the Loan Documents) upon any of the property
or assets of Borrower pursuant to the terms of any indenture, mortgage, deed of
trust, loan agreement, partnership agreement, management agreement or other
agreement or instrument to which Borrower is a party or by which any of
Borrower’s property or assets is subject, nor will such action result in any
violation of the provisions of any statute or any order, rule or regulation of
any Governmental Authority having jurisdiction over Borrower or any of
Borrower’s properties or assets, and any consent, approval, authorization,
order, registration or qualification of or with any court or any such
Governmental Authority required for the execution, delivery and performance by
Borrower of this Agreement or any other Loan Documents has been obtained and is
in full force and effect.
          4.1.4 Litigation. There are no actions, suits or proceedings at law or
in equity by or before any Governmental Authority or other agency now pending or
threatened against or affecting Borrower, Guarantor, Principal or the Property,
which actions, suits or proceedings, if determined against Borrower, Guarantor,
Principal or the Property, might materially adversely affect the condition
(financial or otherwise) or business of Borrower, Guarantor, Principal or the
condition or ownership of the Property.
          4.1.5 Agreements. Borrower is not a party to any agreement or
instrument or subject to any restriction which might materially and adversely
affect Borrower or the Property, or Borrower’s business, properties or assets,
operations or condition, financial or otherwise. Borrower is not in default in
any material respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument to
which it is a party or by which Borrower or the Property is bound. Borrower has
no material financial obligation under any indenture, mortgage, deed of trust,
loan agreement or other

 

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agreement or instrument to which Borrower is a party or by which Borrower or the
Property is otherwise bound, other than (a) obligations incurred in the ordinary
course of the operation of the Property as permitted pursuant to clause
(xxiii) of the definition of “Special Purpose Entity” set forth in Section 1.1
hereof and (b) obligations under the Loan Documents.
          4.1.6 Title. Borrower has good, marketable and insurable fee simple
title to the real property comprising part of the Property and good title to the
balance of the Property, free and clear of all Liens whatsoever except the
Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan
Documents and the Liens created by the Loan Documents. The Permitted
Encumbrances in the aggregate do not materially and adversely affect the value,
operation or use of the Property (as currently used) or Borrower’s ability to
repay the Loan. The Mortgage, when properly recorded in the appropriate records,
together with any Uniform Commercial Code financing statements required to be
filed in connection therewith, will create (a) a valid, perfected first priority
lien on the Property, subject only to Permitted Encumbrances and the Liens
created by the Loan Documents and (b) perfected security interests in and to,
and perfected collateral assignments of, all personalty (including the Leases),
all in accordance with the terms thereof, in each case subject only to any
applicable Permitted Encumbrances, such other Liens as are permitted pursuant to
the Loan Documents and the Liens created by the Loan Documents. There are no
claims for payment for work, labor or materials affecting the Property which are
or may become a Lien prior to, or of equal priority with, the Liens created by
the Loan Documents.
          4.1.7 Solvency. Borrower has (a) not entered into this transaction or
executed the Note, this Agreement or any other Loan Documents with the actual
intent to hinder, delay or defraud any creditor and (b) received reasonably
equivalent value in exchange for its obligations under such Loan Documents.
Giving effect to the Loan, the fair saleable value of Borrower’s assets exceeds
and will, immediately following the making of the Loan, exceed Borrower’s total
liabilities, including, without limitation, subordinated, unliquidated, disputed
and contingent liabilities. The fair saleable value of Borrower’s assets is and
will, immediately following the making of the Loan, be greater than Borrower’s
probable liabilities, including the maximum amount of its contingent liabilities
on its debts as such debts become absolute and matured. Borrower’s assets do not
and, immediately following the making of the Loan will not, constitute
unreasonably small capital to carry out its business as conducted or as proposed
to be conducted. Borrower does not intend to, and does not believe that it will,
incur debt and liabilities (including contingent liabilities and other
commitments) beyond its ability to pay such debt and liabilities as they mature
(taking into account the timing and amounts of cash to be received by Borrower
and the amounts to be payable on or in respect of obligations of Borrower). No
petition in bankruptcy has been filed against Borrower or any constituent Person
in the last seven (7) years, and neither Borrower nor any constituent Person in
the last seven (7) years has ever made an assignment for the benefit of
creditors or taken advantage of any insolvency act for the benefit of debtors.
Neither Borrower nor any of its constituent Persons are contemplating either the
filing of a petition by it under any state or federal bankruptcy or insolvency
laws or the liquidation of all or a major portion of Borrower’s assets or
property, and Borrower has no knowledge of any Person contemplating the filing
of any such petition against it or such constituent Persons.
          4.1.8 Full and Accurate Disclosure. No statement of fact made by
Borrower in this Agreement or in any of the other Loan Documents contains any
untrue statement of a

 

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material fact or omits to state any material fact necessary to make statements
contained herein or therein not misleading. There is no material fact presently
known to Borrower which has not been disclosed to Lender which adversely
affects, nor as far as Borrower can foresee, might adversely affect, the
Property or the business, operations or condition (financial or otherwise) of
Borrower.
          4.1.9 No Plan Assets. Borrower does not sponsor, is not obligated to
contribute to, and is not itself an “employee benefit plan,” as defined in
Section 3(3) of ERISA, subject to Title I of ERISA or Section 4975 of the Code,
and none of the assets of Borrower constitutes or will constitute “plan assets”
of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. In
addition, (a) Borrower is not a “governmental plan” within the meaning of
Section 3(32) of ERISA and (b) transactions by or with Borrower are not subject
to any state or other statute , regulation or other restriction regulating
investments of, or fiduciary obligations with respect to, governmental plans
within the meaning of Section 3(32) of ERISA which is similar to the provisions
of Section 406 of ERISA or Section 4975 of the Code and which prohibit or
otherwise restrict the transactions contemplated by this Agreement, including
but not limited to the exercise by Lender of any of its rights under the Loan
Documents.
          4.1.10 Compliance. To the best of Borrower’s knowledge, Borrower and
the Property and the use thereof comply in all material respects with all
applicable Legal Requirements, including, without limitation, building and
zoning ordinances and codes. To the best of Borrower’s knowledge, Borrower is
not in default or violation of any order, writ, injunction, decree or demand of
any Governmental Authority. There has not been committed by Borrower or any
other Person in occupancy of or involved with the operation or use of the
Property any act or omission affording the federal government or any other
Governmental Authority the right of forfeiture as against the Property or any
part thereof or any monies paid in performance of Borrower’s obligations under
any of the Loan Documents.
          4.1.11 Financial Information. All financial data, including, without
limitation, the statements of cash flow and income and operating expense, that
have been delivered to Lender in connection with the Loan (i) are true, complete
and correct in all material respects, (ii) accurately represent the financial
condition of Borrower and the Property, as applicable, as of the date of such
reports, and (iii) to the extent prepared or audited by n independent certified
public accounting firm, have been prepared in accordance with GAAP throughout
the periods covered, except as disclosed therein. Except for Permitted
Encumbrances, Borrower does not have any contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments that are known to Borrower and
reasonably likely to have a materially adverse effect on the Property or the
operation thereof as a retail shopping center, except as referred to or
reflected in said financial statements. Since the date of such financial
statements, there has been no materially adverse change in the financial
condition, operations or business of Borrower from that set forth in said
financial statements.
          4.1.12 Condemnation. No Condemnation or other similar proceeding has
been commenced or, to Borrower’s best knowledge, is threatened or contemplated
with respect to all or any portion of the Property or for the relocation of
roadways providing access to the Property.

 

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          4.1.13 Federal Reserve Regulations. No part of the proceeds of the
Loan will be used for the purpose of purchasing or acquiring any “margin stock”
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent with such
Regulation U or any other Regulations of such Board of Governors, or for any
purposes prohibited by Legal Requirements or by the terms and conditions of this
Agreement or the other Loan Documents.
          4.1.14 Utilities and Public Access. The Property has rights of access
to public ways and is served by water, sewer, sanitary sewer and storm drain
facilities adequate to service the Property for its intended uses. All public
utilities necessary or convenient to the full use and enjoyment of the Property
are located either in the public right-of-way abutting the Property (which are
connected so as to serve the Property without passing over other property) or in
recorded easements serving the Property and such easements are set forth in and
insured by the Title Insurance Policy. All roads necessary for the use of the
Property for its current purposes have been completed and dedicated to public
use and accepted by all Governmental Authorities.
          4.1.15 Not a Foreign Person. Borrower is not a “foreign person” within
the meaning of §1445(f)(3) of the Code.
          4.1.16 Separate Lots. The Property is comprised of one (1) or more
parcels which constitute a separate tax lot or lots and does not constitute a
portion of any other tax lot not a part of the Property.
          4.1.17 Assessments. There are no pending or proposed special or other
assessments for public improvements or otherwise affecting the Property, nor are
there any contemplated improvements to the Property that may result in such
special or other assessments.
          4.1.18 Enforceability. The Loan Documents are not subject to any right
of rescission, set-off, counterclaim or defense by Borrower or Guarantor,
including the defense of usury, nor would the operation of any of the terms of
the Loan Documents, or the exercise of any right thereunder, render the Loan
Documents unenforceable (subject to principles of equity and bankruptcy,
insolvency and other laws generally affecting creditors’ rights and the
enforcement of debtors’ obligations), and neither Borrower nor Guarantor have
asserted any right of rescission, set-off, counterclaim or defense with respect
thereto.
          4.1.19 No Prior Assignment. There are no prior assignments of the
Leases or any portion of the Rents due and payable or to become due and payable
which are presently outstanding.
          4.1.20 Insurance. Borrower has obtained and has delivered to Lender
certified copies of the Policies reflecting the insurance coverages, amounts and
other requirements set forth in this Agreement. No claims have been made or are
currently pending, outstanding or otherwise remain unsatisfied under any such
Policy, and neither Borrower nor any other Person, has done, by act or omission,
anything which would impair the coverage of any such Policy.
          4.1.21 Use of Property. The Property is used exclusively for retail
shopping center purposes and ancillary office uses (to the extent currently
utilized therefore) and other appurtenant and related uses.

 

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          4.1.22 Certificate of Occupancy; Licenses. 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 as a retail shopping center (collectively, the
“Licenses”), have been obtained and are in full force and effect. Borrower shall
keep and maintain all Licenses necessary for the operation of the Property as a
retail shopping center. The use being made of the Property is in conformity with
the certificate of occupancy issued for the Property.
          4.1.23 Flood Zone. None of the Improvements on the Property are
located in an area as identified by the Federal Emergency Management Agency as
an area having special flood hazards and, if so located, the flood insurance
required pursuant to Section 6.1(a)(i) is in full force and effect with respect
to the Property.
          4.1.24 Physical Condition. The Property, including, without
limitation, all buildings, improvements, parking facilities, sidewalks, storm
drainage systems, roofs, plumbing systems, HVAC systems, fire protection
systems, electrical systems, equipment, elevators, exterior sidings and doors,
landscaping, irrigation systems and all structural components, are in good
condition, order and repair in all material respects; there exists no structural
or other material defects or damages in the Property, whether latent or
otherwise, and Borrower has not received notice from any insurance company or
bonding company of any defects or inadequacies in the Property, or any part
thereof, which would adversely affect the insurability of the same or cause the
imposition of extraordinary premiums or charges thereon or of any termination or
threatened termination of any policy of insurance or bond.
          4.1.25 Boundaries. All of the improvements which were included in
determining the appraised value of the Property lie wholly within the boundaries
and building restriction lines of the Property, and no improvements on adjoining
properties encroach upon the Property, and no easements or other encumbrances
upon the Property encroach upon any of the Improvements, so as to affect the
value or marketability of the Property except those which are insured against by
the Title Insurance Policy.
          4.1.26 Leases. The Property is not subject to any leases other than
the Leases described in the rent roll attached hereto as Schedule I and made a
part hereof. Borrower is the owner and lessor of landlord’s interest in the
Leases. No Person has any possessory interest in the Property or right to occupy
the same except under and pursuant to the provisions of the Leases. The current
Leases are in full force and effect and to the best of Borrower’s knowledge,
there are no defaults thereunder by either party and there are no conditions
that, with the passage of time or the giving of notice, or both, would
constitute defaults thereunder. No Rent (including security deposits) has been
paid more than one (1) month in advance of its due date. To the best of
Borrower’s knowledge, all work to be completed by Borrower prior to the date
hereof under each Lease has been performed as required and has been accepted by
the applicable tenant, and any payments, free rent, partial rent, rebate of rent
or other payments, credits, allowances or abatements required to be given by
Borrower to any tenant has already been received by such tenant. There has been
no prior sale, transfer or assignment, hypothecation or pledge of any Lease or
of the Rents received therein. To the best of Borrower’s knowledge, no tenant
listed on Schedule I has assigned its Lease or sublet all or any portion of the
premises demised thereby, no such tenant holds its leased premises under
assignment or sublease, nor does anyone except such

 

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tenant and its employees occupy such leased premises. No tenant under any Lease
has a right or option pursuant to such Lease or otherwise to purchase all or any
part of the leased premises or the building of which the leased premises are a
part. No tenant under any Lease has any right or option for additional space in
the Improvements. Except as otherwise disclosed by the Environmental Report (as
defined in the Mortgage), no hazardous wastes or toxic substances, as defined by
applicable federal, state or local statutes, rules and regulations, have been
disposed, stored or treated by any tenant under any Lease on or about the leased
premises nor does Borrower have any knowledge of any tenant’s intention to use
its leased premises for any activity which, directly or indirectly, involves the
use, generation, treatment, storage, disposal or transportation of any petroleum
product or any toxic or hazardous chemical, material, substance or waste.
          4.1.27 Survey. The Survey for the Property delivered to Lender in
connection with this Agreement has been prepared in accordance with the
provisions of Section 3.1.3(c) hereof, and does not fail to reflect any material
matter affecting the Property or the title thereto.
          4.1.28 Inventory. Borrower is the owner of all of the Equipment,
Fixtures and Personal Property (as such terms are defined in the Mortgage)
located on or at the Property and shall not lease any Equipment, Fixtures or
Personal Property other than as permitted hereunder. All of the Equipment,
Fixtures and Personal Property are sufficient to operate the Property in the
manner required hereunder and in the manner in which it is currently operated.
          4.1.29 Filing and Recording Taxes. All transfer taxes, deed stamps,
intangible taxes or other amounts in the nature of transfer taxes required to be
paid by any Person under applicable Legal Requirements currently in effect in
connection with the transfer of the Property to Borrower have been paid. All
mortgage, mortgage recording, stamp, intangible or other similar tax required to
be paid by any Person under applicable Legal Requirements currently in effect in
connection with the execution, delivery, recordation, filing, registration,
perfection or enforcement of any of the Loan Documents, including, without
limitation, the Mortgage, have been paid, and, under current Legal Requirements,
the Mortgage is enforceable in accordance with its terms by Lender (or any
subsequent holder thereof), subject to principles of equity and bankruptcy,
insolvency and other laws generally applicable to creditors’ rights and the
enforcement of debtors’ obligations.
          4.1.30 Special Purpose Entity/Separateness. (a) Until the Debt has
been paid in full, Borrower hereby represents, warrants and covenants that
Borrower is, shall be and shall continue to be a Special Purpose Entity.
          (b) The representations, warranties and covenants set forth in
Section 4.1.30(a) shall survive for so long as any amount remains payable to
Lender under this Agreement or any other Loan Document.
          (c) All of the facts stated and all of the assumptions made in the
Insolvency Opinion, including, but not limited to, in any exhibits attached
thereto, are true and correct in all respects and all facts stated and all
assumptions made in any subsequent non-consolidation opinion required to be
delivered in connection with the Loan Documents (an “Additional Insolvency
Opinion”), including, but not limited to, any exhibits attached thereto, will
have

 

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been and shall be true and correct in all respects. Borrower has complied and
will comply with, and Principal has complied with, all of the assumptions made
with respect to Borrower in the Insolvency Opinion. Borrower will have complied
and will comply with all of the assumptions made with respect to Borrower in any
Additional Insolvency Opinion. Each entity other than Borrower and Principal
with respect to which an assumption shall be made in any Additional Insolvency
Opinion will have complied and will comply with all of the assumptions made with
respect to it in any Additional Insolvency Opinion.
          4.1.31 Property Management Agreement. The Management Agreement is in
full force and effect and there is no default thereunder by any party thereto
and no event has occurred that, with the passage of time and/or the giving of
notice would constitute a default thereunder. The Management Agreement was
entered into on commercially reasonable terms.
          4.1.32 Illegal Activity. No portion of the Property has been or will
be purchased with proceeds of any illegal activity.
          4.1.33 No Change in Facts or Circumstances; Disclosure. All
information submitted by and on behalf of Borrower to Lender and in all
financial statements, rent rolls (including the rent roll attached hereto as
Schedule I), reports, certificates and other documents submitted in connection
with the Loan or in satisfaction of the terms thereof and all statements of fact
made by Borrower in this Agreement or in any other Loan Document, are accurate,
complete and correct in all material respects. There has been no material
adverse change in any condition, fact, circumstance or event that would make any
such information inaccurate, incomplete or otherwise misleading in any material
respect or that otherwise materially and adversely affects or might materially
and adversely affect the use, operation or value of the Property or the business
operations or the financial condition of Borrower. Borrower has disclosed to
Lender all material facts and has not failed to disclose any material fact that
could cause any Provided Information or representation or warranty made herein
to be materially misleading.
          4.1.34 Investment Company Act. Borrower is not (a) an “investment
company” or a company “controlled” by an “investment company,” within the
meaning of the Investment Company Act of 1940, as amended; (b) 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 (c) subject to any
other federal or state law or regulation which purports to restrict or regulate
its ability to borrow money.
          4.1.35 Embargoed Person. As of the date hereof and at all times
throughout the term of the Loan, including after giving effect to any Transfers
permitted pursuant to the Loan Documents, (a) none of the funds or other assets
of Borrower and Guarantor constitute property of, or are beneficially owned,
directly or indirectly, by any Embargoed Person; (b) no Embargoed Person has any
interest of any nature whatsoever in Borrower or Guarantor, as applicable, with
the result that the investment in Borrower or Guarantor, as applicable (whether
directly or indirectly), is prohibited by law or the Loan is in violation of
law; and (c) none of the funds of Borrower or Guarantor, as applicable have been
derived from any unlawful activity with the result that the investment in
Borrower or Guarantor, as applicable (whether directly or indirectly), is
prohibited by law or the Loan is in violation of law.

 

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          4.1.36 Principal Place of Business; State of Organization. Borrower’s
principal place of business as of the date hereof is the address set forth in
the introductory paragraph of this Agreement. The Borrower is organized under
the laws of the State of Indiana.
          4.1.37 Loan to Value. The maximum principal amount of the Loan does
not exceed eighty percent (80%) of the fair market value of the Property.
          4.1.38 Mortgage Taxes. As of the date hereof, Borrower represents that
it has paid all state, county and municipal recording and all other taxes
imposed upon the execution and recordation of the Mortgage.
          4.1.39 Cash Management Account. Borrower hereby represents and
warrants to Lender that:
          (a) This Agreement, together with the other Loan Documents, create a
valid and continuing security interest (as defined in the Uniform Commercial
Code of the State of New York) in the Lockbox Account and Cash Management
Account in favor of Lender, which security interest is prior to all other Liens,
other than Permitted Encumbrances, and is enforceable as such against creditors
of and purchasers from Borrower. Other than in connection with the Loan
Documents and except for Permitted Encumbrances, Borrower has not sold, pledged,
transferred or otherwise conveyed the Lockbox Account and Cash Management
Account ;
          (b) Each of the Lockbox Account and Cash Management Account constitute
“deposit accounts” and/or “securities accounts” within the meaning of the
Uniform Commercial Code of the State of New York);
          (c) Pursuant and subject to the terms hereof and the other applicable
Loan Documents, the Lockbox Bank and Agent have agreed to comply with all
instructions originated by Lender, without further consent by Borrower,
directing disposition of the Lockbox Account and Cash Management Account and all
sums at any time held, deposited or invested therein, together with any interest
or other earnings thereon, and all proceeds thereof (including proceeds of sales
and other dispositions), whether accounts, general intangibles, chattel paper,
deposit accounts, instruments, documents or securities; and
          (d) The Lockbox Account and Cash Management Account are not in the
name of any Person other than Borrower, as pledgor, or Lender, as pledgee.
Borrower has not consented to the Lockbox Bank and Agent complying with
instructions with respect to the Lockbox Account and Cash Management Account
from any Person other than Lender.
          Section 4.2 Survival of Representations. Borrower agrees that all of
the representations and warranties of Borrower set forth in Section 4.1 hereof
and elsewhere in this Agreement and in the other Loan Documents shall survive
for so long as any amount remains owing to Lender under this Agreement or any of
the other Loan Documents by Borrower. All representations, warranties, covenants
and agreements made in this Agreement or in the other Loan Documents by Borrower
shall be deemed to have been relied upon by Lender notwithstanding any
investigation heretofore or hereafter made by Lender or on its behalf.

