Exhibit 10.8
Argonaut Hotel
 
MARITIME HOTEL ASSOCIATES, L.P.,
as Borrower
to
FIRST AMERICAN TITLE INSURANCE COMPANY,
as Trustee for the benefit of
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Lender
DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS
AND FIXTURE FILING

         
 
 
  Dated: February 23, 2007    
 
       
 
  PREPARED BY AND UPON RECORDATION RETURN TO:    
 
       
 
  Proskauer Rose LLP    
 
  1585 Broadway    
 
  New York, New York 10036    
 
       
 
  Attention: David J. Weinberger, Esq.    

 

 

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     THIS DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND FIXTURE
FILING (the “Security Instrument”) is made as of the 23rd day of February, 2007,
by MARITIME HOTEL ASSOCIATES, L.P., having its chief executive office at 222
Kearny Street, Suite 200, San Francisco, California 94018 (hereinafter referred
to as “Borrower”), to FIRST AMERICAN TITLE INSURANCE COMPANY having an address
at 1 First American Way, Santa Ana, California 92707 (hereinafter referred to as
“Trustee” for the benefit of WACHOVIA BANK, NATIONAL ASSOCIATION, having an
address at Wachovia Bank, National Association, Commercial Real Estate Services,
8739 Research Drive URP 4, NC 1075, Charlotte, North Carolina 28262 (hereinafter
referred to as “Lender”).
W I T N E S S E T H:
     WHEREAS, Lender has authorized a loan (hereinafter referred to as the
“Loan”) to Borrower in the maximum principal sum of FORTY-TWO MILLION AND NO/100
DOLLARS ($42,000,000.00) (hereinafter referred to as the “Loan Amount”), which
Loan is evidenced by that certain promissory note, dated the date hereof
(together with any supplements, amendments, modifications or extensions thereof,
hereinafter referred to as the “Note”) given by Borrower, as maker, to Lender,
as payee;
     WHEREAS, in consideration of the Loan, Borrower has agreed to make payments
in amounts sufficient to pay and redeem, and provide for the payment and
redemption of the principal of, premium, if any, and interest on the Note when
due;
     WHEREAS, Borrower desires by this Security Instrument to provide for, among
other things, the issuance of the Note and for the deposit, deed and pledge by
Borrower with, and the creation of a security interest in favor of, Lender, as
security for Borrower’s obligations to Lender from time to time pursuant to the
Note and the other Loan Documents;
     WHEREAS, Borrower and Lender intend these recitals to be a material part of
this Security Instrument; and
     WHEREAS, all things necessary to make this Security Instrument the valid
and legally binding obligation of Borrower in accordance with its terms, for the
uses and purposes herein set forth, have been done and performed.
     NOW THEREFORE, to secure the payment of the principal of, prepayment
premium (if any) and interest on the Note and all other obligations, liabilities
or sums due or to become due under this Security Instrument, the Note or any
other Loan Document, including, without limitation, interest on said
obligations, liabilities or sums (said principal, premium, interest and other
sums being hereinafter referred to as the “Debt”), and the performance of all
other covenants, obligations and liabilities of Borrower pursuant to the Loan
Documents, Borrower has executed and delivered this Security Instrument; and
Borrower has irrevocably granted, and by these presents and by the execution and
delivery hereof does hereby irrevocably grant, bargain, sell, alien, demise,
release, convey, assign, transfer, deed, hypothecate, pledge, set over, warrant,
mortgage and confirm to Trustee, forever in trust WITH POWER OF SALE, all right,
title and interest of Borrower in and to all of the following property, rights,
interests and estates, to the greatest extent assignable by law:

 

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     (a) the plot(s), piece(s) or parcel(s) of real property described in
Exhibit A attached hereto and made a part hereof (individually and collectively,
hereinafter referred to as the “Premises”);
     (b) (i) all buildings, foundations, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
of every kind or nature now or hereafter located on the Premises (hereinafter
collectively referred to as the “Improvements”); and (ii) to the extent
permitted by law, the name or names, if any, as may now or hereafter be used for
any of the Improvements, and the goodwill associated therewith;
     (c) all easements, servitudes, rights-of-way, strips and gores of land,
streets, ways, alleys, passages, sewer rights, water, water courses, water
rights and powers, ditches, ditch rights, reservoirs and reservoir rights, air
rights and development rights, lateral support, drainage, gas, oil and mineral
rights, tenements, hereditaments and appurtenances of any nature whatsoever, in
any way belonging, relating or pertaining to the Premises or the Improvements
and the reversion and reversions, remainder and remainders, whether existing or
hereafter acquired, and all land lying in the bed of any street, road or avenue,
opened or proposed, in front of or adjoining the Premises to the center line
thereof and any and all sidewalks, drives, curbs, passageways, streets, spaces
and alleys adjacent to or used in connection with the Premises and/or
Improvements and all the estates, rights, titles, interests, property,
possession, claim and demand whatsoever, both in law and in equity, of Borrower
of, in and to the Premises and Improvements and every part and parcel thereof,
with the appurtenances thereto;
     (d) all machinery, equipment, systems, fittings, apparatus, appliances,
furniture, furnishings, tools, fixtures, Inventory (as hereinafter defined) and
articles of personal property and accessions thereof and renewals, replacements
thereof and substitutions therefor (including, but not limited to, all plumbing,
lighting and elevator fixtures, office furniture, beds, bureaus, chiffonniers,
chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting,
drapes, draperies, curtains, shades, venetian blinds, wall coverings, screens,
paintings, hangings, pictures, divans, couches, luggage carts, luggage racks,
stools, sofas, chinaware, flatware, linens, pillows, blankets, glassware,
foodcarts, cookware, dry cleaning facilities, dining room wagons, keys or other
entry systems, bars, bar fixtures, liquor and other drink dispensers, icemakers,
radios, television sets, intercom and paging equipment, electric and electronic
equipment, dictating equipment, telephone systems, computerized accounting
systems, engineering equipment, vehicles, medical equipment, potted plants,
heating, lighting and plumbing fixtures, fire prevention and extinguishing
apparatus, theft prevention equipment, cooling and air-conditioning systems,
elevators, escalators, fittings, plants, apparatus, stoves, ranges,
refrigerators, laundry machines, tools, machinery, engines, dynamos, motors,
boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning
systems, floor cleaning, waxing and polishing equipment, call systems, brackets,
signs, bulbs, bells, ash and fuel, conveyors, cabinets, lockers, shelving,
spotlighting equipment, dishwashers, garbage disposals, washers and dryers),
other customary hotel equipment, inventory and other property of every kind and
nature whatsoever owned by Borrower, or in which Borrower has or shall have an
interest, now or hereafter located upon, or in, and used in connection with the
Premises or the Improvements, or appurtenant thereto, and all building
equipment, materials and supplies of any nature whatsoever owned by Borrower, or
in which Borrower has or shall have an interest, now or hereafter located upon,
or in, and used in connection with the Premises or the Improvements

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or appurtenant thereto, (hereinafter, all of the foregoing items described in
this paragraph (d) are collectively called the “Equipment”), all of which, and
any replacements, modifications, alterations and additions thereto, to the
extent permitted by applicable law, shall be deemed to constitute fixtures (the
“Fixtures”), and are part of the real estate and security for the payment of the
Debt and the performance of Borrower’s obligations. To the extent any portion of
the Equipment is not real property or fixtures under applicable law, it shall be
deemed to be personal property, and this Security Instrument shall constitute a
security agreement creating a security interest therein in favor of Lender under
the UCC;
     (e) all awards or payments, including interest thereon, which may hereafter
be made with respect to the Premises, the Improvements, the Fixtures, or the
Equipment, whether from the exercise of the right of eminent domain (including
but not limited to any transfer made in lieu of or in anticipation of the
exercise of said right), or for a change of grade, or for any other injury to or
decrease in the value of the Premises, the Improvements or the Equipment or
refunds with respect to the payment of property taxes and assessments, and all
other proceeds of the conversion, voluntary or involuntary, of the Premises,
Improvements, Equipment, Fixtures or any other Property or part thereof into
cash or liquidated claims;
     (f) all leases, tenancies, franchises, licenses and permits, Property
Agreements and other agreements affecting the use, enjoyment or occupancy of the
Premises, the Improvements, the Fixtures, or the Equipment or any portion
thereof now or hereafter entered into, whether before or after the filing by or
against Borrower of any petition for relief under the Bankruptcy Code and all
reciprocal easement agreements, license agreements (hereinafter collectively
referred to as the “Leases”), together with all receivables, revenues, rentals,
credit card receipts, receipts and all payments received which relate to the
rental, lease, franchise and use of space at the Premises and rental and use of
guest rooms or meeting rooms or banquet rooms or recreational facilities or
bars, beverage or food sales, vending machines, mini-bars, room service,
telephone, video and television systems, electronic mail, internet connections,
guest laundry, bars, the provision or sale of other goods and services, and all
other payments received from guests or visitors of the Premises, and other items
of revenue, receipts or income as identified in the Uniform System of Accounts
(as hereinafter defined), all cash or security deposits, lease termination
payments, advance rentals and payments of similar nature and guarantees or other
security held by, or issued in favor of, Borrower in connection therewith to the
extent of Borrower’s right or interest therein and all remainders, reversions
and other rights and estates appurtenant thereto, and all base, fixed,
percentage or additional rents, and other rents, oil and gas or other mineral
royalties, and bonuses, issues, profits and rebates and refunds or other
payments made by any Governmental Authority from or relating to the Premises,
the Improvements, the Fixtures or the Equipment plus all rents, common area
charges and other payments now existing or hereafter arising, whether paid or
accruing before or after the filing by or against Borrower of any petition for
relief under the Bankruptcy Code (the “Rents”) and all proceeds from the sale or
other disposition of the Leases and the right to receive and apply the Rents to
the payment of the Debt subject in all events to the provisions hereof;
     (g) all proceeds of and any unearned premiums on any insurance policies
covering the Premises, the Improvements, the Fixtures, the Rents or the
Equipment, including, without limitation, the right to receive and apply the
proceeds of any insurance, judgments, or settlements made in lieu thereof, for
damage to the Premises, the Improvements, the Fixtures or the

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Equipment and all refunds or rebates of Impositions, and interest paid or
payable with respect thereto;
     (h) all deposit accounts, securities accounts, funds or other accounts
maintained or deposited with Lender, or its assigns, in connection herewith,
including, without limitation, the Escrow Accounts, the Central Account, the
Rent Account, and the Sub-Accounts and all monies and investments deposited or
to be deposited in such accounts;
     (i) all accounts receivable, contract rights, franchises, interests, estate
or other claims, both at law and in equity, now existing or hereafter arising,
and relating to the Premises, the Improvements, the Fixtures or the Equipment,
not included in Rents;
     (j) all now existing or hereafter arising claims against any Person with
respect to any damage to the Premises, the Improvements, the Fixtures or the
Equipment, including, without limitation, damage arising from any defect in or
with respect to the design or construction of the Improvements, the Fixtures or
the Equipment and any damage resulting therefrom;
     (k) all deposits or other security or advance payments, including rental
payments now or hereafter made by or on behalf of Borrower to others, with
respect to (i) insurance policies, (ii) utility services, (iii) cleaning,
maintenance, repair or similar services, (iv) refuse removal or sewer service,
(v) parking or similar services or rights and (vi) rental of Equipment, if any,
relating to or otherwise used in the operation of the Premises, the
Improvements, the Fixtures or the Equipment;
     (l) all intangible property now or hereafter relating to the Premises, the
Improvements, the Fixtures or the Equipment or its operation, including, without
limitation, software, letter of credit rights, trade names, trademarks
(including, without limitation, any licenses of or agreements to license trade
names or trademarks now or hereafter entered into by Borrower), logos, building
names and goodwill to the greatest extent assignable pursuant to the terms
thereof;
     (m) all now existing or hereafter arising advertising material, guaranties,
warranties, building permits, other permits, licenses, plans and specifications,
shop and working drawings, soil tests, appraisals and other documents, materials
and/or personal property of any kind now or hereafter existing in or relating to
the Premises, the Improvements, the Fixtures, and the Equipment, to the greatest
extent assignable pursuant to the terms thereof;
     (n) all now existing or hereafter arising drawings, designs, plans and
specifications prepared by architects, engineers, interior designers, landscape
designers and any other consultants or professionals for the design,
development, construction, repair and/or improvement of the Property, as amended
from time to time;
     (o) the right, in the name of and on behalf of Borrower, to appear in and
defend any now existing or hereafter arising action or proceeding brought with
respect to the Premises, the Improvements, the Fixtures or the Equipment and to
commence any action or proceeding to protect the interest of Lender in the
Premises, the Improvements, the Fixtures or the Equipment to the greatest extent
permitted pursuant to the terms of this Security Instrument;

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     (p) the Ground Lease and the leasehold estate created thereby, together
with all modifications, extensions and renewals of the Ground Lease and all
credits, deposits, options, privileges and rights of Borrower as tenant under
the Ground Lease including, without limitation, the right to renew or extend the
Ground Lease for a succeeding term or terms to the extent set forth therein; and
     (q) all proceeds, products, substitutions and accessions (including claims
and demands therefor) of each of the foregoing.
     All of the foregoing items (a) through (q), together with all of the right,
title and interest of Borrower therein, are collectively referred to as the
“Property”.
     TO HAVE AND TO HOLD the above granted and described Property unto Trustee,
in trust, for the proper use and benefit of Lender, and the successors and
assigns of Lender, forever.
     PROVIDED, ALWAYS, and these presents are upon this express condition, if
Borrower shall well and truly pay and discharge the Debt and perform and observe
the terms, covenants and conditions set forth in the Loan Documents, then these
presents and the estate hereby granted shall cease and be void.
     AND Borrower covenants with and warrants to Lender that:
ARTICLE I: DEFINITIONS
     Section 1.01. Certain Definitions.
     For all purposes of this Security Instrument, except as otherwise expressly
provided or unless the context clearly indicates a contrary intent:
     (i) the capitalized terms defined in this Section have the meanings
assigned to them in this Section, and include the plural as well as the
singular;
     (ii) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with GAAP; and
     (iii) the words “herein”, “hereof”, and “hereunder” and other words of
similar import refer to this Security Instrument as a whole and not to any
particular Section or other subdivision.
     “Adjusted Net Income” shall mean trailing twelve (12) month Operating
Income minus trailing twelve (12) month Operating Expenses. The Adjusted Net
Income shall be calculated by Borrower and shall be subject to the reasonable
review and approval of Lender. “Affiliate” of any specified Person shall mean
any other Person directly or indirectly Controlling or Controlled by or under
direct or indirect common Control with such specified Person.
     “Annual Budget” shall mean an annual budget submitted by Borrower to Lender
in accordance with the terms of Section 2.09 hereof.

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     “Appraisal” shall mean the appraisal of the Property and all supplemental
reports or updates thereto previously delivered to Lender in connection with the
Loan.
     “Appraiser” shall mean the Person who prepared the Appraisal.
     “Approved Annual Budget” shall mean, for purposes of Section 5.05 hereof,
any Annual Budget for which Lender has not issued written notice of objections
to the amount of specific line items within thirty (30) days following the
receipt thereof pursuant to Section 2.09, which objections shall be in Lender’s
reasonable discretion. Borrower shall not be required to alter the Annual Budget
as a result of any such objections by Lender, but in the event Lender is
required to fund Operating Expenses in accordance with the terms of Section 5.05
hereof, Lender shall only be required to disburse Operating Expenses to the
extent Lender did not object to the same, taking into account those amounts
already expended for such Operating Expenses during such Fiscal Year.
     “Approved Manager Standard” shall mean the standard of business operations,
practices and procedures customarily employed by entities having a senior
executive with at least seven (7) years’ experience in the management of hotels
of the same class and quality as the Improvements, and which manage not less
than five (5) such hotel properties having an aggregate number of hotel rooms of
not less than five hundred (500) hotel rooms.
     “Approved Manager Transfer” shall mean any change of control in the
ownership of Manager following which (i) Kimpton Group Holding LLC, a Delaware
limited liability company, continues to control Manager or (ii) whereby Manager
is controlled by a Person or an Affiliate thereof previously approved by Lender
in writing.
     “Architect” shall have the meaning set forth in Section 3.04(b)(i) hereof.
     “Assignment” shall mean the Assignment of Leases and Rents and Security
Deposits of even date herewith relating to the Property given by Borrower to
Lender, as the same may be modified, amended or supplemented from time to time.
     “Bank” shall mean the bank, trust company, savings and loan association or
savings bank designated by Lender, in its sole and absolute discretion, in which
the Central Account shall be located.
     “Bankruptcy Code” shall mean 11 U.S.C. §101 et seq., as amended from time
to time.
     “Basic Carrying Costs” shall mean the sum of the following costs associated
with the Property: (a) Real Estate Taxes, (b) insurance premiums and (c) ground
rents.
     “Basic Carrying Costs Escrow Account” shall mean the Escrow Account
maintained pursuant to Section 5.06 hereof.
     “Basic Carrying Costs Monthly Installment” shall mean Lender’s estimate of
one-twelfth (1/12th) of the annual amount for Basic Carrying Costs.

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     “Basic Carrying Costs Monthly Installment” shall also include, if required
by Lender, a sum of money which, together with such monthly installments, will
be sufficient to make the payment of each such Basic Carrying Cost at least
thirty (30) days prior to the date initially due. Should such Basic Carrying
Costs not be ascertainable at the time any monthly deposit is required to be
made, the Basic Carrying Costs Monthly Installment shall be determined by Lender
in its reasonable discretion on the basis of the aggregate Basic Carrying Costs
for the prior Fiscal Year or month or the prior payment period for such cost. As
soon as the Basic Carrying Costs are fixed for the then current Fiscal Year,
month or period, the next ensuing Basic Carrying Costs Monthly Installment shall
be adjusted to reflect any deficiency or surplus in prior monthly payments. If
at any time during the term of the Loan Lender reasonably determines that there
will be insufficient funds in the Basic Carrying Costs Escrow Account to make
payments when they become due and payable, Lender shall have the right to adjust
the Basic Carrying Costs Monthly Installment such that there will be sufficient
funds to make such payments, which determination shall be based on projections
of those amounts of Basic Carrying Costs as are reasonably expected to become
due and payable during the relevant Fiscal Year. Notwithstanding the foregoing,
provided that no Event of Default has occurred and is continuing, (a) if
Borrower delivers proof reasonably satisfactory to Lender that the insurance
required hereunder is maintained pursuant to a blanket policy and each
installment of the annual insurance premiums relating to the insurance required
pursuant to Section 3.01 hereof has been paid in full prior to the applicable
due date thereof, the Basic Carrying Costs Monthly Installment shall not include
any amount allocable to insurance premiums and (b) if Borrower delivers proof
reasonably satisfactory to Lender that all ground rent due under the Ground
Lease has been paid in full prior to the applicable due date thereof, the Basic
Carrying Costs Monthly Installment shall not include any amounts allocable to
ground rent.
     “Basic Carrying Costs Sub-Account” shall mean the Sub-Account of the
Central Account established pursuant to Section 5.02 into which the Basic
Carrying Costs Monthly Installments shall be deposited.
     “Borrower” shall mean Borrower named herein and any successor to the
obligations of Borrower.
     “Borrower Account” shall have the meaning set forth in Section 5.01 hereof.
     “Borrower’s Knowledge” or words of similar effect shall mean the actual
knowledge of Borrower or knowledge after making all due inquiry of the
Property’s general manager, assistant general manager and Gregory J. Wolkom.
     “Business Day” shall mean any day other than (a) a Saturday or Sunday, or
(b) a day on which banking and savings and loan institutions in the State of New
York or the State of North Carolina are authorized or obligated by law or
executive order to be closed, or at any time during which the Loan is an asset
of a Securitization, the cities, states and/or commonwealths used in the
comparable definition of “Business Day” in the Securitization documents.
     “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.

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     “Cash Expenses” shall mean for any period, (x) the operating expenses
(excluding Capital Expenditures) for the Property as set forth in an Approved
Annual Budget to the extent that such expenses are actually incurred by Borrower
minus (y) payments into the Basic Carrying Costs Sub-Account, the Debt Service
Payment Sub-Account and the Recurring Replacement Reserve Sub-Account (to the
extent such sums are for the payment of sums set forth as operating expenses in
the Approved Annual Budget).
     “Central Account” shall mean an Eligible Account, maintained at the Bank,
in the name of Lender or its successors or assigns (as secured party) as may be
designated by Lender.
     “Closing Date” shall mean the date of the Note.
     “Code” shall mean the Internal Revenue Code of 1986, as amended and as it
may be further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto.
     “Condemnation Proceeds” shall mean all of the proceeds in respect of any
Taking or purchase in lieu thereof.
     “Contractual Obligation” shall mean, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of the property owned by it
is bound.
     “Control” means, when used with respect to any specific Person, the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person whether through
ownership of voting securities, beneficial interests, by contract or otherwise.
The definition is to be construed to apply equally to variations of the word
“Control” including “Controlled,” “Controlling” or “Controlled by.”
     “CPI” shall mean “The Consumer Price Index (New Series) (Base Period
1982-84=100) (all items for all urban consumers)” issued by the Bureau of Labor
Statistics of the United States Department of Labor (the “Bureau”). If the CPI
ceases to use the 1982-84 average equaling 100 as the basis of calculation, or
if a change is made in the term, components or number of items contained in said
index, or if the index is altered, modified, converted or revised in any other
way, then the index shall be adjusted to the figure that would have been arrived
at had the change in the manner of computing the index in effect at the date of
this Security Instrument not been made. If at any time during the term of this
Security Instrument the CPI shall no longer be published by the Bureau, then any
comparable index issued by the Bureau or similar agency of the United States
issuing similar indices shall be used in lieu of the CPI.
     “Credit Card Company” shall have the meaning set forth in Section 5.01
hereof.
     “Credit Card Payment Direction Letter” shall have the meaning set forth in
Section 5.01 hereof.
     “Debt” shall have the meaning set forth in the Recitals hereto.

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     “Debt Service” shall mean the amount of interest and principal payments due
and payable in accordance with the Note during an applicable period.
     “Debt Service Coverage” shall mean the quotient obtained by dividing
Adjusted Net Income by the sum of the (a) aggregate payments of interest,
principal and all other sums due for such specified period under the Note
(determined as of the date the calculation of Debt Service Coverage is required
or requested hereunder) but in all events excluding any payouts of principal due
at maturity and (b) aggregate payments of interest, principal and all other sums
due for such specified period pursuant to the terms of subordinate or mezzanine
financing, if any, then affecting or related to the Property or, if Debt Service
Coverage is being calculated in connection with a request for consent to any
subordinate or mezzanine financing, then proposed.
     “Debt Service Payment Sub-Account” shall mean the Sub-Account of the
Central Account established pursuant to Section 5.02 hereof into which the
Required Debt Service Payment shall be deposited.
     “Default” shall mean any Event of Default or event which would constitute
an Event of Default if all requirements in connection therewith for the giving
of notice, the lapse of time, and the happening of any further condition, event
or act, had been satisfied.
     “Default Rate” shall mean the lesser of (a) the highest rate allowable at
law and (b) five percent (5%) above the interest rate set forth in the Note.
     “Default Rate Interest” shall mean, to the extent the Default Rate becomes
applicable, interest in excess of the interest which would have accrued on
(a) the Principal Amount and (b) any accrued but unpaid interest, if the Default
Rate was not applicable. “Development Laws” shall mean all applicable
subdivision, zoning, environmental protection, wetlands protection, or land use
laws or ordinances, and any and all applicable rules and regulations of any
Governmental Authority promulgated thereunder or related thereto.
     “Disclosure Document” shall mean a prospectus, prospectus supplement,
private placement memorandum, or similar offering memorandum or offering
circular, in each case in preliminary or final form, used to offer securities in
connection with a Securitization.
     “Dollar” and the sign “$” shall mean lawful money of the United States of
America.
     “Eligible Account” shall mean a segregated account which is either (a) an
account or accounts maintained with a federal or state chartered depository
institution or trust company the long term unsecured debt obligations of which
are rated by each of the Rating Agencies (or, if not rated by Fitch, Inc.
(“Fitch”), otherwise acceptable to Fitch, as confirmed in writing that such
account would not, in and of itself, result in a downgrade, qualification or
withdrawal of the then current ratings assigned to any certificates issued in
connection with a Securitization) in its highest rating category at all times
(or, in the case of the Basic Carrying Costs Escrow Account, the long term
unsecured debt obligations of which are rated at least “AA” (or its equivalent))
by each of the Rating Agencies (or, if not rated by Fitch, otherwise acceptable
to Fitch, as confirmed in writing that such account would not, in and of itself,
result in a downgrade, qualification or withdrawal of the then current ratings
assigned to any certificates issued in connection with a Securitization) or, if
the funds in such account are to be held in such account

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for less than thirty (30) days, the short term obligations of which are rated by
each of the Rating Agencies (or, if not rated by Fitch, otherwise acceptable to
Fitch, as confirmed in writing that such account would not, in and of itself,
result in a downgrade, qualification or withdrawal of the then current ratings
assigned to any certificates issued in connection with a Securitization) in its
highest rating category at all times 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 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 $100,000,000 and subject to supervision or examination by federal and
state authority, or otherwise acceptable (as evidenced by a written confirmation
from each Rating Agency that such account would not, in and of itself, cause a
downgrade, qualification or withdrawal of the then current ratings assigned to
any certificates issued in connection with a Securitization) to each Rating
Agency, which may be an account maintained by Lender or its agents. Eligible
Accounts may bear interest. The title of each Eligible Account shall indicate
that the funds held therein are held in trust for the uses and purposes set
forth herein.
     “Engineer” shall have the meaning set forth in Section 3.04(b)(i) hereof.
     “Engineering Escrow Account” shall mean an Escrow Account established and
maintained pursuant to Section 5.12 hereof relating to payments for any Required
Engineering Work.
     “Environmental Problem” shall mean any of the following:
     (a) the presence of any Hazardous Material on, in, under, or above all or
any portion of the Property other than substances of kinds and in amounts
ordinarily and customarily used or stored in properties similar in size and type
to the Property for the purpose of cleaning or other maintenance or operations
and otherwise in compliance with all Environmental Statutes;
     (b) the release or threatened release of any Hazardous Material from or
onto the Property other than substances of kinds and in amounts ordinarily and
customarily used or stored in properties similar in size and type to the
Property for the purpose of cleaning or other maintenance or operations and
otherwise in compliance with all Environmental Statutes;
     (c) the violation or threatened violation of any Environmental Statute with
respect to the Property; or
     (d) the failure to obtain or to abide by the terms or conditions of any
permit or approval required under any Environmental Statute with respect to the
Property.
A condition described above shall be an Environmental Problem regardless of
whether or not any Governmental Authority has taken any action in connection
with the condition and regardless of whether that condition was in existence on
or before the date hereof.