 

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          V. BORROWER COVENANTS
          Section 5.1 Affirmative Covenants. From the date hereof and until
payment and performance in full of all obligations of Borrower under the Loan
Documents or the earlier release of the Lien of the Mortgage encumbering the
Property (and all related obligations) in accordance with the terms of this
Agreement and the other Loan Documents, Borrower hereby covenants and agrees
with Lender that:
          5.1.1 Existence; Compliance with Legal Requirements. Borrower shall do
or cause to be done all things necessary to preserve, renew and keep in full
force and effect its existence, rights, licenses, permits and franchises and
comply with all Legal Requirements applicable to it and the Property. There
shall never be committed by Borrower, and Borrower shall never permit any other
Person in occupancy of or involved with the operation or use of the Property to
commit any act or omission affording the federal government or any state or
local government the right of forfeiture against the Property or any part
thereof or any monies paid in performance of Borrower’s obligations under any of
the Loan Documents. Borrower hereby covenants and agrees not to commit, permit
or suffer to exist any act or omission affording such right of forfeiture.
Borrower shall at all times maintain, preserve and protect all franchises and
trade names and preserve all the remainder of its property used or useful in the
conduct of its business and shall keep the Property in good working order and
repair, and from time to time make, or cause to be made, all reasonably
necessary repairs, renewals, replacements, betterments and improvements thereto,
all as more fully provided in the Mortgage. Borrower shall keep the Property
insured at all times by financially sound and reputable insurers, to such extent
and against such risks, and maintain liability and such other insurance, as is
more fully provided in this Agreement. Borrower shall operate the Property in
accordance with the terms and provisions of the O&M Agreement in all material
respects. After prior written notice to Lender, Borrower, at its own expense,
may contest by appropriate legal proceeding promptly initiated and conducted in
good faith and with due diligence, the validity of any Legal Requirement, the
applicability of any Legal Requirement to Borrower or the Property or any
alleged violation of any Legal Requirement, provided that (i) no Default or
Event of Default has occurred and remains uncured; (ii) Borrower is permitted to
do so under the provisions of any mortgage or deed of trust superior in lien to
the Mortgage; (iii) such proceeding shall be permitted under and be conducted in
accordance with the provisions of any instrument to which Borrower is subject
and shall not constitute a default thereunder and such proceeding shall be
conducted in accordance with all applicable statutes, laws and ordinances;
(iv) neither the Property nor any part thereof or interest therein will be in
danger of being sold, forfeited, terminated, cancelled or lost; (v) Borrower
shall promptly upon final determination thereof comply with any such Legal
Requirement determined to be valid or applicable or cure any violation of any
Legal Requirement; (vi) such proceeding shall suspend the enforcement of the
contested Legal Requirement against Borrower or the Property; and (vii) Borrower
shall furnish such security as may be required in the proceeding, or as may be
requested by Lender, to insure compliance with such Legal Requirement, together
with all interest and penalties payable in connection therewith. Lender may
apply any such security, as necessary to cause compliance with such Legal
Requirement at any time when, in the reasonable judgment of Lender, the
validity, applicability or violation of such Legal Requirement is finally
established or the Property (or any part thereof or interest therein) shall be
in danger of being sold, forfeited, terminated, cancelled or lost.

 

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          5.1.2 Taxes and Other Charges. Borrower shall pay all Taxes and Other
Charges now or hereafter levied or assessed or imposed against the Property or
any part thereof as the same become due and payable; provided, however,
Borrower’s obligation to directly pay Taxes shall be suspended for so long as
Borrower complies with the terms and provisions of Section 7.2 hereof. Borrower
will deliver to Lender receipts for payment or other evidence satisfactory to
Lender that the Taxes and Other Charges have been so paid or are not then
delinquent no later than ten (10) days prior to the date on which the Taxes
and/or Other Charges would otherwise be delinquent if not paid. Borrower shall
furnish to Lender receipts for the payment of the Taxes and the Other Charges
prior to the date the same shall become delinquent (provided, however, Borrower
is not required to furnish such receipts for payment of Taxes in the event that
such Taxes have been paid by Lender pursuant to Section 7.2 hereof). Borrower
shall not suffer and shall promptly cause to be paid and discharged any Lien or
charge whatsoever which may be or become a Lien or charge against the Property,
and shall promptly pay for all utility services provided to the Property. After
prior written notice to Lender, Borrower, at its own expense, may contest by
appropriate legal proceeding, promptly initiated and conducted in good faith and
with due diligence, the amount or validity or application in whole or in part of
any Taxes or Other Charges, provided that (i) no Default or Event of Default has
occurred and remains uncured; (ii) Borrower is permitted to do so under the
provisions of any mortgage or deed of trust superior in lien to the Mortgage;
(iii) such proceeding shall be permitted under and be conducted in accordance
with the provisions of any other instrument to which Borrower is subject and
shall not constitute a default thereunder and such proceeding shall be conducted
in accordance with all applicable statutes, laws and ordinances; (iv) neither
the Property nor any part thereof or interest therein will be in danger of being
sold, forfeited, terminated, cancelled or lost; (v) Borrower shall promptly upon
final determination thereof pay the amount of any such Taxes or Other Charges,
together with all costs, interest and penalties which may be payable in
connection therewith; (vi) such proceeding shall suspend the collection of such
contested Taxes or Other Charges from the Property; and (vii) Borrower shall
furnish such security as may be required in the proceeding, or as may be
requested by Lender, to insure the payment of any such Taxes or Other Charges,
together with all interest and penalties thereon. Lender may pay over any such
cash deposit or part thereof held by Lender to the claimant entitled thereto at
any time when, in the judgment of Lender, the entitlement of such claimant is
established or the Property (or part thereof or interest therein) shall be in
danger of being sold, forfeited, terminated, cancelled or lost or there shall be
any danger of the Lien of the Mortgage being primed by any related Lien.
          5.1.3 Litigation. Borrower shall give prompt written notice to Lender
of any litigation or governmental proceedings pending or threatened against
Borrower and/or Guarantor which might materially adversely affect Borrower’s or
Guarantor’s condition (financial or otherwise) or business or the Property.
          5.1.4 Access to Property. Borrower shall permit agents,
representatives and employees of Lender to inspect the Property or any part
thereof at reasonable hours upon reasonable advance notice.
          5.1.5 Notice of Default. Borrower shall promptly advise Lender of any
material adverse change in Borrower’s condition, financial or otherwise, or of
the occurrence of any Default or Event of Default of which Borrower has
knowledge.

 

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          5.1.6 Cooperate in Legal Proceedings. Borrower shall cooperate fully
with Lender with respect to any proceedings before any court, board or other
Governmental Authority which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the other Loan Documents
and, in connection therewith, permit Lender, at its election, to participate in
any such proceedings.
          5.1.7 Perform Loan Documents. Borrower shall observe, perform and
satisfy all the terms, provisions, covenants and conditions of, and shall pay
when due all costs, fees and expenses to the extent required under the Loan
Documents executed and delivered by, or applicable to, Borrower.
          5.1.8 Award and Insurance Benefits. Borrower shall cooperate with
Lender in obtaining for Lender the benefits of any Awards or Insurance Proceeds
lawfully or equitably payable in connection with the Property, and Lender shall
be reimbursed for any expenses incurred in connection therewith (including
attorneys’ fees and disbursements, and the payment by Borrower of the expense of
an appraisal on behalf of Lender in case of Casualty or Condemnation affecting
the Property or any part thereof) out of such Insurance Proceeds.
          5.1.9 Further Assurances. Borrower shall, at Borrower’s sole cost and
expense:
          (a) furnish to Lender all instruments, documents, boundary surveys,
footing or foundation surveys, certificates, plans and specifications,
appraisals, title and other insurance reports and agreements, and each and every
other document, certificate, agreement and instrument required to be furnished
by Borrower pursuant to the terms of the Loan Documents or which are reasonably
requested by Lender in connection therewith;
          (b) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts necessary
or desirable, to evidence, preserve and/or protect the collateral at any time
securing or intended to secure the obligations of Borrower under the Loan
Documents, as Lender may reasonably require; and
          (c) do and execute all and such further lawful and reasonable acts,
conveyances and assurances for the better and more effective carrying out of the
intents and purposes of this Agreement and the other Loan Documents, as Lender
shall reasonably require from time to time.
          5.1.10 Principal Place of Business, State of Organization. Borrower
will not cause or permit any change to be made in its name, identity (including
its trade name or names), place of organization or formation (as set forth in
Section 4.1.36 hereof) or Borrower’s corporate or partnership structure unless
Borrower shall have first notified Lender in writing of such change at least
thirty (30) days prior to the effective date of such change, and shall have
first taken all reasonable action required by Lender for the purpose of
perfecting or protecting the lien and security interests of Lender pursuant to
this Agreement, the Cash Management Agreement and the other Loan Documents and,
in the case of a change in Borrower’s structure, without first obtaining the
prior consent of Lender. Upon Lender’s request, Borrower shall execute and
deliver additional financing statements, security agreements and other
instruments which may be

 

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necessary to effectively evidence or perfect Lender’s security interest in the
Property as a result of such change of principal place of business or place of
organization. Borrower’s principal place of business and chief executive office,
and the place where Borrower keeps its books and records, including recorded
data of any kind or nature, regardless of the medium or recording, including
software, writings, plans, specifications and schematics, has been for the
preceding four months (or, if less, the entire period of the existence of
Borrower) and will continue to be the address of Borrower set forth at the
introductory paragraph of this Agreement (unless Borrower notifies Lender in
writing at least thirty (30) days prior to the date of such change). Borrower’s
organizational identification number, if any, assigned by the state of
incorporation or organization is correctly set forth in the introductory
paragraph of this Agreement. Borrower shall promptly notify Lender of any change
in its organizational identification number. If Borrower does not now have an
organizational identification number and later obtains one, Borrower promptly
shall notify Lender of such organizational identification number.
          5.1.11 Financial Reporting. (a) Borrower will keep and maintain or
will cause to be kept and maintained on a Fiscal Year basis, in accordance with
GAAP (or such other accounting basis acceptable to Lender), proper and accurate
books, records and accounts reflecting all of the financial affairs of Borrower
and all items of income and expense in connection with the operation of the
Property. Lender shall have the right from time to time at all times during
normal business hours upon reasonable notice to examine such books, records and
accounts at the office of Borrower or any other Person maintaining such books,
records and accounts and to make such copies or extracts thereof as Lender shall
desire at Lender’s expense unless an Event of Default shall have occurred. After
the occurrence of an Event of Default, Borrower shall pay any costs and expenses
incurred by Lender to examine Borrower’s accounting records with respect to the
Property, as Lender shall determine to be necessary or appropriate in the
protection of Lender’s interest. Upon Lender’s reasonable request, Borrower
shall deliver to Lender such other information necessary and sufficient to
fairly represent the financial condition of Borrower and the Property.
          (b) Borrower will furnish to Lender annually, within one hundred
twenty (120) days following the end of each Fiscal Year of Borrower, a complete
internal copy of Borrower’s annual (unaudited) financial statements covering the
Property for such Fiscal Year and containing statements of profit and loss for
Borrower and the Property and a balance sheet for Borrower. Such statements
shall set forth the financial condition and the results of operations for the
Property for such Fiscal Year, and shall include, but not be limited to, amounts
representing annual Net Cash Flow, Net Operating Income, Gross Income from
Operations and Operating Expenses. Borrower’s annual financial statements shall
be accompanied by (i) a comparison of the budgeted income and expenses and the
actual income and expenses for the prior Fiscal Year and (ii) an Officer’s
Certificate stating that each such annual financial statement presents fairly
the financial condition and the results of operations of Borrower and the
Property being reported upon and has been prepared in accordance with GAAP.
Together with Borrower’s annual financial statements, Borrower shall furnish to
Lender an Officer’s Certificate certifying as of the date thereof whether there
exists an event or circumstance which constitutes a Default or Event of Default
under the Loan Documents executed and delivered by, or applicable to, Borrower,
and if such Default or Event of Default exists, the nature thereof, the period
of time it has existed and the action then being taken to remedy the same.

 

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          (c) Borrower will furnish, or cause to be furnished, to Lender on or
before forty-five (45) days after the end of March, June, September and December
throughout the term of the Loan the following items, accompanied by an Officer’s
Certificate stating that such items are true, correct, accurate, and complete
and fairly present the financial condition and results of the operations of
Borrower and the Property (subject to normal year-end adjustments) as
applicable: (i) monthly, quarterly upon securitization and year-to-date
operating statements (including Capital Expenditures) prepared for each calendar
month, noting Net Operating Income, Gross Income from Operations, and Operating
Expenses (not including any contributions to the Replacement Reserve Fund and
the Required Repair Fund), and other information necessary and sufficient to
fairly represent the financial position and results of operation of the Property
during such calendar month, and containing a comparison of budgeted income and
expenses and the actual income and expenses together with a detailed explanation
of any variances of five percent (5%) or more between budgeted and actual
amounts for such periods for any individual items in excess of $10,000, all in
form satisfactory to Lender; (ii) a calculation reflecting the annual Debt
Service Coverage Ratio for the immediately preceding twelve (12) month period as
of the last day of such month accompanied by an Officers’ Certificate with
respect thereto; and (iii) a Net Cash Flow Schedule. In addition, such Officer’s
Certificate shall also state the representations and warranties of Borrower set
forth in Section 4.1.30 are true and correct as of the date of such certificate
and that there are no trade payables outstanding for more than sixty (60) days.
          (d) Borrower will furnish, or cause to be furnished, to Lender on or
before forty-five (45) days after the end March, June, September and December
throughout the term of the Loan, an occupancy report for the subject month,
accompanied by an Officer’s Certificate stating that such report is true,
correct, accurate, and complete and fairly presents the financial condition and
results of the operations of Borrower and the Property (subject to normal
year-end adjustments) as applicable.
          (e) For the partial year period commencing on the date hereof, and for
each Fiscal Year thereafter, Borrower shall submit to Lender an Annual Budget
not later than thirty (30) days prior to the commencement of such period or
Fiscal Year in form reasonably satisfactory to Lender. The Annual Budget shall
be subject to Lender’s written approval (each such Annual Budget, an “Approved
Annual Budget”). In the event that Lender objects to a proposed Annual Budget
submitted by Borrower, Lender shall advise Borrower of such objections within
fifteen (15) days after receipt thereof (and deliver to Borrower a reasonably
detailed description of such objections) and Borrower shall promptly revise such
Annual Budget and resubmit the same to Lender. Lender shall advise Borrower of
any objections to such revised Annual Budget within ten (10) days after receipt
thereof (and deliver to Borrower a reasonably detailed description of such
objections) and Borrower shall promptly revise the same in accordance with the
process described in this subsection until Lender approves the Annual Budget.
Until such time that Lender approves a proposed Annual Budget, the most recently
Approved Annual Budget shall apply; provided that, such Approved Annual Budget
shall be adjusted to reflect actual increases in Taxes, Insurance Premiums and
Other Charges Notwithstanding anything to the contrary contained herein, Lender
hereby approves Borrower’s 2006 Annual Budget attached hereto as
Schedule 5.1.11(e).

 

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          (f) In the event that, Borrower must incur an extraordinary operating
expense or capital expense not set forth in the Approved Annual Budget (each an
“Extraordinary Expense”), then Borrower shall promptly deliver to Lender a
reasonably detailed explanation of such proposed Extraordinary Expense for
Lender’s approval, except in the case of emergency (provided that Borrower will
notify Lender promptly after such emergency).
          (g) Reserved.
          (h) Reserved.
          (i) Reserved.
          (j) Reserved.
          (k) Reserved.
          (l) Any reports, statements or other information required to be
delivered under this Agreement shall be delivered (i) in paper form, (ii) on a
diskette, and (iii) if requested by Lender and within the capabilities of
Borrower’s data systems without change or modification thereto, in electronic
form and prepared using a Microsoft Word for Windows or WordPerfect for Windows
files (which files may be prepared using a spreadsheet program and saved as word
processing files). Borrower agrees that Lender may disclose information
regarding the Property and Borrower that is provided to Lender pursuant to this
Section 5.1.11 in connection with the Securitization to such parties requesting
such information in connection with such Securitization.
          5.1.12 Business and Operations. Borrower will continue to engage in
the businesses presently conducted by it as and to the extent the same are
necessary for the ownership, maintenance, management and operation of the
Property. Borrower will qualify to do business and will remain in good standing
under the laws of the jurisdiction of its formation as and to the extent the
same are required for the ownership, maintenance, management and operation of
the Property. Borrower shall at all times during the term of the Loan, continue
to own and/or maintain all of the Equipment, Fixtures and Personal Property
which are necessary to operate the Property in the manner required hereunder and
in the manner in which it is currently operated.
          5.1.13 Title to the Property. Borrower will warrant and defend (a) the
title to the Property and every part thereof, subject only to Liens permitted
hereunder (including Permitted Encumbrances) and (b) the validity and priority
of the Lien of the Mortgage and the Assignment of Leases on the Property,
subject only to Liens permitted hereunder (including Permitted Encumbrances), in
each case against the claims of all Persons whomsoever. Borrower shall reimburse
Lender for any losses, costs, damages or expenses (including reasonable
attorneys’ fees and court costs) incurred by Lender if an interest in the
Property, other than as permitted hereunder, is claimed by another Person.
          5.1.14 Costs of Enforcement. In the event (a) that the Mortgage
encumbering the Property is foreclosed in whole or in part or that the Mortgage
is put into the hands of an attorney for collection, suit, action or
foreclosure, (b) of the foreclosure of any mortgage encumbering the Property
prior to or subsequent to the Mortgage in which proceeding Lender is

 

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made a party, or (c) of the bankruptcy, insolvency, rehabilitation or other
similar proceeding in respect of Borrower or any of its constituent Persons or
an assignment by Borrower or any of its constituent Persons for the benefit of
its creditors, Borrower, its successors or assigns, shall be chargeable with and
agrees to pay all costs of collection and defense, including attorneys’ fees and
costs, incurred by Lender or Borrower in connection therewith and in connection
with any appellate proceeding or post-judgment action involved therein, together
with all required service or use taxes.
          5.1.15 Estoppel Statement. (a) After request by Lender, Borrower shall
within ten (10) days furnish Lender with a statement, duly acknowledged and
certified, setting forth (i)  the original principal amount of the Note,
(ii) the unpaid principal amount of the Note, (iii) the Interest Rate of the
Note, (iv) the date installments of interest and/or principal were last paid,
(v) any offsets or defenses to the payment of the Debt, if any, and (vi) that
the Note, this Agreement, the Mortgage and the other Loan Documents are valid,
legal and binding obligations and have not been modified or if modified, giving
particulars of such modification.
          (b) Borrower shall deliver to Lender upon request, tenant estoppel
certificates from (i) each Anchor Tenant, (ii) each tenant leasing an entire
building at the Property, (iii) each tenant paying base rent in an amount equal
to or exceeding five percent (5%) of the Gross Income from Operations from the
Property occupied by such tenant in form and substance reasonably satisfactory
to Lender provided that Borrower shall not be required to deliver such
certificates more frequently than two (2) times in any calendar year.
          5.1.16 Loan Proceeds. Borrower shall use the proceeds of the Loan
received by it on the Closing Date only for the purposes set forth in
Section 2.1.4 hereof.
          5.1.17 Performance by Borrower. Borrower shall in a timely manner
observe, perform and fulfill each and every covenant, term and provision of each
Loan Document executed and delivered by, or applicable to, Borrower, and shall
not enter into or otherwise suffer or permit any amendment, waiver, supplement,
termination or other modification of any Loan Document executed and delivered
by, or applicable to, Borrower without the prior written consent of Lender.
          5.1.18 Confirmation of Representations. Borrower shall deliver, in
connection with any Securitization, (a) one (1) or more Officer’s Certificates
certifying as to the accuracy of all representations made by Borrower in the
Loan Documents as of the date of the closing of such Securitization in all
relevant jurisdictions, and (b) certificates of the relevant Governmental
Authorities in all relevant jurisdictions indicating the good standing and
qualification of Borrower, Principal and Guarantor as of the date of the
Securitization.
          5.1.19 No Joint Assessment. Borrower shall not suffer, permit or
initiate the joint assessment of the Property (a) with any other real property
constituting a tax lot separate from the Property, and (b) which constitutes
real property with any portion of the Property which may be deemed to constitute
personal property, or any other procedure whereby the lien of any taxes which
may be levied against such personal property shall be assessed or levied or
charged to such real property portion of the Property.