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     “Environmental Report” shall mean collectively, all environmental audit
reports for the Property and any supplements or updates thereto, previously
delivered to Lender in connection with the Loan.
     “Environmental Statute” shall mean any federal, state or local statute,
ordinance, rule or regulation, any judicial or administrative order (whether or
not on consent) or judgment applicable to Borrower or the Property including,
without limitation, any judgment or settlement based on common law theories, and
any provisions or conditions of any permit, license or other authorization
binding on Borrower relating to (a) the protection of the environment, the
safety and health of persons (including employees) or the public welfare from
actual or potential exposure (or effects of exposure) to any actual or potential
release, discharge, disposal or emission (whether past or present) of any
Hazardous Materials or (b) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any Hazardous Materials,
including, but not limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (“CERCLA”), as amended by the Superfund
Amendments and Reauthorization Act of 1986, 42 U.S.C. §9601 et seq., the Solid
Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of
1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C.
§6901 et seq., the Federal Water Pollution Control Act, as amended by the Clean
Water Act of 1977, 33 U.S.C. §1251 et seq., the Toxic Substances Control Act of
1976, 15 U.S.C. §2601 et seq., the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. §1101 et seq., the Clean Air Act of 1966,
as amended, 42 U.S.C. §7401 et seq., the National Environmental Policy Act of
1975, 42 U.S.C. §4321, the Rivers and Harbors Act of 1899, 33 U.S.C. §401 et
seq., the Endangered Species Act of 1973, as amended, 16 U.S.C. §1531 et seq.,
the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §651 et
seq., and the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. §300(f) et
seq., and all rules, regulations and guidance documents promulgated or published
thereunder.
     “Equipment” shall have the meaning set forth in granting clause (d) of this
Security Instrument.
     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated thereunder. Section
references to ERISA are to ERISA, as in effect at the date of this Security
Instrument and, as of the relevant date, any subsequent provisions of ERISA,
amendatory thereof, supplemental thereto or substituted therefor.
     “ERISA Affiliate” shall mean any corporation or trade or business that is a
member of any group of organizations (a) described in Section 414(b) or (c) of
the Code of which Borrower or Guarantor is a member and (b) solely for purposes
of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11)
of the Code and the lien created under Section 302(f) of ERISA and Section
412(n) of the Code, described in Section 414(m) or (o) of the Code of which
Borrower or Guarantor is a member.
     “Escrow Account” shall mean each of the Engineering Escrow Account, the
Basic Carrying Costs Escrow Account, the Recurring Replacement Reserve Escrow
Account, the Operation and Maintenance Expense Escrow Account and the Management
Fee Escrow

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Account, each of which shall be an Eligible Account or book entry sub-account of
an Eligible Account.
     “Event of Default” shall have the meaning set forth in Section 13.01
hereof.
     “Extraordinary Expense” shall mean an extraordinary operating expense or
capital expense not set forth in the Approved Annual Budget or allotted for in
the Recurring Replacement Reserve Sub-Account.
     “First Payment Date” shall mean, if the Closing Date is prior to the
Payment Date of the month in which the Closing Date occurs, the Payment Date in
the month in which the Closing Date occurs, or, if the Closing Date is on or
subsequent to the Payment Date in the month in which the Closing Date occurs,
the Payment Date in the month following the month in which the Loan is initially
funded.
     “Fiscal Year” shall mean the twelve (12) month period commencing on January
1 and ending on December 31 during each year of the term of this Security
Instrument, or such other fiscal year of Borrower as Borrower may select from
time to time with the prior written consent of Lender.
     “Fixtures” shall have the meaning set forth in granting clause (d) of this
Security Instrument.
     “Franchise Agreement” shall mean any franchise or license agreement
relating to the branding or operation of the Premises or any other agreement
pursuant to which a franchise system, reservation system or brand affiliation is
made available to the hotel operator of the Premises, together with all renewals
and replacements thereof.
     “GAAP” shall mean generally accepted accounting principles in the United
States of America, as of the date of the applicable financial report,
consistently applied.
     “General Partner” shall mean, if Borrower is a partnership, each general
partner of Borrower and, if Borrower is a limited liability company, each
managing member of Borrower and in each case, each general partner or managing
member of such general partner or managing member, unless the general partner of
Borrower is a corporation or Delaware limited liability company, in each case,
which is a Single Purpose Entity.
     “Governmental Authority” shall mean, with respect to any Person, any
federal or State government or other political subdivision thereof and any
entity, including any regulatory or administrative authority or court,
exercising executive, legislative, judicial, regulatory or administrative or
quasi-administrative functions of or pertaining to government, and any
arbitration board or tribunal, in each case having jurisdiction over such
applicable Person or such Person’s property and any stock exchange on which
shares of capital stock of such Person are listed or admitted for trading.
     “Ground Lease” shall mean the lease of the Premises, together with nine
(9) amendments thereto more particularly described on Exhibit G hereto, together
with all exhibits and renewals, modifications and extensions thereto.

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     “Ground Lessor” shall mean the Person which holds the interest of lessor
under the Ground Lease.
     “Guarantor” shall mean any Person guaranteeing, in whole or in part, the
obligations of Borrower under the Loan Documents which shall initially be
Kimpton Development Opportunity Fund, L.P., a California limited partnership.
     “Hazardous Material” shall mean any flammable, explosive or radioactive
materials, hazardous materials or wastes, hazardous or toxic substances,
pollutants or related materials, asbestos or any material containing asbestos,
molds, spores and fungus which may pose a risk to human health or the
environment or any other substance or material as defined in or regulated by any
Environmental Statutes.
     “Impositions” shall mean all taxes (including, without limitation, all real
estate, ad valorem, sales (including those imposed on lease rentals), use,
single business, gross receipts, value added, intangible, transaction, privilege
or license or similar taxes), assessments (including, without limitation, all
assessments for public improvements or benefits, whether or not commenced or
completed prior to the date hereof and whether or not commenced or completed
within the term of this Security Instrument), ground rents, water, sewer or
other rents and charges, excises, levies, fees (including, without limitation,
license, permit, inspection, authorization and similar fees), and all other
governmental charges, in each case whether general or special, ordinary or
extraordinary, or foreseen or unforeseen, of every character in respect of the
Property and/or any Rent (including all interest and penalties thereon), which
at any time prior to, during or in respect of the term hereof may be assessed or
imposed on or in respect of or be a lien upon (a) Borrower (including, without
limitation, all franchise, single business or other taxes imposed on Borrower
for the privilege of doing business in the jurisdiction in which the Property or
any other collateral delivered or pledged to Lender in connection with the Loan
is located) or Lender, (b) the Property or any part thereof or any Rents
therefrom or any estate, right, title or interest therein, or (c) any occupancy,
operation, use or possession of, or sales from, or activity conducted on, or in
connection with the Property, or any part thereof, or the leasing or use of the
Property, or any part thereof, or the acquisition or financing of the
acquisition of the Property, or any part thereof, by Borrower.
     “Improvements” shall have the meaning set forth in granting clause (b) of
this Security Instrument.
     “Indemnified Parties” shall have the meaning set forth in Section 12.01
hereof.
     “Independent” shall mean, when used with respect to any Person, a Person
who (a) is in fact independent, (b) does not have any direct financial interest
or any material indirect financial interest in Borrower, or in any Affiliate of
Borrower or any constituent partner, shareholder, member or beneficiary of
Borrower, (c) is not affiliated with Borrower or any Affiliate of Borrower or
any constituent partner, shareholder, member or beneficiary of Borrower as an
officer, employee, promoter, underwriter, trustee, partner, director or person
performing similar functions and (d) is not a member of the immediate family of
a Person defined in (b) or (c) above. Whenever it is herein provided that any
Independent Person’s opinion or certificate shall

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be provided, such opinion or certificate shall state that the Person executing
the same is Independent within the meaning hereof.
     “Initial Engineering Deposit” shall equal the amount set forth on Exhibit B
attached hereto and made a part hereof.
     “Insolvency Opinion” shall have the meaning set forth in
Section 2.02(g)(xix).
     “Institutional Lender” shall mean any of the following Persons: (a) any
bank, savings and loan association, savings institution, trust company or
national banking association, acting for its own account or in a fiduciary
capacity, (b) any charitable foundation, (c) any insurance company or pension
and/or annuity company, (d) any fraternal benefit society, (e) any pension,
retirement or profit sharing trust or fund within the meaning of Title I of
ERISA or for which any bank, trust company, national banking association or
investment adviser registered under the Investment Advisers Act of 1940, as
amended, is acting as trustee or agent, (f) any investment company or business
development company, as defined in the Investment Company Act of 1940, as
amended, (g) any small business investment company licensed under the Small
Business Investment Act of 1958, as amended, (h) any broker or dealer registered
under the Securities Exchange Act of 1934, as amended, or any investment adviser
registered under the Investment Adviser Act of 1940, as amended, (i) any
government, any public employees’ pension or retirement system, or any other
government agency supervising the investment of public funds, or (j) any other
entity all of the equity owners of which are Institutional Lenders; provided
that each of said Persons shall have net assets in excess of $1,000,000,000 and
a net worth in excess of $500,000,000, be in the business of making commercial
mortgage loans, secured by properties of like type, size and value as the
Property and have a long term credit rating which is not less than “BBB-” (or
its equivalent) from each Rating Agency.
     “Insurance Proceeds” shall mean all of the proceeds received under the
insurance policies required to be maintained by Borrower pursuant to Article III
hereof.
     “Insurance Requirements” shall mean all terms of any insurance policy
required by this Security Instrument, all requirements of the issuer of any such
policy, and all regulations and then current standards applicable to or
affecting the Property or any use or condition thereof, which may, at any time,
be recommended by the Board of Fire Underwriters, if any, having jurisdiction
over the Property, or such other Person exercising similar functions.
     “Interest Accrual Period” shall mean the period commencing on the Closing
Date through and including the tenth (10th) day of March 2007 and, thereafter,
each one (1) month period, which shall commence on the eleventh (11th) day of
each calendar month and end on and include the tenth (10th) day of the next
occurring calendar month.
     “Interest Rate” shall have the meaning set forth in the Note.
     “Interest Shortfall” shall mean any shortfall in the amount of interest
required to be paid with respect to the Loan Amount on any Payment Date.
     “Inventory” shall have the meaning as such term is defined in the Uniform
Commercial Code applicable in the State in which the Property is located,
including, without limitation,

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provisions in storerooms, refrigerators, pantries and kitchens, beverages in
wine cellars and bars, other merchandise for sale, fuel, mechanical supplies,
stationery and other expenses, supplies and similar items, as defined in the
Uniform System of Accounts.
     “Late Charge” shall have the meaning set forth in Section 13.09 hereof.
     “Leases” shall have the meaning set forth in granting clause (f) of this
Security Instrument.
     “Legal Requirement” shall mean as to any Person, the certificate of
incorporation, by-laws, certificate of limited partnership, agreement of limited
partnership or other organization or governing documents of such Person, and any
law, statute, order, ordinance, judgement, decree, injunction, treaty, rule or
regulation (including, without limitation, Environmental Statutes, Development
Laws and Use Requirements) or determination of an arbitrator or a court or other
Governmental Authority and all covenants, agreements, restrictions and
encumbrances contained in any instruments, in each case applicable to or binding
upon such Person or any of its property or to which such Person or any of its
property is subject.
     “Lender” shall mean the Lender named herein and its successors or assigns.
     “Loan” shall have the meaning set forth in the Recitals hereto.
     “Loan Amount” shall have the meaning set forth in the Recitals hereto.
     “Loan Documents” shall mean this Security Instrument, the Note, the
Assignment, and any and all other agreements, instruments, certificates or
documents executed and delivered by Borrower or any Affiliate of Borrower in
connection with the Loan, together with any supplements, amendments,
modifications or extensions thereof.
     “Loan Year” shall mean each 365 day period (or 366 day period if the month
of February in a leap year is included) commencing on the first day of the month
following the Closing Date (provided, however, that the first Loan Year shall
also include the period from the Closing Date to the end of the month in which
the Closing Date occurs).
     “Lockout Expiration Date” shall have the meaning set forth in Section 15.01
hereof.
     “Loss Proceeds” shall mean, collectively, all Insurance Proceeds and all
Condemnation Proceeds.
     “Major Space Lease” shall mean any Space Lease of a tenant or Affiliate of
such tenant where such tenant, together with such Affiliate, leases, in the
aggregate, greater than 5,000 square feet.
     “Management Agreement” shall have the meaning set forth in Section 7.02
hereof.
     “Management Fee Escrow Account” shall mean the Escrow Account maintained
pursuant to Section 5.11 hereof relating to the payment of the Required
Management Fee.

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     “Management Fee Sub-Account” shall mean the Sub-Account of the Central
Account established pursuant to Section 5.02 hereof into which the Required
Management Fee shall be deposited.
     “Manager” shall mean the Person, other than Borrower, which manages the
Property on behalf of Borrower.
     “Material Adverse Effect” shall mean any event or condition that has a
material adverse effect on (a) the Property, (b) the business, prospects,
profits, management, operations or condition (financial or otherwise) of
Borrower, (c) the enforceability, validity, perfection or priority of the lien
of any Loan Document or (d) the ability of Borrower to perform any obligations
under any Loan Document.
     “Maturity”, when used with respect to the Note, shall mean the Maturity
Date set forth in the Note or such other date pursuant to the Note on which the
final payment of principal, and premium, if any, on the Note becomes due and
payable as therein or herein provided, whether at Stated Maturity or by
declaration of acceleration, or otherwise.
     “Maturity Date” shall mean the Maturity Date set forth in the Note.
     “Monthly Debt Service Payment” shall mean a monthly payment of principal
and interest in an amount equal to that which is required pursuant to the Note.
     “Multiemployer Plan” shall mean a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been, or were required to
have been, made by Borrower, Guarantor or any ERISA Affiliate and which is
covered by Title IV of ERISA.
     “Net Capital Expenditures” shall mean for any period the amount by which
Capital Expenditures during such period exceed reimbursements for such items
during such period from any fund established pursuant to the Loan Documents.
     “Net Operating Income” shall mean in each Fiscal Year or portion thereof
during the term hereof, Operating Income less Operating Expenses.
     “Net Proceeds” shall mean the excess of (a)(i) the purchase price (at
foreclosure or otherwise) actually received by Lender with respect to the
Property as a result of the exercise by Lender of its rights, powers, privileges
and other remedies after the occurrence of an Event of Default, or (ii) in the
event that Lender (or Lender’s nominee) is the purchaser at foreclosure by
credit bid, then the amount of such credit bid, in either case, over (b) all
costs and expenses, including, without limitation, all attorneys’ fees and
disbursements and any brokerage fees, if applicable, incurred by Lender in
connection with the exercise of such remedies, including the sale of such
Property after a foreclosure against the Property.
     “New Lease” shall have the meaning set forth in Section 2.05 hereof.
     “Note” shall have the meaning set forth in the Recitals hereto.

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     “OFAC List” shall mean the list of specially designated nationals and
blocked persons subject to financial sanctions that is maintained by the U.S.
Treasury Department, Office of Foreign Assets Control and accessible through the
internet website www.treas.gov/ofac/t11sdn.pdf.
     “Officer’s Certificate” shall mean a certificate delivered to Lender by
Borrower which is signed on behalf of Borrower by an authorized representative
of Borrower which states that the items set forth in such certificate are true,
accurate and complete in all material respects.
     “Operating Expenses” shall mean, in each Fiscal Year or portion thereof
during the term hereof, all expenses directly attributable to the operation,
repair and/or maintenance of the Property including, without limitation,
(a) Impositions, (b) insurance premiums, (c) management fees, whether or not
actually paid, equal to the greater of the actual management fees payable under
the Management Agreement and four percent (4%) of annual gross operating income
for the Property, (d) costs attributable to the operation, repair and
maintenance of the systems for heating, ventilating and air conditioning the
Improvements and actually paid for by Borrower and (e) any other amounts
designated as operating expenses or “Out-of-Pocket Costs” in the Management
Agreement, including without limitation amounts sufficient for the operation,
maintenance and repair of the Property in accordance with the Approved Manager
Standard for the ownership and operation of the Property, including without
limitation all compensation of employees, costs of supplies and Inventory,
amounts payable to vendors and suppliers. Operating Expenses shall not include
interest, principal and premium, if any, due under the Note or otherwise in
connection with the Debt, income taxes, extraordinary capital improvement costs,
any non-cash charge or expense such as depreciation or amortization or any item
of expense otherwise includable in Operating Expenses which is paid directly by
any tenant except real estate taxes paid directly to any taxing authority by any
tenant.
     “Operating Income” shall mean, in each Fiscal Year or portion thereof
during the term hereof, all revenue derived by Borrower arising from the
Property including, without limitation, room revenues, meeting and banquet room
revenue, items sold from guestrooms, sales from shops, sales from restaurants,
parking revenues, vending machines revenues, beverage revenues, food revenues,
and packaging revenues, rental revenues (whether denominated as basic rent,
additional rent, escalation payments, electrical payments or otherwise) and
other fees, charges and amounts from income generating activities connected with
the Property, such as income from vending machines, health club memberships,
service charges, exhibit or sales space, all revenues for providing telephone
services, and all rents or other fees payable by tenants, licensees and
concessionaires or payable pursuant to Leases or otherwise in connection with
the Property, and business interruption, rent or other similar insurance
proceeds. Operating Income shall not include (a) Insurance Proceeds (other than
proceeds of rent, business interruption or other similar insurance allocable to
the applicable period) and Condemnation Proceeds (other than Condemnation
Proceeds arising from a temporary taking or the use and occupancy of all or part
of the applicable Property allocable to the applicable period), or interest
accrued on such Condemnation Proceeds, (b) proceeds of any financing,
(c) proceeds of any sale, exchange or transfer of the Property or any part
thereof or interest therein, (d) capital contributions or loans to Borrower or
an Affiliate of Borrower, (e) any item of income otherwise includable in
Operating Income but paid directly by any tenant to a Person other than Borrower
except for real estate taxes paid directly to any taxing authority by any
tenant, (f) any other extraordinary, non-recurring

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revenues as reasonably determined by Lender, (g) Rent paid by or on behalf of
any lessee under a Space Lease which is the subject of any proceeding or action
relating to its bankruptcy, reorganization or other arrangement pursuant to the
Bankruptcy Code or any similar federal or state law or which has been
adjudicated a bankrupt or insolvent unless such Space Lease, as applicable, has
been affirmed by the trustee in such proceeding or action, (h) Rent paid by or
on behalf of any lessee under a Lease the demised premises of which are not
occupied either by such lessee or by a sublessee thereof; (i) Rent paid by or on
behalf of any lessee under a Lease in whole or partial consideration for the
termination of any Lease, or (j) sales tax rebates from any Governmental
Authority.
     “Operation and Maintenance Expense Escrow Account” shall mean the Escrow
Account maintained pursuant to Section 5.09 hereof relating to the payment of
Operating Expenses (exclusive of Basic Carrying Costs).
     “Operation and Maintenance Expense Sub-Account” shall mean the Sub-Account
of the Central Account established pursuant to Section 5.02 hereof into which
sums allocated for the payment of Cash Expenses, Net Capital Expenditures and
approved Extraordinary Expenses shall be deposited.
     “Payment Date” shall mean, with respect to each month, the eleventh (11th)
calendar day in such month, or if such day is not a Business Day, the next
following Business Day.
     “PBGC” shall mean the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
     “Permitted Encumbrances” shall have the meaning set forth in
Section 2.05(a) hereof.
     “Permitted Liens” shall mean, with respect to the Property, collectively,
(a) the liens created by this Security Instrument and the other Loan Documents,
(b) all liens and other matters disclosed on the title insurance policy insuring
the lien of this Security Instrument, (c) liens, if any, for Impositions imposed
by any Governmental Authority not yet delinquent or being contested in good
faith and by appropriate proceedings in accordance with the Loan Documents, (d)
mechanic’s or materialmen’s liens, if any, being contested in good faith and by
appropriate proceedings in accordance with the Loan Documents, (e) rights of
existing and future tenants pursuant to Space Leases entered into in accordance
with this Security Instrument, (f) liens relating to equipment financing which
are incurred in the ordinary course of business in connection with the ownership
of the Property in an amount not to exceed two percent (2%) of the Loan Amount
and (g) such other title and survey exceptions as Lender has approved or may
approve in writing in Lender’s reasonable discretion, all of which (other than
the liens of the type set forth in clauses (a) and (b) above) are subordinate to
the lien of this Security Instrument.
     “Person” shall mean any individual, corporation, limited liability company,
partnership, joint venture, estate, trust, unincorporated association, any
federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
     “Plan” shall mean an employee benefit or other plan established or
maintained by Borrower, Guarantor or any ERISA Affiliate during the five-year
period ended prior to the date

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of this Security Instrument or to which Borrower, Guarantor or any ERISA
Affiliate makes, is obligated to make or has, within the five year period ended
prior to the date of this Security Instrument, been required to make
contributions (whether or not covered by Title IV of ERISA or Section 302 of
ERISA or Section 401(a) or 412 of the Code), other than a Multiemployer Plan.
     “Premises” shall have the meaning set forth in granting clause (a) of this
Security Instrument.
     “Principal Amount” shall mean the Loan Amount as such amount may be reduced
from time to time pursuant to the terms of this Security Instrument, the Note or
the other Loan Documents.
     “Principal Payments” shall mean all payments of principal made pursuant to
the terms of the Note.
     “Prohibited Person” shall mean any Person and/or any Affiliate thereof
identified on the OFAC List or any other Person or foreign country or agency
thereof with whom a U.S. Person may not conduct business or transactions by
prohibition of Federal law or Executive Order of the President of the United
States of America.
     “Property” shall have the meaning set forth in the granting clauses of this
Security Instrument.
     “Property Agreements” shall mean all agreements, grants of easements and/or
rights-of-way, reciprocal easement agreements, permits, declarations of
covenants, conditions and restrictions, disposition and development agreements,
planned unit development agreements, parking agreements, party wall agreements
or other instruments affecting the Property, but not including any brokerage
agreements, management agreements, service contracts, Space Leases or the Loan
Documents.
     “Rating Agency” shall mean each of Standard & Poor’s Ratings Services, a
division of The McGraw-Hill Company, Inc. (“Standard & Poor’s”), Fitch, Inc.,
and Moody’s Investors Service, Inc. (“Moody’s”), and any successor to any of
them; provided, however, that at any time after a Securitization, “Rating
Agency” shall mean those of the foregoing rating agencies that from time to time
rate the securities issued in connection with such Securitization.
     “Real Estate Taxes” shall mean all real estate taxes, assessments
(including, without limitation, all assessments for public improvements or
benefits, whether or not commenced or completed prior to the date hereof and
whether or not commenced or completed within the term of this Security
Instrument), water, sewer or other rents and charges, and all other governmental
charges, in each case whether general or special, ordinary or extraordinary, or
foreseen or unforeseen, of every character in respect of the Property (including
all interest and penalties thereon), which at any time prior to, during or in
respect of the term hereof may be assessed or imposed on or in respect of or be
a lien upon the Property or any part thereof or any estate, right, title or
interest therein.
     “Realty” shall have the meaning set forth in Section 2.05(b) hereof.

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     “Recurring Replacement Expenditures” shall mean expenditures related to
capital repairs, replacements and improvements performed at the Property from
time to time.
     “Recurring Replacement Reserve Escrow Account” shall mean the Escrow
Account maintained pursuant to Section 5.08 hereof relating to the payment of
Recurring Replacement Expenditures.
     “Recurring Replacement Reserve Monthly Installment” shall mean the amount
per month equal to four percent (4%) of the trailing twelve (12) month gross
revenues of the Property divided by twelve (12) which shall initially be the
amount set forth on Exhibit B attached hereto and made a part hereof (the
“Initial Recurring Installments”).
     “Recurring Replacement Reserve Sub-Account” shall mean the Sub-Account of
the Central Account established pursuant to Section 5.02 hereof into which the
Recurring Replacement Reserve Monthly Installment shall be deposited.
     “Regulation AB” shall mean Regulation AB under the Securities Act and the
Securities Exchange Act of 1934 (as amended).
     “Rent Account” shall mean an Eligible Account maintained at a bank
reasonably acceptable to Lender in the name of Lender or its successors or
assigns (as secured party) as may be designated by Lender, and Borrower.
     “Rents” shall have the meaning set forth in granting clause (f) of this
Security Instrument.
     “Rent Roll” shall have the meaning set forth in Section 2.05 (o) hereof.
     “Required Debt Service Coverage” shall mean a Debt Service Coverage of not
less than 1.2:1.
     “Required Debt Service Payment” shall mean, as of any Payment Date, (a) the
amount of interest and principal then due and payable pursuant to the Note,
together with any other sums due thereunder, including, without limitation, any
prepayments required to be made or for which notice has been given under this
Security Instrument, Default Rate Interest and premium, if any, paid in
accordance therewith plus (b) reasonable out-of-pocket fees incurred by Lender
in connection with its administration and servicing of the Central Account.
     “Required Engineering Work” shall mean the immediate engineering and/or
environmental remediation work set forth on Exhibit D attached hereto and made a
part hereof.
     “Required Management Fee” shall mean, as of any Payment Date, 4% of the
gross revenues of the Property for the prior calendar month.
     “Retention Amount” shall have the meaning set forth in Section 3.04(b)(vii)
hereof.
     “RevPAR” shall mean the average revenues per available room per day.

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     “RevPAR Yield Index” shall mean the percentage amount determined by
dividing the RevPAR of the Property by the RevPAR of the Property’s Competitive
Set as set forth by Smith Travel Research (“STR”) as the Property’s Competitive
Set is reasonably determined by Lender or if STR is no longer publishing, a
successor reasonably acceptable to Lender.
     “Securities Act” shall mean the Securities Act of 1933, as the same shall
be amended from time to time.
     “Securitization” shall mean a public or private offering of securities by
Lender or any of its Affiliates or their respective successors and assigns which
are collateralized, in whole or in part, by this Security Instrument.
     “Security Instrument” shall mean this Security Instrument as originally
executed or as it may hereafter from time to time be supplemented, amended,
modified or extended by one or more indentures supplemental hereto.
     “Significant Obligor” shall have the meaning set forth in Item 1101(k) of
Regulation AB.
     “Single Purpose Entity” shall mean a corporation, partnership, joint
venture, limited liability company, trust or unincorporated association, which
is formed or organized solely for the purpose of holding, directly, an ownership
interest in the Property or, with respect to General Partner, holding an
ownership interest in and managing a Person which holds an ownership interest in
the Property, does not engage in any business unrelated to, with respect to
Borrower, the Property and, with respect to General Partner, its interest in
Borrower, does not have any assets other than those related to, with respect to
Borrower, its interest in the Property and, with respect to General Partner, its
interest in Borrower, or any indebtedness other than as permitted by this
Security Instrument or the other Loan Documents, has its own separate books and
records and has its own accounts, in each case which are separate and apart from
the books and records and accounts of any other Person, holds itself out as
being a Person separate and apart from any other Person and which otherwise
satisfies the criteria of the Rating Agency, as in effect on the Closing Date,
for a special-purpose bankruptcy-remote entity.
     “Solvent” shall mean, as to any Person, that (a) the sum of the assets of
such Person, at a fair valuation, exceeds its liabilities, including contingent
liabilities, (b) such Person has sufficient capital with which to conduct its
business as presently conducted and as proposed to be conducted and (c) such
Person has not incurred debts, and does not intend to incur debts, beyond its
ability to pay such debts as they mature. For purposes of this definition,
“debt” means any liability on a claim, and “claim” means (a) a right to payment,
whether or not such right is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured, or (b) a right to an equitable remedy for breach of
performance if such breach gives rise to a payment, whether or not such right to
an equitable remedy is reduced to judgment, fixed, contingent, matured,
unmatured, disputed, undisputed, secured, or unsecured. With respect to any such
contingent liabilities, such liabilities shall be computed in accordance with
GAAP at the amount which, in light of all the facts and circumstances existing
at the time, represents the amount which can reasonably be expected to become an
actual or matured liability.

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     “Space Leases” shall mean any Lease or sublease thereunder (including,
without limitation, any Major Space Lease) or any other agreement providing for
the use and occupancy of a portion of the Property as the same may be amended,
renewed or supplemented (other than occupancy agreements entered into with hotel
guests, banquet facilities and meeting rooms in the ordinary course of business
for a period of less than ninety (90) consecutive days in the aggregate or seven
(7) consecutive days with respect to meeting rooms and banquet facilities).
     “State” shall mean any of the states which are members of the United States
of America.
     “Stated Maturity”, when used with respect to the Note or any installment of
interest and/or principal payment thereunder, shall mean the date specified in
the Note as the fixed date on which a payment of all or any portion of principal
and/or interest is due and payable.
     “Sub-Accounts” shall have the meaning set forth in Section 5.02 hereof.
     “Substantial Casualty” shall have the meaning set forth in Section 3.04
hereof.
     “Taking” shall mean a condemnation or taking pursuant to the lawful
exercise of the power of eminent domain.
     “Transfer” shall mean the conveyance, assignment, sale, mortgaging,
encumbrance, pledging, hypothecation, granting of a security interest in,
granting of options with respect to, or other disposition of (directly or
indirectly, voluntarily or involuntarily, by operation of law or otherwise, and
whether or not for consideration or of record) all or any portion of any legal
or beneficial interest (a) in all or any portion of the Property (other than
furniture, fixtures, equipment and other personal property which has become
obsolete or unfit for use provided such furniture, fixtures and equipment is
promptly replaced with furniture, fixtures or equipment, as applicable, of equal
value and utility pursuant to Section 8.01(e) hereof or furniture, fixtures and
equipment which is no longer useful in the management, operation or maintenance
of the property); (b) if Borrower is a corporation or, if Borrower is a
partnership and any General Partner, is a corporation, in the stock of Borrower
or any General Partner; (c) in Borrower (or any trust of which Borrower is a
trustee); or (d) if Borrower is a limited or general partnership, joint venture,
limited liability company, trust, nominee trust, tenancy in common or other
unincorporated form of business association or form of ownership interest, in
any Person having a legal or beneficial ownership in Borrower, excluding any
legal or beneficial interest in any constituent limited partner, if Borrower is
a limited partnership, or in any non-managing member, if Borrower is a limited
liability company, unless such interest would, or together with all other direct
or indirect interests in Borrower which were previously transferred, aggregate
49% or more of the partnership or membership, as applicable, interest in
Borrower or would result in any Person who, as of the Closing Date, did not own,
directly or indirectly, 49% or more of the partnership or membership, as
applicable, interest in Borrower, owning, directly or indirectly, 49% or more of
the partnership or membership, as applicable, interest in Borrower and excluding
any legal or beneficial interest in any General Partner unless such interest
would, or together with all other direct or indirect interest in the General
Partner which were previously transferred, aggregate 49% or more of the
partnership or membership, as applicable, interest in the General Partner (or
result in a change in control of the management of the General Partner from the
individuals exercising such control immediately prior to the conveyance or other

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disposition of such legal or beneficial interest). “Transfer” shall also
include, without limitation to the foregoing, the following: (a) an installment
sales agreement wherein Borrower agrees to sell the Property or any part thereof
or any interest therein for a price to be paid in installments, (b) an agreement
by Borrower leasing all or substantially all of the Property to one or more
Persons pursuant to a single or related transactions (outside of rentals of
meeting rooms, banquet facilities or hotel rooms in the ordinary course of
business), 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 Rent, (c) any instrument subjecting the Property to a condominium regime
or transferring ownership to a cooperative corporation, and (d) the dissolution
or termination of Borrower or the merger or consolidation of Borrower with any
other Person. Notwithstanding the foregoing or anything to the contrary
contained in any other Loan Document, “Transfer” shall not include any sale,
transfer, conveyance or assignment of any direct or indirect legal or beneficial
ownership interest in Borrower, or any mortgaging, encumbrance, pledging,
hypothecation or granting of a security interest in any indirect ownership
interest in any limited partner of Borrower, provided, in each case, that
Kimpton Group Holding LLC, a Delaware limited liability company (“KGH”)
continues to Control Borrower and that, in the event that any Person (a
“Principal Transferee”) who does not, as of the Closing Date, own or Control,
directly or indirectly, 49% or more of the stock, partnership interest or
membership interest, as applicable, in Borrower acquires, directly or
indirectly, 49% or more of the stock, partnership or membership interest, as
applicable, in Borrower as a result of such transfer, conveyance, assignment,
sale, mortgaging, encumbrance, pledging, hypothecation or granting of a security
interest, Lender shall be furnished an opinion, in form and substance and from
counsel reasonably satisfactory to Lender, substantially similar to the
Insolvency Opinion which discusses the substantive non-consolidation of Borrower
with the Principal Transferee in the event of a bankruptcy, insolvency or
similar proceeding relating to the Principal Transferee and provided, further,
that, in the event that any Person who does not, as of the Closing Date, own or
Control, directly or indirectly, 20% or more of the stock partnership interest
or membership interest, as applicable, in Borrower acquires, directly or
indirectly, 20% or more of the stock, partnership interest or membership
interest, as applicable, in Borrower as a result of such transfer, conveyance,
assignment, sale, mortgaging, encumbrance, pledging, hypothecation or granting
of a security interest, Lender shall be entitled to approve such Person, which
approval shall not be unreasonably withheld and shall be granted or withheld in
accordance with Lender’s then standard criteria with respect to approving
borrowers for loans similar to the Loan which are to be included in a
Securitization.
     “Trustee” shall mean the Person or Persons identified in this Security
Instrument as the trustee hereunder and its or their successors and assigns.
     “UCC” shall mean the Uniform Commercial Code as in effect on the date
hereof in the State in which the Realty is located; provided, however, that if
by reason of mandatory provisions of law, the perfection or the effect of
perfection or non-perfection or priority of the security interest in any item or
portion of the collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State in which the Realty is located
(“Other UCC State”), “UCC” means the Uniform Commercial Code as in effect in
such Other UCC State for purposes of the provisions hereof relating to such
perfection or effect of perfection or non-perfection or priority.