 

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          5.1.20 Leasing Matters. Any Material Lease (except for expansions of
existing Tenants pursuant to the terms of their respective Leases) with respect
to the Property written after the date hereof, shall be approved by Lender,
which approval shall not be unreasonably withheld, conditioned or delayed. Upon
request, Borrower shall furnish Lender with executed copies of all Leases. All
renewals of Leases and all proposed Leases shall provide for rental rates
comparable to existing local market rates. All proposed Leases shall be on
commercially reasonable terms and shall not contain any terms which would
materially affect Lender’s rights under the Loan Documents. All Leases executed
after the date hereof shall provide that they are subordinate to the Mortgage
and that the lessee agrees to attorn to Lender or any purchaser at a sale by
foreclosure or power of sale. Borrower (i) shall observe and perform the
obligations imposed upon the lessor under the Leases in a commercially
reasonable manner; (ii) shall enforce and may amend or terminate the terms,
covenants and conditions contained in the Leases upon the part of the lessee
thereunder to be observed or performed in a commercially reasonable manner and
in a manner not to impair the value of the Property involved except that no
termination by Borrower or acceptance of surrender by a tenant of any Leases
shall be permitted unless by reason of a tenant default and then only in a
commercially reasonable manner to preserve and protect the Property; provided,
however, that no such termination or surrender of any Material Lease will be
permitted without the written consent of Lender; (iii) shall not collect any of
the rents more than one (1) month in advance (other than security deposits);
(iv) shall not execute any other assignment of lessor’s interest in the Leases
or the Rents (except as contemplated by the Loan Documents); (v) shall not
alter, modify or change the terms of the Leases in a manner inconsistent with
the provisions of the Loan Documents without Lender’s prior written consent
which shall not be unreasonably withheld; and (vi) shall execute and deliver at
the request of Lender all such further assurances, confirmations and assignments
in connection with the Leases as Lender shall from time to time reasonably
require. Notwithstanding anything to the contrary contained herein, Borrower
shall not enter into a lease of all or substantially all of the Property without
Lender’s prior written consent. Further notwithstanding anything to the contrary
contained herein, Borrower shall provide Lender at least fifteen (15) days prior
notice for the approval or rejection of any proposed Lease demising over 10,000
square feet (each a “Material Lease”). In the event that Lender fails to respond
within the required time period, such failure shall be deemed to be the consent
and approval of the Material Lease by Lender if (I) Borrower has delivered to
Lender all required documents and information necessary to adequately and
completely evaluate the Material Lease, (II) Borrower has resubmitted the
Material Lease with the notation “IMMEDIATE RESPONSE REQUIRED, FAILURE TO
RESPOND TO THIS LEASE APPROVAL REQUEST WITHIN FIFTEEN (15) BUSINESS DAYS FROM
RECEIPT SHALL BE DEEMED TO BE LENDER’S APPROVAL OF THE LEASE” prominently
displayed in bold, all caps and fourteen (14) point or larger font at the top of
each page of the Material Lease and the envelope containing such Material Lease
and (III) Lender does not approve or reject the proposed Material Lease within
fifteen (15) Business Days from the date Lender receives the resubmitted
request; provided, however, in no event shall Lender’s consent be deemed given
without the written approval of Lender if the Lease is for 15,000 square feet or
greater.
          5.1.21 Alterations. Borrower shall obtain Lender’s prior written
consent to any alterations to any Improvements, which consent shall not be
unreasonably withheld or delayed except with respect to alterations that may
have a material adverse effect on Borrower’s financial condition, the value of
the Property or the Net Operating Income. Notwithstanding the

 

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foregoing, Lender’s consent shall not be required in connection with any
alterations that will not have a material adverse effect on Borrower’s financial
condition, the value of the Property or the Net Operating Income, provided that
such alterations are made in connection with (a) tenant improvement work
performed pursuant to the terms of any Lease executed on or before the date
hereof, (b) tenant improvement work performed pursuant to the terms and
provisions of a Lease and not adversely affecting any structural component of
any Improvements, any utility or HVAC system contained in any Improvements or
the exterior of any building constituting a part of any Improvements, or
(c) alterations performed in connection with the Restoration of the Property
after the occurrence of a Casualty or Condemnation in accordance with the terms
and provisions of this Agreement. If the total unpaid amounts due and payable
with respect to alterations to the Improvements at the Property (other than such
amounts to be paid or reimbursed by tenants under the Leases) shall at any time
exceed Seven Hundred Eighty Seven Thousand Five Hundred and 00/100 Dollars
($787,500.00) (the “Threshold Amount”), Borrower shall promptly deliver to
Lender as security for the payment of such amounts and as additional security
for Borrower’s obligations under the Loan Documents any of the following:
(A) cash, (B) U.S. Obligations, (C) other securities having a rating acceptable
to Lender and that the applicable Rating Agencies have confirmed in writing will
not, in and of itself, result in a downgrade, withdrawal or qualification of the
initial, or, if higher, then current ratings assigned to any Securities or any
class thereof in connection with any Securitization or (D) a completion and
performance bond or an irrevocable letter of credit (payable on sight draft
only) issued by a financial institution having a rating by S&P of not less than
“A-1+” if the term of such bond or letter of credit is no longer than three
(3) months or, if such term is in excess of three (3) months, issued by a
financial institution having a rating that is acceptable to Lender and that the
applicable Rating Agencies have confirmed in writing will not, in and of itself,
result in a downgrade, withdrawal or qualification of the initial, or, if
higher, then current ratings assigned to any Securities or class thereof in
connection with any Securitization. Such security shall be in an amount equal to
the excess of the total unpaid amounts with respect to alterations to the
Improvements on the Property (other than such amounts to be paid or reimbursed
by tenants under the Leases) over the Threshold Amount and Lender may apply such
security from time to time at the option of Lender to pay for such alterations.
          5.1.22 Operation of Property. (a) Borrower shall cause the Property to
be maintained in good and safe condition and operated, in all material respects,
in accordance with the Management Agreement (or Replacement Management
Agreement) as applicable. In the event that the Management Agreement expires or
is terminated (without limiting any obligation of Borrower to obtain Lender’s
consent to any termination or modification of the Management Agreement in
accordance with the terms and provisions of this Agreement), Borrower shall
promptly enter into a Replacement Management Agreement with Manager or another
Qualified Manager, as applicable.
          (b) Borrower shall: (i) promptly perform and/or observe, in all
material respects, all of the covenants and agreements required to be performed
and observed by it under the Management Agreement, and do all things necessary
to preserve and to keep unimpaired its material rights thereunder; (ii) promptly
notify Lender of any material default under the Management Agreement of which it
is aware; (iii) promptly deliver to Lender a copy of each financial statement,
business plan, capital expenditures plan, notice, report and estimate received
by it under the Management Agreement; and (iv) enforce the performance and
observance of all

 

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of the covenants and agreements required to be performed and/or observed by
Manager under the Management Agreement, in a commercially reasonable manner.
          5.1.23 Embargoed Person. Borrower has performed and shall perform
reasonable due diligence to insure that at all times throughout the term of the
Loan, including after giving effect to any Transfers permitted pursuant to the
Loan Documents, (a) none of the funds or other assets of Borrower, Principal and
Guarantor constitute property of, or are beneficially owned, directly or
indirectly, by any person, entity or government subject to trade restrictions
under U.S. law, including, but not limited to, The USA PATRIOT Act (including
the anti-terrorism provisions thereof), the International Emergency Economic
Powers Act, 50 U.S.C. §§ 1701, et seq., The Trading with the Enemy Act, 50
U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated
thereunder including those related to Specially Designated Nationals and
Specially Designated Global Terrorists, with the result that the investment in
Borrower, Principal or Guarantor, as applicable (whether directly or
indirectly), is prohibited by law or the Loan made by the Lender is in violation
of law (“Embargoed Person”); (b) no Embargoed Person has any interest of any
nature whatsoever in Borrower, Principal or Guarantor, as applicable, with the
result that the investment in Borrower, Principal or Guarantor, as applicable
(whether directly or indirectly), is prohibited by law or the Loan is in
violation of law; and (c) none of the funds of Borrower, Principal or Guarantor,
as applicable, have been derived from, or are the proceeds of, any unlawful
activity, including money laundering, terrorism or terrorism activities, with
the result that the investment in Borrower, Principal or Guarantor, as
applicable (whether directly or indirectly), is prohibited by law or the Loan is
in violation of law, or may cause the Property to be subject to forfeiture or
seizure.
          Section 5.2 Negative Covenants. From the date hereof until payment and
performance in full of all obligations of Borrower under the Loan Documents or
the earlier release of the Lien of the Mortgage and any other collateral in
accordance with the terms of this Agreement and the other Loan Documents,
Borrower covenants and agrees with Lender that it will not do, directly or
indirectly, any of the following:
          5.2.1 Operation of Property. (a) Borrower shall not, without Lender’s
prior written consent (which consent shall not be unreasonably withheld):
(i) surrender, terminate, cancel, amend or modify the Management Agreement;
provided, that Borrower may, without Lender’s consent, replace the Manager so
long as the replacement manager is a Qualified Manager pursuant to a Replacement
Management Agreement; (ii) reduce or consent to the reduction of the term of the
Management Agreement; (iii) increase or consent to the increase of the amount of
any charges under the Management Agreement; or (iv) otherwise modify, change,
supplement, alter or amend, or waive or release any of its rights and remedies
under, the Management Agreement in any material respect.
          (b) Following the occurrence and during the continuance of an Event of
Default, Borrower shall not exercise any rights, make any decisions, grant any
approvals or otherwise take any action under the Management Agreement without
the prior written consent of Lender, which consent may be granted, conditioned
or withheld in Lender’s sole discretion.
          5.2.2 Liens. Borrower shall not create, incur, assume or suffer to
exist any Lien on any portion of the Property or permit any such action to be
taken, except:

 

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               (i) Permitted Encumbrances;
               (ii) Liens created by or permitted pursuant to the Loan
Documents; and
               (iii) Liens for Taxes or Other Charges not yet due.
          5.2.3 Dissolution. Borrower shall not (a) engage in any dissolution,
liquidation or consolidation or merger with or into any other business entity,
(b) engage in any business activity not related to the ownership and operation
of the Property, (c) transfer, lease or sell, in one transaction or any
combination of transactions, the assets or all or substantially all of the
properties or assets of Borrower except to the extent permitted by the Loan
Documents, (d) modify, amend, waive or terminate its organizational documents or
its qualification and good standing in any jurisdiction or (e) cause the
Principal to (i) dissolve, wind up or liquidate or take any action, or omit to
take an action, as a result of which the Principal would be dissolved, wound up
or liquidated in whole or in part, or (ii) amend, modify, waive or terminate the
certificate of incorporation or bylaws of the Principal, in each case, without
obtaining the prior written consent of Lender or Lender’s designee.
          5.2.4 Change In Business. Borrower shall not enter into any line of
business other than the ownership and operation of the Property, or make any
material change in the scope or nature of its business objectives, purposes or
operations, or undertake or participate in activities other than the continuance
of its present business. Nothing contained in this Section 5.2.4 is intended to
expand the rights of Borrower contained in Section 5.2.10(d) hereof.
          5.2.5 Debt Cancellation. Borrower shall not cancel or otherwise
forgive or release any claim or debt (other than termination of Leases in
accordance herewith and for claims of less than $20,000) owed to Borrower by any
Person, except for adequate consideration and in the ordinary course of
Borrower’s business.
          5.2.6 Zoning. Borrower shall not initiate or consent to any zoning
reclassification of any portion of the Property or seek any variance under any
existing zoning ordinance or use or permit the use of any portion of the
Property in any manner that could result in such use becoming a non-conforming
use under any zoning ordinance or any other applicable land use law, rule or
regulation, without the prior consent of Lender.
          5.2.7 Intentionally Omitted.
          5.2.8 Intentionally Omitted.
          5.2.9 ERISA. (a) Borrower shall not engage in any transaction which
would cause any obligation, or action taken or to be taken, hereunder (or the
exercise by Lender of any of its rights under the Note, this Agreement or the
other Loan Documents) to be a non-exempt (under a statutory or administrative
class exemption) prohibited transaction under ERISA.
          (b) Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of the
Loan, as requested by Lender in its sole discretion, that (A) Borrower is not
and does not maintain an “employee

 

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benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I
of ERISA, or a “governmental plan” within the meaning of Section 3(32) of ERISA;
(B) Borrower is not subject to any state statute regulating investment of, or
fiduciary obligations with respect to governmental plans and (C) one or more of
the following circumstances is true:
               (i) Equity interests in Borrower are publicly offered securities,
within the meaning of 29 C.F.R. §2510.3-101(b)(2);
               (ii) Less than twenty-five percent (25%) of each outstanding
class of equity interests in Borrower are held by “benefit plan investors”
within the meaning of 29 C.F.R. §2510.3-101(f)(2); or
               (iii) Borrower qualifies as an “operating company” or a “real
estate operating company” within the meaning of 29 C.F.R. §2510.3-101(c) or (e).
          5.2.10 Transfers. (a) Borrower acknowledges that Lender has examined
and relied on the experience of Borrower and its stockholders, general partners,
members, principals and (if Borrower is a trust) beneficial owners in owning and
operating properties such as the Property in agreeing to make the Loan, and will
continue to rely on Borrower’s ownership of the Property as a means of
maintaining the value of the Property as security for repayment of the Debt and
the performance of the Other Obligations. Borrower acknowledges that Lender has
a valid interest in maintaining the value of the Property so as to ensure that,
should Borrower default in the repayment of the Debt or the performance of the
Other Obligations, Lender can recover the Debt by a sale of the Property.
          (b) Without the prior written consent of Lender, and except to the
extent otherwise set forth in this Section 5.2.10, Borrower shall not, and shall
not permit any Restricted Party do any of the following (collectively, a
“Transfer”): (i) sell, convey, mortgage, grant, bargain, encumber, pledge,
assign, grant options with respect to, or otherwise transfer or dispose of
(directly or indirectly, voluntarily or involuntarily, by operation of law or
otherwise, and whether or not for consideration or of record) the Property or
any part thereof or any legal or beneficial interest therein or (ii) permit a
Sale or Pledge of an interest in any Restricted Party, other than (A) pursuant
to Leases of space in the Improvements to tenants in accordance with the
provisions of Section 5.1.20 and (B) Permitted Transfers.
          (c) A Transfer shall include, but not be limited to, (i) an
installment sales agreement wherein Borrower agrees to sell the Property or any
part thereof for a price to be paid in installments; (ii) an agreement by
Borrower leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower’s right, title and interest
in and to any Leases or any Rents; (iii) if a Restricted Party is a corporation,
any merger, consolidation or Sale or Pledge of such corporation’s stock or the
creation or issuance of new stock; (iv) if a Restricted Party is a limited or
general partnership or joint venture, any merger or consolidation or the change,
removal, resignation or addition of a general partner or the Sale or Pledge of
the partnership interest of any general partner or any profits or proceeds
relating to such partnership interest, or the Sale or Pledge of limited
partnership interests or any profits or proceeds relating to such limited
partnership interest or the creation or issuance of new limited partnership
interests; (v) if

 

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a Restricted Party is a limited liability company, any merger or consolidation
or the change, removal, resignation or addition of a managing member or
non-member manager (or if no managing member, any member) or the Sale or Pledge
of the membership interest of a managing member (or if no managing member, any
member) or any profits or proceeds relating to such membership interest, or the
Sale or Pledge of non-managing membership interests or the creation or issuance
of new non-managing membership interests; (vi) if a Restricted Party is a trust
or nominee trust, any merger, consolidation or the Sale or Pledge of the legal
or beneficial interest in a Restricted Party or the creation or issuance of new
legal or beneficial interests; or (vii) the removal or the resignation of the
managing agent (including, without limitation, an Affiliated Manager) other than
in accordance with Section 5.1.22 hereof.
          (d) Notwithstanding the provisions of this Section 5.2.10, Lender’s
consent shall not be required in connection with one or a series of Transfers,
of not more than forty-nine percent (49%) of the stock, the limited partnership
interests or non-managing membership interests (as the case may be) in a
Restricted Party; provided, however, no such Transfer shall result in the change
of Control in a Restricted Party, and as a condition to each such Transfer,
Lender shall receive not less than thirty (30) days prior notice of such
proposed Transfer. If after giving effect to any such Transfer, more than
forty-nine percent (49%) in the aggregate of direct or indirect interests in a
Restricted Party are owned by any Person and its Affiliates that owned less than
forty-nine percent (49%) direct or indirect interest in such Restricted Party as
of the Closing Date, Borrower shall, no less than thirty (30) days prior to the
effective date of any such Transfer, deliver to Lender an Additional Insolvency
Opinion acceptable to Lender and the Rating Agencies. In addition, at all
times, (a) Acadia Realty Trust or their respective Permitted Transferees must
continue to Control Borrower, Guarantor and Manager, if any, and, own, directly
or indirectly, in the aggregate, at least a 51% legal and beneficial interest
in, Borrower, and (b) Acadia Realty Trust or its Permitted Transferees must
continue to Control, and own, directly or indirectly, at least a 20% legal and
beneficial interest in, each of Borrower, Guarantor and Manager. Notwithstanding
anything to the contrary contained herein, the following shall not be deemed to
be a Transfer as defined above: (i) the transfer, directly as a result of the
death of a natural person, of stock, membership interests, partnership interests
or other ownership interests previously held by the decedent in question to the
person(s) lawfully entitled thereto, (ii) any transfer, directly as a result of
the legal incapacity of a natural person, of stock, membership interests,
partnership interests or other ownership interests previously held by the
decedent in question to the person(s) lawfully entitled thereto, (iii) a sale,
transfer or hypothecation of a partnership, shareholder or membership interest
in Borrower (or any entity with an interest in Borrower), whichever the case may
be, by the current partner(s), shareholder(s) or member(s), as applicable, to an
immediate family member (i.e., parent, spouses, siblings, children or
grandchildren) of such partner, or shareholder or member or Principal (or a
trust to the benefit of any such person) and (iv) Transfers with respect to any
Person whose stocks or certificates are traded on a nationally recognized stock
exchange.
          (e) No consent to any assumption of the Loan shall occur on or before
the first (1st) anniversary of the first (1st) Payment Date. Thereafter,
Lender’s consent to a one (1) time Transfer of the Property and assumption of
the Loan shall not be unreasonably withheld provided that Lender receives sixty
(60) days prior written notice of such Transfer and no Event of Default has
occurred and is continuing, and further provided that the following additional
requirements are satisfied for all Transfers other than those described in
subsection (d) above:

 

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               (i) Borrower shall pay Lender a transfer fee equal to one-half of
one percent (0.50%) of the outstanding principal balance of the Loan at the time
of such transfer;
               (ii) Borrower shall pay any and all reasonable out-of-pocket
costs incurred in connection with such Transfer (including, without limitation,
Lender’s counsel fees and disbursements and all recording fees, title insurance
premiums and mortgage and intangible taxes and the fees and expenses of the
Rating Agencies pursuant to clause (x) below);
               (iii) The proposed transferee (the “Transferee”) or Transferee’s
Principals must have demonstrated expertise in owning and operating properties
similar in location, size, class and operation to the Property, which expertise
shall be reasonably determined by Lender;
               (iv) Transferee and Transferee’s Principals shall, as of the date
of such transfer, have an aggregate net worth and liquidity reasonably
acceptable to Lender;
               (v) Transferee, Transferee’s Principals and all other entities
which may be owned or Controlled directly or indirectly by Transferee’s
Principals (“Related Entities”) must not have been party to any bankruptcy
proceedings, voluntary or involuntary, made an assignment for the benefit of
creditors or taken advantage of any insolvency act, or any act for the benefit
of debtors within seven (7) years prior to the date of the proposed Transfer;
               (vi) Transferee shall assume all of the obligations of Borrower
under the Loan Documents in a manner satisfactory to Lender in all respects,
including, without limitation, by entering into an assumption agreement in form
and substance satisfactory to Lender;
               (vii) There shall be no material litigation or regulatory action
pending or threatened against Transferee, Transferee’s Principals or Related
Entities which is not reasonably acceptable to Lender;
               (viii) Transferee, Transferee’s Principals and Related Entities
shall not have defaulted under its or their obligations with respect to any
other Indebtedness in a manner which is not reasonably acceptable to Lender;
               (ix) Transferee and Transferee’s Principals must be able to
satisfy all the representations and covenants set forth in Sections 4.1.30,
4.1.35, 5.1.23 and 5.2.9 of this Agreement, no Default or Event of Default shall
otherwise occur as a result of such Transfer, and Transferee and Transferee’s
Principals shall deliver (A) all organizational documentation reasonably
requested by Lender, which shall be reasonably satisfactory to Lender and
(B) all certificates, agreements and covenants reasonably required by Lender;

 

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               (x) Transferee shall be approved by the Rating Agencies selected
by Lender, which approval, if required by Lender, shall take the form of a
confirmation in writing from such Rating Agencies to the effect that such
Transfer will not result in a requalification, reduction, downgrade or
withdrawal of the ratings in effect immediately prior to such assumption or
transfer for the Securities or any class thereof issued in connection with a
Securitization which are then outstanding;
               (xi) Borrower or Transferee, at its sole cost and expense, shall
deliver to Lender an Additional Insolvency Opinion reflecting such Transfer
satisfactory in form and substance to Lender;
               (xii) Prior to any release of Guarantor, one (1) or more
substitute guarantors reasonably acceptable to Lender shall have assumed all of
the liabilities and obligations of Guarantor under the Guaranty and
Environmental Indemnity executed by Guarantor or execute a replacement guaranty
and environmental indemnity reasonably satisfactory to Lender;
               (xiii) Borrower shall deliver, at its sole cost and expense, an
endorsement to the Title Insurance Policy, as modified by the assumption
agreement, as a valid first lien on the Property and naming the Transferee as
owner of the Property, which endorsement shall insure that, as of the date of
the recording of the assumption agreement, the Property shall not be subject to
any additional exceptions or liens other than those contained in the Title
Policy issued on the date hereof and the Permitted Encumbrances; and
               (xiv) The Property shall be managed by a Qualified Manager
pursuant to a Replacement Management Agreement.
          Immediately upon a Transfer to such Transferee and the satisfaction of
all of the above requirements, the named Borrower and Guarantor herein shall be
released from all liability under this Agreement, the Note, the Mortgage and the
other Loan Documents accruing after such Transfer. The foregoing release shall
be effective upon the date of such Transfer, but Lender agrees to provide
written evidence thereof reasonably requested by Borrower.
          (f) Lender shall not be required to demonstrate any actual impairment
of its security or any increased risk of default hereunder in order to declare
the Debt immediately due and payable upon Borrower’s Transfer without Lender’s
consent. This provision shall apply to every Transfer regardless of whether
voluntary or not, or whether or not Lender has consented to any previous
Transfer.

  VI.   INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS

          Section 6.1 Insurance. (a) Borrower shall obtain and maintain, or
cause to be maintained, insurance for Borrower and the Property providing at
least the following coverages:

 

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               (i) comprehensive all risk insurance (“Special Form”) including,
but not limited to, loss caused by any type of windstorm or hail on the
Improvements and the Personal Property, (A) in an amount equal to one hundred
percent (100%) of the “Full Replacement Cost,” which for purposes of this
Agreement shall mean actual replacement value (exclusive of costs of
excavations, foundations, underground utilities and footings) with a waiver of
depreciation, but the amount shall in no event be less than the outstanding
principal balance of the Loan; (B) containing an agreed amount endorsement with
respect to the Improvements and Personal Property waiving all co-insurance
provisions or to be written on a no co-insurance form; (C) providing for no
deductible in excess of Twenty-Five Thousand and 00/100 Dollars ($25,000.00) for
all such insurance coverage excluding windstorm and earthquake and (D)  if any
of the Improvements or the use of the Property shall at any time constitute
legal non-conforming structures or uses, coverage for loss due to operation of
law in an amount equal to the full Replacement Cost, coverage for demolition
costs and coverage for increased costs of construction. In addition, Borrower
shall obtain: (x) if any portion of the Improvements is currently or at any time
in the future located in a federally designated “special flood hazard area”,
flood hazard insurance in an amount equal to the lesser of (1) the outstanding
principal balance of the Note or (2) the maximum amount of such insurance
available under the National Flood Insurance Act of 1968, the Flood Disaster
Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as
each may be amended or such greater amount as Lender shall require and
(y) earthquake insurance in amounts and in form and substance satisfactory to
Lender in the event the Property is located in an area with a high degree of
seismic activity;
               (ii) business income insurance (A) with loss payable to Lender;
(B) covering all risks required to be covered by the insurance provided for in
subsection (i) above; (C) in an amount equal to one hundred percent (100%) of
the projected gross revenues from the operation of the Property (as reduced to
reflect expenses not incurred during a period of Restoration) for a period of at
least eighteen (18) months after the date of the Casualty; and (D) containing an
extended period of indemnity endorsement which provides that after the physical
loss to the Improvements and Personal Property has been repaired, the continued
loss of income will be insured until such income either returns to the same
level it was at prior to the loss, or the expiration of six (6) months from the
date that the Property is repaired or replaced and operations are resumed,
whichever first occurs, and notwithstanding that the policy may expire prior to
the end of such period. The amount of such business income insurance shall be
determined prior to the date hereof and at least once each year thereafter based
on Borrower’s reasonable estimate of the gross revenues from the Property for
the succeeding eighteen (18) month period. Notwithstanding the provisions of
Section 2.7.1 hereof, all proceeds payable to Lender pursuant to this subsection
shall be held by Lender and shall be applied to the obligations secured by the
Loan Documents from time to time due and payable hereunder and under the Note;
provided, however, that nothing herein contained shall be deemed to relieve
Borrower of its obligations to pay the obligations secured by the Loan Documents
on the

 

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respective dates of payment provided for in this Agreement and the other Loan
Documents except to the extent such amounts are actually paid out of the
proceeds of such business income insurance;
               (iii) at all times during which structural construction, repairs
or alterations are being made with respect to the Improvements, and only if the
Property coverage form does not otherwise apply, (A) owner’s contingent or
protective liability insurance, otherwise known as Owner Contractor’s Protective
Liability, covering claims not covered by or under the terms or provisions of
the above mentioned commercial general liability insurance policy and (B) the
insurance provided for in subsection (i) above written in a so-called builder’s
risk completed value form (1) on a non-reporting basis, (2) against all risks
insured against pursuant to subsection (i) above, (3) including permission to
occupy the Property and (4) with an agreed amount endorsement waiving
co-insurance provisions;
               (iv) comprehensive boiler and machinery insurance, if steam
boilers or other pressure-fixed vessels are in operation, in amounts as shall be
reasonably required by Lender on terms consistent with the commercial property
insurance policy required under subsection (i) above;
               (v) commercial general liability insurance against claims for
personal injury, bodily injury, death or property damage occurring upon, in or
about the Property, such insurance (A) to be on the so-called “occurrence” form
with a combined limit of not less than Two Million and 00/100 Dollars
($2,000,000.00) in the aggregate and One Million and 00/100 Dollars
($1,000,000.00) per occurrence; (B) to continue at not less than the aforesaid
limit until required to be changed by Lender in writing by reason of changed
economic conditions making such protection inadequate and (C) to cover at least
the following hazards: (1) premises and operations; (2) products and completed
operations on an “if any” basis; (3) independent contractors; (4) blanket
contractual liability for all written contracts and (5) contractual liability
covering the indemnities contained in Article 9 of the Mortgage to the extent
the same is available;
               (vi) automobile liability coverage for all owned and non-owned
vehicles, including rented and leased vehicles containing minimum limits per
occurrence of One Million Dollars and 00/100 Dollars ($1,000,000.00);
               (vii) worker’s compensation and employee’s liability subject to
the worker’s compensation laws of the applicable state;
               (viii) umbrella and excess liability insurance in an amount not
less than Fifty Million and 00/100 Dollars ($50,000,000.00) per occurrence on
terms consistent with the commercial general liability insurance policy required
under subsection (v) above, including, but not limited to, supplemental coverage
for employer liability and automobile liability, which umbrella liability
coverage shall apply in excess of the automobile liability coverage in
clause (vi) above;

 

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               (ix) the insurance required under this Section 6.1(a) above shall
cover perils of terrorism and acts of terrorism and Borrower shall maintain
insurance for loss resulting from perils and acts of terrorism on terms
(including amounts) consistent with those required under Sections 6.1(a) above
at all times during the term of the Loan; and
               (x) upon sixty (60) days written notice, such other reasonable
insurance, including, but not limited to, sinkhole or land subsidence insurance,
and in such reasonable amounts as Lender from time to time may reasonably
request against such other insurable hazards which at the time are commonly
insured against for property similar to the Property located in or around the
region in which the Property is located.
          (b) All insurance provided for in Section 6.1(a) hereof, shall be
obtained under valid and enforceable policies (collectively, the “Policies” or
in the singular, the “Policy”), and shall be subject to the approval of Lender
as to insurance companies, amounts, deductibles, loss payees and insureds. The
Policies shall be issued by financially sound and responsible insurance
companies authorized to do business in the State and having a claims paying
ability rating of “AA” or better (and the equivalent thereof) by at least
two (2) of the Rating Agencies rating the Securities (one (1) of which shall be
S&P if they are rating the Securities and one (1) of which will be Moody’s if
they are rating the Securities), or if only one (1) Rating Agency is rating the
Securities, then only by such Rating Agency. The Policies described in
Section 6.1 hereof (other than those strictly limited to liability protection)
shall designate Lender as loss payee. Not less than ten (10) days prior to the
expiration dates of the Policies theretofore furnished to Lender, certificates
of insurance evidencing the Policies accompanied by evidence satisfactory to
Lender of payment of the premiums due thereunder (the “Insurance Premiums”),
shall be delivered by Borrower to Lender.
          (c) Any blanket insurance Policy shall specifically allocate to the
Property the amount of coverage from time to time required hereunder and shall
otherwise provide the same protection as would a separate Policy insuring only
the Property in compliance with the provisions of Section 6.1(a) hereof.
          (d) All Policies provided for or contemplated by Section 6.1(a)
hereof, except for the Policy referenced in Section 6.1(a)(vii) of this
Agreement, shall name Borrower as the insured and Lender as the additional
insured, as its interests may appear, and in the case of property damage, boiler
and machinery, flood and earthquake insurance, shall contain a so-called New
York standard non-contributing mortgagee clause in favor of Lender providing
that the loss thereunder shall be payable to Lender.
          (e) All Policies shall contain clauses or endorsements to the effect
that:
               (i) no act or negligence of Borrower, or anyone acting for
Borrower, or of any tenant or other occupant, or failure to comply with the
provisions of any Policy, which might otherwise result in a forfeiture of the
insurance or any part thereof, shall in any way affect the validity or
enforceability of the insurance insofar as Lender is concerned;

 

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               (ii) the Policy shall not be materially changed (other than to
increase the coverage provided thereby) or canceled without at least thirty (30)
days written notice to Lender and any other party named therein as an additional
insured;
               (iii) the issuers thereof shall give written notice to Lender if
the Policy has not been renewed thirty (30) days prior to its expiration; and
               (iv) Lender shall not be liable for any Insurance Premiums
thereon or subject to any assessments thereunder.
          (f) If at any time Lender is not in receipt of written evidence that
all insurance required hereunder is in full force and effect, Lender shall have
the right, without notice to Borrower, to take such action as Lender deems
necessary to protect its interest in the Property, including, without
limitation, the obtaining of such insurance coverage as Lender in its sole
discretion deems appropriate after three (3) Business Days notice to Borrower if
prior to the date upon which any such coverage will lapse or at any time Lender
deems necessary (regardless of prior notice to Borrower) to avoid the lapse of
any such coverage. All premiums incurred by Lender in connection with such
action or in obtaining such insurance and keeping it in effect shall be paid by
Borrower to Lender upon demand and, until paid, shall be secured by the Mortgage
and shall bear interest at the Default Rate.
          Section 6.2 Casualty. If the Property shall be damaged or destroyed,
in whole or in part, by fire or other casualty (a “Casualty”), Borrower shall
give prompt notice of such damage to Lender and shall promptly commence and
diligently prosecute the completion of the Restoration of the Property pursuant
to Section 6.4 hereof as nearly as possible to the condition the Property was in
immediately prior to such Casualty, with such alterations as may be reasonably
approved by Lender and otherwise in accordance with Section 6.4 hereof. Borrower
shall pay all costs of such Restoration whether or not such costs are covered by
insurance. Lender may, but shall not be obligated to make proof of loss if not
made promptly by Borrower. In addition, Lender may participate in any settlement
discussions with any insurance companies (and shall approve the final
settlement, which approval shall not be unreasonably withheld or delayed) with
respect to any Casualty in which the Net Proceeds or the costs of completing the
Restoration are equal to or greater than One Million and 00/100 Dollars
($1,000,000.00) and Borrower shall deliver to Lender all instruments required by
Lender to permit such participation.
          Section 6.3 Condemnation. Borrower shall promptly give Lender notice
of the actual or threatened commencement of any proceeding for the Condemnation
of the Property and shall deliver to Lender copies of any and all papers served
in connection with such proceedings. Lender may participate in any such
proceedings, and Borrower shall from time to time deliver to Lender all
instruments requested by it to permit such participation. Borrower shall, at its
expense, diligently prosecute any such proceedings, and shall consult with
Lender, its attorneys and experts, and cooperate with them in the carrying on or
defense of any such proceedings. Notwithstanding any taking by any public or
quasi-public authority through Condemnation or otherwise (including, but not
limited to, any transfer made in lieu of or in anticipation of the exercise of
such taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Agreement and the Debt
shall

 

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not be reduced until any Award shall have been actually received and applied by
Lender, after the deduction of expenses of collection, to the reduction or
discharge of the Debt. Lender shall not be limited to the interest paid on the
Award by the condemning authority but shall be entitled to receive out of the
Award interest at the rate or rates provided herein or in the Note. If any
portion of the Property is taken by a condemning authority, Borrower shall
promptly commence and diligently prosecute the Restoration of the Property
pursuant to Section 6.4 hereof and otherwise comply with the provisions of
Section 6.4 hereof. If the Property is sold, through foreclosure or otherwise,
prior to the receipt by Lender of the Award, Lender shall have the right,
whether or not a deficiency judgment on the Note shall have been sought,
recovered or denied, to receive the Award, or a portion thereof sufficient to
pay the Debt.
          Section 6.4 Restoration. The following provisions shall apply in
connection with the Restoration of the Property:
          (a) If the Net Proceeds shall be less than One Million and 00/100
Dollars ($1,000,000.00) and the costs of completing the Restoration shall be
less than One Million and 00/100 Dollars ($1,000,000.00), the Net Proceeds will
be disbursed by Lender to Borrower upon receipt, provided that all of the
conditions set forth in Section 6.4(b)(i) hereof are met and Borrower delivers
to Lender a written undertaking to expeditiously commence and to satisfactorily
complete with due diligence the Restoration in accordance with the terms of this
Agreement.
          (b) If the Net Proceeds are equal to or greater than One Million and
00/100 Dollars ($1,000,000.00) or the costs of completing the Restoration is
equal to or greater than One Million and 00/100 Dollars ($1,000,000.00) Lender
shall make the Net Proceeds available for the Restoration in accordance with the
provisions of this Section 6.4. The term “Net Proceeds” for purposes of this
Section 6.4 shall mean: (i) the net amount of all insurance proceeds received by
Lender pursuant to Section 6.1 (a)(i), (iv), (ix) and (x) as a result of such
damage or destruction, after deduction of its reasonable costs and expenses
(including, but not limited to, reasonable counsel fees), if any, in collecting
same (“Insurance Proceeds”), or (ii) the net amount of the Award, after
deduction of its reasonable costs and expenses (including, but not limited to,
reasonable counsel fees), if any, in collecting same (“Condemnation Proceeds”),
whichever the case may be.
(i) The Net Proceeds shall be made available to Borrower for Restoration
provided that each of the following conditions are met:
                    (A) no Event of Default shall have occurred and be
continuing;
                    (B) (1) in the event the Net Proceeds are Insurance
Proceeds, less than thirty-five percent (35%) of the total floor area of the
Improvements on the Property has been damaged, destroyed or rendered unusable as
a result of such Casualty or (2) in the event the Net Proceeds are Condemnation
Proceeds, less than ten percent (10%) of the land constituting the Property is
taken, and such land is located along the perimeter or periphery of the
Property, and no portion of the Improvements is located on such land;

 

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     (C) Leases demising in the aggregate a percentage amount equal to or
greater than the Rentable Space Percentage of the total rentable space in the
Property which has been demised under executed and delivered Leases in effect as
of the date of the occurrence of such Casualty or Condemnation, whichever the
case may be, shall remain in full force and effect during and after the
completion of the Restoration, notwithstanding the occurrence of any such
Casualty or Condemnation, whichever the case may be, and Borrower and/or Tenant,
as applicable under the respective Lease, will make all necessary repairs and
restorations thereto at their sole cost and expense. The term “Rentable Space
Percentage” shall mean (1) in the event the Net Proceeds are Insurance Proceeds,
a percentage amount equal to ninety percent (90%) and (2) in the event the Net
Proceeds are Condemnation Proceeds, a percentage amount equal to ninety percent
(90%);
     (D) Borrower shall diligently proceed with the Restoration efforts as soon
as reasonably practicable (but in no event later than sixty (60) days after such
Casualty or Condemnation, whichever the case may be, occurs) and shall
diligently pursue the same to satisfactory completion;
     (E) Lender shall be satisfied that any operating deficits, including all
scheduled payments of principal and interest under the Note, which will be
incurred with respect to the Property as a result of the occurrence of any such
Casualty or Condemnation, whichever the case may be, will be covered out of
(1) the Net Proceeds, (2) the insurance coverage referred to in
Section 6.1(a)(ii) hereof, if applicable, or (3) by other funds of Borrower;
     (F) Lender shall be satisfied that the Restoration will be completed on or
before the earliest to occur of (1) six (6) months prior to the Maturity Date,
(2) the earliest date required for such completion under the terms of any Anchor
Tenant Leases, (3) such time as may be required under all applicable Legal
Requirements in order to repair and restore the Property to the condition it was
in immediately prior to such Casualty or to as nearly as possible the condition
it was in immediately prior to such Condemnation, as applicable, or (4) the
expiration of the insurance coverage referred to in Section 6.1(a)(ii) hereof;
     (G) the Property and the use thereof after the Restoration will be in
compliance with and permitted under all applicable Legal Requirements;
     (H) the Restoration shall be done and completed by Borrower in an
expeditious and diligent fashion and in compliance with all applicable Legal
Requirements;

 

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     (I) such Casualty or Condemnation, as applicable, does not result in the
loss of access to the Property or the Improvements;
     (J) the Debt Service Coverage Ratio for the Property, after giving effect
to the Restoration, shall be equal to or greater than 1.20 to 1.0 (assuming a
Debt Service Constant of 7.27% based upon payments of interest only);
     (K) Borrower shall deliver, or cause to be delivered, to Lender a signed
detailed budget approved in writing by Borrower’s architect or engineer stating
the entire cost of completing the Restoration, which budget shall be acceptable
to Lender; and
     (L) the Net Proceeds together with any cash or cash equivalent deposited by
Borrower with Lender are sufficient in Lender’s discretion to cover the cost of
the Restoration.
     (ii) The Net Proceeds shall be held by Lender in an interest-bearing
account and, until disbursed in accordance with the provisions of this
Section 6.4(b), shall constitute additional security for the Debt and Other
Obligations under the Loan Documents. The Net Proceeds shall be disbursed by
Lender to, or as directed by, Borrower from time to time during the course of
the Restoration, upon receipt of evidence satisfactory to Lender that (A) all
materials installed and work and labor performed (except to the extent that they
are to be paid for out of the requested disbursement) in connection with the
Restoration have been paid for in full, and (B) there exist no notices of
pendency, stop orders, mechanic’s or materialman’s liens or notices of intention
to file same, or any other liens or encumbrances of any nature whatsoever on the
Property which have not either been fully bonded to the satisfaction of Lender
and discharged of record or in the alternative fully insured to the satisfaction
of Lender by the title company issuing the Title Insurance Policy.
     (iii) All plans and specifications required in connection with the
Restoration shall be subject to prior review and acceptance in all respects by
Lender and by an independent consulting engineer selected by Lender (the
“Casualty Consultant”). Lender shall have the use of the plans and
specifications and all permits, licenses and approvals required or obtained in
connection with the Restoration. The identity of the contractors, subcontractors
and materialmen engaged in the Restoration, as well as the contracts under which
they have been engaged, shall be subject to prior review and acceptance by
Lender and the Casualty Consultant. All costs and expenses incurred by Lender in
connection with making the Net Proceeds available for the Restoration including,
without limitation, reasonable counsel fees and disbursements and the Casualty
Consultant’s fees, shall be paid by Borrower.
     (iv) In no event shall Lender be obligated to make disbursements of the Net
Proceeds in excess of an amount equal to the costs actually incurred from

 

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time to time for work in place as part of the Restoration, as certified by the
Casualty Consultant, minus the Casualty Retainage. The term “Casualty Retainage”
shall mean an amount equal to ten percent (10%) of the costs actually incurred
for work in place as part of the Restoration, as certified by the Casualty
Consultant, until the Restoration has been completed. The Casualty Retainage
shall in no event, and notwithstanding anything to the contrary set forth above
in this Section 6.4(b), be less than the amount actually held back by Borrower
from contractors, subcontractors and materialmen engaged in the Restoration. The
Casualty Retainage shall not be released until the Casualty Consultant certifies
to Lender that the Restoration has been completed in accordance with the
provisions of this Section 6.4(b) and that all approvals necessary for the
re-occupancy and use of the Property have been obtained from all appropriate
governmental and quasi-governmental authorities, and Lender receives evidence
satisfactory to Lender that the costs of the Restoration have been paid in full
or will be paid in full out of the Casualty Retainage; provided, however, that
Lender will release the portion of the Casualty Retainage being held with
respect to any contractor, subcontractor or materialman engaged in the
Restoration as of the date upon which the Casualty Consultant certifies to
Lender that the contractor, subcontractor or materialman has satisfactorily
completed all work and has supplied all materials in accordance with the
provisions of the contractor’s, subcontractor’s or materialman’s contract, the
contractor, subcontractor or materialman delivers the lien waivers and evidence
of payment in full of all sums due to the contractor, subcontractor or
materialman as may be reasonably requested by Lender or by the title company
issuing the Title Insurance Policy, and Lender receives an endorsement to the
Title Insurance Policy insuring the continued priority of the lien of the
Mortgage and evidence of payment of any premium payable for such endorsement. If
required by Lender, the release of any such portion of the Casualty Retainage
shall be approved by the surety company, if any, which has issued a payment or
performance bond with respect to the contractor, subcontractor or materialman.
     (v) Lender shall not be obligated to make disbursements of the Net Proceeds
more frequently than once every calendar month.
     (vi) If at any time the Net Proceeds or the undisbursed balance thereof
shall not, in the opinion of Lender in consultation with the Casualty
Consultant, be sufficient to pay in full the balance of the costs which are
estimated by the Casualty Consultant to be incurred in connection with the
completion of the Restoration, Borrower shall deposit the deficiency (the “Net
Proceeds Deficiency”) with Lender before any further disbursement of the Net
Proceeds shall be made. The Net Proceeds Deficiency deposited with Lender shall
be held by Lender and shall be disbursed for costs actually incurred in
connection with the Restoration on the same conditions applicable to the
disbursement of the Net Proceeds, and until so disbursed pursuant to this
Section 6.4(b) shall constitute additional security for the Debt and Other
Obligations under the Loan Documents.

 

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     (vii) The excess, if any, of the Net Proceeds (and the remaining balance,
if any, of the Net Proceeds Deficiency) deposited with Lender after the Casualty
Consultant certifies to Lender that the Restoration has been completed in
accordance with the provisions of this Section 6.4(b), and the receipt by Lender
of evidence satisfactory to Lender that all costs incurred in connection with
the Restoration have been paid in full, shall be deposited in the Lockbox
Account to be disbursed in accordance with the Lockbox Agreement, provided no
Event of Default shall have occurred and shall be continuing under the Note,
this Agreement or any of the other Loan Documents.
          (c) All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant
to Section 6.4(b)(vii) hereof may be retained and applied by Lender toward the
payment of the Debt in accordance with Section 2.4.2 hereof, whether or not then
due and payable in such order, priority and proportions as Lender in its sole
discretion shall deem proper, or, at the discretion of Lender, the same may be
paid, either in whole or in part, to Borrower for such purposes as Lender shall
approve, in its discretion.
          (d) In the event of foreclosure of the Mortgage, or other transfer of
title to the Property in extinguishment in whole or in part of the Debt all
right, title and interest of Borrower in and to the Policies that are not
blanket Policies then in force concerning the Property and all proceeds payable
thereunder shall thereupon vest in the purchaser at such foreclosure or Lender
or other transferee in the event of such other transfer of title.
VII. RESERVE FUNDS
Section 7.1 Required Repairs.
          7.1.1 Deposits. Borrower shall perform the repairs at the Property, as
more particularly set forth on Schedule II hereto (such repairs hereinafter
referred to as “Required Repairs”). Borrower shall complete the Required Repairs
on or before the required deadline for each repair as set forth on Schedule II.
It shall be an Event of Default under this Agreement if (a) Borrower does not
complete the Required Repairs at the Property by the required deadline for each
repair as set forth on Schedule II, or (b) Borrower does not satisfy each
condition contained in Section 7.1.2 hereof. Upon the occurrence of such an
Event of Default, Lender, at its option, may withdraw all Required Repair Funds
from the Required Repair Account and Lender may apply such funds either to
completion of the Required Repairs at the Property or toward payment of the Debt
in such order, proportion and priority as Lender may determine in its sole
discretion. Lender’s right to withdraw and apply Required Repair Funds shall be
in addition to all other rights and remedies provided to Lender under this
Agreement and the other Loan Documents. On the Closing Date, Borrower shall
deposit with Lender the amount for the Property set forth on such Schedule II
hereto to perform the Required Repairs for the Property. Amounts so deposited
with Lender shall be held by Lender in accordance with Section 7.5 hereof.
Amounts so deposited shall hereinafter be referred to as the “Required Repair
Fund” and the account in which such amounts are held shall hereinafter be
referred to as the “Required Repair Account”.

 

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          7.1.2 Release of Required Repair Funds. Lender shall disburse to
Borrower the Required Repair Funds from the Required Repair Account from time to
time upon satisfaction by Borrower of each of the following conditions:
(a) Borrower shall submit a written request for payment to Lender at least
fifteen (15) days prior to the date on which Borrower requests such payment be
made and specifies the Required Repairs to be paid, (b) on the date such request
is received by Lender and on the date such payment is to be made, no Default or
Event of Default shall exist and remain uncured, (c) Lender shall have received
an Officers’ Certificate (i) stating that all Required Repairs to be funded by
the requested disbursement have been completed in good and workmanlike manner
and in accordance with all applicable federal, state and local laws, rules and
regulations, such certificate to be accompanied by a copy of any license, permit
or other approval by any Governmental Authority required to commence and/or
complete the Required Repairs, (ii) identifying each Person that supplied
materials or labor in connection with the Required Repairs to be funded by the
requested disbursement, and (iii) stating that each such Person has been paid in
full or will be paid in full upon such disbursement, such Officers’ Certificate
to be accompanied by lien waivers or other evidence of payment satisfactory to
Lender, (d) at Lender’s option, a title search for the Property indicating that
the Property is free from all liens, claims and other encumbrances not
previously approved by Lender, and (e) Lender shall have received such other
evidence as Lender shall reasonably request that the Required Repairs to be
funded by the requested disbursement have been completed and are paid for or
will be paid upon such disbursement to Borrower. Lender shall not be required to
make disbursements from the Required Repair Account with respect to the Property
unless such requested disbursement is in an amount greater than Ten Thousand and
00/100 Dollars ($10,000.00) (or a lesser amount if the total amount in the
Required Repair Account is less than Ten Thousand and 00/100 Dollars
($10,000.00), in which case only one disbursement of the amount remaining in the
account shall be made) and such disbursement shall be made only upon
satisfaction of each condition contained in this Section 7.1.2.
          Section 7.2 Tax and Insurance Escrow Fund. Borrower shall pay to
Lender on each Payment Date (a) one-twelfth (1/12)of the Taxes and Other Charges
that Lender estimates will be payable during the next ensuing twelve (12) months
in order to accumulate with Lender sufficient funds to pay all such Taxes and
Other Charges at least thirty (30) days prior to their respective due dates, and
(b) one-twelfth (1/12) of the Insurance Premiums that Lender estimates will be
payable for the renewal of the coverage afforded by the Policies upon the
expiration thereof in order to accumulate with Lender sufficient funds to pay
all such Insurance Premiums at least thirty (30) days prior to the expiration of
the Policies (said amounts in (a) and (b) above hereinafter called the “Tax and
Insurance Escrow Fund”). The Tax and Insurance Escrow Fund and the Monthly Debt
Service Payment Amount, shall be added together and shall be paid as an
aggregate sum by Borrower to Lender. Lender will apply the Tax and Insurance
Escrow Fund to payments of Taxes and Insurance Premiums required to be made by
Borrower pursuant to Section 5.1.2 hereof and under the Mortgage. In making any
payment relating to the Tax and Insurance Escrow Fund, Lender may do so
according to any bill, statement or estimate procured from the appropriate
public office (with respect to Taxes) or insurer or agent (with respect to
Insurance Premiums), without inquiry into the accuracy of such bill, statement
or estimate or into the validity of any tax, assessment, sale, forfeiture, tax
lien or title or claim thereof. If the amount of the Tax and Insurance Escrow
Fund shall exceed the amounts due for Taxes, Other Charges and Insurance
Premiums pursuant to Section 5.1.2 hereof, Lender shall, in its sole discretion,
return any excess to Borrower or credit such excess against

 

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future payments to be made to the Tax and Insurance Escrow Fund. Any amount
remaining in the Tax and Insurance Escrow Fund after the Debt has been paid in
full shall be returned to Borrower. If at any time Lender reasonably determines
that the Tax and Insurance Escrow Fund is not or will not be sufficient to pay
Taxes, Other Charges and Insurance Premiums by the dates set forth in (a) and
(b) above, Lender shall notify Borrower of such determination and Borrower shall
increase its monthly payments to Lender by the amount that Lender estimates is
sufficient to make up the deficiency at least thirty (30) days prior to the due
date of the Taxes and Other Charges and/or thirty (30) days prior to expiration
of the Policies, as the case may be. Notwithstanding the foregoing, Borrower’s
obligation to make monthly deposits with Lender for Insurance Premiums shall be
suspended for so long as no Event of Default has occurred and is continuing and
Borrower provides Lender with written evidence reasonably satisfactory to Lender
that all insurance coverages required to be maintained by Borrower pursuant to
the terms of this Agreement are being maintained in full force and effect
through one or more blanket insurance policies (provided that any such blanket
insurance policies provide the same level of coverage which would otherwise be
provided by a stand-alone policy). Borrower shall provide evidence reasonably
acceptable to Lender on an annual basis thirty (30) days prior to the expiration
of the existing insurance that the insurance has been renewed and will provide
notice of cancellation for non-payment. In the event Borrower fails to provide
such evidence or an Event of Default occurs, however, Borrower will thereafter
be required to make deposits with Lender for Insurance Premiums as provided
herein.
Section 7.3 Replacements and Replacement Reserve.
          7.3.1 Replacement Reserve Fund. On the Closing Date and on each
Payment Date thereafter, Borrower shall pay to Lender $3,535.19 (the
“Replacement Reserve Monthly Deposit”) for replacements and repairs required to
be made to the Property (collectively, the “Replacements”). Amounts so deposited
shall hereinafter be referred to as Borrower’s “Replacement Reserve Fund” and
the account in which such amounts are held shall hereinafter be referred to as
Borrower’s “Replacement Reserve Account”. Lender may reassess its estimate of
the amount necessary for the Replacement Reserve Fund from time to time, and may
increase the monthly amounts required to be deposited into the Replacement
Reserve Fund upon thirty (30) days notice to Borrower if Lender determines in
its reasonable discretion that an increase is necessary to maintain the proper
maintenance and operation of the Property.
          7.3.2 Disbursements from Replacement Reserve Account. (a) Lender shall
make disbursements from the Replacement Reserve Account to pay Borrower only for
the costs of the Replacements. Lender shall not be obligated to make
disbursements from the Replacement Reserve Account to reimburse Borrower for the
costs of routine maintenance to the Property, replacements of inventory or for
costs which are to be reimbursed from the Required Repair Fund.
          (b) Lender shall, upon written request from Borrower and satisfaction
of the requirements set forth in this Section 7.3.2, disburse to Borrower
amounts from the Replacement Reserve Account necessary to pay for the actual
approved costs of Replacements or to reimburse Borrower therefor, upon
completion of such Replacements (or, upon partial completion in the case of
Replacements made pursuant to Section 7.3.2(e) hereof) as determined by Lender.
In no

 

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event shall Lender be obligated to disburse funds from the Replacement Reserve
Account if a Default or an Event of Default exists.
          (c) Each request for disbursement from the Replacement Reserve Account
shall be in a form specified or approved by Lender and shall specify (i) the
specific Replacements for which the disbursement is requested, (ii) the quantity
and price of each item purchased, if the Replacement includes the purchase or
replacement of specific items, (iii) the price of all materials (grouped by type
or category) used in any Replacement other than the purchase or replacement of
specific items, and (iv) the cost of all contracted labor or other services
applicable to each Replacement for which such request for disbursement is made.
With each request Borrower shall certify that all Replacements have been made in
accordance with all applicable Legal Requirements of any Governmental Authority
having jurisdiction over the Property. Each request for disbursement shall
include copies of invoices for all items or materials purchased and all
contracted labor or services provided and, unless Lender has agreed to issue
joint checks as described below in connection with a particular Replacement,
each request shall include evidence satisfactory to Lender of payment of all
such amounts. Except as provided in Section 7.3.2(e) hereof, each request for
disbursement from the Replacement Reserve Account shall be made only after
completion of the Replacement for which disbursement is requested. Borrower
shall provide Lender evidence of completion of the subject Replacement
satisfactory to Lender in its reasonable judgment.
          (d) Borrower shall pay all invoices in connection with the
Replacements with respect to which a disbursement is requested prior to
submitting such request for disbursement from the Replacement Reserve Account
or, at the request of Borrower, Lender will issue joint checks, payable to
Borrower and the contractor, supplier, materialman, mechanic, subcontractor or
other party to whom payment is due in connection with a Replacement. In the case
of payments made by joint check, Lender may require a waiver of lien from each
Person receiving payment prior to Lender’s disbursement from the Replacement
Reserve Account. In addition, as a condition to any disbursement, Lender may
require Borrower to obtain lien waivers from each contractor, supplier,
materialman, mechanic or subcontractor who receives payment in an amount equal
to or greater than Twenty-five Thousand and 00/100 Dollars ($25,000.00) for
completion of its work or delivery of its materials. Any lien waiver delivered
hereunder shall conform to the requirements of applicable law and shall cover
all work performed and materials supplied (including equipment and fixtures) for
the Property by that contractor, supplier, subcontractor, mechanic or
materialman through the date covered by the current reimbursement request (or,
in the event that payment to such contractor, supplier, subcontractor, mechanic
or materialmen is to be made by a joint check, the release of lien shall be
effective through the date covered by the previous release of funds request).
          (e) If (i) the cost of a Replacement exceeds Twenty-five Thousand and
00/100 Dollars ($25,000.00), (ii) the contractor performing such Replacement
requires periodic payments pursuant to terms of a written contract, and
(iii) Lender has approved in writing in advance such periodic payments, a
request for reimbursement from the Replacement Reserve Account may be made after
completion of a portion of the work under such contract, provided (A) such
contract requires payment upon completion of such portion of the work, (B) the
materials for which the request is made are on site at the Property and are
properly secured or have been installed in the Property, (C) all other
conditions in this Agreement for disbursement

 

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have been satisfied, (D) funds remaining in the Replacement Reserve Account are,
in Lender’s judgment, sufficient to complete such Replacement and other
Replacements when required, and (E) if required by Lender, each contractor or
subcontractor receiving payments under such contract shall provide a waiver of
lien with respect to amounts which have been paid to that contractor or
subcontractor.
          (f) Borrower shall not make a request for disbursement from the
Replacement Reserve Account more frequently than once in any calendar month and
(except in connection with the final disbursement) the total cost of all
Replacements in any request shall not be less than Ten Thousand and 00/100
Dollars ($10,000.00).
          7.3.3 Performance of Replacements. (a) Borrower shall make
Replacements when required in order to keep the Property in condition and repair
consistent with other first class, full service retail shopping centers in the
same market segment in the metropolitan area in which the Property is located,
and to keep the Property or any portion thereof from deteriorating. Borrower
shall complete all Replacements in a good and workmanlike manner as soon as
practicable following the commencement of making each such Replacement.
          (b) Lender reserves the right, at its option, to approve all contracts
or work orders over Twenty-five Thousand and 00/100 Dollars ($25,000.00) with
materialmen, mechanics, suppliers, subcontractors, contractors or other parties
providing labor or materials in connection with the Replacements. Upon Lender’s
request, Borrower shall assign any contract or subcontract to Lender.
          (c) In the event Lender determines in its reasonable discretion that
any Replacement is not being performed in a workmanlike or timely manner or that
any Replacement has not been completed in a workmanlike or timely manner, after
notice and reasonable period to cure, Lender shall have the option to withhold
disbursement for such unsatisfactory Replacement and to proceed under existing
contracts or to contract with third parties to complete such Replacement and to
apply the Replacement Reserve Fund toward the labor and materials necessary to
complete such Replacement, upon reasonable prior notice to Borrower and to
exercise any and all other remedies available to Lender upon an Event of Default
hereunder.
          (d) In order to facilitate Lender’s completion or making of such
Replacements pursuant to Section 7.3.3(c) above, Borrower grants Lender the
right to enter onto the Property and perform any and all work and labor
necessary to complete or make such Replacements and/or employ watchmen to
protect the Property from damage. All sums so expended by Lender, to the extent
not from the Replacement Reserve Fund, shall be deemed to have been advanced
under the Loan to Borrower and secured by the Mortgage. For this purpose
Borrower constitutes and appoints Lender its true and lawful attorney-in-fact
with full power of substitution to complete or undertake such Replacements in
the name of Borrower. Such power of attorney shall be deemed to be a power
coupled with an interest and cannot be revoked. Borrower empowers said
attorney-in-fact as follows: (i) to use any funds in the Replacement Reserve
Account for the purpose of making or completing such Replacements; (ii) to make
such additions, changes and corrections to such Replacements as shall be
necessary or desirable to complete such Replacements; (iii) to employ such
contractors, subcontractors, agents, architects and inspectors as shall be
required for such purposes; (iv) to pay, settle or compromise all