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     “Uniform System of Accounts” shall mean the Uniform System of Accounts for
the Lodging Industry, 9th Revised Edition, Educational Institute of the American
Hotel and Motel Association and Hotel Association of New York City (1996), as
from time to time amended.
     “Unscheduled Payments” shall mean (a) all Loss Proceeds that Borrower has
elected or is required to apply to the repayment of the Debt pursuant to this
Security Instrument, the Note or any other Loan Documents, (b) any funds
representing a voluntary or involuntary principal prepayment other than
scheduled Principal Payments and (c) any Net Proceeds.
     “Use Requirements” shall mean any and all building codes, permits,
certificates of occupancy or compliance, laws, regulations, or ordinances
(including, without limitation, health, pollution, fire protection, medical and
day-care facilities, waste product and sewage disposal regulations),
restrictions of record, easements, reciprocal easements, declarations or other
agreements affecting the use of the Property or any part thereof.
     “Welfare Plan” shall mean an employee welfare benefit plan as defined in
Section 3(1) of ERISA established or maintained by Borrower, Guarantor or any
ERISA Affiliate or that covers any current or former employee of Borrower,
Guarantor or any ERISA Affiliate.
     “Work” shall have the meaning set forth in Section 3.04(a)(i) hereof.
     “Yield Maintenance Premium” shall have the meaning set forth in
Section 15.01 hereof.
ARTICLE II: REPRESENTATIONS, WARRANTIES
AND COVENANTS OF BORROWER
     Section 2.01. Payment of Debt. Borrower will pay the Debt at the time and
in the manner provided in the Note and the other Loan Documents, all in lawful
money of the United States of America in immediately available funds.
     Section 2.02. Representations, Warranties and Covenants of Borrower.
Borrower represents and warrants to and covenants with Lender:
          (a) Organization and Authority. Borrower (i) is a limited liability
company, general partnership, limited partnership or corporation, as the case
may be, duly organized, validly existing and in good standing under the laws of
the jurisdiction of its formation, (ii) has all requisite power and authority
and has or has caused Manager to obtain all necessary licenses and permits to
own and operate the Property and to carry on its business as now conducted and
as presently proposed to be conducted and (iii) is duly qualified, authorized to
do business and in good standing in the jurisdiction where the Property is
located and in each other jurisdiction where the conduct of its business or the
nature of its activities makes such qualification necessary. If Borrower is a
limited liability company, limited partnership or general partnership, each
general partner or managing member, as applicable, of Borrower which is a
corporation is duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.
          (b) Power. Borrower and, if applicable, each General Partner has full
power and authority to execute, deliver and perform, as applicable, the Loan
Documents to which it is a

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party, to make the borrowings thereunder, to execute and deliver the Note and to
grant to Lender a first, prior, perfected and continuing lien on and security
interest in the Property, subject only to the Permitted Encumbrances.
          (c) Authorization of Borrowing. The execution, delivery and
performance of the Loan Documents to which Borrower is a party, the making of
the borrowings thereunder, the execution and delivery of the Note, the grant of
the liens on the Property pursuant to the Loan Documents to which Borrower is a
party and the consummation of the Loan are within the powers of Borrower and
have been duly authorized by Borrower and, if applicable, the General Partners,
by all requisite action (and Borrower hereby represents that no approval or
action of any member, limited partner or shareholder, as applicable, of Borrower
is required to authorize any of the Loan Documents to which Borrower is a party
or if such authorization is required, it has been obtained) and will constitute
the legal, valid and binding obligation of Borrower, enforceable against
Borrower in accordance with their terms, except as enforcement may be stayed or
limited by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors’ rights generally and by general principles of equity (whether
considered in proceedings at law or in equity) and will not (i) violate any
provision of its partnership agreement or partnership certificate or certificate
of incorporation or by-laws, or operating agreement, certificate of formation or
articles of organization, as applicable, or, to its knowledge, any law,
judgment, order, rule or regulation of any court, arbitration panel or other
Governmental Authority, domestic or foreign, or other Person affecting or
binding upon Borrower or the Property, or (ii) violate any provision of any
indenture, agreement, mortgage, deed of trust, contract or other instrument to
which Borrower or, if applicable, any General Partner is a party or by which any
of their respective property, assets or revenues are bound, or be in conflict
with, result in an acceleration of any obligation or a breach of or constitute
(with notice or lapse of time or both) a default or require any payment or
prepayment under, any such indenture, agreement, mortgage, deed of trust,
contract or other instrument, or (iii) result in the creation or imposition of
any lien, except those in favor of Lender as provided in the Loan Documents to
which it is a party.
          (d) Consent. Neither Borrower nor, if applicable, any General Partner,
is required to obtain any consent, approval or authorization from, or to file
any declaration or statement with, any Governmental Authority or other agency in
connection with or as a condition to the execution, delivery or performance of
this Security Instrument, the Note or the other Loan Documents which has not
been so obtained or filed.
          (e) Interest Rate. The rate of interest paid under the Note and the
method and manner of the calculation thereof do not violate any usury or other
law or applicable Legal Requirement.
          (f) Other Agreements. Borrower is not a party to nor is otherwise
bound by any agreements or instruments which, individually or in the aggregate,
are reasonably likely to have a Material Adverse Effect. Neither Borrower nor,
if applicable, any General Partner, is in violation of its organizational
documents or other restriction or any agreement or instrument by which it is
bound, or any judgment, decree, writ, injunction, order or award of any
arbitrator, court or Governmental Authority, or any Legal Requirement, in each
case, applicable to

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Borrower or the Property, except for such violations that would not,
individually or in the aggregate, have a Material Adverse Effect.
          (g) Maintenance of Existence. (i) Borrower and, if applicable, each
General Partner at all times since their formation have been duly formed and
existing at all times and at all times have preserved and shall preserve and has
kept and shall keep in full force and effect their existence as a Single Purpose
Entity, it being acknowledged by Lender that, although Borrower and General
Partner conducted themselves in accordance with the provisions of this
Section 2.02(g) since their formation, prior to the Loan the organizational
documents of Borrower and General Partner did not contain all of the covenants
as set forth in this Section 2.02(g).
     (ii) Borrower and, if applicable, each General Partner, at all times since
their organization have complied, and will continue to comply, with the
provisions of its certificate of limited partnership and agreement of limited
partnership or certificate of incorporation and by-laws or articles of
organization, certificate of formation and operating agreement, as applicable,
and the laws of its jurisdiction of organization relating to partnerships,
corporations or limited liability companies, as applicable.
     (iii) Borrower and, if applicable, each General Partner have done or caused
to be done and will do all things necessary to observe organizational
formalities and preserve their existence and Borrower and, if applicable, each
General Partner will not amend, modify or otherwise change any material
provisions contained in the certificate of limited partnership and agreement of
limited partnership or certificate of incorporation and by-laws or articles of
organization, certificate of formation and operating agreement, as applicable,
or other organizational documents of Borrower and, if applicable, each General
Partner (it being acknowledged that all provisions relating to the requirements
of any Person to be a Single Purpose Entity shall be deemed material).
     (iv) Borrower and, if applicable, each General Partner, have at all times
accurately maintained, and will continue to accurately maintain, their
respective financial statements, accounting records and other partnership,
company or corporate documents separate from those of any other Person, have
filed and will file their own tax returns or, if Borrower and/or, if applicable,
General Partner is part of a consolidated group for purposes of filing tax
returns, Borrower and, General Partner, as applicable, have been shown and will
be shown as separate members of such group. Borrower and, if applicable, each
General Partner have not at any time since their formation commingled, and will
not commingle, their respective assets with those of any other Person and each
has maintained and will maintain their assets in such a manner such that it will
not be costly or difficult to segregate, ascertain or identify their individual
assets from those of any other Person. Borrower and, if applicable, each General
Partner has not permitted and will not permit any Affiliate independent access
to their bank accounts provided that Borrower has granted Manager the ability to
sign checks from its accounts. Borrower and, if applicable, each General Partner
have at all times since their formation accurately maintained and utilized, and
will continue to accurately maintain and utilize, their own separate bank
accounts, payroll and separate books of account, stationery, invoices and
checks.

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     (v) Borrower and, if applicable, each General Partner, have at all times
paid, and will continue to pay, their own liabilities from their own separate
assets and each has allocated and charged and shall each allocate and charge
fairly and reasonably any overhead which Borrower and, if applicable, any
General Partner, shares with any other Person, including, without limitation,
for office space and services performed by any employee of another Person.
     (vi) Borrower and, if applicable, each General Partner, have at all times
identified themselves, and will continue to identify themselves, in all dealings
with the public, under their own names and as separate and distinct entities and
have corrected and shall correct any known misunderstanding regarding their
status as separate and distinct entities. Borrower and, if applicable, each
General Partner, have not at any time identified themselves, and will not
identify themselves, as being a division of any other Person.
     (vii) Borrower and, if applicable, each General Partner, have been at all
times, and will continue to be, adequately capitalized in light of the nature of
their respective businesses.
     (viii) Borrower and, if applicable, each General Partner, (A) have not
owned, do not own and will not own any assets or property other than, with
respect to Borrower, the Property and any incidental personal property necessary
for the ownership, management or operation of the Property and, with respect to
General Partner, if applicable, its interest in Borrower, (B) have not engaged
and will not engage in any business other than the ownership, management and
operation of the Property or, with respect to General Partner, if applicable,
its interest in Borrower, (C) other than debt secured by the Property being paid
in full on the Closing Date (the “Previous Loan”), have not incurred and will
not incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than, with respect to Borrower, (X) the Loan
and (Y) unsecured trade and operational debt which (1) is not evidenced by a
note, (2) is incurred in the ordinary course of the operation of the Property,
(3) does not exceed in the aggregate four percent (4%) of the Loan Amount, and
(4) is, unless being contested in accordance with the terms of this Security
Instrument, paid prior to the earlier to occur of the sixtieth (60th) day after
the date incurred and the date when due, (D) other than the pledge securing the
Previous Loan which shall be released on the Closing Date, have not pledged and
will not pledge their assets for the benefit of any other Person, and (E) have
not made and will not make any loans or advances to any Person (including any
Affiliate).
     (ix) Neither Borrower nor, if applicable, any General Partner will change
its name or principal place of business.
     (x) Neither Borrower nor, if applicable, any General Partner has, and
neither of such Persons will have, any subsidiaries (other than, with respect to
General Partner, Borrower).
     (xi) Borrower has preserved and maintained and will preserve and maintain
its existence as a California limited partnership and all material rights,
privileges,

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tradenames and franchises. General Partner, if applicable, has preserved and
maintained and will preserve and maintain its existence as a Delaware limited
liability company and all material rights, privileges, tradenames and
franchises.
     (xii) Neither Borrower, nor, if applicable, any General Partner, has merged
or consolidated with, and neither will merge or consolidate with, and neither
has sold all or substantially all of its respective assets to any Person, and
neither will sell all or substantially all of its respective assets to any
Person, and neither has liquidated, wound up or dissolved itself (or suffered
any liquidation, winding up or dissolution) and neither will liquidate, wind up
or dissolve itself (or suffer any liquidation, winding up or dissolution).
Neither Borrower, nor, if applicable, any General Partner has acquired, nor will
acquire any business or assets from, or capital stock or other ownership
interest of, or be a party to any acquisition of, any Person.
     (xiii) Borrower and, if applicable, each General Partner, have not at any
time since their formation assumed, guaranteed or held themselves out to be
responsible for, and will not assume, guarantee or hold themselves out to be
responsible for the liabilities or the decisions or actions respecting the daily
business affairs of their partners, shareholders or members or any predecessor
company, corporation or partnership, each as applicable, any Affiliates, or any
other Persons. Borrower and, if applicable, each General Partner, have not at
any time since their formation acquired, and will not acquire, obligations or
securities of its partners or shareholders, members or any predecessor company,
corporation or partnership, each as applicable, or any Affiliates (other than,
with respect to General Partner, its interest in Borrower). Borrower and, if
applicable, each General Partner, have not at any time (other than on
arms-length market terms) since their formation made, and will not make, loans
to its partners, members or shareholders or any predecessor company, corporation
or partnership, each as applicable, or any Affiliates of any of such Persons.
Borrower and, if applicable, each General Partner, have no knowledge of any
contingent liabilities that could reasonably be expected to, individually or in
the aggregate, have a Material Adverse Effect, nor do they have any material
financial liabilities under any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which such Person is a party or by
which it is otherwise bound other than under the Loan Documents.
     (xiv) Borrower and, if applicable, each General Partner, have not at any
time since their formation entered into and was not a party to, and, will not
enter into or be a party to, any transaction with its Affiliates, members,
partners or shareholders, as applicable, or any Affiliates thereof except in the
ordinary course of business of such Person on terms which are no less favorable
to such Person than would be obtained in a comparable arm’s length transaction
with an unrelated third party.
     (xv) If Borrower is a limited partnership or a limited liability company,
the General Partner shall be a corporation or limited liability company whose
sole asset is its interest in Borrower and the General Partner will at all times
comply, and will cause Borrower to comply, with each of the representations,
warranties, and covenants contained in this Section 2.02(g) as if such
representation, warranty or covenant was made directly by such General Partner.

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     (xvi) Borrower shall at all times cause there to be at least one duly
appointed member of the board of directors or board of managers or other
governing board or body, as applicable (an “Independent Director”), of, if
Borrower is a corporation, Borrower, and, if Borrower is a limited partnership,
of the General Partner, and if Borrower is a limited liability company, of the
General Partner or of Borrower, provided that such Independent Director may, for
purposes hereof, be a member of the General Partner rather than of the board of
directors of the General Partner, reasonably satisfactory to Lender who shall
not have been at the time of such individual’s appointment, and may not be or
have been at any time (A) a shareholder, officer, director, attorney, counsel,
partner, member or employee of Borrower or any of the foregoing Persons or
Affiliates thereof, (B) a customer or creditor of, or supplier or service
provider (other than a supplier of registered agent or registered office
services) to, Borrower or any of its shareholders, partners, members or their
Affiliates, (C) a member of the immediate family of any Person referred to in
(A) or (B) above or (D) a Person Controlling, Controlled by or under common
Control with any Person referred to in (A) through (C) above.
     (xvii) General Partner and, if applicable, Borrower, shall not cause or
permit the board of directors or board of managers or other governing board or
body, as applicable, of General Partner or, if applicable, Borrower, to take any
action which, under the terms of any certificate of incorporation, by-laws,
limited liability company agreement, operating agreement, certificate of
formation or articles of organization requires a vote of the board of directors
or board of managers or other governing board or body of the General Partner,
or, if applicable, Borrower, unless at the time of such action there shall be at
least one member who is an Independent Director.
     (xviii) Borrower and, if applicable, each General Partner has paid and
shall pay the salaries of their own employees and has maintained and shall
maintain a sufficient number of employees in light of their contemplated
business operations.
     (xix) Borrower shall, and shall cause its Affiliates to, and Borrower has
and has caused its Affiliates to, conduct its business so that the assumptions
made with respect to Borrower and, if applicable, each General Partner, in that
certain opinion letter relating to substantive non-consolidation dated the date
hereof (the “Insolvency Opinion”) delivered in connection with the Loan has been
and shall be true and correct in all material respects.
     (xx) Borrower shall not enter into any franchise agreement without Lender’s
prior written consent.
     Notwithstanding anything to the contrary contained in this Section 2.02(g),
provided Borrower is a Delaware single member limited liability company which
satisfies the single purpose bankruptcy remote entity requirements of each
Rating Agency for a single member limited liability company, the foregoing
provisions of this Section 2.02(g) shall not apply to the General Partner.

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     (h) No Defaults. No Default or Event of Default has occurred and is
continuing or would occur as a result of the consummation of the transactions
contemplated by the Loan Documents. Borrower is not in default in the payment or
material performance of any of its Contractual Obligations in any respect.
     (i) Consents and Approvals. Borrower and, if applicable, each General
Partner, have obtained or made all necessary (i) consents, approvals and
authorizations, and registrations and filings of or with all Governmental
Authorities and (ii) consents, approvals, waivers and notifications of partners,
stockholders, members, creditors, lessors and other nongovernmental Persons, in
each case, which are required to be obtained or made by Borrower or, if
applicable, the General Partner, in connection with the execution and delivery
of, and the performance by Borrower of its obligations under, the Loan
Documents.
     (j) Investment Company Act Status, Etc. Borrower is not (i) an “investment
company,” or a company “controlled” by an “investment company,” as such terms
are defined in the Investment Company Act of 1940, as amended, (ii) 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 (iii) subject to any
other federal or state law or regulation which purports to restrict or regulate
its ability to borrow money.
     (k) Compliance with Law. (i) Except as previously disclosed to Lender in
the Disclosure Schedule, Borrower has received no written notice of violation of
any Legal Requirements and (ii) except for such violations which would not,
individually or in the aggregate, have a Material Adverse Effect, Borrower is in
compliance in all material respects with all Legal Requirements to which it or
the Property is subject, including, without limitation, all Environmental
Statutes, the Occupational Safety and Health Act of 1970, the Americans with
Disabilities Act and ERISA. No portion of the Property has been or will be
purchased, improved, fixtured, equipped or furnished with proceeds of any
illegal activity and to Borrower’s knowledge, no illegal activities are being
conducted at or from the Property.
     (l) Financial Information. All financial data that has been delivered by
Borrower to Lender in connection with the Loan (i) is true, complete and correct
in all material respects, (ii) accurately represents the financial condition and
results of operations of the Persons covered thereby as of the date on which the
same shall have been furnished, and (iii) in the case of audited financial
statements, has been prepared in accordance with GAAP and the Uniform System of
Accounts (or such other accounting basis as is reasonably acceptable to Lender)
throughout the periods covered thereby. As of the date hereof, neither Borrower
nor, if applicable, any General Partner, has any contingent liability, liability
for taxes or other unusual or forward commitment not reflected in such financial
statements delivered to Lender. Since the date of the last financial statements
delivered by Borrower to Lender except as otherwise disclosed in such financial
statements or notes thereto, there has been no change in the assets, liabilities
or financial position of Borrower nor, if applicable, any General Partner, or in
the results of operations of Borrower, in each case which would have a Material
Adverse Effect. Neither Borrower nor, if applicable, any General Partner, has
incurred any obligation or liability, contingent or otherwise not reflected in
such financial statements which would have a Material Adverse Effect.

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     (m) Transaction Brokerage Fees. Borrower has not dealt with any financial
advisors, brokers, underwriters, placement agents, agents or finders in
connection with the transactions contemplated by this Security Instrument. All
brokerage fees, commissions and other expenses payable in connection with the
transactions contemplated by the Loan Documents have been paid in full by
Borrower contemporaneously with the execution of the Loan Documents and the
funding of the Loan. Borrower hereby agrees to indemnify and hold Lender
harmless for, from and against any and all claims, liabilities, costs and
expenses of any kind in any way relating to or arising from (i) a claim by any
Person that such Person acted on behalf of Borrower in connection with the
transactions contemplated herein or (ii) any breach of the foregoing
representation. The provisions of this subsection (m) shall survive the
repayment of the Debt.
     (n) Federal Reserve Regulations. No part of the proceeds of the Loan will
be used for the purpose of “purchasing” or “carrying” any “margin stock” within
the meaning of Regulations T, U or X of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent with such
Regulations T, U or X or any other Regulations of such Board of Governors, or
for any purposes prohibited by Legal Requirements or by the terms and conditions
of the Loan Documents.
     (o) Pending Litigation. There are no actions, suits or proceedings pending
or, to the knowledge of Borrower, threatened against or affecting Borrower or
the Property in any court or before any Governmental Authority which if
adversely determined either individually or collectively has or is reasonably
likely to have a Material Adverse Effect.
     (p) Solvency; No Bankruptcy. Each of Borrower and, if applicable, the
General Partner, (i) is and has at all times been Solvent and will remain
Solvent immediately upon the consummation of the transactions contemplated by
the Loan Documents and (ii) is free from bankruptcy, reorganization or
arrangement proceedings or a general assignment for the benefit of creditors and
is not contemplating the filing of a petition under any state or federal
bankruptcy or insolvency laws or the liquidation of all or a major portion of
such Person’s assets or property and Borrower has no knowledge of any Person
contemplating the filing of any such petition against it or, if applicable, the
General Partner. None of the transactions contemplated hereby will be or have
been made with an intent to hinder, delay or defraud any present or future
creditors of Borrower and Borrower has received reasonably equivalent value in
exchange for its obligations under the Loan Documents. Borrower’s assets do not,
and immediately upon consummation of the transaction contemplated in the Loan
Documents will not, constitute unreasonably small capital to carry out its
business as presently conducted or as proposed to be conducted. Borrower does
not intend to, nor believes that it will, incur debts and liabilities beyond its
ability to pay such debts as they may mature.
     (q) Use of Proceeds. The proceeds of the Loan shall be applied by Borrower
to, inter alia, (i) satisfy certain mortgage loans presently encumbering all or
a part of the Property, (ii) pay certain transaction costs incurred by Borrower
in connection with the Loan, (iii) fund the Escrow Accounts as required by this
Security Instrument, and (iv) make distributions to the partners of Borrower. No
portion of the proceeds of the Loan will be used for family, personal,
agricultural or household use.

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     (r) Tax Filings. Borrower and, if applicable, each General Partner, have
filed all federal, state and local tax returns required to be filed and have
paid or made adequate provision for the payment of all federal, state and local
taxes, charges and assessments payable by Borrower and, if applicable, the
General Partners. Borrower and, if applicable, the General Partners, believe
that their respective tax returns properly reflect the income and taxes of
Borrower and said General Partner, if any, for the periods covered thereby,
subject only to reasonable adjustments required by the Internal Revenue Service
or other applicable tax authority upon audit.
     (s) Not Foreign Person. Borrower is not a “foreign person” within the
meaning of §1445(f)(3) of the Code.
     (t) ERISA. (i) The assets of Borrower and Guarantor are not and will not
become treated as “plan assets”, whether by operation of law or under
regulations promulgated under ERISA. If any Person having a legal or beneficial
ownership interest in Borrower is using (or is deemed under ERISA to be using)
“plan assets”, Borrower will qualify as a “real estate operating company” within
the meaning of 29 C.F.R. §2510.3-101(e) at all times that the Loan is
outstanding. Each Plan and Welfare Plan, and, to the knowledge of Borrower, each
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, its terms and the
applicable provisions of ERISA, the Code and any other applicable Legal
Requirement, and no event or condition has occurred and is continuing as to
which Borrower would be under an obligation to furnish a report to Lender under
clause (ii)(A) of this Section. Other than an application for a favorable
determination letter with respect to a Plan, there are no pending issues or
claims before the Internal Revenue Service, the United States Department of
Labor or any court of competent jurisdiction related to any Plan or Welfare Plan
under which Borrower, Guarantor or any ERISA Affiliate, directly or indirectly
(through an indemnification agreement or otherwise), could be subject to any
material risk of liability under Section 409 or 502(i) of ERISA or Section 4975
of the Code. No Welfare Plan provides or will provide benefits, including,
without limitation, death or medical benefits (whether or not insured) with
respect to any current or former employee of Borrower, Guarantor or any ERISA
Affiliate beyond his or her retirement or other termination of service other
than (A) coverage mandated by applicable law, (B) death or disability benefits
that have been fully provided for by fully paid up insurance or (C) severance
benefits.
     (ii) Borrower will furnish to Lender as soon as possible, and in any event
within ten (10) days after Borrower knows or has reason to believe that any of
the events or conditions specified below with respect to any Plan, Welfare Plan
or Multiemployer Plan has occurred or exists, an Officer’s Certificate setting
forth details respecting such event or condition and the action, if any, that
Borrower or its ERISA Affiliate proposes to take with respect thereto (and a
copy of any report or notice required to be filed with or given to PBGC (or any
other relevant Governmental Authority)) by Borrower or an ERISA Affiliate with
respect to such event or condition, if such report or notice is required to be
filed with the PBGC or any other relevant Governmental Authority:
     (A) any reportable event, as defined in Section 4043 of ERISA and the
regulations issued thereunder, with respect to a Plan, as to which PBGC has not
by regulation waived the requirement of Section 4043(a) of ERISA that it be

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notified within thirty (30) days of the occurrence of such event (provided that
a failure to meet the minimum funding standard of Section 412 of the Code and of
Section 302 of ERISA, including, without limitation, the failure to make on or
before its due date a required installment under Section 412(m) of the Code and
of Section 302(e) of ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the Code), and any
request for a waiver under Section 412(d) of the Code for any Plan;
     (B) the distribution under Section 4041 of ERISA of a notice of intent to
terminate any Plan or any action taken by Borrower or an ERISA Affiliate to
terminate any Plan;
     (C) the institution by PBGC of proceedings under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Plan, or
the receipt by Borrower or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by PBGC with respect to such Multiemployer
Plan;
     (D) the complete or partial withdrawal from a Multiemployer Plan by
Borrower or any ERISA Affiliate that results in liability under Section 4201 or
4204 of ERISA (including the obligation to satisfy secondary liability as a
result of a purchaser default) or the receipt by Borrower or any ERISA Affiliate
of notice from a Multiemployer Plan that it is in reorganization or insolvency
pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
     (E) the institution of a proceeding by a fiduciary of any Multiemployer
Plan against Borrower or any ERISA Affiliate to enforce Section 515 of ERISA,
which proceeding is not dismissed within thirty (30) days;
     (F) the adoption of an amendment to any Plan that, pursuant to Section
401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of
tax-exempt status of the trust of which such Plan is a part if Borrower or an
ERISA Affiliate fails to timely provide security to the Plan in accordance with
the provisions of said Sections; or
     (G) the imposition of a lien or a security interest in connection with a
Plan.
     (iii) Borrower shall not knowingly engage in or permit any transaction in
connection with which Borrower, Guarantor or any ERISA Affiliate could be
subject to either a civil penalty or tax assessed pursuant to Section 502(i) or
502(l) of ERISA or Section 4975 of the Code, permit any Welfare Plan to provide
benefits, including without limitation, medical benefits (whether or not
insured), with respect to any current or former employee of Borrower, Guarantor
or any ERISA Affiliate beyond his or her retirement or other termination of
service other than (A) coverage mandated by applicable law, (B) death or
disability benefits that have been fully provided for by paid