 

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existing bills and claims which are or may become Liens against the Property, or
as may be necessary or desirable for the completion of such Replacements, or for
clearance of title; (v) to execute all applications and certificates in the name
of Borrower which may be required by any of the contract documents; (vi) to
prosecute and defend all actions or proceedings in connection with the Property
or the rehabilitation and repair of the Property; and (vii) to do any and every
act which Borrower might do in its own behalf to fulfill the terms of this
Agreement.
          (e) Nothing in this Section 7.3.3 shall: (i) make Lender responsible
for making or completing any Replacements; (ii) require Lender to expend funds
in addition to the Replacement Reserve Fund to make or complete any Replacement;
(iii) obligate Lender to proceed with any Replacements; or (iv) obligate Lender
to demand from Borrower additional sums to make or complete any Replacement.
          (f) Borrower shall permit Lender and Lender’s agents and
representatives (including, without limitation, Lender’s engineer, architect, or
inspector) or third parties making Replacements pursuant to this Section 7.3.3
to enter onto the Property during normal business hours (subject to the rights
of tenants under their Leases) to inspect the progress of any Replacements and
all materials being used in connection therewith, to examine all plans and shop
drawings relating to such Replacements which are or may be kept at the Property,
and to complete any Replacements made pursuant to this Section 7.3.3. Borrower
shall cause all contractors and subcontractors to cooperate with Lender or
Lender’s representatives or such other persons described above in connection
with inspections described in this Section 7.3.3(f) or the completion of
Replacements pursuant to this Section 7.3.3.
          (g) Lender may require an inspection of the Property at Borrower’s
expense prior to making a monthly disbursement from the Replacement Reserve
Account in order to verify completion of the Replacements for which
reimbursement is sought. Lender may require that such inspection be conducted by
an appropriate independent qualified professional selected by Lender and/or may
require a copy of a certificate of completion by an independent qualified
professional acceptable to Lender prior to the disbursement of any amounts from
the Replacement Reserve Account. Borrower shall pay the expense of the
inspection as required hereunder, whether such inspection is conducted by Lender
or by an independent qualified professional.
          (h) The Replacements and all materials, equipment, fixtures, or any
other item comprising a part of any Replacement shall be constructed, installed
or completed, as applicable, free and clear of all mechanic’s, materialmen’s or
other liens (except for those Liens existing on the date of this Agreement which
have been approved in writing by Lender).
          (i) Before each disbursement from the Replacement Reserve Account,
Lender may require Borrower to provide Lender with a search of title to the
Property effective to the date of the disbursement, which search shows that no
mechanic’s or materialmen’s liens or other liens of any nature have been placed
against the Property since the date of recordation of the related Mortgage and
that title to the Property is free and clear of all Liens (other than the lien
of the related Mortgage and any other Liens previously approved in writing by
Lender, if any).

 

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          (j) All Replacements shall comply with all applicable Legal
Requirements of all Governmental Authorities having jurisdiction over the
Property and applicable insurance requirements including, without limitation,
applicable building codes, special use permits, environmental regulations, and
requirements of insurance underwriters.
          (k) In addition to any insurance required under the Loan Documents,
Borrower shall provide or cause to be provided workmen’s compensation insurance,
builder’s risk, and public liability insurance and other insurance to the extent
required under applicable law in connection with a particular Replacement. All
such policies shall be in form and amount reasonably satisfactory to Lender. All
such policies which can be endorsed with standard mortgagee clauses making loss
payable to Lender or its assigns shall be so endorsed. Certified copies of such
policies shall be delivered to Lender.
          7.3.4 Failure to Make Replacements. (a) It shall be an Event of
Default under this Agreement if Borrower fails to comply with any provision of
this Section 7.3 and such failure is not cured within thirty (30) days after
notice from Lender. Upon the occurrence of such an Event of Default, Lender may
use the Replacement Reserve Fund (or any portion thereof) for any purpose,
including but not limited to completion of the Replacements as provided in
Section 7.3.3, or for any other repair or replacement to the Property or toward
payment of the Debt in such order, proportion and priority as Lender may
determine in its sole discretion. Lender’s right to withdraw and apply the
Replacement Reserve Fund shall be in addition to all other rights and remedies
provided to Lender under this Agreement and the other Loan Documents.
          (b) Nothing in this Agreement shall obligate Lender to apply all or
any portion of the Replacement Reserve Fund on account of an Event of Default to
payment of the Debt or in any specific order or priority.
          7.3.5 Balance in the Replacement Reserve Account. The insufficiency of
any balance in the Replacement Reserve Account shall not relieve Borrower from
its obligation to fulfill all preservation and maintenance covenants in the Loan
Documents.
          Section 7.4 Rollover Reserve.
          7.4.1 Deposits to Rollover Reserve Fund. On the Closing Date, Borrower
shall pay to Lender the sum of $1,500,000.00 (the “Initial Rollover Reserve
Deposit”), and then Borrower shall pay to Lender on each Payment Date the sum of
$9,250.00 (the “Monthly Rollover Reserve Deposit”), which amounts shall be
deposited with and held by Lender for tenant improvement and leasing commission
obligations incurred following the date hereof. The Initial Rollover Reserve
Deposit, the Monthly Rollover Reserve Deposits and all other amounts so
deposited shall hereinafter be referred to as the “Rollover Reserve Fund” and
the account to which such amounts are held shall hereinafter be referred to as
the “Rollover Reserve Account”.
          7.4.2 Withdrawal of Rollover Reserve Funds. Lender shall make
disbursements from the Rollover Reserve Fund for tenant improvement and leasing
commission obligations incurred by Borrower. All such expenses shall be approved
by Lender in its sole

 

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discretion. Lender shall make disbursements as requested by Borrower on a
quarterly basis in increments of no less than $5,000.00 upon delivery by
Borrower of Lender’s standard form of draw request accompanied by copies of paid
invoices for the amounts requested and, if required by Lender, lien waivers and
releases from all parties furnishing materials and/or services in connection
with the requested payment. Lender may require an inspection of the Property at
Borrower’s expense prior to making a quarterly disbursement in order to verify
completion of improvements for which reimbursement is sought.
          7.4.3 Release of Rollover Reserve Funds. Upon evidence reasonably
acceptable to Lender that Borrower has entered into lease extensions for terms
of not less than five (5) years with both J.C. Penney and T.J. Maxx, Lender
shall make a disbursement from the Rollover Reserve Fund of $1,100,000 of the
Initial Rollover Reserve Deposit.
          Section 7.5 Reserve Funds, Generally. Borrower grants to Lender a
first-priority perfected security interest in each of the Reserve Funds and any
and all monies now or hereafter deposited in each Reserve Fund as additional
security for payment of the Debt. Until expended or applied in accordance
herewith, the Reserve Funds shall constitute additional security for the Debt.
Upon the occurrence of an Event of Default, Lender may, in addition to any and
all other rights and remedies available to Lender, apply any sums then present
in any or all of the Reserve Funds to the payment of the Debt in any order in
its sole discretion. The Reserve Funds shall not constitute trust funds and may
be commingled with other monies held by Lender. The Reserve Funds shall be held
in an Eligible Account in Permitted Investments in accordance with the terms and
provisions of the Cash Management Agreement. Interest earned on the Replacement
Reserve Funds and Rollover Reserve Funds shall be added to and become a part of
such Reserve Fund and shall be disbursed in the same manner as other monies
deposited in such Reserve Fund. Any interest on the Tax and Insurance Escrow
Funds shall not be added to or become a part thereof and shall be the sole
property of and shall be paid to Lender. Borrower shall be responsible for
payment of any federal, state or local income or other tax applicable to the
interest earned on the Reserve Funds credited or paid to Borrower. Borrower
shall not, without obtaining the prior written consent of Lender, further
pledge, assign or grant any security interest in any Reserve Fund or the monies
deposited therein or permit any lien or encumbrance to attach thereto, or any
levy to be made thereon, or any UCC-1 Financing Statements, except those naming
Lender as the secured party, to be filed with respect thereto. Lender shall not
be liable for any loss sustained on the investment of any funds constituting the
Reserve Funds. Borrower shall indemnify Lender and hold Lender harmless from and
against any and all actions, suits, claims, demands, liabilities, losses,
damages, obligations and costs and expenses (including litigation costs and
reasonable attorneys fees and expenses) arising from or in any way connected
with the Reserve Funds or the performance of the obligations for which the
Reserve Funds were established. Borrower shall assign to Lender all rights and
claims Borrower may have against all persons or entities supplying labor,
materials or other services which are to be paid from or secured by the Reserve
Funds; provided, however, that Lender may not pursue any such right or claim
unless an Event of Default has occurred and remains uncured.
          VIII. DEFAULTS

 

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          Section 8.1 Event of Default. (a) Each of the following events shall
constitute an event of default hereunder (an “Event of Default”):
     (i) if any portion of the Debt is not paid within five (5) days of the date
when due (except that Borrower shall not be afforded such 5-day cure period for
the portion of the Debt due and payable on the Maturity Date);
     (ii) if any of the Taxes (other than Taxes being contested pursuant to
Section 5.1.2 of this Agreement) are not paid when the same are due and payable
or Other Charges are not paid within five (5) days after Borrower receives
notice of same;
     (iii) if the Policies are not kept in full force and effect, or if
certified copies of the Policies are not delivered to Lender upon request;
     (iv) if Borrower Transfers or otherwise encumbers any portion of the
Property without Lender’s prior written consent in violation of the provisions
of this Agreement and Article 6 of the Mortgage;
     (v) if any material representation or warranty made by Borrower herein or
in any other Loan Document, or in any report, certificate, financial statement
or other instrument, agreement or document furnished to Lender shall have been
false or misleading in any material respect as of the date the representation or
warranty was made;
     (vi) if Borrower, Principal, Guarantor or any other guarantor under any
guaranty issued in connection with the Loan shall make an assignment for the
benefit of creditors;
     (vii) if a receiver, liquidator or trustee shall be appointed for Borrower,
Principal, Guarantor or any other guarantor under any guarantee issued in
connection with the Loan or if Borrower, Principal, Guarantor or such other
guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for
bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or
any similar federal or state law, shall be filed by or against, consented to, or
acquiesced in by, Borrower, Principal, Guarantor or such other guarantor, or if
any proceeding for the dissolution or liquidation of Borrower, Principal,
Guarantor or such other guarantor shall be instituted; provided, however, if
such appointment, adjudication, petition or proceeding was involuntary and not
consented to by Borrower, Principal, Guarantor or such other guarantor, upon the
same not being discharged, stayed or dismissed within ninety (90) days;
     (viii) if Borrower attempts to assign its rights under this Agreement or
any of the other Loan Documents or any interest herein or therein in
contravention of the Loan Documents;
     (ix) if Borrower breaches any covenant contained in Section 4.1.30 hereof;

 

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     (x) with respect to any term, covenant or provision set forth herein which
specifically contains a notice requirement or grace period, if Borrower shall be
in default under such term, covenant or condition after the giving of such
notice or the expiration of such grace period;
     (xi) if any of the assumptions contained in the Insolvency Opinion
delivered to Lender in connection with the Loan, or in any Additional Insolvency
Opinion delivered subsequent to the closing of the Loan, is or shall become
untrue in any material respect;
     (xii) if a material default has occurred and continues beyond any
applicable cure period under the Management Agreement (or any Replacement
Management Agreement) and if such default permits the Manager thereunder to
terminate or cancel the Management Agreement (or any Replacement Management
Agreement);
     (xiii) if Borrower shall continue to be in Default under any of the terms,
covenants or conditions of Section 9.1 hereof, or fails to cooperate with Lender
in connection with a Securitization pursuant to the provisions of Section 9.1
hereof, for three (3) days after notice to Borrower from Lender;
     (xiv) if Borrower shall continue to be in Default under any of the other
terms, covenants or conditions of this Agreement not specified in
subsections (i) to (xii) above, for twenty (20) days after notice to Borrower
from Lender, in the case of any Default which can be cured by the payment of a
sum of money, or for thirty (30) days after notice from Lender in the case of
any other Default; provided, however, that if such non-monetary Default is
susceptible of cure but cannot reasonably be cured within such thirty (30) day
period and provided further that Borrower shall have commenced to cure such
Default within such thirty (30) day period and thereafter diligently and
expeditiously proceeds to cure the same, such thirty (30) day period shall be
extended for such time as is reasonably necessary for Borrower in the exercise
of due diligence to cure such Default, such additional period not to exceed
sixty (60) days; or
     (xv) if there shall be default under any of the other Loan Documents beyond
any applicable cure periods contained in such documents, whether as to Borrower
or the Property, or if any other such event shall occur or condition shall
exist, if the effect of such default, event or condition is to accelerate the
maturity of any portion of the Debt or to permit Lender to accelerate the
maturity of all or any portion of the Debt.
          (b) Upon the occurrence of an Event of Default (other than an Event of
Default described in clauses (vi), (vii) or (viii) above) and at any time
thereafter, in addition to any other rights or remedies available to it pursuant
to this Agreement and the other Loan Documents or at law or in equity, Lender
may take such action, without notice or demand, that Lender deems advisable to
protect and enforce its rights against Borrower and the Property, including,
without limitation, declaring the Debt to be immediately due and payable, and
Lender

 

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may enforce or avail itself of any or all rights or remedies provided in the
Loan Documents against Borrower and any or all of the Property, including,
without limitation, all rights or remedies available at law or in equity; and
upon any Event of Default described in clauses (vi), (vii) or (viii) above, the
Debt and Other Obligations of Borrower hereunder and under the other Loan
Documents shall immediately and automatically become due and payable, without
notice or demand, and Borrower hereby expressly waives any such notice or
demand, anything contained herein or in any other Loan Document to the contrary
notwithstanding.
          Section 8.2 Remedies. (a) Upon the occurrence of an Event of Default,
all or any one or more of the rights, powers, privileges and other remedies
available to Lender against Borrower under this Agreement or any of the other
Loan Documents executed and delivered by, or applicable to, Borrower or at law
or in equity may be exercised by Lender at any time and from time to time,
whether or not all or any of the Debt shall be declared due and payable, and
whether or not Lender shall have commenced any foreclosure proceeding or other
action for the enforcement of its rights and remedies under any of the Loan
Documents with respect to all or any part of the Property. Any such actions
taken by Lender shall be cumulative and concurrent and may be pursued
independently, singularly, successively, together or otherwise, at such time and
in such order as Lender may determine in its sole discretion, to the fullest
extent permitted by law, without impairing or otherwise affecting the other
rights and remedies of Lender permitted by law, equity or contract or as set
forth herein or in the other Loan Documents. Without limiting the generality of
the foregoing, Borrower agrees that if an Event of Default is continuing
(i) Lender is not subject to any “one action” or “election of remedies” law or
rule, and (ii) all liens and other rights, remedies or privileges provided to
Lender shall remain in full force and effect until Lender has exhausted all of
its remedies against the Property and the Mortgage has been foreclosed, sold
and/or otherwise realized upon in satisfaction of the Debt or the Debt has been
paid in full.
          (b) With respect to Borrower and the Property, nothing contained
herein or in any other Loan Document shall be construed as requiring Lender to
resort to the Property for the satisfaction of any of the Debt in any preference
or priority, and Lender may seek satisfaction out of the Property, or any part
thereof, in its absolute discretion in respect of the Debt. In addition, Lender
shall have the right from time to time to partially foreclose the Mortgage in
any manner and for any amounts secured by the Mortgage then due and payable as
determined by Lender in its sole discretion including, without limitation, the
following circumstances: (i) in the event Borrower defaults beyond any
applicable grace period in the payment of one or more scheduled payments of
principal and interest, Lender may foreclose the Mortgage to recover such
delinquent payments or (ii) in the event Lender elects to accelerate less than
the entire outstanding principal balance of the Loan, Lender may foreclose the
Mortgage to recover so much of the principal balance of the Loan as Lender may
accelerate and such other sums secured by the Mortgage as Lender may elect.
Notwithstanding one or more partial foreclosures, the Property shall remain
subject to the Mortgage to secure payment of sums secured by the Mortgage and
not previously recovered.
          (c) Lender shall have the right from time to time to sever the Note
and the other Loan Documents into one or more separate notes, mortgages and
other security documents (the “Severed Loan Documents”) in such denominations as
Lender shall determine in its sole discretion for purposes of evidencing and
enforcing its rights and remedies provided hereunder.

 

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Borrower shall execute and deliver to Lender from time to time, promptly after
the request of Lender, a severance agreement and such other documents as Lender
shall request in order to effect the severance described in the preceding
sentence, all in form and substance reasonably satisfactory to Lender. Borrower
hereby absolutely and irrevocably appoints Lender as its true and lawful
attorney, coupled with an interest, in its name and stead to make and execute
all documents necessary or desirable to effect the aforesaid severance, Borrower
ratifying all that its said attorney shall do by virtue thereof; provided,
however, Lender shall not make or execute any such documents under such power
until three (3) days after notice has been given to Borrower by Lender of
Lender’s intent to exercise its rights under such power. Borrower shall be
obligated to pay any costs or expenses incurred in connection with the
preparation, execution, recording or filing of the Severed Loan Documents and
the Severed Loan Documents shall not contain any representations, warranties or
covenants not contained in the Loan Documents and any such representations and
warranties contained in the Severed Loan Documents will be given by Borrower
only as of the Closing Date.
          Section 8.3 Remedies Cumulative; Waivers. The rights, powers and
remedies of Lender under this Agreement shall be cumulative and not exclusive of
any other right, power or remedy which Lender may have against Borrower pursuant
to this Agreement or the other Loan Documents, or existing at law or in equity
or otherwise. Lender’s rights, powers and remedies may be pursued singularly,
concurrently or otherwise, at such time and in such order as Lender may
determine in Lender’s sole discretion. No delay or omission to exercise any
remedy, right or power accruing upon an Event of Default shall impair any such
remedy, right or power or shall be construed as a waiver thereof, but any such
remedy, right or power may be exercised from time to time and as often as may be
deemed expedient. A waiver of one Default or Event of Default with respect to
Borrower shall not be construed to be a waiver of any subsequent Default or
Event of Default by Borrower or to impair any remedy, right or power consequent
thereon.
          IX. SPECIAL PROVISIONS
          Section 9.1 Securitization.
          9.1.1 Sale of Notes and Securitization. Borrower acknowledges and
agrees that Lender may sell all or any portion of the Loan and the Loan
Documents, or issue one or more participations therein, or consummate one or
more private or public securitizations of rated single- or multi-class
securities (the “Securities”) secured by or evidencing ownership interests in
all or any portion of the Loan and the Loan Documents or a pool of assets that
include the Loan and the Loan Documents (such sales, participations and/or
securitizations, collectively, a “Securitization”). At the request of Lender,
and to the extent not already required to be provided by or on behalf of
Borrower under this Agreement, Borrower shall use reasonable efforts to provide
information not in the possession of Lender or which may be reasonably required
by Lender or take other actions reasonably required by Lender, in each case in
order to satisfy the market standards to which Lender customarily adheres or
which may be reasonably required by prospective investors and/or the Rating
Agencies in connection with any such Securitization including, without
limitation, to:

 

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          (a) provide additional and/or updated Provided Information, together
with appropriate verification and/or consents related to the Provided
Information through letters of auditors or opinions of counsel of independent
attorneys reasonably acceptable to Lender, prospective investors and/or the
Rating Agencies;
          (b) assist in preparing descriptive materials for presentations to any
or all of the Rating Agencies, and work with, and if requested, supervise,
third-party service providers engaged by Borrower and approved by Lender,
Principal and their respective affiliates to obtain, collect, and deliver
information requested or required by Lender, prospective investors and/or the
Rating Agencies;
          (c) deliver (i) an Additional Insolvency Opinion and an opinion with
respect to, due execution and enforceability with respect to the Property,
Borrower, Principal, Guarantor and their respective Affiliates and the Loan
Documents, including, without limitation, a so called “10b-5” opinion, and
(ii) revised organizational documents for Borrower, which counsel opinions and
organizational documents shall be reasonably satisfactory to Lender, prospective
investors and/or the Rating Agencies;
          (d) if required by any prospective investor and/or any Rating Agency,
use commercially reasonable efforts to deliver such additional tenant estoppel
letters, subordination agreements or other agreements from parties to agreements
that affect the Property, which estoppel letters, subordination agreements or
other agreements shall be reasonably satisfactory to Lender, prospective
investors and/or the Rating Agencies;
          (e) make such representations and warranties as of the closing date of
the Securitization with respect to the Property, Borrower, Principal, Guarantor
and the Loan Documents as may be reasonably requested by Lender, prospective
investors and/or the Rating Agencies and consistent with the facts covered by
such representations and warranties as they exist on the date thereof, including
the representations and warranties made in the Loan Documents;
          (f) execute such amendments to the Loan Documents as may be requested
by Lender, prospective investors and/or the Rating Agencies to effect the
Securitization;
          (g) if requested by Lender, review any information regarding the
Property, Borrower, Principal, Guarantor, Manager and the Loan which is
contained in a preliminary or final private placement memorandum, prospectus,
prospectus supplement (including any amendment or supplement to either thereof),
or other disclosure document to be used by Lender or any affiliate thereof; and
          (h) supply to Lender such documentation, financial statements and
reports in form and substance required in order to comply with any applicable
securities laws.
          9.1.2 Loan Components. Borrower covenants and agrees that in
connection with any Securitization of the Loan, upon Lender’s request Borrower
shall deliver one or more new component notes to replace the original note or
modify the original note to reflect multiple components of the Loan or create
one or more mezzanine loans (including amending Borrower’s organizational
structure to provide for one or more mezzanine borrowers) (each a “Resizing

 

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Event”). Lender agrees that such new notes or modified note or mezzanine notes
shall immediately after the Resizing Event have the same initial weighted
average coupon as the original note prior to such Resizing Event,
notwithstanding that such new notes or modified note or mezzanine notes or may,
in connection with the application of principal to such new notes or modified
note or mezzanine notes, subsequently cause the weighted average spread of such
new notes or modified note or mezzanine notes to change (but not increase,
except that the weighted average spread may subsequently increase due to
involuntary prepayments or if an Event of Default shall occur) and apply
principal, interest rates and amortization of the Loan between such new
components and/or mezzanine loans in a manner specified by Lender in its sole
discretion such that the pricing and marketability of the Securities and the
size of each class of Securities and the rating assigned to each such class by
the Rating Agencies shall provide the most favorable rating levels and achieve
the optimum bond execution for the Loan. In connection with any Resizing Event,
Borrower covenants and agrees to modify the Cash Management Agreement with
respect to the newly created components and/or mezzanine loans.
          9.1.3 Securitization Costs. All reasonable third party costs and
expenses incurred by Borrower and Guarantor in connection with Borrower’s
complying with requests made under this Section 9.1 (including, without
limitation, the fees and expenses of the Rating Agencies) shall be paid by
Lender. Lender shall structure any Resizing Event in such a way as to not
adversely impact any 1031 tax exchange made in connection with Borrower’s
acquisition of the Property.
          Section 9.2 Securitization Indemnification. (a) Borrower understands
that certain of the Provided Information may be included in Disclosure Documents
in connection with the Securitization and may also be included in filings with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), or provided or made available to investors or
prospective investors in the Securities, the Rating Agencies, and service
providers relating to the Securitization. In the event that the Disclosure
Document is required to be revised prior to the sale of all Securities, Borrower
will cooperate with the holder of the Note in updating the Disclosure Document
by providing all current information necessary to keep the Disclosure Document
accurate and complete in all material respects.
          (b) The Indemnifying Persons agree to provide, in connection with the
Securitization, an indemnification agreement (A) certifying that (i) the
Indemnifying Persons have carefully examined the Disclosure Documents, including
without limitation, the sections entitled “Risk Factors,” “Special
Considerations,” “Description of the Mortgages,” “Description of the Mortgage
Loans and Mortgaged Property,” “The Manager,” “The Borrower” and “Certain Legal
Aspects of the Mortgage Loan,” and (ii) such sections and such other information
in the Disclosure Documents (to the extent such information relates to or
includes any Provided Information or any information regarding the Properties,
Borrower, Manager and/or the Loan) (collectively with the Provided Information,
the “Covered Disclosure Information”) do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading, (B) jointly and severally indemnifying Lender, BSCMI (whether or
not it is the Lender), any Affiliate of BSCMI that has filed any registration
statement relating to the Securitization or has acted as the sponsor or
depositor in connection with the Securitization, any

 

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Affiliate of BSCMI that acts as an underwriter, placement agent or initial
purchaser of Securities issued in the Securitization, any other co-underwriters,
co-placement agents or co-initial purchasers of Securities issued in the
Securitization, and each of their respective officers, directors, partners,
employees, representatives, agents and Affiliates and each Person or entity who
Controls any such Person within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act (collectively, the “Indemnified Persons”), for
any losses, claims, damages, liabilities, costs or expenses (including without
limitation legal fees and expenses for enforcement of these obligations
(collectively, the “Liabilities”) to which any such Indemnified Person may
become subject insofar as the Liabilities arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
the Covered Disclosure Information or arise out of or are based upon the
omission or alleged omission to state in the Covered Disclosure Information a
material fact required to be stated therein or necessary in order to make the
statements in the Covered Disclosure Information, in light of the circumstances
under which they were made, not misleading and (C) agreeing to reimburse each
Indemnified Person for any legal or other expenses incurred by such Indemnified
Person, as they are incurred, in connection with investigating or defending the
Liabilities. This indemnity agreement will be in addition to any liability which
Borrower may otherwise have. Moreover, the indemnification and reimbursement
obligations provided for in clauses (B) and (C) above shall be effective, valid
and binding obligations of the Indemnifying Persons whether or not an
indemnification agreement described in clause (A) above is provided.
          (c) In connection with Exchange Act Filings, the Indemnifying Persons
jointly and severally agree to indemnify (i) the Indemnified Persons for
Liabilities to which any such Indemnified Person may become subject insofar as
the Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact in the Covered Disclosure Information, or
the omission or alleged omission to state in the Covered Disclosure Information
a material fact required to be stated therein or necessary in order to make the
statements in the Covered Disclosure Information, in light of the circumstances
under which they were made, not misleading and (ii) reimburse each Indemnified
Person for any legal or other expenses incurred by such Indemnified Persons, as
they are incurred, in connection with defending or investigating the
Liabilities.
          (d) Promptly after receipt by an Indemnified Person of notice of any
claim or the commencement of any action, the Indemnified Person shall, if a
claim in respect thereof is to be made against any Indemnifying Person, notify
such Indemnifying Person in writing of the claim or the commencement of that
action; provided, however, that the failure to notify such Indemnifying Person
shall not relieve it from any liability which it may have under the
indemnification provisions of this Section 9.2 except to the extent that it has
been materially prejudiced by such failure and, provided further that the
failure to notify such Indemnifying Person shall not relieve it from any
liability which it may have to an Indemnified Person otherwise than under the
provisions of this Section 9.2. If any such claim or action shall be brought
against an Indemnified Person, and it shall notify any Indemnifying Person
thereof, such Indemnifying Person shall be entitled to participate therein and,
to the extent that it wishes, assume the defense thereof with counsel reasonably
satisfactory to the Indemnified Person. After notice from any Indemnifying
Person to the Indemnified Person of its election to assume the defense of such
claim or action, such Indemnifying Person shall not be liable to the Indemnified
Person for any legal or other expenses subsequently incurred by the Indemnified

 

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Person in connection with the defense thereof except as provided in the
following sentence; provided, however, if the defendants in any such action
include both an Indemnifying Person, on the one hand, and one or more
Indemnified Persons on the other hand, and an Indemnified Person shall have
reasonably concluded that there are any legal defenses available to it and/or
other Indemnified Persons that are different or in addition to those available
to the Indemnifying Person, the Indemnified Person or Persons shall have the
right to select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such Indemnified Person
or Persons. The Indemnified Person shall instruct its counsel to maintain
reasonably detailed billing records for fees and disbursements for which such
Indemnified Person is seeking reimbursement hereunder and shall submit copies of
such detailed billing records to substantiate that such counsel’s fees and
disbursements are solely related to the defense of a claim for which the
Indemnifying Person is required hereunder to indemnify such Indemnified Person.
No Indemnifying Person shall be liable for the expenses of more than one (1)
such separate counsel unless such Indemnified Person shall have reasonably
concluded that there may be legal defenses available to it that are different
from or additional to those available to another Indemnified Person.
          (e) Without the prior written consent of BSCMI (which consent shall
not be unreasonably withheld or delayed), no Indemnifying Person shall settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any Indemnified Person is an actual or
potential party to such claim, action, suit or proceeding) unless the
Indemnifying Person shall have given BSCMI reasonable prior written notice
thereof and shall have obtained an unconditional release of each Indemnified
Person hereunder from all liability arising out of such claim, action, suit or
proceedings. As long as an Indemnifying Person has complied with its obligations
to defend and indemnify hereunder, such Indemnifying Person shall not be liable
for any settlement made by any Indemnified Person without the consent of such
Indemnifying Person (which consent shall not be unreasonably withheld or
delayed).
          (f) The Indemnifying Persons agree that if any indemnification or
reimbursement sought pursuant to this Section 9.2 is finally judicially
determined to be unavailable for any reason or is insufficient to hold any
Indemnified Person harmless (with respect only to the Liabilities that are the
subject of this Section 9.2), then the Indemnifying Persons, on the one hand,
and such Indemnified Person, on the other hand, shall contribute to the
Liabilities for which such indemnification or reimbursement is held unavailable
or is insufficient: (x) in such proportion as is appropriate to reflect the
relative benefits to the Indemnifying Persons, on the one hand, and such
Indemnified Person, on the other hand, from the transactions to which such
indemnification or reimbursement relates; or (y) if the allocation provided by
clause (x) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (x)
but also the relative faults of the Indemnifying Persons, on the one hand, and
all Indemnified Persons, on the other hand, as well as any other equitable
considerations. Notwithstanding the provisions of this Section 9.2, (A) no party
found liable for a fraudulent misrepresentation shall be entitled to
contribution from any other party who is not also found liable for such
fraudulent misrepresentation, and (B) the Indemnifying Persons agree that in no
event shall the amount to be contributed by the

 

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Indemnified Persons collectively pursuant to this paragraph exceed the amount of
the fees actually received by the Indemnified Persons in connection with the
closing of the Loan.
          (g) The Indemnifying Persons agree that the indemnification,
contribution and reimbursement obligations set forth in this Section 9.2 shall
apply whether or not any Indemnified Person is a formal party to any lawsuits,
claims or other proceedings. The Indemnifying Persons further agree that the
Indemnified Persons are intended third party beneficiaries under this
Section 9.2.
          (h) The liabilities and obligations of the Indemnified Persons and the
Indemnifying Persons under this Section 9.2 shall survive the termination of
this Agreement and the satisfaction and discharge of the Debt.
          (i) Notwithstanding anything to the contrary contained herein,
Borrower shall have no obligation to act as depositor with respect to the Loan
or an issuer or registrant with respect to the Securities issued in any
Securitization.
          Section 9.3 Exculpation. Subject to the qualifications below, Lender
shall not enforce the liability and obligation of Borrower to perform and
observe the obligations contained in the Note, this Agreement, the Mortgage or
the other Loan Documents by any action or proceeding wherein a money judgment
shall be sought against Borrower, except that Lender may bring a foreclosure
action, an action for specific performance or any other appropriate action or
proceeding to enable Lender to enforce and realize upon its interest under the
Note, this Agreement, the Mortgage and the other Loan Documents, or in the
Property, the Rents, or any other collateral given to Lender pursuant to the
Loan Documents; provided, however, that, except as specifically provided herein,
any judgment in any such action or proceeding shall be enforceable against
Borrower only to the extent of Borrower’s interest in the Property, in the Rents
and in any other collateral given to Lender, and Lender, by accepting the Note,
this Agreement, the Mortgage and the other Loan Documents, agrees that it shall
not sue for, seek or demand any deficiency judgment against Borrower in any such
action or proceeding under or by reason of or under or in connection with the
Note, this Agreement, the Mortgage or the other Loan Documents. The provisions
of this Section shall not, however, (a) constitute a waiver, release or
impairment of any obligation evidenced or secured by any of the Loan Documents;
(b) impair the right of Lender to name Borrower as a party defendant in any
action or suit for foreclosure and sale under the Mortgage; (c) affect the
validity or enforceability of or any guaranty made in connection with the Loan
or any of the rights and remedies of Lender thereunder; (d) impair the right of
Lender to obtain the appointment of a receiver; (e) impair the enforcement of
any of the Assignment of Leases; (f) constitute a prohibition against Lender to
seek a deficiency judgment against Borrower in order to fully realize the
security granted by the Mortgage or to commence any other appropriate action or
proceeding in order for Lender to exercise its remedies against the Property; or
(g) constitute a waiver of the right of Lender to enforce the liability and
obligation of Borrower, by money judgment or otherwise, to the extent of any
loss, damage, cost, expense, liability, claim or other obligation incurred by
Lender (including attorneys’ fees and costs reasonably incurred) arising out of
or in connection with the following:

 

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          (i) fraud or intentional misrepresentation by Borrower or Principal or
Guarantor in connection with the Loan;
          (ii) the gross negligence or willful misconduct of Borrower;
          (iii) the breach of any representation, warranty, covenant or
indemnification provision in the Environmental Indemnity Agreement or in the
Mortgage concerning environmental laws, hazardous substances and asbestos and
any indemnification of Lender with respect thereto in either document;
          (iv) the removal or disposal of any portion of the Property after an
Event of Default;
          (v) the misapplication or conversion by Borrower of (A) any Insurance
Proceeds paid by reason of any loss, damage or destruction to the Property,
(B) any Awards received in connection with a Condemnation of all or a portion of
the Property, (C) any Rents following an Event of Default, or (D) any Rents paid
more than one month in advance;
          (vi) failure to pay charges for labor or materials or other charges
that can create Liens on any portion of the Property; and
          (vii) any security deposits, advance deposits or any other deposits
collected with respect to the Property which are not delivered to Lender upon a
foreclosure of the Property or action in lieu thereof, except to the extent any
such security deposits were applied in accordance with the terms and conditions
of any of the Leases prior to the occurrence of the Event of Default that gave
rise to such foreclosure or action in lieu thereof.
          Notwithstanding anything to the contrary in this Agreement, the Note
or any of the Loan Documents, (A) Lender shall not be deemed to have waived any
right which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
Debt secured by the Mortgage or to require that all collateral shall continue to
secure all of the Debt owing to Lender in accordance with the Loan Documents,
and (B) the Debt shall be fully recourse to Borrower (i) in the event of:
(a) Borrower filing a voluntary petition under the Bankruptcy Code or any other
Federal or state bankruptcy or insolvency law; (b) the filing of an involuntary
petition against Borrower under the Bankruptcy Code or any other Federal or
state bankruptcy or insolvency law, in which Borrower colludes with, or
otherwise assists such Person, or solicits or causes to be solicited petitioning
creditors for any involuntary petition against Borrower from any Person;
(c) Borrower filing an answer consenting to or otherwise acquiescing in or
joining in any involuntary petition filed against it, by any other Person under
the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law;
(d) Borrower consenting to or acquiescing in or joining in an application for
the appointment of a custodian, receiver, trustee, or examiner for Borrower or
any portion of the Property; (e) Borrower making an assignment for the benefit
of creditors, or admitting, in writing or in any legal proceeding, its
insolvency or inability to pay its debts as they become due; (ii) if the first
full monthly payment of principal and interest on the

 

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Note is not paid when due; (iii) if Borrower fails to maintain its status as a
Single Purpose Entity, after the Guaranty Notice (as defined in the Guaranty) if
Borrower fails to permit on-site inspections of the Property, fails to provide
financial information, or fails to appoint a new property manager upon the
request of Lender as permitted under this Agreement, each as required by, and in
accordance with, the terms and provisions of this Agreement or the Mortgage;
(iv) if Borrower fails to obtain Lender’s prior written consent to any
Indebtedness or voluntary Lien encumbering the Property; or (v) if Borrower
fails to obtain Lender’s prior written consent to any Transfer as required by
this Agreement or the Mortgage.
          Section 9.4 Matters Concerning Manager. If (a) an Event of Default
occurs, (b) Manager shall become bankrupt or insolvent or (c) a default occurs
under the Management Agreement, Borrower shall, at the request of Lender,
terminate the Management Agreement and replace the Manager with a Qualified
Manager pursuant to a Replacement Management Agreement, it being understood and
agreed that the management fee for such Qualified Manager shall not exceed then
prevailing market rates.
          Section 9.5 Servicer. At the option of Lender, the Loan may be
serviced by a servicer/trustee (any such servicer/trustee, together with its
agents, nominees or designees, are collectively referred to as “Servicer”)
selected by Lender and Lender may delegate all or any portion of its
responsibilities under this Agreement and the other Loan Documents to Servicer
pursuant to a servicing agreement (the “Servicing Agreement”) between Lender and
Servicer. Borrower shall not be responsible for any set-up fees or any other
initial costs relating to or arising under the Servicing Agreement or the
monthly servicing fee due to Servicer under the Servicing Agreement; provided,
however, that Borrower shall be responsible for expenses incurred by Lender or
Servicer as set forth in Section 10.13 hereof.