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up insurance or otherwise or (C) severance benefits, permit the assets of
Borrower or Guarantor to become “plan assets”, whether by operation of law or
under regulations promulgated under ERISA or adopt, amend (except as may be
required by applicable law) or increase the amount of any benefit or amount
payable under, or permit any ERISA Affiliate to adopt, amend (except as may be
required by applicable law) or increase the amount of any benefit or amount
payable under, any employee benefit plan (including, without limitation, any
employee welfare benefit plan) or other plan, policy or arrangement, except for
normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, do not result in a material increase in
benefits expense to Borrower, Guarantor or any ERISA Affiliate.
     (iv) Labor Matters. No organized work stoppage or labor strike is pending
or threatened by employees or other laborers at the Property and neither
Borrower nor Manager (i) except as otherwise disclosed in writing to Lender, is
involved in or threatened with any labor dispute, grievance or litigation
relating to labor matters involving any employees and other laborers at the
Property, including, without limitation, violation of any federal, state or
local labor, safety or employment laws (domestic or foreign) and/or charges of
unfair labor practices or discrimination complaints; (ii) has engaged in any
unfair labor practices within the meaning of the National Labor Relations Act or
the Railway Labor Act; or (iii) is a party to, or bound by, any collective
bargaining agreement or union contract with respect to employees and other
laborers at the Property and no such agreement or contract is currently being
negotiated by Borrower, Manager or any of their Affiliates.
     (v) Borrower’s Legal Status. Borrower’s exact legal name that is indicated
on the signature page hereto, organizational identification number and place of
business or, if more than one, its chief executive office, as well as Borrower’s
mailing address, if different, which were identified by Borrower to Lender and
contained in this Security Instrument, are true, accurate and complete. Borrower
(i) will not change its name, its place of business or, if more than one place
of business, its chief executive office, or its mailing address or
organizational identification number if it has one without giving Lender at
least thirty (30) days prior written notice of such change, (ii) if Borrower
does not have an organizational identification number and later obtains one,
Borrower shall promptly notify Lender of such organizational identification
number and (iii) will not change its type of organization, jurisdiction of
organization or other legal structure.
     (vi) Compliance with Anti-Terrorism, Embargo and Anti-Money Laundering
Laws. (i) None of Borrower, General Partner, any Guarantor, or any Person who
owns any equity interest in or Controls Borrower, General Partner or any
Guarantor currently is identified on the OFAC List or otherwise qualifies as a
Prohibited Person, and Borrower has implemented procedures, approved by Borrower
and, if applicable, General Partner, to ensure that no Person who now or
hereafter owns an equity interest in Borrower or General Partner is a Prohibited
Person or Controlled by a Prohibited Person, (ii) no proceeds of the Loan will
be used to fund any operations in, finance any investments or activities in or
make any payments to, Prohibited Persons, and (iii) none of Borrower, General
Partner, or any Guarantor are in violation of any Legal Requirements relating to
anti-money laundering or anti-terrorism, including, without limitation, Legal

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Requirements related to transacting business with Prohibited Persons or the
requirements of the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001, U.S. Public Law
107-56, and the related regulations issued thereunder, including temporary
regulations, all as amended from time to time. No tenant under a Space Lease at
the Property currently is identified on the OFAC List or otherwise qualifies as
a Prohibited Person, and, to Borrower’s knowledge, no tenant at the Property is
owned or Controlled by a Prohibited Person. Borrower has determined that Manager
has implemented procedures, approved by Borrower, to ensure that no tenant under
a Space Lease at the Property is a Prohibited Person or owned or Controlled by a
Prohibited Person.
     Section 2.03. Further Acts, Etc. Borrower will, at the cost of Borrower,
and without expense to Lender, do, execute, acknowledge and deliver all and
every such further acts, deeds, conveyances, mortgages or deeds of trust, as
applicable, assignments, notices of assignments, transfers and assurances as
Lender or Trustee shall, from time to time, reasonably require for the better
assuring, conveying, assigning, transferring, and confirming unto Lender and
Trustee the property and rights hereby mortgaged, given, granted, bargained,
sold, alienated, enfeoffed, conveyed, confirmed, pledged, assigned and
hypothecated, or which Borrower may be or may hereafter become bound to convey
or assign to Lender and Trustee, or for carrying out or facilitating the
performance of the terms of this Security Instrument or for filing, registering
or recording this Security Instrument and, on demand, will execute and deliver
and hereby authorizes Lender to execute in the name of Borrower or without the
signature of Borrower to the extent Lender may lawfully do so, one or more
financing statements, chattel mortgages or comparable security instruments to
evidence more effectively the lien hereof upon the Property. Borrower grants to
Lender an irrevocable power of attorney coupled with an interest for the purpose
of protecting, perfecting, preserving and realizing upon the interests granted
pursuant to this Security Instrument and to effect the intent hereof, all as
fully and effectually as Borrower might or could do; and Borrower hereby
ratifies all that Lender shall lawfully do or cause to be done by virtue hereof;
provided, however, that Lender shall not exercise such power of attorney unless
and until Borrower fails to take the required action within the five
(5) Business Day time period stated above unless the failure to so exercise,
could, in Lender’s reasonable judgment, result in a Material Adverse Effect.
Upon (a) receipt of an affidavit of an officer of Lender as to the loss, theft,
destruction or mutilation of the Note or any other Loan Document which is not of
public record, (b) receipt of an indemnity of Lender related to losses resulting
solely from the issuance of a replacement note or other applicable Loan Document
and (c) in the case of any such mutilation, upon surrender and cancellation of
such Note or other applicable Loan Document, Borrower will issue, in lieu
thereof, a replacement Note or other applicable Loan Document, dated the date of
such lost, stolen, destroyed or mutilated Note or other Loan Document in the
same principal amount thereof and otherwise of like tenor.
     Section 2.04. Recording of Security Instrument, Etc. Borrower forthwith
upon the execution and delivery of this Security Instrument and thereafter, from
time to time, will cause this Security Instrument, and any security instrument
creating a lien or security interest or evidencing the lien hereof upon the
Property and each instrument of further assurance to be filed, registered or
recorded in such manner and in such places as may be required by any present or
future law in order to publish notice of and fully protect the lien or security
interest hereof upon, and the interest of Lender in, the Property. Borrower will
pay all filing, registration or recording

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fees, and all expenses incident to the preparation, execution and acknowledgment
of this Security Instrument, any mortgage or deed of trust, as applicable,
supplemental hereto, any security instrument with respect to the Property and
any instrument of further assurance, and all federal, state, county and
municipal, taxes, duties, imposts, assessments and charges arising out of or in
connection with the execution and delivery of this Security Instrument, any
mortgage or deed of trust, as applicable, supplemental hereto, any security
instrument with respect to the Property or any instrument of further assurance,
except where prohibited by law to do so, in which event Lender may declare the
Debt to be immediately due and payable. Borrower shall hold harmless and
indemnify Lender and Trustee, and their successors and assigns, against any
liability incurred as a result of the imposition of any tax on the making and
recording of this Security Instrument.
     Section 2.05. Representations, Warranties and Covenants Relating to the
Property. Borrower represents and warrants to and covenants with Lender with
respect to the Property as follows:
     (a) Lien Priority. This Security Instrument is a valid and enforceable
first lien on the Property, free and clear of all encumbrances and liens having
priority over the lien of this Security Instrument, except for the items set
forth as exceptions to or subordinate matters in the title insurance policy
insuring the lien of this Security Instrument, none of which, individually or in
the aggregate, materially interfere with the benefits of the security intended
to be provided by this Security Instrument, materially affect the value or
marketability of the Property as presently utilized, impair the use or operation
of the Property for the use currently being made thereof or impair Borrower’s
ability to pay its obligations in a timely manner (such items being the
“Permitted Encumbrances”).
     (b) Title. Borrower has, subject only to the Permitted Encumbrances, good,
insurable and marketable leasehold title to the Premises, Improvements and
Fixtures, other than the Trade Fixtures described on Exhibit F to the Ground
Lease (“Trade Fixtures”) and good, insurable and marketable fee simple title to
the Trade Fixtures (the Improvements and Fixtures, including the Trade Fixtures,
together with the Premises are referred to collectively as the “Realty”) and to
all easements and rights benefiting the Realty and has the right, power and
authority to mortgage, encumber, give, grant, bargain, sell, alien, enfeoff,
convey, confirm, pledge, assign, and hypothecate the Property. Borrower will
preserve its interest in and title to the Property and will forever warrant and
defend the same to Lender against any and all claims made by, through or under
Borrower and will forever warrant and defend the validity and priority of the
lien and security interest created herein against the claims of all Persons
whomsoever claiming by, through or under Borrower. The foregoing warranty of
title shall survive the foreclosure of this Security Instrument and shall inure
to the benefit of and be enforceable by Lender in the event Lender acquires
title to the Property pursuant to any foreclosure. In addition, except for a
right of first refusal as set forth in the Management Agreement which is
subordinate to the Security Instrument, there are no outstanding options or
rights of first refusal to purchase the Property or Borrower’s ownership
thereof.
     (c) Taxes and Impositions. All taxes and other Impositions and governmental
assessments due and owing in respect of, and affecting, the Property have been
paid. Borrower has paid all Impositions which constitute special governmental
assessments in full, except for

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those assessments which are permitted by applicable Legal Requirements to be
paid in installments, in which case all installments which are due and payable
have been paid in full. Other than as previously disclosed to Lender in writing,
there are no pending, or to Borrower’s knowledge, proposed special or other
assessments for public improvements or otherwise affecting the Property, nor are
there any contemplated improvements to the Property that may result in such
special or other assessments.
     (d) Casualty; Flood Zone. The Realty is in good repair and free and clear
of any damage, destruction or casualty (whether or not covered by insurance)
that would materially affect the value of the Realty or the use for which the
Realty was intended. There exists no structural or other material defects or,
except as disclosed in the property condition report relating to the Property
which was prepared by IVI Due Diligence, Inc. and delivered to Lender in
connection with the origination of the Loan, damages in or to the Property and
Borrower has not received any written notice from any insurance company or
bonding company of any material defect or inadequacies in the Property, or any
part thereof, which would materially and 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.
No portion of the Premises is located in an “area of special flood hazard,” as
that term is defined in the regulations of the Federal Insurance Administration,
Department of Housing and Urban Development, under the National Flood Insurance
Act of 1968, as amended (24 CFR § 1909.1) or Borrower has obtained the flood
insurance required by Section 3.01(a)(vi) hereof. The Premises either does not
lie in a 100 year flood plain that has been identified by the Secretary of
Housing and Urban Development or any other Governmental Authority or, if it
does, Borrower has obtained the flood insurance required by Section 3.01(a)(vi)
hereof.
     (e) Completion; Encroachment. All Improvements necessary for the use and
operation of the Premises, including, without limitation, all Improvements which
were included for purposes of determining the appraised value of the Property in
the Appraisal, have been completed and none of said Improvements lie outside the
boundaries and building restriction lines of the Premises, except to the extent
otherwise disclosed to Lender pursuant to any title insurance policy insuring
the lien of this Security Instrument or on any survey certified to Lender in
connection with the Loan. Except as set forth in the title insurance policy
insuring the lien of this Security Instrument, no improvements on adjoining
properties encroach upon the Premises.
     (f) Separate Lot. The Premises are taxed separately without regard to any
other real estate and constitute a legally subdivided lot under all applicable
Legal Requirements (or, if not subdivided, no subdivision or platting of the
Premises is required under applicable Legal Requirements), and for all purposes
may be mortgaged, encumbered, conveyed or otherwise dealt with as an independent
parcel. The Property does not benefit from any tax abatement or exemption.
     (g) Use. The existence of all Improvements, the present use and operation
thereof and the access of the Premises and the Improvements to all of the
utilities and other items referred to in paragraph (k) below are in compliance
in all material respects with all Leases affecting the Property and all
applicable Legal Requirements, including, without limitation, Environmental
Statutes, Development Laws and Use Requirements. Except as previously disclosed
to Lender in the Disclosure Schedule, Borrower has not received any notice from
any

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Governmental Authority alleging any uncured violation relating to the Property
of any applicable Legal Requirements. In the event that Borrower has received
any written notices from any Governmental Authority alleging an uncured
violation relating to the Property or any applicable Legal Requirement, no such
violation could have a Material Adverse Effect.
     (h) Licenses and Permits. Borrower currently holds and will continue to
hold all certificates of occupancy, licenses, registrations, permits, consents,
franchises and approvals of any Governmental Authority or any other Person which
are material for the lawful occupancy and operation of the Realty or which are
material to the ownership or operation of the Property or the conduct of
Borrower’s business. All such certificates of occupancy, licenses,
registrations, permits, consents, franchises and approvals are current and in
full force and effect.
     (i) Intentionally Omitted.
     (j) Property Proceedings. There are no actions, suits or proceedings
pending or, to the Borrower’s knowledge, threatened in any court or before any
Governmental Authority or arbitration board or tribunal (i) relating to (A) the
zoning of the Premises or any part thereof, (B) any certificates of occupancy,
licenses, registrations, permits, consents or approvals issued with respect to
the Property or any part thereof, (C) the condemnation of the Property or any
part thereof, or (D) the condemnation or relocation of any roadways abutting the
Premises required for access or the denial or limitation of access to the
Premises or any part thereof from any point of access to the Premises,
(ii) asserting that (A) any such zoning, certificates of occupancy, licenses,
registrations, permits, consents and/or approvals do not permit the operation of
any material portion of the Realty as presently being conducted, (B) any
material improvements located on the Property or any part thereof cannot be
located thereon or operated with their intended use or (C) the operation of the
Property or any part thereof is in violation in any material respect of any
Environmental Statutes, Development Laws or other Legal Requirements or Space
Leases or Property Agreements or (iii) which might (A) affect the validity or
priority of any Loan Document or (B) have a Material Adverse Effect. Borrower
has no knowledge of any facts or circumstances which could reasonably be
expected to give rise to any actions, suits or proceedings described in the
preceding sentence.
     (k) Utilities. The Premises has all necessary legal access to water, gas
and electrical supply, storm and sanitary sewerage facilities, other required
public utilities (with respect to each of the aforementioned items, by means of
either a direct connection to the source of such utilities or through
connections available on publicly dedicated roadways directly abutting the
Premises or through permanent insurable easements benefiting the Premises), fire
and police protection, parking, and means of direct access between the Premises
and public highways over recognized curb cuts (or such access to public highways
is through private roadways which may be used for ingress and egress pursuant to
permanent insurable easements).
     (l) Mechanics’ Liens. The Property is free and clear of any mechanics’
liens or liens in the nature thereof, and no rights are outstanding that under
law could give rise to any such liens, any of which liens are or may be prior
to, or equal with, the lien of this Security Instrument, except those which are
insured against by the title insurance policy insuring the lien of this Security
Instrument.

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     (m) Intentionally Omitted.
     (n) Insurance. The Property is insured in accordance with the requirements
set forth in Article III hereof.
     (o) Space Leases.
     (i) Borrower has delivered a true, correct and complete schedule of all
Space Leases as of the date hereof, if any, which accurately and completely sets
forth in all material respects, for each such Space Lease, the following
(collectively, the “Rent Roll”): the name and address of the tenant with the
name, title and telephone number of the contact person of such tenant; the base
rent and percentage rent payable; all additional rent and pass-through
obligations; and the security deposit held thereunder and the location of such
deposit.
     (ii) Each Space Lease constitutes the legal, valid and binding obligation
of Borrower and, to the knowledge of Borrower, is enforceable against the tenant
thereof. No default exists, or with the passing of time or the giving of notice
would exist, (A) under any Major Space Lease (if any) or (B) under any other
Space Leases which would, in the aggregate, have a Material Adverse Effect.
     (iii) No tenant under any Space Lease has, as of the date hereof, paid Rent
more than thirty (30) days in advance, and the Rents under such Space Leases
have not been waived, released, or otherwise discharged or compromised.
     (iv) All work to be performed by Borrower under the Space Leases has been
substantially performed, all contributions to be made by Borrower to the tenants
thereunder have been made except for any held-back amounts, and all other
conditions precedent to each such tenant’s obligations thereunder have been
satisfied.
     (v) Except as previously disclosed to Lender in writing, there are no
options to terminate any Space Lease.
     (vi) Each tenant under a Major Space Lease (if any) has entered into
occupancy of the demised premises to the extent required under the terms of its
Major Space Lease (if any), and each such tenant is open and conducting business
with the public in the demised premises. To the knowledge of Borrower, after due
inquiry, each tenant under a Lease other than a Major Space Lease has entered
into occupancy of its demised premises under its Lease to the extent required
under the terms of its Lease.
     (vii) Borrower has delivered to Lender true, correct and complete copies of
all Space Leases.
     (viii) Each Space Lease is in full force and effect and, except as
previously disclosed in writing to Lender, to Borrower’s knowledge, has not
(i) been assigned by the tenant thereunder, or (ii) modified, supplemented or
amended in any way. Borrower has not assigned its interest in any Space Lease
except pursuant to the terms hereof.

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     (ix) To Borrower’s knowledge, each tenant under each Space Lease is free
from bankruptcy, reorganization or arrangement proceedings or a general
assignment for the benefit of creditors.
     (x) No Space Lease provides any party with the right to obtain a lien or
encumbrance upon the Property superior to the lien of this Security Instrument.
     (p) Property Agreements.
     (i) Borrower has delivered to Lender true, correct and complete copies of
all Property Agreements.
     (ii) No Property Agreement provides any party thereto with the right to
obtain a lien or encumbrance upon the Property superior to the lien of this
Security Instrument.
     (iii) No default exists or with the passing of time or the giving of notice
or both would exist under any Property Agreement which would, individually or in
the aggregate, have a Material Adverse Effect.
     (iv) Borrower has not received or given any written communication which is
outstanding which alleges that a default exists or, with the giving of notice or
the lapse of time, or both, would exist under the provisions of any Property
Agreement.
     (v) No condition exists whereby Borrower or any future owner of the
Property may be required to purchase any other parcel of land which is subject
to any Property Agreement or which gives any Person a right to purchase, or
right of first refusal with respect to, the Property, except for a right of
first refusal as set forth in the Management Agreement which is subordinate to
the Security Instrument.
     (vi) To the knowledge of Borrower, no offset or any right of offset exists
respecting continued contributions to be made by any party to any Property
Agreement except as expressly set forth therein. Except as previously disclosed
to Lender in writing, no material exclusions or restrictions on the utilization,
leasing or improvement of the Property (including non-compete agreements) exists
in any Property Agreement.
     (q) Personal Property. Borrower has delivered to Lender a depreciation
schedule of the personal property, if any, owned by Borrower and located upon
the Property or used in connection with the use or operation of the Realty which
is true, correct and complete in all material respects and Borrower represents
that it has good and marketable title to all such personal property, free and
clear of any liens, except for liens created under the Loan Documents and liens
which describe the equipment and other personal property owned by tenants.
     (r) Leasing Brokerage and Management Fees. Except as previously disclosed
to Lender in writing or as set forth in the Management Agreement, there are no
brokerage fees or commissions payable by Borrower with respect to the leasing of
space at the Property and there are no management fees payable by Borrower with
respect to the management of the Property.

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     (s) Security Deposits. Borrower is in compliance with all Legal
Requirements relating to such security deposits as to which failure to comply
might, individually or in the aggregate, have a Material Adverse Effect.
     (t) Intentionally Omitted.
     (u) Representations Generally. The representations and warranties contained
in this Security Instrument, and the review and inquiry made on behalf of
Borrower therefor, have all been made by Persons having the requisite expertise
and knowledge to provide such representations and warranties. No representation,
warranty or statement of fact made by or on behalf of Borrower in this Security
Instrument or in any certificate, document or schedule furnished to Lender
pursuant hereto, contains any untrue statement of a material fact or omits to
state any material fact necessary to make statements contained therein or herein
not misleading (which may be to Borrower’s knowledge where so provided herein).
There are no facts presently known to Borrower which have not been disclosed to
Lender which would, individually or in the aggregate, have a Material Adverse
Effect nor as far as Borrower can reasonably foresee might, individually or in
the aggregate, have a Material Adverse Effect.
     (v) Ground Lease.
     (i) Subject to Section 28.15 of the Ground Lease, Borrower is authorized to
assign its interest in any condemnation award which Borrower is entitled to
receive pursuant to the Ground Lease.
     (ii) Provided Lender provides to Ground Lessor the certification required
pursuant to Section 28.12.2 of the Ground Lease, if any default by Borrower
shall occur under the Ground Lease, Lender is entitled under the Ground Lease to
receive notice of such default contemporaneously with any notice of default
which is given to Borrower from Ground Lessor and an additional opportunity to
cure any such default which is susceptible of cure by Lender, which in the case
of any non-monetary default susceptible of cure by Lender, includes the right of
Lender or its designee to acquire possession of the Premises by means of
foreclosure of this Security Instrument or by other means and to become the
lessee under the Ground Lease subject to Lessor’s approval pursuant to
Section 28.13.2(b) of the Ground Lease. So long as Lender has agreed to
effectuate a cure and is proceeding to cure any such non-monetary default within
applicable notice and grace periods and no monetary default remains uncured
beyond any applicable notice and grace periods to which Borrower and Lender are
entitled, Ground Lessor may not terminate the Ground Lease.
     (iii) The Ground Lease is in full force and effect and has not been
modified or supplemented. The Ground Lease cannot be amended or modified in any
respect whatsoever except by an instrument in writing signed by Ground Lessor
and Borrower.
     (iv) All rents (including Annual Rental, Base Rental and Percentage Rental
(each as defined in the Ground Lease) and other charges) reserved for in the
Ground Lease and payable prior to the date hereof have been paid.

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     (v) No party to the Ground Lease is in default of any obligation such party
has thereunder and no event has occurred which, with the giving of notice or the
lapse of time, or both, would constitute such a default.
     (vi) Other than as set forth in any ground lessor estoppel addressed to
Lender which was delivered to Lender in connection with the origination of the
Loan, no notice or other written or oral communication has been provided to any
party under the Ground Lease which alleges that, as of the date hereof, either a
default exists or with the passage of time will exist under the provisions of
such Ground Lease.
     (vii) If there shall be a Taking of the fee title to the Premises, subject
to amounts which are applied to restoration, Borrower is entitled to receive
such portion of the award for such Taking as equals the value of Borrower’s
estate under the Ground Lease and improvements made by Borrower. If there shall
be a casualty under a Ground Lease, there is an obligation to use insurance
proceeds for a full restoration.
     (viii) Provided that no monetary default remains uncured beyond any
applicable notice and grace periods to which Borrower and Lender are entitled,
the Ground Lease may not be terminated by Ground Lessor by reason of any default
by Borrower which is not susceptible of cure by Lender.
     (ix) Pursuant and subject to Section 28.13.3 of the Ground Lease, if the
Ground Lease is terminated, upon Lender’s request pursuant to Section 28.13.3.1
of the Ground Lease and if Lender is then the most senior Leasehold Mortgagee
(as defined in the Ground Lease) giving such notice, Ground Lessor shall enter
into a new lease (the “New Lease”) with Lender for the remainder of the term of
the Ground Lease upon the same base rent and additional rent and other terms,
covenants, conditions and agreements as are contained in the Ground Lease in
accordance with Section 28.13.3.2 of the Ground Lease.
     (w) Liquor License. All licenses, permits, approvals and consents which are
required for the sale and service of alcoholic beverages on the Premises have
been obtained from the applicable Governmental Authorities.
     (x) Credit Card Companies. The only Credit Card Company that serves as a
credit card clearing bank is Wells Fargo Merchant Services.
     Section 2.06. Removal of Lien. (a) Borrower shall, at its expense, maintain
this Security Instrument as a first lien on the Property and shall keep the
Property free and clear of all liens and encumbrances of any kind and nature
other than the Permitted Encumbrances. Borrower shall, within ten (10) days
following the filing thereof, promptly discharge of record, by bond or
otherwise, any such liens and, promptly upon request by Lender, shall deliver to
Lender evidence reasonably satisfactory to Lender of the discharge thereof.
     (b) Without limitation to the provisions of Section 2.06(a) hereof,
Borrower shall (i) pay, from time to time when the same shall become due, all
claims and demands of mechanics, materialmen, laborers, and others which, if
unpaid, could reasonably be expected to result in, or permit the creation of, a
lien on the Property or any part thereof, (ii) cause to be removed of

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record (by payment or posting of bond or settlement or otherwise) any
mechanics’, materialmens’, laborers’ or other lien on the Property, or any part
thereof, or on the revenues, rents, issues, income or profit arising therefrom,
and (iii) in general, do or cause to be done, without expense to Lender,
everything reasonably necessary to preserve in full the lien of this Security
Instrument. If Borrower fails to comply with the requirements of this
Section 2.06(b), then, upon ten (10) Business Days’ prior notice to Borrower,
Lender may, but shall not be obligated to, pay any such lien, and Borrower
shall, within ten (10) Business Days after Lender’s demand therefor, reimburse
Lender for all sums so expended, together with interest thereon at the Default
Rate from the date advanced, all of which shall be deemed part of the Debt.
Nothing contained herein shall be deemed a consent or request of Lender, express
or implied, by inference or otherwise, to the performance of any alteration,
repair or other work by any contractor, subcontractor or laborer or the
furnishing of any materials by any materialmen in connection therewith.
     (c) Notwithstanding the foregoing, Borrower may contest any lien (other
than a lien relating to non-payment of Impositions, the contest of which shall
be governed by Section 4.04 hereof) of the type set forth in subparagraph
(b)(ii) of this Section 2.06 provided that, following prior notice to Lender
(i) Borrower is contesting the validity of such lien with due diligence and in
good faith and by appropriate proceedings, without cost or expense to Lender or
any of its agents, employees, officers, or directors, (ii) Borrower shall
preclude the collection of, or other realization upon, any contested amount from
the Property or any revenues from or interest in the Property, (iii) neither the
Property nor any part thereof nor interest therein, shall be in any danger of
being sold, forfeited or lost by reason of such contest by Borrower, (iv) such
contest by Borrower shall not affect the ownership, use or occupancy of the
Property, (v) such contest by Borrower shall not subject Lender, Trustee or
Borrower to the risk of civil or criminal liability (other than the civil
liability of Borrower for the amount of the lien in question), (vi) such lien is
subordinate to the lien of this Security Instrument, (vii) Borrower has not
consented to such lien, (viii) Borrower has given Lender prompt notice of the
filing of such lien and the bonding thereof by Borrower and, upon request by
Lender from time to time, notice of the status of such contest by Borrower
and/or confirmation of the continuing satisfaction of the conditions set forth
in this Section 2.06(c), (ix) Borrower shall promptly pay the obligation secured
by such lien upon a final determination of Borrower’s liability therefor, and
(x) Borrower shall deliver to Lender cash, a bond or other security acceptable
to Lender equal to 125% of the contested amount pursuant to collateral
arrangements reasonably satisfactory to Lender.
     Section 2.07. Cost of Defending and Upholding this Security Instrument
Lien. If any action or proceeding is commenced to which Lender or Trustee is
made a party relating to the Loan Documents and/or the Property or Lender’s or
Trustee’s interest therein or in which it becomes necessary to defend or uphold
the lien of this Security Instrument or any other Loan Document, Borrower shall,
on written demand, reimburse Lender and/or Trustee, as applicable, for all
expenses (including, without limitation, reasonable attorneys’ fees and
disbursements) incurred by Lender and/or Trustee, as applicable, in connection
therewith, and such sum, together with interest thereon at the Default Rate from
and after such demand until fully paid, shall constitute a part of the Debt.
     Section 2.08. Use of the Property. Borrower will use, or cause to be used,
the Property for such use as is permitted pursuant to the Ground Lease and
applicable Legal Requirements