  X.   MISCELLANEOUS

          Section 10.1 Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery to Lender of the Note, and shall continue in full force and effect
so long as all or any of the Debt is outstanding and unpaid unless a longer
period is expressly set forth herein or in the other Loan Documents. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the legal representatives, successors and assigns of such
party. All covenants, promises and agreements in this Agreement, by or on behalf
of Borrower, shall inure to the benefit of the legal representatives, successors
and assigns of Lender.
          Section 10.2 Lender’s Discretion. Whenever pursuant to this Agreement,
Lender exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Lender, the decision of Lender to
approve or disapprove or to decide whether arrangements or terms are
satisfactory or not satisfactory shall (except as is otherwise specifically
herein provided) be in the sole discretion of Lender and shall be final and
conclusive.
          Section 10.3 Governing Law.
          (a) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN
WAS MADE BY LENDER AND ACCEPTED BY

 

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BORROWER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE LOAN 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 AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE
OBLIGATIONS ARISING HEREUNDER AND THEREUNDER 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 CONFLICTS OF
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
AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND THIS AGREEMENT, THE NOTE
AND THE OTHER LOAN DOCUMENTS 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 AGREEMENT OR THE OTHER LOAN DOCUMENTS 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 JURISDICTION OF ANY
SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND
APPOINT:
National Registered Agents, Inc.,
320 North Meridian Street
Indianapolis, IN 46204

 

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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.
          Section 10.4 Modification, Waiver in Writing. No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, or of the Note, or of any other Loan Document, nor consent to any
departure by Borrower therefrom, shall in any event be effective unless the same
shall be in a writing signed by the party against whom enforcement is sought,
and then such waiver or consent shall be effective only in the specific
instance, and for the purpose, for which given. Except as otherwise expressly
provided herein, no notice to, or demand on Borrower, shall entitle Borrower to
any other or future notice or demand in the same, similar or other
circumstances.
          Section 10.5 Delay Not a Waiver. Neither any failure nor any delay on
the part of Lender in insisting upon strict performance of any term, condition,
covenant or agreement, or exercising any right, power, remedy or privilege
hereunder, or under the Note or under any other Loan Document, or any other
instrument given as security therefor, shall operate as or constitute a waiver
thereof, nor shall a single or partial exercise thereof preclude any other
future exercise, or the exercise of any other right, power, remedy or privilege.
In particular, and not by way of limitation, by accepting payment after the due
date of any amount payable under this Agreement, the Note or any other Loan
Document, Lender shall not be deemed to have waived any right either to require
prompt payment when due of all other amounts due under this Agreement, the Note
or the other Loan Documents, or to declare a default for failure to effect
prompt payment of any such other amount.
          Section 10.6 Notices. All notices, consents, approvals and requests
required or permitted hereunder or under any other Loan Document shall be given
in writing and shall be effective for all purposes if hand delivered or sent by
(a) certified or registered United States mail, postage prepaid, return receipt
requested or (b) expedited prepaid delivery service, either commercial or United
States Postal Service, with proof of attempted delivery, and by telecopier (with
answer back acknowledged), addressed as follows (or at such other address and
Person as shall be designated from time to time by any party hereto, as the case
may be, in a written notice to the other parties hereto in the manner provided
for in this Section):

 

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  If to Lender:   Bear Stearns Commercial Mortgage, Inc. 383 Madison Avenue New
York, New York 10179 Attention: J. Christopher Hoeffel Facsimile No.:
(212) 272-7047    
 
           
 
  with a copy to:   Kelley Drye & Warren LLP    
 
      101 Park Avenue New York, New York 10178 Attention: Paul A. Keenan, Esq.
Facsimile No.: (212) 808-7897    
 
           
 
  If to Borrower:   Acadia Merrillville Realty, L.P.    
 
      c/o Acadia Realty Trust 1311 Mamaroneck Avenue, Suite 260 White Plains,
New York 10605 Attention: Robert Masters, Esq., General Counsel Facsimile No.:
(914) 288-2139    

A notice shall be deemed to have been given: in the case of hand delivery, at
the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery and telecopy, upon the first attempted delivery on a
Business Day; or in the case of telecopy, upon sender’s receipt of a
machine-generated confirmation of successful transmission after advice by
telephone to recipient that a telecopy notice is forthcoming.
          Section 10.7 Trial by Jury.
          BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE
TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE
EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN
DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION
THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE
AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.
LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING
AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
          Section 10.8 Headings. The Article and/or Section headings and the
Table of Contents in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.
          Section 10.9 Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.

 

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          Section 10.10 Preferences. Lender shall have the continuing and
exclusive right to apply or reverse and reapply any and all payments by Borrower
to any portion of the obligations of Borrower hereunder. To the extent Borrower
makes a payment or payments to Lender, which payment or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid to a trustee, receiver or any other party
under any bankruptcy law, state or federal law, common law or equitable cause,
then, to the extent of such payment or proceeds received, the obligations
hereunder or part thereof intended to be satisfied shall be revived and continue
in full force and effect, as if such payment or proceeds had not been received
by Lender.
          Section 10.11 Waiver of Notice. Borrower shall not be entitled to any
notices of any nature whatsoever from Lender except with respect to matters for
which this Agreement or the other Loan Documents specifically and expressly
provide for the giving of notice by Lender to Borrower and except with respect
to matters for which Borrower is not, pursuant to applicable Legal Requirements,
permitted to waive the giving of notice. Borrower hereby expressly waives the
right to receive any notice from Lender with respect to any matter for which
this Agreement or the other Loan Documents do not specifically and expressly
provide for the giving of notice by Lender to Borrower.
          Section 10.12 Remedies of Borrower. In the event that a claim or
adjudication is made that Lender or its agents have acted unreasonably or
unreasonably delayed acting in any case where by law or under this Agreement or
the other Loan Documents, Lender or such agent, as the case may be, has an
obligation to act reasonably or promptly, Borrower agrees that neither Lender
nor its agents shall be liable for any monetary damages, and Borrower’s sole
remedies shall be limited to commencing an action seeking injunctive relief or
declaratory judgment. The parties hereto agree that any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment.
          Section 10.13 Expenses; Indemnity. (a) Borrower covenants and agrees
to pay or, if Borrower fails to pay, to reimburse, Lender upon receipt of
written notice from Lender for all reasonable costs and expenses (including
reasonable attorneys’ fees and disbursements) incurred by Lender in connection
with (i) the preparation, negotiation, execution and delivery of this Agreement
and the other Loan Documents and the consummation of the transactions
contemplated hereby and thereby and all the costs of furnishing all opinions by
counsel for Borrower (including without limitation any opinions requested by
Lender as to any legal matters arising under this Agreement or the other Loan
Documents with respect to the Property); (ii) Borrower’s ongoing performance of
and compliance with Borrower’s respective agreements and covenants contained in
this Agreement and the other Loan Documents on its part to be performed or
complied with after the Closing Date, including, without limitation, confirming
compliance with environmental and insurance requirements; (iii) Lender’s ongoing
performance and compliance with all agreements and conditions contained in this
Agreement and the other Loan Documents on its part to be performed or complied
with after the Closing Date; (iv) the negotiation, preparation, execution,
delivery and administration of any consents, amendments, waivers or other
modifications to this Agreement and the other Loan Documents and any other
documents or matters requested by Lender; (v) securing Borrower’s compliance
with any requests made pursuant to the provisions of this Agreement; (vi) the
filing and recording fees and expenses, title insurance and reasonable fees and
expenses of counsel for providing to Lender all

 

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required legal opinions, and other similar expenses incurred in creating and
perfecting the Lien in favor of Lender pursuant to this Agreement and the other
Loan Documents; (vii) enforcing or preserving any rights, in response to third
party claims or the prosecuting or defending of any action or proceeding or
other litigation, in each case against, under or affecting Borrower, this
Agreement, the other Loan Documents, the Property, or any other security given
for the Loan; and (viii) enforcing any obligations of or collecting any payments
due from Borrower under this Agreement, the other Loan Documents or with respect
to the Property (including any fees incurred by Servicer in connection with the
transfer of the Loan to a special servicer prior to a Default or Event of
Default) or in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement in the nature of a “work-out” or of
any insolvency or bankruptcy proceedings; provided, however, that Borrower shall
not be liable for the payment of any such costs and expenses to the extent the
same arise by reason of the gross negligence, illegal acts, fraud or willful
misconduct of Lender. Any cost and expenses due and payable to Lender may be
paid from any amounts in the Lockbox Account or Cash Management Account, as
applicable.
          (b) Borrower shall indemnify, defend and hold harmless Lender from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, expenses and disbursements of any kind
or nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for Lender in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not
Lender shall be designated a party thereto), that may be imposed on, incurred
by, or asserted against Lender in any manner relating to or arising out of
(i) any breach by Borrower of its obligations under, or any material
misrepresentation by Borrower contained in, this Agreement or the other Loan
Documents, or (ii) the use or intended use of the proceeds of the Loan
(collectively, the “Indemnified Liabilities”); provided, however, that Borrower
shall not have any obligation to Lender hereunder to the extent that such
Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or
willful misconduct of Lender. To the extent that the undertaking to indemnify,
defend and hold harmless set forth in the preceding sentence may be
unenforceable because it violates any law or public policy, Borrower shall pay
the maximum portion that it is permitted to pay and satisfy under applicable law
to the payment and satisfaction of all Indemnified Liabilities incurred by
Lender.
          (c) Borrower covenants and agrees to pay for or, if Borrower fails to
pay, to reimburse Lender for, any fees and expenses incurred by any Rating
Agency in connection with any consent, approval, waiver or confirmation obtained
from such Rating Agency pursuant to the terms and conditions of this Agreement
or any other Loan Document and Lender shall be entitled to require payment of
such fees and expenses as a condition precedent to the obtaining of any such
consent, approval, waiver or confirmation.
          Section 10.14 Schedules Incorporated. The Schedules annexed hereto are
hereby incorporated herein as a part of this Agreement with the same effect as
if set forth in the body hereof.
          Section 10.15 Offsets, Counterclaims and Defenses. Any assignee of
Lender’s interest in and to this Agreement, the Note and the other Loan
Documents shall take the same free and clear of all offsets, counterclaims or
defenses which are unrelated to such documents

 

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which Borrower may otherwise have against any assignor of such documents, and no
such unrelated counterclaim or defense shall be interposed or asserted by
Borrower in any action or proceeding brought by any such assignee upon such
documents and any such right to interpose or assert any such unrelated offset,
counterclaim or defense in any such action or proceeding is hereby expressly
waived by Borrower.
          Section 10.16 No Joint Venture or Partnership; No Third Party
Beneficiaries. (a) Borrower and Lender intend that the relationships created
hereunder and under the other Loan Documents be solely that of borrower and
lender. Nothing herein or therein is intended to create a joint venture,
partnership, tenancy-in-common, or joint tenancy relationship between Borrower
and Lender nor to grant Lender any interest in the Property other than that of
mortgagee, beneficiary or lender.
          (b) This Agreement and the other Loan Documents are solely for the
benefit of Lender and Borrower and nothing contained in this Agreement or the
other Loan Documents shall be deemed to confer upon anyone other than Lender and
Borrower any right to insist upon or to enforce the performance or observance of
any of the obligations contained herein or therein. All conditions to the
obligations of Lender to make the Loan hereunder are imposed solely and
exclusively for the benefit of Lender and no other Person shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Lender will refuse to make the Loan in the absence of
strict compliance with any or all thereof and no other Person shall under any
circumstances be deemed to be a beneficiary of such conditions, any or all of
which may be freely waived in whole or in part by Lender if, in Lender’s sole
discretion, Lender deems it advisable or desirable to do so.
          Section 10.17 Publicity. All news releases, publicity or advertising
by Borrower or its Affiliates through any media intended to reach the general
public which refers to the Loan Documents or the financing evidenced by the Loan
Documents, to Lender, BSCMI, or any of their Affiliates shall be subject to the
prior written approval of Lender.
          Section 10.18 Waiver of Marshalling of Assets. To the fullest extent
permitted by law, Borrower, for itself and its successors and assigns, waives
all rights to a marshalling of the assets of Borrower, Borrower’s partners and
others with interests in Borrower, and of the Property, and agrees not to assert
any right under any laws pertaining to the marshalling of assets, the sale in
inverse order of alienation, homestead exemption, the administration of estates
of decedents, or any other matters whatsoever to defeat, reduce or affect the
right of Lender under the Loan Documents to a sale of the Property for the
collection of the Debt without any prior or different resort for collection or
of the right of Lender to the payment of the Debt out of the net proceeds of the
Property in preference to every other claimant whatsoever.
          Section 10.19 Waiver of Counterclaim. Borrower hereby waives the right
to assert a counterclaim, other than a compulsory counterclaim, in any action or
proceeding brought against it by Lender or its agents.
          Section 10.20 Conflict; Construction of Documents; Reliance. In the
event of any conflict between the provisions of this Agreement and any of the
other Loan Documents, the provisions of this Agreement shall control. The
parties hereto acknowledge that they were

 

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represented by competent counsel in connection with the negotiation, drafting
and execution of the Loan Documents and that such Loan Documents shall not be
subject to the principle of construing their meaning against the party which
drafted same. Borrower acknowledges that, with respect to the Loan, Borrower
shall rely solely on its own judgment and advisors in entering into the Loan
without relying in any manner on any statements, representations or
recommendations of Lender or any parent, subsidiary or Affiliate of Lender.
Lender shall not be subject to any limitation whatsoever in the exercise of any
rights or remedies available to it under any of the Loan Documents or any other
agreements or instruments which govern the Loan by virtue of the ownership by it
or any parent, subsidiary or Affiliate of Lender of any equity interest any of
them may acquire in Borrower, and Borrower hereby irrevocably waives the right
to raise any defense or take any action on the basis of the foregoing with
respect to Lender’s exercise of any such rights or remedies. Borrower
acknowledges that Lender engages in the business of real estate financings and
other real estate transactions and investments which may be viewed as adverse to
or competitive with the business of Borrower or its Affiliates.
          Section 10.21 Brokers and Financial Advisors. Borrower hereby
represents that it has dealt with no financial advisors, brokers, underwriters,
placement agents, agents or finders in connection with the transactions
contemplated by this Agreement. Borrower hereby agrees to indemnify, defend and
hold Lender harmless from and against any and all claims, liabilities, costs and
expenses of any kind (including Lender’s attorneys’ fees and expenses) in any
way relating to or arising from a claim by any Person that such Person acted on
behalf of Borrower or Lender in connection with the transactions contemplated
herein. The provisions of this Section 10.21 shall survive the expiration and
termination of this Agreement and the payment of the Debt.
          Section 10.22 Prior Agreements. This Agreement and the other Loan
Documents contain the entire agreement of the parties hereto and thereto in
respect of the transactions contemplated hereby and thereby, and all prior
agreements among or between such parties, whether oral or written, including,
without limitation, the Application Letter dated August 22, 2006 (as amended)
between Borrower and Lender are superseded by the terms of this Agreement and
the other Loan Documents.
          Section 10.23 Joint and Several Liability. If Borrower consists of
more than one (1) Person the obligations and liabilities of each Person shall be
joint and several.
          Section 10.24 Certain Additional Rights of Lender (VCOC).
Notwithstanding anything to the contrary contained in this Agreement, Lender
shall have:
          (a) the right to routinely consult with and advise Borrower’s
management regarding the significant business activities and business and
financial developments of Borrower; provided, however, that such consultations
shall not include discussions of environmental compliance programs or disposal
of hazardous substances. Consultation meetings should occur on a regular basis
(no less frequently than quarterly) with Lender having the right to call special
meetings at any reasonable times and upon reasonable advance notice;
          (b) the right, in accordance with the terms of this Agreement, to
examine the books and records of Borrower at any reasonable times upon
reasonable notice;

 

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          (c) the right, in accordance with the terms of this Agreement,
including, without limitation, Section 5.1.11 hereof, to receive monthly,
quarterly and year end financial reports, including balance sheets, statements
of income, shareholder’s equity and cash flow, a management report and schedules
of outstanding indebtedness; and
          (d) the right, without restricting any other rights of Lender under
this Agreement (including any similar right), to approve any acquisition by
Borrower of any other significant property (other than personal property
required for the day to day operation of the Property).
The rights described above in this Section 10.24 may be exercised by any entity
which owns and controls, directly or indirectly, substantially all of the
interests in Lender.
          Section 10.25 MERS. Mortgage Electronic Registration Systems, Inc., a
Delaware corporation (“MERS”), serves as mortgagee of record and secured party
solely as nominee, in an administrative capacity, for Lender and only holds
legal title to the interests granted, assigned, and transferred in the Security
Instruments and the Assignments of Leases. MERS shall at all times comply with
the instructions of Lender. If necessary to comply with law or custom, MERS (for
the benefit of Lender) may be directed by Lender to exercise any or all of those
interests, including without limitation, the right to foreclose and sell the
Property, and take any action required of Lender, including without limitation,
a release, discharge or reconveyance of the Mortgage. Subject to the foregoing,
all references in the Loan Documents to “Mortgagee” shall include Lender and its
successors and assigns. The relationship of Mortgagor and Lender under the
Mortgage and the other Loan Documents is, and shall at all times remain, solely
that of borrower and lender (the role of MERS thereunder being solely that of
nominee as set forth above and not that of a lender); and Mortgagee neither
undertakes nor assumes any responsibility or duty to Borrower or to any other
Person with respect to the Property.
Preparer affirmation: I affirm, under penalty of perjury, that I have taken
reasonable care to redact each Social Security number in this document, unless
required by law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized representatives, all as of the day and
year first above written.

                          ACADIA MERRILLVILLE REALTY, L.P., an   Indiana limited
partnership
 
                            By: Acadia Merrillville Realty, Inc., its General
Partner    
 
                   
 
          By:        
 
                   
 
              Name: Robert Masters    
 
              Title: Senior Vice President    
 
                        BEAR STEARNS COMMERCIAL MORTGAGE, INC., a New York
corporation
 
                   
 
  By:                                       Name:             Title:    

 

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JOINDER
          By executing this Joinder (the “Joinder”), the undersigned (“Joinder
Parties”) hereby covenant, warrant and agree to comply with all of the terms and
conditions set forth in Section 9.2 hereof.
          1. Waivers. With respect to the obligations of the Joinder Parties
pursuant to Section 9.2 hereof, to the fullest extent permitted by applicable
law, each Joinder Party waives all rights and defenses of sureties, guarantors,
accommodation parties and/or co-makers and agrees that its obligations under
this Joinder shall be primary, absolute and unconditional, and that its
obligations under this Joinder shall be unaffected by any of such rights or
defenses, including:
          (a) the unenforceability of any Loan Document against Borrower and/or
any guarantor or other Joinder Party;
          (b) any release or other action or inaction taken by Lender with
respect to the collateral, the Loan, Borrower, any guarantor and/or other
Joinder Party, whether or not the same may impair or destroy any subrogation
rights of any Joinder Party, or constitute a legal or equitable discharge of any
surety or indemnitor;
          (c) the existence of any collateral or other security for the Loan,
and any requirement that Lender pursue any of such collateral or other security,
or pursue any remedies it may have against Borrower, any guarantor and/or any
other Joinder Party;
          (d) any requirement that Lender provide notice to or obtain a Joinder
Party’s consent to any modification, increase, extension or other amendment of
the Loan, including the guaranteed obligations;
          (e) any right of subrogation (until payment in full of the Loan,
including the guaranteed obligations, and the expiration of any applicable
preference period and statute of limitations for fraudulent conveyance claims);
          (f) any defense based on any statute of limitations;
          (g) any payment by Borrower to Lender if such payment is held to be a
preference or fraudulent conveyance under bankruptcy laws or Lender is otherwise
required to refund such payment to Borrower or any other party; and
          (h) any voluntary or involuntary bankruptcy, receivership, insolvency,
reorganization or similar proceeding affecting Borrower or any of its assets.
          2. Agreements. With respect to the obligations of the Joinder Parties
pursuant to Section 9.2 hereof, each Joinder Party further represents, warrants
and agrees that:
          (a) The obligations under this Joinder are enforceable against each
such party and are not subject to any defenses, offsets or counterclaims;

 

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          (b) The provisions of this Joinder are for the benefit of Lender and
its successors and assigns;
          (c) Lender shall have the right to (i) renew, modify, extend or
accelerate the Loan, (ii) pursue some or all of its remedies against Borrower,
any guarantor or any Joinder Party, (iii) add, release or substitute any
collateral for the Loan or party obligated thereunder, and (iv) release
Borrower, any guarantor or any Joinder Party from liability, all without notice
to or consent of any Joinder Party (or other Joinder Party) and without
affecting the obligations of any Joinder Party (or other Joinder Party)
hereunder;
          (d) To the maximum extent permitted by law, each Joinder Party hereby
knowingly, voluntarily and intentionally waives the right to a trial by jury in
respect of any litigation based hereon. This waiver is a material inducement to
Lender to enter into this Agreement.
          This Joinder shall be governed by the laws of the State of New York.
Executed as of July                     , 2007.
ACADIA REALTY LIMITED
PARTNERSHIP, a Delaware limited
partnership
By: Acadia Realty Trust, its General Partner

                  By:           Name:           Title:        

 

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SCHEDULE I
(Rent Roll)

 

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SCHEDULE II
(Required Repairs — Deadlines For Completion)
(TABLE) [w41985w4198501.gif]

 

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SCHEDULE III
(Organizational Chart of Borrower)

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