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including, without limitation, under the certificate of occupancy applicable to
the Property, and which is required by the Loan Documents. Borrower shall not
suffer or permit the Property or any portion thereof to be used by the public,
any tenant, or any Person not subject to a Lease, in a manner as is reasonably
likely to impair Borrower’s title to the Property, or in such manner as may give
rise to a claim or claims of adverse usage or adverse possession by the public,
or of implied dedication of the Property or any part thereof.
     Section 2.09. Financial Reports. (a) Borrower will keep and maintain or
will cause to be kept and maintained on a Fiscal Year basis, in accordance with
GAAP and The Uniform System of Accounts (or such other accounting basis
reasonably acceptable to Lender) consistently applied, proper and accurate
books, tax returns, records and accounts reflecting (i) all of the financial
affairs of Borrower and Guarantor and (ii) all items of income and expense in
connection with the operation of the Property or in connection with any
services, equipment or furnishings provided in connection with the operation
thereof, whether such income or expense may be realized by Borrower or by any
other Person whatsoever, excepting lessees unrelated to and unaffiliated with
Borrower who have leased from Borrower portions of the Premises for the purpose
of occupying the same. Lender shall have the right from time to time at all
times during normal business hours upon reasonable notice to examine such books,
tax returns, records and accounts at the office of Borrower or other Person
maintaining such books, tax returns, records and accounts and to make such
copies or extracts thereof as Lender shall desire, provided that (i) Borrower
shall have a right to have a representative present at all times and (ii) Lender
shall do so in a manner so as to avoid disruption to the operation of the Hotel
or to Manager’s management thereof. After the occurrence and during the
continuation of an Event of Default, Borrower shall pay any reasonable costs and
expenses incurred by Lender to examine Borrower’s and Guarantor’s accounting
records with respect to the Property, as Lender shall determine to be necessary
or appropriate in the protection of Lender’s interest.
     (b) Borrower will furnish Lender (i) annually, within one hundred twenty
(120) days following the end of each Fiscal Year of Borrower and Guarantor and
(ii) on a quarterly basis, within forty-five (45) days following the end of each
fiscal quarter of Borrower, with a complete copy of Borrower’s financial
statement consistently applied covering (i) all of the financial affairs of
Borrower and Guarantor, as applicable, and (ii) the operation of the Property
for such Fiscal Year or fiscal quarters, as applicable, and containing a
statement of revenues and expenses, a statement of assets and liabilities and a
statement of Borrower’s equity. Each annual financial statement of Guarantor
shall be audited by an Independent certified public accountant that is
reasonably acceptable to Lender in accordance with GAAP and The Uniform System
of Accounts (or such other accounting basis reasonably acceptable to Lender).
Together with the financial statements required to be furnished pursuant to this
Section 2.09(b), Borrower shall furnish to Lender (A) an Officer’s Certificate
certifying as of the date thereof (1) that the financial statements accurately
represent the results of operations and financial condition of Borrower,
Guarantor, if applicable, and the Property all in accordance with GAAP and The
Uniform System of Accounts (or such other accounting basis reasonably acceptable
to Lender) consistently applied, provided that Lender acknowledges that
Borrower’s quarterly financial statements do not include any footnote
disclosures, and (2) whether there exists a Default under the Note or any other
Loan Document executed and delivered by Borrower, and if such event or
circumstance exists, the nature thereof, the period of time it has existed and
the action then being taken to remedy such event or circumstance and (B) upon
request of Lender with the financial

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statements delivered pursuant to Section 2.09(b)(ii) above, a statement showing
(1) the Adjusted Net Income (subject to verification by Lender in its reasonable
discretion) and (2) the calculation of the Debt Service Coverage.
     (c) When requested by Lender, Borrower will furnish Lender monthly, within
thirty (30) days following the end of each month, with a true, complete and
correct income and expense statement with respect to the Property in the form
attached hereto as Exhibit C and made a part hereof calculated on an accrual
basis, showing (i) all income and expenses with respect to the Property and
(ii) year-to-date summaries of such cash receipts, payments and disbursements,
together with a certification of Borrower stating that such income and expense
statement is true, complete and correct in all material respects and a list of
all litigation and proceedings affecting Borrower or the Property in which the
amount involved is $500,000 or more, if not covered by insurance (or $1,000,000
or more whether or not covered by insurance). Lender hereby agrees and
acknowledges that the form of cash flow statement used by Borrower as of the
Closing Date and attached as Exhibit C shall be satisfactory to Lender which
Lender agrees and acknowledges may not be in accordance with GAAP.
     (d) Intentionally Omitted.
     (e) Borrower will furnish Lender annually, to the extent not included in
any other annual report delivered by Borrower to Lender within twenty (20) days
following the end of each year and within twenty (20) days following receipt of
such request therefor, with a true, complete and correct rent roll for the
Property, including a list of which tenants are in default under their
respective Leases, dated as of the date of Lender’s request, identifying each
tenant, the monthly rent and additional rent, if any, payable by such tenant,
the expiration date of such tenant’s Lease, the security deposit, if any, held
by Borrower under the Lease, the space covered by the Lease, each tenant that
has filed a bankruptcy, insolvency, or reorganization proceeding since delivery
of the last such rent roll, and the arrearages for such tenant, if any, and, if
requested by Lender, a summary of the material terms of the Leases, including,
without limitation, the dates of occupancy, the dates of expiration, any Rent
concessions, work obligations or other inducements granted to the tenants
thereunder, and any renewal options, and such rent roll shall be accompanied by
an Officer’s Certificate, dated as of the date of the delivery of such rent
roll, certifying that such rent roll is true, correct and complete in all
material respects as of its date.
     (f) Borrower shall furnish to Lender, within thirty (30) days after
Lender’s request therefor, with such further detailed information with respect
to the operation of the Property and the financial affairs of Borrower as may be
reasonably requested by Lender.
     (g) To the extent any security deposits with respect to the Space Leases is
then held by Manager or Borrower, Borrower shall cause Manager to furnish to
Lender, within thirty (30) days following the end of each year and within thirty
(30) days of Lender’s request, provided that Lender may not make more than two
(2) requests per year unless an Event of Default exists, in which event no such
limit shall apply, a schedule of tenant security deposits for such month,
together with a statement of Manager as to the amount of any security deposits
and that such tenant security deposits are being held in accordance with all
Legal Requirements.

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     (h) Borrower will furnish Lender annually, within one hundred twenty
(120) days after the end of each Fiscal Year, with a report setting forth
(i) the Net Operating Income for such Fiscal Year, (ii) the average occupancy
rate of the Property during such Fiscal Year, (iii) the capital repairs,
replacements and improvements performed at the Property during such Fiscal Year
and the aggregate Recurring Replacement Expenditures made in connection
therewith, and (iv) the balance contained in each of the Escrow Accounts as of
the end of such Fiscal Year (which balance Lender shall provide upon Borrower’s
written request therefor).
     (i) Intentionally Omitted.
     (j) Borrower will furnish Lender monthly, within thirty (30) days following
the end of each month, or with respect to STR Reports, within sixty (60) days
following the end of each month, an occupancy summary for the Property setting
forth the occupancy rates, average daily room rates, RevPAR Yield Index (to the
extent available), RevPAR (to the extent available) and room revenues for each
month of the preceding calendar year, as well as annual averages of the same,
and, if requested by Lender, advance booking information (excluding customer
names) and such other information as may customarily be reflected thereon or
reasonably requested by Lender, together with all franchise inspection reports
and STR Reports received by Borrower during the preceding month.
     (k) Borrower shall and shall cause Guarantor to furnish to Lender annually,
within ninety (90) days after the end of each Fiscal Year, a statement of net
worth of the Guarantor.
     (l) Borrower shall submit to Lender an Annual Budget not later than thirty
(30) days prior to the commencement of each Fiscal Year or, with respect to the
Fiscal Year in which the Closing Date occurs, within sixty (60) days of the
Closing Date, in form reasonably satisfactory to Lender setting forth in
reasonable detail budgeted monthly operating income and monthly operating
capital and other expenses for the Property. Each Annual Budget shall contain,
among other things, management fees, third party service fees, and other
expenses as Borrower may reasonably determine.
     (m) In the event that Borrower fails to deliver any of the financial
statements, reports or other information required to be delivered to Lender
pursuant to this Section 2.09 on or prior to their due dates, if any such
failure shall continue for ten (10) days following notice thereof from Lender,
Borrower shall pay to Lender an administrative fee in the amount of One Thousand
Dollars ($1,000) for each due date with respect to which such a failure occurs
(and not on a per-item basis). Borrower agrees that such administrative fee
(i) is a fair and reasonable fee necessary to compensate Lender for its
additional administrative costs and increased costs relating to Borrower’s
failure to deliver the aforementioned statements, reports or other items as and
when required hereunder and (ii) is not a penalty.
     Section 2.10. Litigation. Borrower will give prompt written notice to
Lender of any litigation or governmental proceedings pending or threatened (in
writing) against Borrower which could reasonably have a Material Adverse Effect.
     Section 2.11. Updates of Representations. Borrower shall deliver to Lender
within ten (10) Business Days of the request of Lender an Officer’s Certificate
updating all of the

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representations and warranties contained in this Security Instrument and the
other Loan Documents and certifying that all of the representations and
warranties contained in this Security Instrument and the other Loan Documents,
as updated pursuant to such Officer’s Certificate, are true, accurate and
complete as of the date of such Officer’s Certificate or shall set forth the
exceptions to representations and/or warranties in reasonable detail, as
applicable, and, upon Lender’s request for further information with respect to
such exceptions, shall provide Lender such additional information as Lender may
reasonably request. Notwithstanding the foregoing, provided that no Event of
Default has occurred and is continuing, Borrower shall not be required to
deliver the foregoing Officer’s Certificate more than three (3) times during the
term of the Loan and, subsequent to a Securitization, in no event more than one
(1) time in any calendar year.
     Section 2.12. Ground Lease. (a) Borrower will comply in all material
respects with the terms and conditions of the Ground Lease. Borrower will not do
or permit anything to be done, the doing of which, or refrain from doing
anything, the omission of which, will impair or tend to impair the security of
the Premises under the Ground Lease or will be grounds for declaring a
forfeiture of the Ground Lease.
     (b) Borrower shall enforce the Ground Lease and will not terminate, modify,
cancel, change, supplement, alter or amend the Ground Lease, or waive, excuse,
condone or in any way release or discharge Ground Lessor of or from any of the
material covenants and conditions to be performed or observed by Ground Lessor.
Borrower does hereby bargain, sell, assign and set over to Lender, all of
Borrower’s interests in the Ground Lease. The assignment of Borrower’s interest
set forth in this Section 2.12(b) is an absolute, unconditional and present
assignment from Borrower to Lender and not an assignment for security and the
existence or exercise of Borrower’s revocable license to take all actions with
respect to the Ground Lease shall not operate to subordinate this assignment to
any subsequent assignment. The exercise by Lender of any of its rights or
remedies pursuant to this Section 2.12(b) shall not be deemed to make Lender a
mortgagee-in-possession. So long as there is no existing or continuing Event of
Default, Borrower shall have a revocable license to take all actions with
respect to the Ground Lease subject to the terms of this Security Instrument.
Any surrender of the leasehold estate created by the Ground Lease or
termination, cancellation, modification, change, supplement, alteration or
amendment of the Ground Lease without the prior written consent of Lender shall
be void and of no force and effect.
     (c) Lender shall have the right, but not the obligation, to perform any
obligations of Borrower under the terms of the Ground Lease during the
continuance of an Event of Default. All costs and expenses (including, without
limitation, reasonable attorneys’ fees and expenses) so incurred, shall be
treated as an advance secured by this Security Instrument, shall bear interest
thereon at the Default Rate from the date of payment by Lender until paid in
full and shall be paid by Borrower to Lender during the continuance of an Event
of Default within five (5) Business Days after demand. No performance by Lender
of any obligations of Borrower shall constitute a waiver of any Event of Default
arising by reason of Borrower’s failure to perform the same. If Lender shall
make any payment or perform any act or take action in accordance with this
Section 2.12(c), Lender will notify Borrower of the making of any such payment,
the performance of any such act, or the taking of any such action. In any such
event, subject to the rights of lessees, sublessees and other occupants under
the Leases, Lender and any Person

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designated by Lender shall have, and are hereby granted, the right to enter upon
the Property at any time and from time to time for the purpose of taking any
such action.
     (d) To the extent permitted by law, the price payable by Borrower or any
other Person in the exercise of any right of redemption following foreclosure of
the Property shall include all rents paid and other sums advanced by Lender on
behalf of Borrower, together with interest thereon at the Default Rate.
     (e) Unless Lender shall otherwise consent, the fee title and the leasehold
estate in the Premises shall not merge but shall always be kept separate and
distinct, notwithstanding the union of said estates either in Ground Lessor or
in Borrower, or in a third party, by purchase or otherwise.
     (f) If the Ground Lessor shall deliver to Lender a copy of any notice of
default sent by the Ground Lessor to Borrower, as tenant under the Ground Lease,
such notice shall constitute full protection to Lender for any action taken or
omitted to be taken by Lender, in good faith in accordance with this Security
Instrument, in reliance thereon.
     (g) Borrower shall exercise each individual option, if any, to extend or
renew the term of the Ground Lease not less than thirty (30) days prior to the
last day upon which any such option may be exercised (and in all events within
five (5) days after demand by Lender made at any time within one (1) year of the
last day upon which any such option may be exercised), and Borrower hereby
expressly authorizes and appoints Lender its attorney-in-fact to exercise any
such option in the name of and upon behalf of Borrower to so exercise such
option if Borrower fails to exercise as herein required, which power of attorney
shall be irrevocable and shall be deemed to be coupled with an interest.
Borrower shall give Lender notice of Borrower’s exercise of any such option to
extend or renew the term of the Ground Lease within five (5) days of the
exercise of any such option.
     (h) Each Space Lease hereafter made and each renewal of any existing Space
Lease shall provide that, in the event of any action for the foreclosure of this
Security Instrument, such Space Lease shall not terminate or be terminable by
the lessee by reason of the termination of the Ground Lease unless the lessee is
specifically named and joined in any such action and unless a judgment is
obtained therein against the lessee.
     (i) Borrower hereby assigns, transfers and sets over to Lender all of
Borrower’s claims and rights to the payment of damages arising from any
rejection by the Ground Lessor of the Ground Lease under the Bankruptcy Code.
Borrower shall notify Lender promptly (and in any event within ten (10) days) of
any claim, suit, action or proceeding relating to the rejection of the Ground
Lease. Lender is hereby irrevocably appointed as Borrower’s attorney-in-fact,
coupled with an interest, with exclusive power to file and prosecute, to the
exclusion of Borrower, any proofs of claim, complaints, motions, applications,
notices and other documents, in any case in respect of the Ground Lessor under
the Bankruptcy Code during the continuance of an Event of Default. Borrower may
make any compromise or settlement in connection with such proceedings (subject
to Lender’s reasonable approval); provided, however, that Lender shall be
authorized and entitled to compromise or settle any such proceeding if such
compromise or settlement is made after the occurrence and during the continuance
of an Event of Default.

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Borrower shall promptly execute and deliver to Lender any and all instruments
reasonably required in connection with any such proceeding after request
therefor by Lender. Except as set forth above, Borrower shall not adjust,
compromise, settle or enter into any agreement with respect to such proceedings
without the prior written consent of Lender, which consent shall not be
unreasonably withheld or delayed.
     (j) Borrower shall not, without Lender’s prior written consent, elect to
treat the Ground Lease as terminated under Section 365(h)(1) of the Bankruptcy
Code. Any such election made without Lender’s prior written consent shall be
void.
     (k) If pursuant to Section 365(h)(2) of the Bankruptcy Code, Borrower seeks
to offset against the rent reserved in the Ground Lease the amount of any
damages caused by the non-performance by the Ground Lessor of any of the Ground
Lessor’s obligations under the Ground Lease after the rejection by the Ground
Lessor of the Ground Lease under the Bankruptcy Code, Borrower shall, prior to
effecting such offset, notify Lender of its intention to do so, setting forth
the amounts proposed to be so offset and the basis therefor. If Lender has
failed to object as aforesaid within ten (10) days after notice from Borrower in
accordance with the first sentence of this Section 2.12(k), Borrower may proceed
to effect such offset in the amounts set forth in Borrower’s notice. Neither
Lender’s failure to object as aforesaid nor any objection or other communication
between Lender and Borrower relating to such offset shall constitute an approval
of any such offset by Lender. Borrower shall indemnify and save Lender harmless
from and against any and all claims, demands, actions, suits, proceedings,
damages, losses, costs and expenses of every nature whatsoever (including,
without limitation, reasonable attorneys’ fees and disbursements) arising from
or relating to any such offset by Borrower against the rent reserved in the
Ground Lease.
     (l) Borrower shall immediately, after obtaining knowledge thereof, notify
Lender of any filing by or against the Ground Lessor of a petition under the
Bankruptcy Code. Borrower shall thereafter forthwith give written notice of such
filing to Lender, setting forth any information available to Borrower as to the
date of such filing, the court in which such petition was filed, and the relief
sought therein. Borrower shall promptly deliver to Lender following receipt any
and all notices, summonses, pleadings, applications and other documents received
by Borrower in connection with any such petition and any proceedings relating
thereto.
     (m) If there shall be filed by or against Borrower a petition under the
Bankruptcy Code, and Borrower, as the tenant under the Ground Lease, shall
determine to reject the Ground Lease pursuant to Section 365(a) of the
Bankruptcy Code, then Borrower shall give Lender not less than ten (10) days
prior notice of the date on which Borrower shall apply to the bankruptcy court
for authority to reject the Ground Lease. Lender shall have the right, but not
the obligation, to serve upon Borrower within such 10-day period a notice
stating that (i) Lender demands that Borrower assume and assign the Ground Lease
to Lender pursuant to Section 365 of the Bankruptcy Code and (ii) Lender
covenants to cure or provide adequate assurance of prompt cure of all defaults
and provide adequate assurance of future performance under the Ground Lease. If
Lender serves upon Borrower the notice described in the preceding sentence,
Borrower shall not seek to reject the Ground Lease and shall comply with the
demand provided for in clause (i) of the preceding sentence within thirty
(30) days after the notice shall have been given,

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subject to the performance by Lender of the covenant provided for in clause
(ii) of the preceding sentence.
     (n) Effective upon the entry of an order for relief in respect of Borrower
under the Bankruptcy Code, Borrower hereby assigns and transfers to Lender a
non-exclusive right to apply to the appropriate bankruptcy court under
Section 365(d)(4) of the Bankruptcy Code for an order extending the period
during which the Ground Lease may be rejected or assumed.
     (o) Borrower will give Lender prompt (and in all events within five
(5) Business Days) notice of any default under the Ground Lease or of the
receipt by Borrower of any notice of default from Ground Lessor. Borrower will
promptly (and in all events within (5) Business Days) furnish to Lender copies
of all information furnished to Ground Lessor by the terms of the Ground Lease
or the provisions of this Section 2.12. Borrower will deposit with Lender an
exact copy of any notice, communication, plan, specification or other instrument
or document received or given by Borrower in any way relating to or affecting
the Ground Lease which may concern or affect the estate of Ground Lessor or
Borrower thereunder in or under the Ground Lease or in the real estate thereby
demised.
     (p) Upon acquisition of the fee title or any other estate, title or
interest in the Premises by Borrower, this Security Instrument shall,
automatically and without the necessity of execution of any other documents,
attach to and cover and be a lien upon such other estate so acquired, and such
other estate shall be considered as mortgaged, assigned and conveyed to Lender
and the lien hereof spread to cover such estate with the same force and effect
as though specifically herein mortgaged, assigned and conveyed. The provisions
of this subsection shall not apply if Lender acquires title to the Premises
unless Lender shall so elect.
ARTICLE III: INSURANCE AND CASUALTY RESTORATION
     Section 3.01. Insurance Coverage. Borrower shall, at its expense, maintain
the following insurance coverages with respect to the Property during the term
of this Security Instrument:
     (a) (i) Insurance against loss or damage by fire, casualty and other
hazards included in an “all-risk” coverage endorsement or its equivalent (which,
in the case of insurance during the time of any construction work
(“Construction”) shall be in “builder’s risk completed value non-reporting form”
together with rents, earnings and extra expense insurance covering loss due to
delay in completion of the Improvements), with such endorsements as Lender may
from time to time reasonably require and which are customarily required by
Institutional Lenders of similar properties similarly situated, including,
without limitation, if the Property constitutes a legal non-conforming use, an
ordinance of law coverage endorsement which contains “Demolition Cost”, “Loss
Due to Operation of Law” and “Increased Cost of Construction” coverages,
covering the Property in an amount not less than the greater of (A) 100% of the
insurable replacement value of the Property (exclusive of the Premises and
footings and foundations) and (B) such other amount as is necessary to prevent
any reduction in such policy by reason of and to prevent Borrower, Lender or any
other insured thereunder from being deemed to be a co-insurer. Not less
frequently than once every three (3) years, Borrower, at its option, shall
either (A) have the Appraisal updated or obtain a new appraisal of the

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Property, (B) have a valuation of the Property made by or for its insurance
carrier conducted by an appraiser experienced in valuing properties of similar
type to that of the Property which are in the geographical area in which the
Property is located or (C) provide such other evidence as will, in Lender’s sole
judgment, enable Lender to determine whether there shall have been an increase
in the insurable value of the Property and Borrower shall deliver such updated
Appraisal, new appraisal, insurance valuation or other evidence acceptable to
Lender, as the case may be, and, if such updated Appraisal, new appraisal,
insurance valuation, or other evidence acceptable to Lender reflects an increase
in the insurable value of the Property, the amount of insurance required
hereunder shall be increased accordingly and Borrower shall deliver evidence
satisfactory to Lender that such policy has been so increased.
     (ii) Commercial general liability insurance against claims for personal and
bodily injury and/or death to one or more persons or property damage, occurring
on, in or about the Property (including the adjoining streets, sidewalks and
passageways therein) in such amounts as Lender may from time to time reasonably
require (but in no event shall Lender’s requirements be increased more
frequently than once during each twelve (12) month period) and which are
customarily required by Institutional Lenders for similar properties similarly
situated, but not less than $1,000,000 per occurrence and $2,000,000 general
aggregate on a per location basis and, in addition thereto, not less than
$25,000,000 excess and/or umbrella liability insurance shall be maintained for
any and all claims.
     (iii) Business interruption, rent loss or other similar insurance with an
unlimited restoration period (A) with loss payable to Lender, (B) covering all
risks required to be covered by the insurance provided for in Section 3.01(a)(i)
hereof and (C) in an amount not less than 100% of the projected total revenues
derived from the Property for the succeeding eighteen (18) month period based on
an occupancy rate taking into account historical and projected occupancy. The
amount of such insurance shall be determined upon the execution of this Security
Instrument, and not more frequently than once each calendar year thereafter
based on Borrower’s reasonable estimate of projected total revenues derived from
the Property for the next succeeding eighteen (18) months together with an
eighteen (18) month extended period of indemnity. In the event the Property
shall be damaged or destroyed, Borrower shall and hereby does assign to Lender
all payment of claims under the policies of such insurance, and all amounts
payable thereunder, and all net amounts, shall be collected by Lender under such
policies and shall be applied in accordance with this Security Instrument;
provided, however, that nothing herein contained shall be deemed to relieve
Borrower of its obligations to timely pay all amounts due under the Loan
Documents.
     (iv) Intentionally omitted.
     (v) Insurance against loss or damages from (A) leakage of sprinkler systems
and (B) explosion of steam boilers, air conditioning equipment, pressure vessels
or similar apparatus now or hereafter installed at the Property, in such amounts
as Lender may from time to time reasonably require and which are then
customarily required by

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Institutional Lenders of similar properties similarly situated, but in no event
less than $25,000,000.
     (vi) Flood insurance in an amount equal to the full insurable value of the
Property or the maximum amount available, whichever is less, if the Improvements
are located in an area designated by the Secretary of Housing and Urban
Development as being “an area of special flood hazard” under the National Flood
Insurance Program (i.e., having a one percent or greater chance of flooding),
and if flood insurance is available under the National Flood Insurance Act.
     (vii) Worker’s compensation insurance or other similar insurance which may
be required by Governmental Authorities or Legal Requirements.
     (viii) Insurance against loss resulting from mold, spores or fungus on or
about the Premises to the extent maintained as of the Closing Date.
     (ix) (A) During any period of the term of the Loan that the Terrorism Risk
Insurance Extension Act of 2005 (“TRIA”) is in effect in substantially the same
form as its current form, if “acts of terrorism” or other similar acts or events
are hereafter excluded from Borrower’s comprehensive all risk insurance policy
(including business interruption, rent loss or similar insurance coverage),
Borrower shall obtain an endorsement to such policy, or a separate policy
insuring against all “certified acts of terrorism” as defined by TRIA and “fire
following”, each in an amount equal to one hundred percent (100%) of the “Full
Replacement Cost,” which for purposes of the Security Instrument shall mean
actual replacement value (exclusive of the Premises, footings and foundations)
with a waiver of depreciation; and
          (B) during any period of the term of the Loan that TRIA is not in
effect, if “acts of terrorism” or other similar acts or events or “fire
following” are hereafter excluded from Borrower’s comprehensive all risk
insurance policy or business interruption insurance coverage, Borrower shall
obtain an endorsement to such policy, or a separate policy insuring against all
such excluded acts or events, to the extent such policy or endorsement is
available, in an amount determined by Lender in its sole discretion (but in no
event greater than the total insurable value plus required business
interruption, rent loss or similar coverage); provided, however, Borrower shall
not be required to pay annual premiums for the insurance required pursuant to
this Section 3.01(a)(ix) in excess of three (3) times the premium as of the
Closing Date for the insurance required pursuant to this Section 3.01(a)(ix) for
such coverage.
     (x) At all times during Construction, contractor’s liability insurance to a
limit of not less than $25,000,000 on a per occurrence basis covering each
contractor’s construction operation at the Premises.
     (xi) Such other insurance as may from time to time be required by Lender
and which is then customarily required by Institutional Lenders for similar
properties similarly situated, against other insurable hazards, including, but
not limited to, war risk, malicious mischief, vandalism, sinkhole and mine
subsidence, earthquake (in an amount

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equal to the probable maximum loss multiplied by the insurable replacement value
of the Property (exclusive of the Premises and footings and foundations)) and/or
windstorm, due regard to be given to the size and type of the Premises,
Improvements, Fixtures and Equipment and their location, construction and use.
     (xii) If Borrower, any of its Affiliates or Manager holds a liquor license
for the Premises, liquor liability insurance in the amount of no less than
$10,000,000.
     (xiii) Automobile liability insurance covering owned, hired and not owned
vehicles in an amount of not less than $1,000,000 per accident.
     (b) Notwithstanding anything set forth herein, Lender hereby acknowledges
that the insurance coverage maintained by Borrower is, as of the Closing Date,
acceptable to Lender and shall, as of the Closing Date, be deemed to comply with
the provisions hereof.
     (c) Borrower shall cause any Manager of the Property to maintain fidelity
insurance in an amount equal to Five Hundred Thousand Dollars ($500,000).
     Section 3.02. Policy Terms. (a) All insurance required by this Article III
shall be in the form (other than with respect to Sections 3.01(a)(vi) and
(vii) above when insurance in those two sub-sections is placed with a
governmental agency or instrumentality on such agency’s forms) and amount and
with deductibles as, from time to time, shall be reasonably acceptable to
Lender, under valid and enforceable policies issued by financially responsible
insurers authorized to do business in the State where the Property is located,
with a general policyholder’s service rating of not less than A and a financial
rating of not less than XIII as rated in the most currently available Best’s
Insurance Reports (or the equivalent, if such rating system shall hereafter be
altered or replaced) and shall have a claims paying ability rating and/or
financial strength rating, as applicable, of not less than “AA” (or its
equivalent), or such lower claims paying ability rating and/or financial
strength rating, as applicable, as Lender shall, in its sole and absolute
discretion, consent to, from a Rating Agency (one of which after a
Securitization in which Standard & Poor’s rates any securities issued in
connection with such Securitization, shall be Standard & Poor’s). Originals or
certified copies of all insurance policies shall be delivered to and held by
Lender. All such policies (except policies for worker’s compensation) shall name
Lender, its successors and/or assigns as an additional named insured, with
respect to the insurance required pursuant to Section 3.01(a)(iii) above, shall
provide for loss payable to Lender, its successors and/or assigns and shall
contain (or have attached): (i) standard “non-contributory mortgagee”
endorsement or its equivalent relating, inter alia, to recovery by Lender
notwithstanding the negligent or willful acts or omissions of Borrower; (ii) a
waiver of subrogation endorsement as to Lender; (iii) an endorsement indicating
that neither Lender nor Borrower shall be or be deemed to be a co-insurer with
respect to any casualty risk insured by such policies and shall provide for a
deductible per loss of an amount not more than $10,000, and (iv) a provision
that such policies shall not be canceled, terminated, denied renewal or amended,
including, without limitation, any amendment reducing the scope or limits of
coverage, without at least thirty (30) days’ prior written notice to Lender in
each instance. Not less than thirty (30) days, or, with respect to non-payment
of premiums, ten (10) days, prior to the expiration dates of the insurance
policies obtained pursuant to this Security Instrument, originals or certified
copies of renewals of such policies (or certificates evidencing such renewals)
bearing notations evidencing the payment of

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premiums or accompanied by other reasonable evidence of such payment (which
premiums shall not be paid by Borrower through or by any financing arrangement
which would entitle an insurer to terminate a policy unless Borrower has on
deposit in the Basic Carrying Costs Escrow Account an amount, as reasonably
determined by Lender, equal to not less than one-fourth of the annual insurance
premium with respect to the insurance required by this Article III) shall be
delivered by Borrower to Lender. Borrower shall not carry separate insurance,
concurrent in kind or form or contributing in the event of loss, with any
insurance required under this Article III.
     (b) If Borrower fails to maintain and deliver to Lender the original
policies or certificates of insurance required by this Security Instrument, or
if there are insufficient funds in the Basic Carrying Costs Escrow Account to
pay the premiums for same, Lender may, at its option, following five (5) days
written notice to Borrower, procure such insurance, and Borrower shall pay, or
as the case may be, reimburse Lender for, all premiums thereon promptly, upon
demand by Lender, with interest thereon at the Default Rate from the date paid
by Lender to the date of repayment and such sum shall constitute a part of the
Debt.
     (c) Borrower shall notify Lender of the renewal premium of each insurance
policy and, if an Event of Default has occurred and is then continuing, Lender
shall be entitled to pay such amount on behalf of Borrower from the Basic
Carrying Costs Escrow Account.
     (d) The insurance required by this Security Instrument may, at the option
of Borrower, be effected by blanket and/or umbrella policies issued to Borrower
covering the Property provided that, in each case, the policies otherwise comply
with the provisions of this Security Instrument and allocate to the Property,
from time to time (but in no event less than once a year), the coverage
specified by this Security Instrument, without possibility of reduction or
coinsurance by reason of, or damage to, any other property (real or personal)
named therein. If the insurance required by this Security Instrument shall be
effected by any such blanket or umbrella policies, Borrower shall furnish to
Lender (i) original policies or certified copies thereof, or an original
certificate of insurance together with reasonable access to the original of such
policy to review such policy’s coverage of the Property, with schedules attached
thereto showing the amount of the insurance provided under such policies
applicable to the Property and (ii) an Officer’s Certificate setting forth
(A) the number of properties covered by such policy, (B) the location by city
(if available, otherwise, county) and state of the properties, (C) the average
square footage of the properties, (D) a brief description of the typical
construction type included in the blanket policy and (E) such other information
as Lender may reasonably request.
     Section 3.03. Assignment of Policies. (a) Borrower hereby assigns to Lender
the proceeds of all insurance (other than worker’s compensation and liability
insurance) obtained pursuant to this Security Instrument, all of which proceeds
shall be payable to Lender as collateral and further security for the payment of
the Debt and the performance of Borrower’s obligations hereunder and under the
other Loan Documents, and Borrower hereby authorizes and directs the issuer of
any such insurance to make payment of such proceeds directly to Lender. Except
as otherwise expressly provided in Section 3.04 or elsewhere in this
Article III, Lender shall have the option, in its discretion, and without regard
to the adequacy of its security, to apply all or any part of the proceeds it may
receive pursuant to this Article in such manner as Lender may elect to any one
or more of the following: (i) the payment of the Debt, whether or not then

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due, in any proportion or priority as Lender, in its discretion, may elect,
(ii) the repair or restoration of the Property, (iii) the cure of any Default or
(iv) the reimbursement of the costs and expenses of Lender incurred pursuant to
the terms hereof in connection with the recovery of the Insurance Proceeds.
Nothing herein contained shall be deemed to excuse Borrower from repairing or
maintaining the Property as provided in this Security Instrument or restoring
all damage or destruction to the Property, regardless of the sufficiency of the
Insurance Proceeds, and the application or release by Lender of any Insurance
Proceeds shall not cure or waive any Default or notice of Default.
     (b) In the event of the foreclosure of this Security Instrument or any
other transfer of title or assignment of all or any part of the Property in
extinguishment, in whole or in part, of the Debt, all right, title and interest
of Borrower in and to all policies of insurance required by this Security
Instrument shall inure to the benefit of the successor in interest to Borrower
or the purchaser of the Property. If, prior to the receipt by Lender of any
proceeds, the Property or any portion thereof shall have been sold on
foreclosure of this Security Instrument or by deed in lieu thereof or otherwise,
or any claim under such insurance policy arising during the term of this
Security Instrument is not paid until after the extinguishment of the Debt, and
Lender shall not have received the entire amount of the Debt outstanding at the
time of such extinguishment, whether or not a deficiency judgment on this
Security Instrument shall have been sought or recovered or denied, then, the
proceeds of any such insurance to the extent of the amount of the Debt not so
received, shall be paid to and be the property of Lender, together with interest
thereon at the Default Rate, and the reasonable attorney’s fees, costs and
disbursements incurred by Lender in connection with the collection of the
proceeds which shall be paid to Lender and Borrower hereby assigns, transfers
and sets over to Lender all of Borrower’s right, title and interest in and to
such proceeds. Notwithstanding any provisions of this Security Instrument to the
contrary, Lender shall not be deemed to be a trustee or other fiduciary with
respect to its receipt of any such proceeds, which may be commingled with any
other monies of Lender; provided, however, that Lender shall use such proceeds
for the purposes and in the manner permitted by this Security Instrument. Any
proceeds deposited with Lender shall be held by Lender in an interest-bearing
account, but Lender makes no representation or warranty as to the rate or amount
of interest, if any, which may accrue on such deposit and shall have no
liability in connection therewith. Interest accrued, if any, on the proceeds
shall be deemed to constitute a part of the proceeds for purposes of this
Security Instrument. The provisions of this Section 3.03(b) shall survive the
termination of this Security Instrument by foreclosure, deed in lieu thereof or
otherwise as a consequence of the exercise of the rights and remedies of Lender
hereunder after a Default.
     Section 3.04. Casualty Restoration. (a) (i) In the event of any damage to
or destruction of the Property, Borrower shall give prompt written notice to
Lender (which notice shall set forth Borrower’s good faith estimate of the cost
of repairing or restoring such damage or destruction, or if Borrower cannot
reasonably estimate the anticipated cost of restoration, Borrower shall
nonetheless give Lender prompt notice of the occurrence of such damage or
destruction, and will diligently proceed to obtain estimates to enable Borrower
to quantify the anticipated cost and time required for such restoration,
whereupon Borrower shall promptly notify Lender of such good faith estimate)
and, provided that restoration does not violate any Legal Requirements, Borrower
shall promptly commence and diligently prosecute to completion the repair,
restoration or rebuilding of the Property so damaged or destroyed to a condition
such that the Property shall

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be at least equal in value to that immediately prior to the damage to the extent
practicable, in full compliance with all Legal Requirements and the provisions
of all Leases, and in accordance with Section 3.04(b) below. Such repair,
restoration or rebuilding of the Property are sometimes hereinafter collectively
referred to as the “Work”.
     (ii) Borrower shall not adjust, compromise or settle any claim for
Insurance Proceeds without the prior written consent of Lender, which shall not
be unreasonably withheld or delayed and Lender shall have the right, at
Borrower’s sole cost and expense, to participate in any settlement or adjustment
of Insurance Proceeds; provided, however, that, except during the continuance of
an Event of Default, Lender’s consent shall not be required with respect to the
adjustment, compromising or settlement of any claim for Insurance Proceeds in an
amount less than $500,000.
     (iii) Subject to Section 3.04(a)(iv), Lender shall apply any Insurance
Proceeds which it may receive towards the Work in accordance with
Section 3.04(b) and the other applicable sections of this Article III.
     (iv) If (A) an Event of Default shall have occurred and be continuing,
(B) Lender is not reasonably satisfied that the Debt Service Coverage, within
eighteen (18) months after substantial completion of the Work, will be at least
equal to the Required Debt Service Coverage, (C) the cost of restoration exceeds
more than thirty percent (30%) of the reasonably estimated fair market value of
the Property immediately prior to the applicable damage or destruction is
damaged or destroyed, (D) Lender is not reasonably satisfied that the Work can
be completed six (6) months prior to Maturity, or (E) Lender is not reasonably
satisfied that the Work can be completed within fifteen (15) months of the
damage to or destruction of the Property (each, a “Substantial Casualty”),
Lender shall have the option, in its sole discretion to apply any Insurance
Proceeds it may receive pursuant to this Security Instrument (less any cost to
Lender of recovering and paying out such proceeds incurred pursuant to the terms
hereof and not otherwise reimbursed to Lender, including, without limitation,
reasonable attorneys’ fees and expenses) to the payment of the Debt, without any
prepayment fee or charge of any kind, or to allow such proceeds to be used for
the Work pursuant to the terms and subject to the conditions of Section 3.04(b)
hereof and the other applicable sections of this Article III.
     (v) In the event that Lender elects or is obligated hereunder to allow
Insurance Proceeds to be used for the Work, any excess proceeds remaining after
completion of such Work shall be held by Lender as additional collateral for the
Loan and, if the Debt Service Coverage is 1.2:1.0 or greater for two
(2) consecutive calendar quarters at any time subsequent to the completion of
the Work, and a Default does not exist, shall, at the request of Borrower be
disbursed to Borrower.
     (b) If any Condemnation Proceeds in accordance with Section 6.01(a), or any
Insurance Proceeds in accordance with Section 3.04(a), are to be applied to the
repair, restoration or rebuilding of the Property, then such proceeds shall be
deposited into a segregated interest-bearing bank account at the Bank (and the
interest accrued thereon shall accrue to the benefit of Borrower), which shall
be an Eligible Account, held by Lender and shall be paid out from time to time
to Borrower as the Work progresses (less any cost to Lender of recovering and
paying

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out such proceeds, including, without limitation, reasonable attorneys’ fees and
costs allocable to inspecting the Work and the plans and specifications
therefor) subject to Section 5.13 hereof and to all of the following conditions:
     (i) An Independent architect or engineer selected by Borrower and
reasonably acceptable to Lender (an “Architect” or “Engineer”) or a Person
(which Lender acknowledges may be personnel employed by Borrower or an Affiliate
thereof experienced in such matters) otherwise reasonably acceptable to Lender,
shall have delivered to Lender a certificate estimating the cost of completing
the Work, and, if the amount set forth therein is more than the sum of the
amount of Insurance Proceeds then being held by Lender in connection with a
casualty and amounts agreed to be paid as part of a final settlement under the
insurance policy upon or before completion of the Work, Borrower shall have
delivered to Lender (A) cash collateral in an amount equal to such excess,
(B) an unconditional, irrevocable, clean sight draft letter of credit, in form,
substance and issued by a bank reasonably acceptable to Lender, in the amount of
such excess and draws on such letter of credit shall be made by Lender to make
payments pursuant to this Article III following exhaustion of the Insurance
Proceeds therefor, (C) a completion bond in form, substance and issued by a
surety company reasonably acceptable to Lender, or (D) other evidence reasonably
satisfactory to Lender that any such excess shall be provided by Borrower.
     (ii) If the cost of the Work is reasonably estimated by an Architect or
Engineer in a certification reasonably acceptable to Lender to be equal to or
exceed five percent (5%) of the Loan Amount, such Work shall be performed under
the supervision of an Architect or Engineer, it being understood that the plans
and specifications with respect thereto shall provide for Work so that, upon
completion thereof, the Property shall be at least equal in replacement value
and general utility to the Property prior to the damage or destruction.
     (iii) Each request for payment shall be made on not less than ten
(10) days’ prior notice to Lender and shall be accompanied by a certificate of
an Architect or Engineer, or, if the Work is not required to be supervised by an
Architect or Engineer, by an Officer’s Certificate stating (A) that payment is
for Work completed in compliance with the plans and specifications, if required
under clause (ii) above, (B) that the sum requested is required to reimburse
Borrower for payments by Borrower to date, or is due to the contractors,
subcontractors, materialmen, laborers, engineers, architects or other Persons
rendering services or materials for the Work (giving a brief description of such
services and materials), and that when added to all sums previously paid out by
Lender does not exceed the value of the Work done to the date of such
certificate, (C) if the sum requested is to cover payment relating to repair and
restoration of personal property required or relating to the Property, that
title to the personal property items covered by the request for payment is
vested in Borrower (unless Borrower is lessee of such personal property), and
(D) that the Insurance Proceeds and other amounts deposited by Borrower held by
Lender after such payment is more than or equal to the estimated remaining cost
to complete such Work; provided, however, that if such certificate is given by
an Architect or Engineer, such Architect or Engineer shall certify as to clause
(A) above, and such Officer’s Certificate shall certify as to the remaining
clauses above, and provided,

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further, that Lender shall not be obligated to disburse such funds if Lender
determines, in Lender’s reasonable discretion, that Borrower shall not be in
compliance with this Section 3.04(b). Additionally, each request for payment
shall contain a statement signed by Borrower stating that the requested payment
is for Work satisfactorily done to date.
     (iv) Each request for payment shall be accompanied by waivers of lien, in
customary form and substance, covering that part of the Work for which payment
or reimbursement is being requested and, if required by Lender, a search
prepared by a title company or licensed abstractor, or by other evidence
reasonably satisfactory to Lender that there has not been filed with respect to
the Property any mechanic’s or other lien or instrument for retention of title
relating to any part of the Work not discharged of record. Additionally, as to
any personal property covered by the request for payment, Lender shall be
furnished with evidence of Borrower having incurred a payment obligation
therefor and such further evidence reasonably satisfactory to assure Lender that
UCC filings therefor provide a valid first lien on the personal property.
     (v) Lender shall have the right to inspect the Work at all reasonable times
upon reasonable prior notice and may condition any disbursement of Insurance
Proceeds upon satisfactory compliance by Borrower with the provisions hereof.
Neither the approval by Lender of any required plans and specifications for the
Work nor the inspection by Lender of the Work shall make Lender responsible for
the preparation of such plans and specifications, or the compliance of such
plans and specifications of the Work, with any applicable law, regulation,
ordinance, covenant or agreement.
     (vi) Insurance Proceeds shall not be disbursed more frequently than once
every thirty (30) days.
     (vii) Until such time as the Work has been substantially completed, Lender
shall not be obligated to disburse up to ten percent (10%) of the cost of the
Work (the “Retention Amount”) to Borrower. Upon substantial completion of the
Work, Borrower shall send notice thereof to Lender and, subject to the
conditions of Section 3.04(b)(i)-(iv), Lender shall disburse one-half of the
Retention Amount to Borrower; provided, however, that the remaining one-half of
the Retention Amount shall be disbursed to Borrower when Lender shall have
received copies of any and all final certificates of occupancy or other
certificates, licenses and permits required for the ownership, occupancy and
operation of the Property in accordance with all Legal Requirements, if any.
Borrower hereby covenants to diligently, and in a commercially reasonable
fashion, seek to obtain any certificates, licenses and permits required for the
use and occupancy of the Property in accordance with all Legal Requirements.
     (viii) Upon failure on the part of Borrower promptly to commence the Work
or to proceed diligently and continuously to completion of the Work, which
failure shall continue after written notice for thirty (30) days, Lender may
apply any Insurance Proceeds or Condemnation Proceeds it then or thereafter
holds to the payment of the Debt in accordance with the provisions of the Note;
provided, however, that Lender shall be entitled to apply at any time all or any
portion of the Insurance Proceeds or

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Condemnation Proceeds it then holds to the extent necessary to cure any Event of
Default.
     (c) If Borrower (i) within one hundred twenty (120) days after the
occurrence of any damage to the Property or any portion thereof (or such shorter
period as may be required under any Major Space Lease) shall fail to submit to
Lender for approval plans and specifications for the Work (approved by the
Architect and by all Governmental Authorities whose approval is required), (ii)
after any such plans and specifications are approved by all Governmental
Authorities, the Architect and Lender, shall fail to promptly commence such Work
or (iii) shall fail to diligently prosecute such Work to completion, then, in
addition to all other rights available hereunder, at law or in equity, Lender,
or any receiver of the Property or any portion thereof, upon five (5) Business
Days prior notice to Borrower (except in the event of emergency in which case no
notice shall be required), may (but shall have no obligation to) perform or
cause to be performed such Work, and may take such other steps as it reasonably
deems advisable. Borrower hereby waives, for Borrower, any claim, other than for
gross negligence or willful misconduct, against Lender and any receiver arising
out of any act or omission of Lender or such receiver pursuant hereto, and
Lender may apply all or any portion of the Insurance Proceeds (without the need
to fulfill any other requirements of this Section 3.04) to reimburse Lender and
such receiver, for all costs not reimbursed to Lender or such receiver upon
demand together with interest thereon at the Default Rate from the date such
amounts are advanced until the same are paid to Lender or the receiver.
     (d) Borrower hereby irrevocably appoints Lender as its attorney-in-fact,
coupled with an interest, to collect and receive any Insurance Proceeds paid
with respect to any portion of the Property or the insurance policies required
to be maintained hereunder in accordance with the terms hereof, and to endorse
any checks, drafts or other instruments representing any Insurance Proceeds
whether payable by reason of loss thereunder or otherwise.
     (e) Notwithstanding the foregoing provisions of this Section 3.04, upon the
occurrence of any damage to or destruction of the Property, provided that such
damage or destruction is not a Substantial Casualty, if in Lender’s reasonable
judgment the cost of repair of or restoration to the Property required as a
result of any damage or destruction is less than $500,000 in the aggregate and
the Work can be completed in less than one hundred twenty (120) days (but in no
event beyond the date which is six (6) months prior to the Maturity Date), then
Lender, upon request by Borrower, shall permit Borrower to apply for and receive
the Insurance Proceeds directly from the insurer (and Lender shall advise the
insurer to pay over such Insurance Proceeds directly to Borrower), to the extent
required to pay for any such Work, with any excess thereof after completion of
such Work to be delivered to Lender to be held by Lender as additional
collateral for the Loan, and if the Debt Service Coverage is 1.2:1.0 or greater
for two (2) consecutive calendar quarters at any time subsequent to the
completion of the Work, and a Default does not exist, shall at the request of
Borrower be disbursed to Borrower.
     Section 3.05. Compliance with Insurance Requirements. Borrower promptly
shall comply with, and shall cause the Property to comply with, all Insurance
Requirements, even if such compliance requires structural changes or
improvements or would result in interference with the use or enjoyment of the
Property or any portion thereof; provided, however, Borrower shall have a right
to contest in good faith and with diligence such Insurance Requirements

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provided (a) no Event of Default shall exist during such contest and such
contest shall not subject the Property or any portion thereof to any lien or
affect the priority of the lien of this Security Instrument, (b) failure to
comply with such Insurance Requirements will not subject Lender, Trustee or any
of their agents, employees, officers or directors to any civil or criminal
liability, (c) such contest will not cause any reduction in insurance coverage
then existing on the Property, (d) such contest shall not affect the ownership,
use or occupancy of the Property, (e) the Property or any part thereof or any
interest therein shall not be in any danger of being sold, forfeited or lost by
reason of such contest by Borrower, (f) Borrower has given Lender prompt notice
of such contest and, upon request by Lender from time to time, notice of the
status of such contest by Borrower and/or information of the continuing
satisfaction of the conditions set forth in clauses (a) through (e) of this
Section 3.05, (g) upon a final determination of such contest, Borrower shall
promptly comply with the requirements thereof, and (h) prior to and during such
contest, Borrower shall furnish to Lender security satisfactory to Lender, in
its reasonable discretion, against loss or injury by reason of such contest or
the non-compliance with such Insurance Requirement (and if such security is
cash, Lender shall deposit the same in an interest-bearing account and interest
accrued thereon, if any, shall be deemed to constitute a part of such security
for purposes of this Security Instrument, but Lender (i) makes no representation
or warranty as to the rate or amount of interest, if any, which may accrue
thereon and shall have no liability in connection therewith and (ii) shall not
be deemed to be a trustee or fiduciary with respect to its receipt of any such
security and any such security may be commingled with other monies of Lender).
If Borrower shall use the Property or any portion thereof in any manner which
permits the insurer to cancel any insurance required to be provided hereunder,
Borrower immediately shall obtain a substitute policy which shall satisfy the
requirements of this Security Instrument and which shall be effective on or
prior to the date on which any such other insurance policy shall be canceled.
Borrower shall not by any action or omission invalidate any insurance policy
required to be carried hereunder unless such policy is replaced as aforesaid, or
materially increase the premiums on any such policy above the normal premium
charged for such policy. Borrower shall cooperate with Lender in obtaining for
Lender the benefits of any Insurance Proceeds lawfully or equitably payable to
Lender in connection with the transaction contemplated hereby.
     Section 3.06. Event of Default During Restoration. Notwithstanding anything
to the contrary contained in this Security Instrument including, without
limitation, the provisions of this Article III, if, at the time of any casualty
affecting the Property or any part thereof, or at any time during any Work, or
at any time that Lender is holding or is entitled to receive any Insurance
Proceeds pursuant to this Security Instrument, either a Default of which
Borrower has been given notice or an Event of Default exists and is continuing,
Lender shall then have no obligation to make such proceeds available for Work
(unless, provided no Event of Default exists, the disbursement of such Insurance
Proceeds will cure the Default, in which event Lender shall disburse Insurance
Proceeds for Work) and Lender shall have the right and option, to be exercised
in its sole and absolute discretion and election, with respect to the Insurance
Proceeds, either to retain and apply such proceeds in reimbursement for the
actual costs, fees and expenses incurred by Lender in accordance with the terms
hereof in connection with the adjustment of the loss and, after the occurrence
of an Event of Default, any balance toward payment of the Debt in such priority
and proportions as Lender, in its sole discretion, shall deem proper, or towards
the Work, upon such terms and conditions as Lender shall determine, or to cure
such Event of Default, or to any one or more of the foregoing as Lender, in its
sole and absolute discretion,

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may determine. If Lender shall receive and retain such Insurance Proceeds, the
lien of this Security Instrument shall be reduced only by the amount thereof
received, after reimbursement to Lender of expenses of collection, and actually
applied by Lender in reduction of the principal sum payable under the Note in
accordance with the Note.
     Section 3.07. Application of Proceeds to Debt Reduction.
     (a) No damage to the Property, or any part thereof, by fire or other
casualty whatsoever, whether such damage be partial or total, shall relieve
Borrower from its liability to pay in full the Debt and to perform its
obligations under this Security Instrument and the other Loan Documents.
     (b) If any Insurance Proceeds are applied to reduce the Debt, Lender shall
apply the same in accordance with the provisions of the Note.
ARTICLE IV: IMPOSITIONS
     Section 4.01. Payment of Impositions, Utilities and Taxes, Etc. Subject to
any right to contest pursuant to the terms of the Loan Documents and Lender’s
obligations pursuant to Article V hereof, Borrower shall pay or cause to be paid
all Impositions at least five (5) days prior to the date upon which any fine,
penalty, interest or cost for nonpayment is imposed, and furnish to Lender, upon
request, receipted bills of the appropriate taxing authority or other
documentation reasonably satisfactory to Lender evidencing the payment thereof.
If Borrower shall fail to pay any Imposition in accordance with this Section and
is not contesting or causing a contesting of such Imposition in accordance with
Section 4.04 hereof, or if there are insufficient funds in the Basic Carrying
Costs Escrow Account to pay any Imposition, Lender shall have the right, but
shall not be obligated, to pay that Imposition, and Borrower shall repay to
Lender, on demand, any amount paid by Lender, with interest thereon at the
Default Rate from the date of the advance thereof to the date of repayment, and
such amount shall constitute a portion of the Debt secured by this Security
Instrument.
     (a) Borrower shall, prior to the date upon which any fine, penalty,
interest or cost for the nonpayment is imposed, pay or cause to be paid all
charges for electricity, power, gas, water and other services and utilities in
connection with the Property, and shall, upon request, deliver to Lender
receipts or other documentation reasonably satisfactory to Lender evidencing
payment thereof. If Borrower shall fail to pay any amount required to be paid by
Borrower pursuant to this Section 4.01 and is not contesting such charges in
accordance with Section 4.04 hereof, Lender shall have the right, but shall not
be obligated, to pay that amount, and Borrower will repay to Lender, on demand,
any amount paid by Lender with interest thereon at the Default Rate from the
date of the advance thereof to the date of repayment, and such amount shall
constitute a portion of the Debt secured by this Security Instrument.
     (b) Borrower shall pay all taxes, charges, filing, registration and
recording fees, excises and levies imposed upon Lender by reason of or in
connection with its ownership of any Loan Document or any other instrument
related thereto, or resulting from the execution, delivery and recording of, or
the lien created by, or the obligation evidenced by, any of them, other than
income, franchise and other similar taxes imposed on Lender and shall pay all
corporate stamp

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taxes, if any, and other taxes, required to be paid on the Loan Documents. If
Borrower shall fail to make any such payment within ten (10) days after written
notice thereof from Lender, Lender shall have the right, but shall not be
obligated, to pay the amount due, and Borrower shall reimburse Lender therefor,
on demand, with interest thereon at the Default Rate from the date of the
advance thereof to the date of repayment, and such amount shall constitute a
portion of the Debt secured by this Security Instrument.
     Section 4.02. Deduction from Value. In the event of the passage after the
date of this Security Instrument of any Legal Requirement deducting from the
value of the Property for the purpose of taxation, any lien thereon or changing
in any way the Legal Requirements now in force for the taxation of this Security
Instrument and/or the Debt for federal, state or local purposes, or the manner
of the operation of any such taxes so as to adversely affect the interest of
Lender, or imposing any tax or other charge on any Loan Document, then Borrower
will pay such tax, with interest and penalties thereon, if any, within the
statutory period. In the event the payment of such tax or interest and penalties
by Borrower would be unlawful, or taxable to Lender or unenforceable or provide
the basis for a defense of usury, then in any such event, Lender shall have the
option, by written notice of not less than thirty (30) days, to declare the Debt
immediately due and payable, with no prepayment fee or charge of any kind.
     Section 4.03. No Joint Assessment. Borrower shall not consent to or
initiate the joint assessment of the Premises or the Improvements (a) with any
other real property constituting a separate tax lot and Borrower represents and
covenants that the Premises and the Improvements are and shall remain a separate
tax lot or (b) 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 the Property as a single lien.
     Section 4.04. Right to Contest. Borrower shall have the right, after prior
notice to Lender, at its sole expense, to contest by appropriate legal
proceedings diligently conducted in good faith, without cost or expense to
Lender or any of its agents, employees, officers or directors, the validity,
amount or application of any Imposition or any charge described in Section 4.01,
provided that (a) no Event of Default shall exist during such proceedings and
such contest shall not (unless Borrower shall comply with clause (d) of this
Section 4.04) subject the Property or any portion thereof to any lien or affect
the priority of the lien of this Security Instrument, (b) failure to pay such
Imposition or charge will not subject Lender, Trustee or any of their agents,
employees, officers or directors to any civil or criminal liability, (c) the
contest suspends enforcement of the Imposition or charge (unless Borrower first
pays the Imposition or charge), (d) prior to and during such contest, Borrower
shall furnish to Lender security satisfactory to Lender, in its reasonable
discretion, against loss or injury by reason of such contest or the non-payment
of such Imposition or charge (and if such security is cash, Lender may deposit
the same in an interest-bearing account and interest accrued thereon, if any,
shall be deemed to constitute a part of such security for purposes of this
Security Instrument, but Lender (i) makes no representation or warranty as to
the rate or amount of interest, if any, which may accrue thereon and shall have
no liability in connection therewith and (ii) shall not be deemed to be a
trustee or fiduciary with respect to its receipt of any such security and any
such security may be commingled with other monies of Lender), (e) such contest
shall not affect the ownership, use or occupancy of the Property, (f) the
Property or any part thereof or any interest therein shall not

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be in any danger of being sold, forfeited or lost by reason of such contest by
Borrower, (g) Borrower has given Lender notice of the commencement of such
contest and upon request by Lender, from time to time, notice of the status of
such contest by Borrower and/or confirmation of the continuing satisfaction of
clauses (a) through (f) of this Section 4.04, and (h) upon a final determination
of such contest, Borrower shall promptly comply with the requirements thereof.
Upon completion of any contest, Borrower shall immediately pay the amount due,
if any, and deliver to Lender proof of the completion of the contest and payment
of the amount due, if any, following which Lender shall return the security, if
any, deposited with Lender pursuant to clause (d) of this Section 4.04. Borrower
shall not pay any Imposition in installments unless permitted by applicable
Legal Requirements, and shall, upon the request of Lender, deliver copies of all
notices and bills relating to any Imposition or other charge covered by this
Article IV to Lender.
     Section 4.05. No Credits on Account of the Debt. Borrower will not claim or
demand or be entitled to any credit or credits on account of the Debt for any
part of the Impositions assessed against the Property or any part thereof and no
deduction shall otherwise be made or claimed from the taxable value of the
Property, or any part thereof, by reason of this Security Instrument or the
Debt. In the event such claim, credit or deduction shall be required by Legal
Requirements, Lender shall have the option, by written notice of not less than
thirty (30) days, to declare the Debt immediately due and payable, and Borrower
hereby agrees to pay such amounts not later than thirty (30) days after such
notice.
     Section 4.06. Documentary Stamps. If, at any time, the United States of
America, any State or Commonwealth thereof or any subdivision of any such State
shall require revenue or other stamps to be affixed to the Note, this Security
Instrument or any other Loan Document, or impose any other tax or charges on the
same, Borrower will pay the same, with interest and penalties thereon, if any.
ARTICLE V: CENTRAL CASH MANAGEMENT
     Section 5.01. Cash Flow. Borrower hereby acknowledges and agrees that the
Rents (which for the purposes of this Section 5.01 shall not include security
deposits from tenants under Leases held by Borrower and not applied towards
Rent) derived from the Property and Loss Proceeds shall be utilized to fund the
Sub-Accounts. Borrower shall give each tenant under a Space Lease an irrevocable
direction in the form of Exhibit E attached hereto and made a part hereof to
deliver all rent payments made by tenants and other payments constituting Rent
directly into the Rent Account. All payments constituting Rent, other than
payments received from tenants under a Lease and payments made by credit cards,
shall be delivered to Manager.
     Manager shall collect all of such Rent and shall deposit such funds, within
three (3) Business Days after receipt thereof in the Rent Account, the name and
address of the bank in which such account is located and the account number of
which to be identified in writing by Manager to Lender. Borrower shall cause
Manager to give to the bank in which the Rent Account is located an irrevocable
written instruction, in form and substance acceptable to Lender, that, upon
receipt of notice from Lender that an Event of Default exists (the “Trigger
Notice”), all funds deposited in such account shall be automatically transferred
through automated clearing house funds (“ACH”) or by Federal wire to the Central
Account prior to 5:00

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p.m. (New York City time) on a daily basis. Provided that the bank in which the
Rent Account is located has not received a Trigger Notice, all sums on deposit
in the Rent Account shall be transferred on a daily basis to an account
designated in writing by Borrower (the “Borrower Account”). Within two
(2) Business Days of the Closing Date, Borrower shall deliver to Lender a copy
of the irrevocable notice which Borrower delivered to the bank in which the Rent
Account is located pursuant to the provisions of this Section 5.01, the receipt
of which is acknowledged in writing by such bank. Additionally, Borrower shall,
or shall cause Manager to send to each respective credit card company or credit
card clearing bank with which Borrower or Manager has entered into merchant’s
agreements (each, a “Credit Card Company”) a direction letter in the form of
Exhibit F annexed hereto and made a part hereof (the “Credit Card Payment
Direction Letter”) directing such Credit Card Company to make all payments due
in connection with goods or services furnished at or in connection with the
Property by Federal wire or through ACH directly to the Rent Account. Without
the prior written consent of Lender, neither Borrower nor Manager shall
(i) terminate, amend, revoke or modify any Credit Card Payment Direction Letter
in any manner or (ii) direct or cause any Credit Card Company to pay any amount
in any manner other than as specifically provided in the related Credit Card
Payment Direction Letter. Lender may elect to change the financial institution
in which the Central Account shall be maintained; however, Lender shall give
Borrower and the bank in which the Rent Account is located not fewer than five
(5) Business Days’ prior notice of such change. Neither Borrower nor Manager
shall change such bank or the Rent Account without the prior written consent of
Lender, which shall not be unreasonably withheld, conditioned or delayed. All
fees and charges of the bank(s) in which the Rent Account and the Central
Account are located shall be paid by Borrower. Promptly following the cure of
any Event of Default which resulted in Lender giving a Trigger Notice, Lender
shall inform the bank holding the Rent Account of the cure of such Event of
Default, and at Borrower’s sole cost and expense take all such actions and
execute and deliver all such documents and instruments as are reasonably
required to restore Borrower’s right to daily withdrawals from the Rent Account.
     Section 5.02. Establishment of Accounts. Lender has established the Escrow
Accounts and the Central Account in the name of Lender as secured party and
Borrower has established the Rent Account in the joint names of Lender, as
secured party, and Borrower. The Escrow Accounts, the Rent Account and the
Central Account shall be under the sole dominion and control of Lender and funds
held therein shall not constitute trust funds. Borrower hereby irrevocably
directs and authorizes Lender to withdraw funds from the Rent Account and to
deposit into and withdraw funds from the Central Account and the Escrow
Accounts, all in accordance with the terms and conditions of this Security
Instrument. Borrower shall have no right of withdrawal in respect of the Central
Account, the Rent Account or the Escrow Accounts, except to the extent expressly
provided for in this Agreement, including without limitation as provided for in
Section 5.01. Each transfer of funds to be made hereunder shall be made only to
the extent that funds are on deposit in the Rent Account, the Central Account or
the affected Sub-Account or Escrow Account, and Lender shall have no
responsibility to make additional funds available in the event that funds on
deposit are insufficient. The Central Account shall contain the Basic Carrying
Costs Sub-Account, the Debt Service Payment Sub-Account, the Recurring
Replacement Reserve Sub-Account, the Management Fee Sub-Account and the
Operations and Maintenance Expense Sub-Account, each of which accounts shall be
Eligible Accounts or book-entry sub-accounts of an Eligible Account (each a
“Sub-Account” and collectively, the “Sub-Accounts”) to which certain funds shall
be allocated and from which disbursements shall be

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made pursuant to the terms of this Security Instrument. Sums held in the Escrow
Accounts may be commingled with other monies held by Lender.
     Section 5.03. Intentionally Omitted.
     Section 5.04. Servicing Fees. Provided that no Default has occurred and is
continuing, Borrower shall have no obligation to reimburse Lender for servicing
fees incurred in connection with the ordinary, routine servicing of the Loan;
provided, however, that Borrower shall reimburse Lender for (a) any and all
costs and expenses incurred after the occurrence of a Default of which Borrower
has been given notice or an Event of Default and (b) as otherwise provided for
in this Security Instrument. Additionally, in the event that Borrower requests
more than one disbursement from an Escrow Account in any month and Lender, in
its sole and absolute discretion, consents to such disbursement, Borrower shall
pay Lender a disbursement fee in the amount of $250.00 with respect to each
Escrow Account from which the additional disbursement is sought.
     Section 5.05. Monthly Funding of Sub-Accounts and Escrow Accounts. (a) On
or before each Payment Date during the term of the Loan, commencing on the first
(1st) Payment Date occurring after the month in which the Loan is initially
funded, Borrower shall pay or cause to be paid to the Central Account all sums
required to be deposited in the Sub-Accounts pursuant to this Section 5.05(a)
and all funds transferred or deposited into the Central Account shall be
allocated among the Sub-Accounts as follows and in the following priority:
     (i) first, to the Basic Carrying Costs Sub-Account, until an amount equal
to the Basic Carrying Costs Monthly Installment for such Payment Date has been
allocated to the Basic Carrying Costs Sub-Account;
     (ii) second, but only if an Event of Default exists, to the Management Fee
Sub-Account, until an amount equal to the Required Management Fee for such
Payment Date has been allocated to the Management Fee Sub-Account;
     (iii) third, to the Debt Service Payment Sub-Account, until an amount equal
to the Required Debt Service Payment for such Payment Date has been allocated to
the Debt Service Payment Sub-Account;
     (iv) fourth, but only if an Event of Default exists, to the Operation and
Maintenance Expense Sub-Account until an amount equal to the Cash Expenses,
other than the Required Management Fee, for the Interest Accrual Period ending
immediately prior to such Payment Date pursuant to the related Approved Annual
Budget; and
     (v) fifth, the balance, if any, to the Recurring Replacement Reserve
Sub-Account, until an amount equal to the Recurring Replacement Reserve Monthly
Installment for such Payment Date has been allocated to the Recurring
Replacement Reserve Sub-Account.
     Provided that no Event of Default has occurred and is continuing, Lender
agrees that in each Interest Accrual Period any amounts deposited into or
remaining in the Central Account after the Sub-Accounts have been funded as set
forth in this Section 5.05(a) with respect to such

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Interest Accrual Period and any periods prior thereto, shall be disbursed by
Lender to Borrower on each Payment Date applicable to such Interest Accrual
Period. The balance of the funds distributed to Borrower after payment of all
Operating Expenses by or on behalf of Borrower may be retained by Borrower.
Other than as set forth in Section 5.09 and Section 5.11, after the occurrence,
and during the continuance, of an Event of Default, no funds held in the Central
Account shall be distributed to, or withdrawn by, Borrower and Lender shall have
the right to apply all or any portion of the funds held in the Central Account
or any Sub Account or any Escrow Account to the Debt in Lender’s sole
discretion; provided, however, notwithstanding anything set forth herein, Lender
shall disburse (i) the Required Management Fee to Manager to the extent of
amounts in the Management Fee Escrow Account and (ii) Operating Expenses
incurred by Borrower to the extent of amounts then in the Operations and
Maintenance Expense Escrow Account pursuant to the Approved Annual Budget from
the Operations and Maintenance Expense Escrow Account until the later to occur
of (a) sixty (60) days after the occurrence of an Event of Default and
(b) thirty (30) days following the transfer of the Loan to “special servicing”
as provided in the pooling and servicing agreement, trust and servicing
agreement or similar agreement entered into in connection with a Securitization.
     (b) On each Payment Date, (i) sums held in the Basic Carrying Costs Sub
Account shall be transferred to the Basic Carrying Costs Escrow Account,
(ii) sums held in the Debt Service Payment Sub-Account, together with any
amounts deposited into the Central Account that are either (x) Loss Proceeds
that Lender has elected to apply to reduce the Debt in accordance with the terms
of Article III hereof or (y) excess Loss Proceeds remaining after the completion
of any restoration required hereunder that have not been transferred to Borrower
in accordance with the provisions set forth in Section 5.13 hereof, shall be
transferred to Lender to be applied towards the Required Debt Service Payment
and (iii) sums held in the Recurring Replacement Reserve Sub-Account shall be
transferred to the Recurring Replacement Reserve Escrow Account, (iv) sums held
in the Operation and Maintenance Expense Sub-Account shall be transferred to the
Operation and Maintenance Expense Escrow Account and (v) sums held in the
Management Fee Sub-Account shall be transferred to the Management Fee Escrow
Account.
     Section 5.06. Payment of Basic Carrying Costs. Borrower hereby agrees to
pay all Basic Carrying Costs (without regard to the amount of money in the Basic
Carrying Costs Sub Account or the Basic Carrying Costs Escrow Account). At least
ten (10) Business Days prior to the due date of any Basic Carrying Costs, and
not more frequently than once each month, Borrower may notify Lender in writing
and request that Lender pay such Basic Carrying Costs on behalf of Borrower on
or prior to the due date thereof, and, provided that no Event of Default has
occurred and that there are sufficient funds available in the Basic Carrying
Costs Escrow Account, Lender shall make such payments out of the Basic Carrying
Costs Escrow Account before same shall be delinquent. Together with each such
request, Borrower shall furnish Lender with bills and all other documents
necessary, as reasonably determined by Lender, for the payment of the Basic
Carrying Costs which are the subject of such request. Borrower’s obligation to
pay (or cause Lender to pay) Basic Carrying Costs pursuant to this Security
Instrument shall include, to the extent permitted by applicable law, Impositions
resulting from future changes in law which impose upon Lender an obligation to
pay any property taxes or other Impositions or which otherwise adversely affect
Lender’s interests. Notwithstanding the foregoing, in the event that Lender
receives a tax bill directly from a Governmental Authority relating to any Real
Estate Taxes, Lender shall pay all sums due thereunder prior to the date such
Real Estate Taxes would

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accrue late charges or interest thereon or within ten (10) Business Days of the
receipt of such tax bill, whichever is later. In making any payment of Real
Estate Taxes, Lender may rely on any bill, statement or estimate obtained from
the applicable Governmental Authority without inquiry into the accuracy of such
bill, statement or estimate or into the validity of any Real Estate Taxes or
claim with respect thereto.
     Provided that no Event of Default shall have occurred and be continuing,
all funds deposited into the Basic Carrying Costs Escrow Account shall be held
by Lender pursuant to the provisions of this Security Instrument and shall be
applied in payment of Basic Carrying Costs in accordance with the terms hereof.
Should an Event of Default occur and be continuing, the sums on deposit in the
Basic Carrying Costs Sub-Account and the Basic Carrying Costs Escrow Account may
be applied by Lender in payment of any Basic Carrying Costs or may be applied to
the payment of the Debt (subject to any obligations of Lender pursuant to
Section 5.05 hereof) or any other charges affecting all or any portion of the
Property as Lender in its sole discretion may determine; provided, however, that
no such application shall be deemed to have been made by operation of law or
otherwise until actually made by Lender as herein provided.
     Notwithstanding anything set forth herein, provided no Event of Default has
occurred and is continuing, to the extent all funds required to be collected as
part of any future Basic Carrying Costs Monthly Installment with respect to
Impositions during any Fiscal Year of the Loan exceed the amounts reasonably
required by Lender to be escrowed in order to pay Impositions for such Fiscal
Year in accordance with the terms of this Security Instrument at least thirty
(30) days prior to their respective due dates for such Fiscal Year, such excess
funds (if any) shall, if requested by Borrower in writing, be promptly released
to Borrower.
     Section 5.07. Intentionally Omitted.
     Section 5.08. Recurring Replacement Reserve Escrow Account. Borrower hereby
agrees to pay all Recurring Replacement Expenditures with respect to the
Property (without regard to the amount of money then available in the Recurring
Replacement Reserve Sub-Account or the Recurring Replacement Reserve Escrow
Account). Provided that (a) Lender has received written notice from Borrower at
least five (5) Business Days prior to the due date of any payment relating to
Recurring Replacement Expenditures and not more frequently than once each month,
and further provided that no Event of Default has occurred and is continuing,
(b) there are sufficient funds available in the Recurring Replacement Reserve
Escrow Account, and (c) Borrower shall have theretofore furnished Lender with
lien waivers (which lien waivers may be conditional pending final payment, if
applicable), copies of bills, invoices and other reasonable documentation as may
be required by Lender to establish that the Recurring Replacement Expenditures
which are the subject of such request represent amounts due for completed or
partially completed additions, replacements, capital work and improvements
performed at the Property, then Lender shall make such payments out of the
Recurring Replacement Reserve Escrow Account.
     Provided that no Event of Default shall have occurred and be continuing,
all funds deposited into the Recurring Replacement Reserve Escrow Account shall
be held by Lender pursuant to the provisions of this Security Instrument and
shall be applied in payment of Recurring Replacement Expenditures. Should an
Event of Default occur and be continuing, the

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sums on deposit in the Recurring Replacement Reserve Sub-Account and the
Recurring Replacement Reserve Escrow Account may be applied by Lender in payment
of any Recurring Replacement Expenditures or may be applied to the payment of
the Debt or any other charges affecting all or any portion of the Property, as
Lender in its sole discretion may determine; provided, however, that no such
application shall be deemed to have been made by operation of law or otherwise
until actually made by Lender as herein provided.
     Section 5.09. Operation and Maintenance Expense Escrow Account. Borrower
hereby agrees to pay all Operating Expenses with respect to the Property
(without regard to the amount of money then available in the Operation and
Maintenance Expense Sub-Account or the Operation and Maintenance Expense Escrow
Account). All funds allocated to the Operation and Maintenance Expense Escrow
Account shall be held by Lender pursuant to the provisions of this Security
Instrument. Any sums held in the Operation and Maintenance Expense Escrow
Account shall be disbursed to Borrower within five (5) Business Days of receipt
by Lender from Borrower of (a) a written request for such disbursement which
shall indicate the Operating Expenses (exclusive of Basic Carrying Costs and any
Required Management Fee payable to Borrower, or to any Affiliate of Borrower)
for which the requested disbursement is to pay and (b) an Officer’s Certificate
stating that no Operating Expenses with respect to the Property are more than
sixty (60) days past due; provided, however, in the event that Borrower
legitimately disputes any invoice for an Operating Expense, and (i) no Event of
Default has occurred and is continuing hereunder, (ii) Borrower shall have set
aside adequate reserves for the payment of such disputed sums together with all
interest and late fees thereon, (iii) Borrower has complied with all the
requirements of this Security Instrument relating thereto, and (iv) the
contesting of such sums shall not constitute a default under any other
instrument, agreement, or document to which Borrower is a party (other than any
agreement with the vendor with respect to which the unpaid Operating Expenses
relates), then Borrower may, after certifying to Lender as to items (i) through
(iv) hereof, contest such invoice. Together with each such request, Borrower
shall furnish Lender with bills and all other documents necessary for the
payment of the Operating Expenses which are the subject of such request.
Borrower may request a disbursement from the Operation and Maintenance Expense
Escrow Account no more than one (1) time per calendar month. Should an Event of
Default occur and be continuing, the sums on deposit in the Operation and
Maintenance Expense Sub-Account or the Operation and Maintenance Expense Escrow
Account shall be applied by Lender in payment of any Operating Expenses for the
Property or, if Lender has accelerated the outstanding Principal Amount, may be
applied to the payment of the Debt or any other charges affecting all or any
portion of the Property as Lender, in its sole discretion, may determine;
provided, however, that no such application shall be deemed to have been made by
operation of law or otherwise until actually made by Lender as herein provided.
     Section 5.10. Intentionally Omitted.
     Section 5.11. Management Fee Escrow Account. Borrower hereby agrees to pay
all Required Management Fees (without regard to the amount of money then
available in the Management Fee Sub-Account or the Management Fee Escrow
Account). All funds allocated to the Management Fee Escrow Account shall be held
by Lender pursuant to the provisions of this Security Instrument. Any sums held
in the Management Fee Escrow Account shall be disbursed to Borrower within five
(5) Business Days of receipt by Lender from Borrower of (a) a written

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request for such disbursement which shall indicate the Required Management Fee
for which the requested disbursement is to pay and (b) an Officer’s Certificate
stating that no Required Management Fees are more than sixty (60) days past due;
provided, however, in the event that Borrower legitimately disputes any invoice
for a Required Management Fee, and (i) no Event of Default has occurred and is
continuing hereunder, (ii) Borrower shall have set aside adequate reserves for
the payment of such disputed sums together with all interest and late fees
thereon, (iii) Borrower has complied with all the requirements of this Security
Instrument relating thereto, and (iv) the contesting of such sums shall not
constitute a default under any other instrument, agreement, or document to which
Borrower is a party, then Borrower may, after certifying to Lender as to items
(i) through (iv) hereof, contest such invoice. Together with each such request,
Borrower shall furnish Lender with bills and all other documents necessary for
the payment of the Required Management Fees which are the subject of such
request. Borrower may request a disbursement from the Management Fee Escrow
Account no more than one (1) time per calendar month. Should an Event of Default
occur, the sums on deposit in the Management Fee Sub-Account or the Management
Fee Escrow Account shall be applied by Lender in payment of any Required
Management Fee or, if Lender has accelerated the outstanding Principal Amount,
may be applied to the payment of the Debt or any other charges affecting all or
any portion of the Property as Lender, in its sole discretion, may determine;
provided, however, that no such application shall be deemed to have been made by
operation of law or otherwise until actually made by Lender as herein provided.
     Section 5.12. Performance of Engineering Work. (a) Borrower shall promptly
commence and diligently thereafter pursue to completion (without regard to the
amount of money then available in the Engineering Escrow Account) the Required
Engineering Work prior to the six (6) month anniversary of the Closing Date.
After Borrower completes an item of Required Engineering Work, Borrower may
submit to Lender an invoice therefor with lien waivers (which may be conditional
pending payment, if applicable) and a statement from the Engineer, reasonably
acceptable to Lender, indicating that the portion of the Required Engineering
Work in question has been completed in compliance with all Legal Requirements,
and Lender shall, within twenty (20) days thereafter, although in no event more
frequently than once each month, reimburse such amount to Borrower from the
Engineering Escrow Account; provided, however, that Borrower shall not be
reimbursed out of the Engineering Escrow Account more than the amount set forth
on Exhibit D hereto as the amount allocated to the portion of the Required
Engineering Work for which reimbursement is sought.
     (b) From and after the date all of the Required Engineering Work is
completed, Borrower may submit a written request, which request shall be
delivered together with final lien waivers and a statement from the Engineer, as
the case may be, reasonably acceptable to Lender, indicating that all of the
Required Engineering Work has been completed in compliance with all Legal
Requirements, and Lender shall, within twenty (20) days thereafter, disburse any
balance of the Engineering Escrow Account to Borrower. Should an Event of
Default occur and be continuing, the sums on deposit in the Engineering Escrow
Account may be applied by Lender in payment of any Required Engineering Work or
may be applied to the payment of the Debt or any other charges affecting all or
any portion of the Property, as Lender in its sole discretion may determine;
provided, however, that no such application shall be deemed to have been made by
operation of law or otherwise until actually made by Lender as herein provided.

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     Section 5.13. Loss Proceeds. In the event of a casualty to the Property,
except to the extent Lender elects, or is required pursuant to Article III
hereof to make all or any portion of the Insurance Proceeds available to
Borrower for restoration, Lender and Borrower shall cause all such Insurance
Proceeds to be paid by the insurer directly to the Central Account, whereupon
Lender shall, after deducting Lender’s costs of recovering and paying out such
Insurance Proceeds, including without limitation, reasonable attorneys’ fees,
apply same to reduce the Debt in accordance with the terms of the Note;
provided, however, that if Lender elects, or is deemed to have elected, or is
otherwise required pursuant to the terms of this Security Instrument, to make
all or a portion of the Insurance Proceeds available for restoration, all
Insurance Proceeds in respect of rent loss, business interruption or similar
coverage shall be maintained in the Central Account, to be applied by Lender in
the same manner as Rent received with respect to the operation of the Property;
provided, further, however, that in the event that the Insurance Proceeds with
respect to such rent loss, business interruption or similar insurance policy are
paid in a lump sum in advance, Lender shall hold such Insurance Proceeds in a
segregated interest-bearing escrow account, which shall be an Eligible Account,
shall estimate, in Lender’s reasonable discretion, the number of months required
for Borrower to restore the damage caused by the casualty, shall divide the
aggregate rent loss, business interruption or similar Insurance Proceeds by such
number of months, and shall disburse from such bank account into the Central
Account each month during the performance of such restoration such monthly
installment of said Insurance Proceeds until such time as the Debt Service
Coverage for two (2) consecutive calendar quarters, the first of which shall not
occur prior to the applicable casualty, shall equal the Required Debt Service
Coverage or greater, at which time, after receipt of a written request from
Borrower, all sums held by Lender which related to rent loss, business
interruption insurance or similar Insurance Proceeds shall be disbursed to
Borrower. In the event that Insurance Proceeds are to be applied toward
restoration, Lender shall hold such funds in a segregated bank account at the
Bank, which shall be an Eligible Account, and shall disburse same in accordance
with the provisions of Section 3.04 hereof. Except to the extent Lender elects,
or is required pursuant to Section 6.01 hereof to make all or a portion of the
Condemnation Proceeds available to Borrower for restoration, Lender and Borrower
shall cause all such Condemnation Proceeds to be paid to the Central Account,
whereupon Lender shall, after deducting Lender’s costs of recovering and paying
out such Condemnation Proceeds, including without limitation, reasonable
attorneys’ fees, apply same to reduce the Debt in accordance with the terms of
the Note; provided, however, that any Condemnation Proceeds received in
connection with a temporary Taking shall be maintained in the Central Account,
to be applied by Lender in the same manner as Rent received with respect to the
operation of the Property; provided, further, however, that in the event that
the Condemnation Proceeds of any such temporary Taking are paid in a lump sum in
advance, Lender shall hold such Condemnation Proceeds in a segregated
interest-bearing bank account, which shall be an Eligible Account, shall
estimate, in Lender’s reasonable discretion, the number of months that the
Property shall be affected by such temporary Taking, shall divide the aggregate
Condemnation Proceeds in connection with such temporary Taking by such number of
months, and shall disburse from such bank account into the Central Account each
month during the pendency of such temporary Taking such monthly installment of
said Condemnation Proceeds. In the event that Condemnation Proceeds are to be
applied toward restoration, Lender shall hold such funds in a segregated bank
account at the Bank, which shall be an Eligible Account, and shall disburse same
in accordance with the provisions of Section 3.04 hereof. If any Loss Proceeds
are

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received by Borrower, such Loss Proceeds shall be received in trust for Lender,
shall be segregated from other funds of Borrower, and shall be forthwith paid
into the Central Account, or paid to Lender to hold in a segregated bank account
at the Bank, in each case to be applied or disbursed in accordance with the
foregoing. Any Loss Proceeds made available to Borrower for restoration in
accordance herewith, to the extent not used by Borrower in connection with, or
to the extent they exceed the cost of, such restoration, shall be deposited into
the Central Account, to be held by Lender as additional collateral for the Loan,
until such time, if any, at any time subsequent to the completion of the Work,
the Debt Service Coverage is 1.2:1.0 or greater for two (2) consecutive calendar
quarters and provided a Default does not exist, at the request of Borrower, such
excess Loss Proceeds shall be disbursed to Borrower provided any such Loss
Proceeds still remain in the Central Account.
ARTICLE VI: CONDEMNATION
     Section 6.01. Condemnation. (a) Borrower shall notify Lender promptly of
the commencement or threat of any Taking of the Property or any portion thereof.
Lender is hereby irrevocably appointed as Borrower’s attorney-in-fact, coupled
with an interest, with exclusive power to collect, receive and retain the
proceeds of any such Taking as to which Borrower is or may be entitled and to
make any compromise or settlement in connection with such proceedings (subject
to Borrower’s reasonable approval, except after the occurrence of an Event of
Default, in which event Borrower’s approval shall not be required), subject to
the provisions of this Security Instrument; provided, however, that Borrower may
participate in any such proceedings (without regard to the extent of the Taking)
and Borrower shall be authorized and entitled to compromise or settle any such
proceeding with respect to Condemnation Proceeds in an amount less than five
percent (5%) of the Loan Amount. Borrower shall execute and deliver to Lender
any and all instruments reasonably required in connection with any such
proceeding promptly after request therefor by Lender. Except as set forth above,
Borrower shall not adjust, compromise, settle or enter into any agreement with
respect to such proceedings without the prior consent of Lender. All
Condemnation Proceeds are hereby assigned to and shall be paid to Lender to be
applied in accordance with the terms hereof. With respect to Condemnation
Proceeds in an amount in excess of five percent (5%) of the Loan Amount,
Borrower hereby authorizes Lender to compromise, settle, collect and receive
such Condemnation Proceeds, and to give proper receipts and acquittance
therefor. Subject to the provisions of this Article VI, Lender may apply such
Condemnation Proceeds (less any cost to Lender of recovering and paying out such
proceeds, including, without limitation, reasonable attorneys’ fees and
disbursements and costs allocable to inspecting any repair, restoration or
rebuilding work and the plans and specifications therefor) toward the payment of
the Debt or to allow such proceeds to be used for the Work.
     (b) “Substantial Taking” shall mean (i) a Taking of such portion of the
Property that would, in Lender’s reasonable discretion, leave remaining a
balance of the Property which would not under then current economic conditions,
applicable Development Laws and other applicable Legal Requirements, permit the
restoration of the Property so as to constitute a complete, rentable facility of
the same type as existed prior to the Taking, having adequate ingress and egress
to the Property, capable of producing a projected Net Operating Income (as
reasonably determined by Lender) yielding a projected Debt Service Coverage
therefrom for the next two (2) years of not less than the Required Debt Service
Coverage, or (ii) a Taking which occurs less

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than two (2) years prior to the Maturity Date, or (iii) a Taking which Lender is
not reasonably satisfied could be repaired within twelve (12) months and at
least six (6) months prior to the Maturity Date, or (iv) a Taking of fifteen
percent (15%) or more of the Premises.
     (c) In the case of a Substantial Taking, Condemnation Proceeds shall be
payable to Lender in reduction of the Debt but without any prepayment fee or
charge of any kind and, if Borrower elects to apply any Condemnation Proceeds it
may receive pursuant to this Security Instrument to the payment of the Debt,
Borrower may prepay the balance of the Debt without any prepayment fee or charge
of any kind.
     (d) In the event of a Taking which is less than a Substantial Taking,
Borrower at its sole cost and expense (whether or not the award shall have been
received or shall be sufficient for restoration) shall proceed diligently to
restore, or cause the restoration of, the remaining Improvements not so taken,
to maintain a complete, rentable, self-contained fully operational facility of
the same sort as existed prior to the Taking in as good a condition as is
reasonably possible. In the event of such a Taking, Lender shall receive the
Condemnation Proceeds and shall pay over the same:
     (i) first, provided no Event of Default shall have occurred and be
continuing, to Borrower to the extent of any portion of the award as may be
necessary to pay the reasonable cost of restoration of the Improvements
remaining, and
     (ii) second, to Lender to be held as additional collateral for the Loan
and, if the Debt Service Coverage is 1.2:1.0 or greater for two (2) consecutive
calendar quarters at any time subsequent to the completion of the Work, and a
Default does not exist, shall, at the request of Borrower be disbursed to
Borrower.
     If one or more Takings in the aggregate create a Substantial Taking, then,
in such event, the sections of this Article VI above applicable to Substantial
Takings shall apply.
     (e) In the event Lender is obligated to or elects to make Condemnation
Proceeds available for the restoration or rebuilding of the Property, such
proceeds shall be disbursed in the manner and subject to the conditions set
forth in Section 3.04(b) hereof. If, in accordance with this Article VI, any
Condemnation Proceeds are used to reduce the Debt, they shall be applied in
accordance with the provisions of the Note and, with no prepayment fee or charge
of any kind. Borrower shall promptly execute and deliver all instruments
requested by Lender for the purpose of confirming the assignment of the
Condemnation Proceeds to Lender. Application of all or any part of the
Condemnation Proceeds to the Debt shall be made in accordance with the
provisions of Sections 3.06 and 3.07 hereof. No application of the Condemnation
Proceeds to the reduction of the Debt shall have the effect of releasing the
lien of this Security Instrument until the remainder of the Debt has been paid
in full. In the case of any Taking, Lender, to the extent that Lender has not
been reimbursed by Borrower, shall be entitled, as a first priority out of any
Condemnation Proceeds, to reimbursement for all costs, fees and expenses
reasonably incurred in the determination and collection of any Condemnation
Proceeds. All Condemnation Proceeds deposited with Lender pursuant to this
Section, until expended or applied as provided herein, shall be held in
accordance with Section 3.04(b) hereof and shall constitute additional security
for the payment of the Debt and the payment and performance of Borrower’s
obligations, but

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Lender shall not be deemed a trustee or other fiduciary with respect to its
receipt of such Condemnation Proceeds or any part thereof. All awards so
deposited with Lender shall be held by Lender in an Eligible Account, but Lender
makes no representation or warranty as to the rate or amount of interest, if
any, which may accrue on any such deposit and shall have no liability in
connection therewith. For purposes hereof, any reference to the award shall be
deemed to include interest, if any, which has accrued thereon.
ARTICLE VII: LEASES AND RENTS
     Section 7.01. Assignment. (a) Borrower does hereby bargain, sell, assign
and set over unto Lender, all of Borrower’s interest in the Leases and Rents
pursuant to the terms hereof. The assignment of Leases and Rents in this
Section 7.01 is an absolute, unconditional and present assignment from Borrower
to Lender and not an assignment for security and the existence or exercise of
Borrower’s revocable license to collect Rent shall not operate to subordinate
this assignment to any subsequent assignment. The exercise by Lender of any of
its rights or remedies pursuant to this Section 7.01 shall not be deemed to make
Lender a mortgagee-in-possession. In addition to the provisions of this
Article VII, Borrower shall comply with all terms, provisions and conditions of
the Assignment.
     (b) So long as no Event of Default exists or is continuing, Borrower shall
have a revocable license to take all actions with respect to all Leases and
Rents, present and future, including the right to collect and use the Rents,
subject to the terms of this Security Instrument and the Assignment.
     (c) In a separate instrument Borrower shall, as requested from time to time
by Lender, assign to Lender or its nominee by specific or general assignment,
any and all Leases, such assignments to be in form and content reasonably
acceptable to Lender, but subject to the provisions of Sections 7.01(a) and
(b) hereof. Borrower agrees to deliver to Lender, within thirty (30) days after
Lender’s request, a true and complete copy of every Lease.
     (d) The rights of Lender contained in this Article VII, the Assignment or
any other assignment of any Lease shall not result in any obligation or
liability of Lender to Borrower or any lessee under a Lease or any party
claiming through any such lessee.
     (e) At any time during the continuation of an Event of Default, the license
granted hereinabove may be revoked by Lender, and Lender or a receiver appointed
in accordance with this Security Instrument may enter upon the Property, and
collect, retain and apply the Rents toward payment of the Debt in such priority
and proportions as Lender in its sole discretion shall deem proper.
     (f) In addition to the rights which Lender may have herein, upon the
occurrence of any Event of Default, Lender, at its option, may require Borrower
to pay monthly in advance to Lender, or any receiver appointed to collect the
Rents, the fair and reasonable rental value for the use and occupation of such
part of the Property as may be used and occupied by Borrower and may require
Borrower to vacate and surrender possession of the Property to Lender or to such
receiver and, in default thereof, Borrower may be evicted by summary proceedings
or otherwise.

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     Section 7.02. Management of Property.
     (a) Borrower shall manage the Property or cause the Property to be managed
in a manner which is consistent with the Approved Manager Standard. All Space
Leases shall provide for rental rates comparable to then existing local market
rates for comparable space in hotel properties and terms and conditions which
constitute good and prudent business practice and are consistent with prevailing
market terms and conditions for comparable space in hotel properties, and shall
be arms-length transactions. All Space Leases shall be on a form reasonably
acceptable to Lender and shall provide that they are subordinate to this
Security Instrument and that the lessees thereunder attorn to Lender. Borrower
shall deliver copies of all Leases, amendments, modifications and renewals
thereof to Lender. All proposed Leases for the Property shall be subject to the
prior written approval of Lender, provided, however that Borrower may enter into
new leases with unrelated third parties without obtaining the prior consent of
Lender provided that: (i) the proposed leases conform with the requirements of
this Section 7.02; (ii) the space to be leased pursuant to such proposed lease
together with any space leased or to be leased to an Affiliate of the tenant
thereunder does not exceed 5,000 square feet; and (iii) the term of the proposed
lease inclusive of all extensions and renewals, does not exceed five (5) years
or, if all extensions and renewals are at the then prevailing market rates, does
not exceed ten (10) years.
     (b) Borrower (i) shall observe and perform all of its material obligations
under the Leases pursuant to applicable Legal Requirements and shall not do or
permit to be done anything to materially impair the value of the Leases as
security for the Debt; (ii) shall promptly send copies to Lender of all written
notices of default which Borrower shall receive under the Leases; (iii) shall,
consistent with the Approved Manager Standard, enforce all of the terms,
covenants and conditions contained in the Leases to be observed or performed in
all material respects; (iv) shall not collect any of the Rents under the Leases
more than one (1) month in advance (except that Borrower may collect in advance
such security deposits as are permitted pursuant to applicable Legal
Requirements and are commercially reasonable in the prevailing market);
(v) shall not execute any other assignment of lessor’s interest in the Leases or
the Rents except as otherwise expressly permitted pursuant to this Security
Instrument; (vi) shall not cancel or terminate any of the Leases or accept a
surrender thereof in any manner inconsistent with the Approved Manager Standard;
(vii) shall not convey, transfer or suffer or permit a conveyance or transfer of
all or any part of the Premises or the Improvements or of any interest therein
so as to effect a merger of the estates and rights of, or a termination or
diminution of the obligations of, lessees thereunder; (viii) shall not alter,
modify or change the terms of any guaranty of any Major Space Lease or cancel or
terminate any such guaranty; (ix) shall, in accordance with the Approved Manager
Standard, make all reasonable efforts to seek lessees for space as it becomes
vacant and enter into Leases in accordance with the terms hereof; (x) shall not
cancel or terminate or materially modify, alter or amend any Major Space Lease
or Property Agreement without Lender’s consent, which consent will not be
unreasonably withheld or delayed; (xi) shall notify Lender promptly if any
agreement pursuant to which uses all or any portion of any adjacent or adjoining
property is adversely affected in such a manner as would have a Material Adverse
Effect; and (xii) shall, without limitation to any other provision hereof,
execute and deliver at the request of Lender all such further assurances,
confirmations and assignments in connection with the Property as are required
herein and as Lender shall from time to time reasonably require.

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     (c) Any bond or other instrument which Borrower is permitted to hold in
lieu of cash security deposits under applicable Legal Requirements shall be
maintained in full force and effect unless replaced by cash deposits as
hereinabove described, shall be issued by a Person reasonably satisfactory to
Lender, shall, if permitted pursuant to Legal Requirements, at Lender’s option,
name Lender as payee or mortgagee thereunder or be fully assignable to Lender
and shall, in all respects, comply with applicable Legal Requirements and
otherwise be reasonably satisfactory to Lender. Borrower shall, upon request,
provide Lender with evidence reasonably satisfactory to Lender of Borrower’s
compliance with the foregoing. Following the occurrence and during the
continuance of any Event of Default, Borrower shall, upon Lender’s request, if
permitted by applicable Legal Requirements, turn over the security deposits (and
any interest thereon) to Lender to be held by Lender in accordance with the
terms of the Leases and all Legal Requirements.
     (d) If requested by Lender, Borrower shall furnish, or shall cause the
applicable lessee to furnish, to Lender financial data and/or financial
statements in accordance with Regulation AB for any lessee of the Property if,
in connection with a Securitization, Lender expects there to be, with respect to
such lessee or any group of affiliated lessees, a concentration within all of
the mortgage loans included or expected to be included, as applicable, in such
Securitization such that such lessee or group of affiliated lessees would
constitute a Significant Obligor; provided, however, that in the event the
related Space Lease does not require the related lessee to provide the foregoing
information, Borrower shall use commercially reasonable efforts to cause the
applicable lessee to furnish such information.
     (e) Borrower covenants and agrees with Lender that (i) the Property will be
managed at all times by Manager pursuant to the management agreement approved by
Lender, which management agreement at present is that certain Hotel Operating
Agreement between Kimpton Hotel & Restaurant Group, LLC, a Delaware limited
liability company (“Kimpton”), as “Operator” and Borrower dated as of June 14,
2001, as the same may have been amended, modified or supplemented from time to
time with the consent of Lender (the “Management Agreement”), (ii) after
Borrower has knowledge of a fifty percent (50%) or more change in control of the
ownership of Manager, Borrower will promptly give Lender notice thereof (a
“Manager Control Notice”) and (iii) the Management Agreement may be terminated
by Lender if Borrower has the right to terminate pursuant to the provisions of
the Management Agreement (as a result of Manager’s gross negligence,
misappropriation of funds, willful misconduct or fraud) or at any time following
(A) the earlier to occur of (i) the later to occur of (a) sixty (60) days after
the occurrence of an Event of Default of which Manager has been given notice or
(b) from and after the occurrence of a Securitization, thirty (30) days
following the transfer of the Loan to “special servicing” as provided in the
pooling and servicing agreement, trust and servicing agreement or similar
agreement entered into in connection with a Securitization and (ii) transfer of
title to the Property by foreclosure or delivery of a deed in lieu thereof, or
(B) the receipt of a Manager Control Notice (except to the extent the same would
be an Approved Manager Transfer) and a substitute managing agent shall be
appointed by Borrower, subject to Lender’s prior written approval, which may not
be unreasonably withheld and which may be conditioned on, inter alia, a letter
from each Rating Agency confirming that any rating issued by the Rating Agency
in connection with a Securitization will not, as a result of the proposed change
of Manager, be downgraded from the then current ratings thereof, qualified or
withdrawn. Lender acknowledges that, as of the Closing Date, Kimpton is an
acceptable manager. Borrower may

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from time to time appoint a successor manager to manage the Property with
Lender’s prior written consent which consent shall not be unreasonably withheld
or delayed, provided that any such successor manager shall be a reputable
management company which meets the Approved Manager Standard and each Rating
Agency shall have confirmed in writing that any rating issued by the Rating
Agency in connection with a Securitization will not, as a result of the proposed
change of Manager, be downgraded from the then current ratings thereof,
qualified or withdrawn. Borrower further covenants and agrees that Borrower
shall require Manager (or any successor managers) to maintain at all times
during the term of the Loan worker’s compensation insurance as required by
Governmental Authorities.
     (f) There are no Franchise Agreements. Borrower will not enter into any
Franchise Agreement without the express written consent of Lender.
     (g) Borrower covenants that it shall not, nor permit Manager, to sell or
deliver rooms or suites and accept payment therefor for more than thirty
(30) days in advance of delivery except in the ordinary course of business and
in a manner consistent with the Approved Manager Standard.
     (h) Borrower shall fund and operate, or shall cause Manager to fund and
operate, the Property in a manner consistent with a hotel of the same type and
category as the Property.
     (i) Borrower shall maintain or cause Manager to maintain Inventory in kind
and amount sufficient to meet hotel industry standards for hotels comparable to
the hotel located at the Premises and at levels sufficient for the operation of
the hotel located at the Premises at historic occupancy levels.
     (j) Borrower shall deliver to Lender all written notices of default or
termination received by Borrower or Manager with respect to any licenses and
permits, contracts, Property Agreements, Leases or insurance policies within
three (3) Business Days of receipt of the same.
     (k) Borrower shall not permit any Equipment or other personal property to
be removed from the Property unless the removed item is consumed or sold in the
ordinary course of business, removed temporarily for maintenance and repair, or,
if removed permanently, replaced by an article of equivalent suitability and not
materially less value, owned by Borrower free and clear of any lien.
ARTICLE VIII: MAINTENANCE AND REPAIR
     Section 8.01. Maintenance and Repair of the Property; Alterations;
Replacement of Equipment. Borrower hereby covenants and agrees:
     (a) Borrower shall not (i) desert or abandon the Property, (ii) change the
use of the Property or cause or permit the use or occupancy of any part of the
Property to be discontinued if such discontinuance or use change would violate
any zoning or other law, ordinance or regulation; (iii) consent to or seek any
lowering of the zoning classification, or greater zoning restriction affecting
the Property; or (iv) take any steps whatsoever to convert the Property, or any
portion thereof, to a condominium or cooperative form of ownership.

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     (b) Borrower shall, at its expense, (i) take good care of the Property
including grounds generally, and utility systems and sidewalks, roads, alleys,
and curbs therein, and shall keep the same in good, safe and insurable condition
and in compliance with all applicable Legal Requirements, (ii) promptly make all
repairs to the Property necessary or appropriate for the use or operation
thereof, above grade and below grade, interior and exterior, structural and
nonstructural, ordinary and extraordinary, unforeseen and foreseen, and maintain
the Property in a manner appropriate for the facility and (iii) not commit or
suffer to be committed any waste of the Property or do or suffer to be done
anything which will increase the risk of fire or other hazard to the Property or
impair the value thereof. Borrower shall keep the sidewalks, vaults, gutters and
curbs comprising, or adjacent to, the Property, clean and free from dirt, snow,
ice, rubbish and obstructions. All repairs made by Borrower shall be made with
first-class materials, in a good and workmanlike manner, shall be equal or
better in quality and class to the original work and shall comply with all
applicable Legal Requirements and Insurance Requirements. To the extent any of
the above obligations are obligations of tenants under Space Leases or other
Persons under Property Agreements, Borrower may fulfill its obligations
hereunder by causing such tenants or other Persons, as the case may be, to
perform their obligations thereunder. As used herein, the terms “repair” and
“repairs” shall be deemed to include all necessary replacements.
     (c) Borrower shall not demolish, remove, construct, or, except as otherwise
expressly provided herein, restore, or alter the Property or any portion
thereof; nor consent to or permit any such demolition, removal, construction,
restoration, addition or alteration which would diminish the value of the
Property without Lender’s prior written consent in each instance, which consent
shall not be unreasonably withheld or delayed; provided, however, Borrower may
make structural or exterior alterations to the Improvements or interior
alterations of a non-structural type without Lender’s prior written consent
provided that the aggregate cost of such alterations does not exceed $500,000.
     (d) Borrower represents and warrants to Lender that (i) there are no
fixtures, machinery, apparatus, tools, equipment or articles of personal
property attached or appurtenant to, or located on, or used in connection with
the management, operation or maintenance of the Property, except for the
Equipment and equipment leased by Borrower for the management, operation or
maintenance of the Property in accordance with the Loan Documents or that is
otherwise the property of tenants or hotel guests; (ii) the Equipment and the
leased equipment constitute all of the fixtures, machinery, apparatus, tools,
equipment and articles of personal property necessary to the proper operation
and maintenance of the Property; and (iii) all of the Equipment is free and
clear of all liens, except for the lien of this Security Instrument and the
Permitted Encumbrances, and further provided that Lender acknowledges that
certain items of software relating to the accounting system, property management
system and reservation system is presently leased to Manager, and that the
foregoing lease shall terminate, and the Property shall no longer have the use
thereof, in the event that Manager is no longer managing the Property pursuant
to the Management Agreement. All right, title and interest of Borrower in and to
all extensions, improvements, betterments, renewals and appurtenances to the
Property hereafter acquired by, or released to, Borrower or constructed,
assembled or placed by Borrower in the Property, and all changes and
substitutions of the security constituted thereby, shall be and, in each such
case, without any further mortgage, encumbrance, conveyance, assignment or other
act by Lender or Borrower, shall become subject to the lien and security
interest of this Security

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Instrument as fully and completely, and with the same effect, as though now
owned by Borrower and specifically described in this Security Instrument, but at
any and all times Borrower shall execute and deliver to Lender any documents
Lender may reasonably deem necessary or appropriate for the purpose of
specifically subjecting the same to the lien and security interest of this
Security Instrument.
     (e) Notwithstanding the provisions of this Security Instrument to the
contrary, Borrower shall have the right, at any time and from time to time, to
remove and dispose of Equipment which may have become obsolete or unfit for use
or which is no longer useful in the management, operation or maintenance of the
Property. Borrower shall promptly replace any such Equipment so disposed of or
removed with other Equipment of equal value and utility, free of any security
interest or superior title, liens or claims; except that, if by reason of
technological or other developments, replacement of the Equipment so removed or
disposed of is not necessary or desirable for the proper management, operation
or maintenance of the Property, Borrower shall not be required to replace the
same. All such replacements or additional equipment shall be deemed to
constitute “Equipment” and shall be covered by the security interest herein
granted.
ARTICLE IX: TRANSFER OR ENCUMBRANCE OF THE PROPERTY
     Section 9.01. Other Encumbrances. Borrower shall not further encumber or
permit the further encumbrance in any manner (whether by grant of a pledge,
security interest or otherwise) of the Property or any part thereof or interest
therein, including, without limitation, of the Rents therefrom other than
Permitted Liens. In addition, Borrower shall not further encumber and shall not
permit the further encumbrance in any manner (whether by grant of a pledge,
security interest or otherwise) of Borrower or any direct or indirect interest
in Borrower except as expressly permitted pursuant to this Security Instrument.
     Section 9.02. No Transfer. Borrower acknowledges that Lender has examined
and relied on the expertise of Borrower and, if applicable, each General
Partner, 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 Borrower acknowledges that Lender has a valid interest in
maintaining the value of the Property. Borrower shall not Transfer, nor permit
any Transfer, without the prior written consent of Lender, which consent Lender
may withhold in its sole and absolute discretion. 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
a 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.
     Section 9.03. Due on Sale. Lender may declare the Debt immediately due and
payable upon any Transfer or further encumbrance without Lender’s consent
without regard to whether any impairment of its security or any increased risk
of default hereunder can be demonstrated. This provision shall apply to every
Transfer or further encumbrance of the Property or any part thereof or interest
in the Property or in Borrower regardless of whether voluntary or not, or
whether or not Lender has consented to any previous Transfer or further
encumbrance of the Property or interest in Borrower.

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     Section 9.04. Permitted Transfer. Notwithstanding the foregoing provisions
of this Article IX, a sale, conveyance or transfer of the Property in its
entirety (hereinafter, “Sale”) shall be permitted hereunder provided that each
of the following terms and conditions are satisfied:
     (a) no Event of Default is then continuing hereunder or under any of the
other Loan Documents;
     (b) Lender shall have, in its reasonable discretion, consented to the Sale,
and, if the proposed Sale is to occur at any time after a Securitization, each
Rating Agency shall have delivered written confirmation that any rating issued
by such Rating Agency in connection with the Securitization will not, as a
result of the proposed Sale, be downgraded from the then current ratings
thereof, qualified or withdrawn; provided, however, that no request for consent
to the Sale will be entertained by Lender if the proposed Sale is to occur
within sixty (60) days of any contemplated sale of the Loan by Lender, whether
in connection with a Securitization or otherwise;
     (c) Borrower gives Lender written notice of the terms of the proposed Sale
not less than sixty (60) days before the date on which such Sale is scheduled to
close and, concurrently therewith, gives Lender (i) all such information
concerning the proposed transferee of the Property (hereinafter, “Buyer”) as
Lender would require in evaluating an initial extension of credit to a borrower
and Lender determines, in its sole discretion that the Buyer is acceptable to
Lender in all respects and (ii) a non-refundable application fee equal to
$7,500;
     (d) Borrower pays Lender, concurrently with the closing of such Sale, a
non-refundable assumption fee in an amount equal to one-half of one percent
(.5%) of the then outstanding Loan Amount together with all out-of-pocket costs
and expenses, including, without limitation, reasonable attorneys’ fees,
incurred by Lender in connection with the Sale;
     (e) Buyer assumes all of the obligations under the Loan Documents and,
prior to or concurrently with the closing of such Sale, Buyer executes, without
any cost or expense to Lender, such documents and agreements as Lender shall
reasonably require to evidence and effectuate said assumption and delivers such
legal opinions as Lender may require;
     (f) Borrower and Buyer execute, without any cost or expense to Lender, new
financing statements or financing statement amendments and any additional
documents reasonably requested by Lender;
     (g) Borrower delivers to Lender, without any cost or expense to Lender,
such endorsements to Lender’s title insurance policy, hazard insurance policy
endorsements or certificates and other similar materials as Lender may deem
necessary at the time of the Sale, all in form and substance satisfactory to
Lender, including, without limitation, an endorsement or endorsements to
Lender’s title insurance policy insuring the lien of this Security Instrument,
extending the effective date of such policy to the date of execution and
delivery (or, if later, of recording) of the assumption agreement referenced
above in subparagraph (e) of this Section, with no additional exceptions added
to such policy, and insuring that leasehold title to the Property is vested in
Buyer;

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     (h) Borrower executes and delivers to Lender, without any cost or expense
to Lender, a release of Lender, its officers, directors, employees and agents,
from all claims and liability relating to the transactions evidenced by the Loan
Documents, through and including the date of the closing of the Sale, which
agreement shall be in form and substance satisfactory to Lender and shall be
binding upon Buyer;
     (i) subject to the provisions of Section 18.32 hereof, such Sale is not
construed so as to relieve Borrower of any personal liability under the Note or
any of the other Loan Documents for any acts or events occurring or obligations
arising prior to or simultaneously with the closing of such Sale, and Borrower
executes, without any cost or expense to Lender, such documents and agreements
as Lender shall reasonably require to evidence and effectuate the ratification
of said personal liability;
     (j) such Sale is not construed so as to relieve any Guarantor of its
obligations under any guaranty or indemnity agreement executed in connection
with the Loan and each such Guarantor executes, without any cost or expense to
Lender, such documents and agreements as Lender shall reasonably require to
evidence and effectuate the ratification of each such guaranty agreement,
provided that if Buyer or a party associated with Buyer approved by Lender in
its sole discretion assumes the obligations of the current Guarantor under its
guaranty and Buyer or such party associated with Buyer, as applicable, executes,
without any cost or expense to Lender, a new guaranty in similar form and
substance to the existing guaranty and otherwise satisfactory to Lender, then
Lender shall release the current Guarantor from all obligations arising under
its guaranty after the closing of such Sale; and
     (k) Buyer is a Single Purpose Entity and Lender receives a
non-consolidation opinion relating to Buyer from Buyer’s counsel, which opinion
is in form and substance reasonably acceptable to Lender.
ARTICLE X: CERTIFICATES
     Section 10.01. Estoppel Certificates.
     (a) After request by Lender, Borrower, within fifteen (15) days and at its
expense, will furnish Lender with a statement, duly acknowledged and certified,
setting forth (i) the amount of the original principal amount of the Note, and
the unpaid principal amount of the Note, (ii) the rate of interest of the Note,
(iii) the date payments of interest and/or principal were last paid, (iv) any
offsets or defenses to the payment of the Debt, and, if any are alleged, the
nature thereof, (v) that the Note, this Security Instrument and the other Loan
Documents have not been modified or if modified, giving particulars of such
modification and (vi) that there has occurred and is then continuing no Event of
Default or if such Event of Default exists, the nature thereof, the period of
time it has existed, and the action being taken to remedy such Event of Default.
     (b) Within fifteen (15) days after written request by Borrower, Lender
shall furnish to Borrower a written statement confirming the amount of the Debt,
the maturity date of the Note and the date to which interest has been paid.

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     (c) Borrower shall use all reasonable efforts to obtain estoppel
certificates from tenants under Space Leases (if any) in form and substance
reasonably acceptable to Lender upon request from Lender.
ARTICLE XI: NOTICES
     Section 11.01. Notices. Any notice, demand, statement, request or consent
made hereunder shall be in writing and delivered personally or sent to the party
to whom the notice, demand or request is being made by Federal Express or other
nationally recognized overnight delivery service, as follows and shall be deemed
given when delivered personally or one (1) Business Day after being deposited
with Federal Express or such other nationally recognized delivery service:

         
 
  If to Lender:   Wachovia Bank, National Association
Commercial Real Estate Services
8739 Research Drive URP 4
NC 1075
Charlotte, North Carolina 28262
Loan Number: 502858677
Attention: Portfolio Management
Fax No.: (704) 715-0036
 
       
 
  with a copy to:   Proskauer Rose LLP
1585 Broadway
New York, New York 10036
Attn: David J. Weinberger, Esq.
Fax No.: (212) 969-2900
 
       
 
  If to Borrower:   To Borrower, c/o Chief Financial Officer, at the address
first written above,
 
       
 
  with a copy to:   Heller Ehrman LLP
333 Bush Street
San Francisco, California 94104
Attn: Judith C. Miles, Esq.
 
       
 
  If to Trustee:   To Trustee at the address first written above,

or such other address as Borrower, Trustee or Lender shall hereafter specify by
not less than ten (10) days prior written notice as provided herein; provided,
however, that notwithstanding any provision of this Article to the contrary,
such notice of change of address shall be deemed given only upon actual receipt
thereof. Rejection or other refusal to accept or the inability to deliver
because of changed addresses of which no notice was given as herein required
shall be deemed to be receipt of the notice, demand, statement, request or
consent.

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ARTICLE XII: INDEMNIFICATION
     Section 12.01. Indemnification Covering Property. In addition, and without
limitation, to any other provision of this Security Instrument or any other Loan
Document, Borrower shall protect, indemnify and save harmless Lender, Trustee
and their successors and assigns, and each of their agents, employees, officers,
directors, stockholders, partners and members (collectively, “Indemnified
Parties”) for, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature, known or unknown, contingent or otherwise, whether incurred or imposed
within or outside the judicial process, including, without limitation,
reasonable attorneys’ fees and disbursements imposed upon or incurred by or
asserted against any of the Indemnified Parties by reason of (a) ownership of
this Security Instrument, the Assignment, the Property or any part thereof or
any interest therein or receipt of any Rents; (b) any accident, injury to or
death of any person or loss of or damage to property occurring in, on or about
the Property or any part thereof or on the adjoining sidewalks, curbs, parking
areas, streets or ways; (c) any use, nonuse or condition in, on or about, or
possession, alteration, repair, operation, maintenance or management of, the
Property or any part thereof or on the adjoining sidewalks, curbs, parking
areas, streets or ways; (d) any failure on the part of Borrower to perform or
comply with any of the terms of this Security Instrument or the Assignment;
(e) performance of any labor or services or the furnishing of any materials or
other property in respect of the Property or any part thereof; (f) any claim by
brokers, finders or similar Persons claiming to be entitled to a commission in
connection with any Lease or other transaction involving the Property or any
part thereof; (g) any Imposition including, without limitation, any Imposition
attributable to the execution, delivery, filing, or recording of any Loan
Document, Lease or memorandum thereof; (h) any lien or claim arising on or
against the Property or any part thereof under any Legal Requirement or any
liability asserted against any of the Indemnified Parties with respect thereto;
(i) any claim arising out of or in any way relating to any tax or other
imposition on the making and/or recording of this Security Instrument, the Note
or any of the other Loan Documents; (j) a Default under Sections 2.02(f),
2.02(g), 2.02(k), 2.02(t) or 2.02(w) hereof, (k) the failure of any Person to
file timely with the Internal Revenue Service an accurate Form 1099-B, Statement
for Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with the Loan, or to supply a
copy thereof in a timely fashion to the recipient of the proceeds of the Loan;
(l) the claims of any lessee or any Person acting through or under any lessee or
otherwise arising under or as a consequence of any Lease or (m) the failure to
pay any insurance premiums. Notwithstanding the foregoing provisions of this
Section 12.01 to the contrary, Borrower shall have no obligation to indemnify
the Indemnified Parties pursuant to this Section 12.01 for liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
relative to the foregoing which result from Lender’s, and its successors’ or
assigns’, willful misconduct or gross negligence or if the condition or event
which gave rise to liability first arose or accrued following the date of
transfer of title to the Property to Lender in connection with any foreclosure
of the Property or acceptance by Lender of a deed-in-lieu thereof. Any amounts
payable to Lender by reason of the application of this Section 12.01 shall
constitute a part of the Debt secured by this Security Instrument and the other
Loan Documents and shall become immediately due and payable and shall bear
interest at the Default Rate from the date the liability, obligation, claim,
cost or expense is sustained by Lender, as applicable, until paid. The
provisions of this Section 12.01 shall survive the termination of this Security
Instrument whether by repayment of the Debt, foreclosure or delivery of a deed
in lieu thereof, assignment or

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otherwise. In case any action, suit or proceeding is brought against any of the
Indemnified Parties by reason of any occurrence of the type set forth in
(a) through (m) above, Borrower shall, at Borrower’s expense, take all
commercially reasonable steps to resist and defend such action, suit or
proceeding or will cause the same to be resisted and defended by counsel at
Borrower’s expense for the insurer of the liability or by counsel designated by
Borrower (unless reasonably disapproved by Lender promptly after Lender has been
notified of such counsel); provided, however, that nothing herein shall
compromise the right of Lender (or any other Indemnified Party) to appoint its
own counsel at Borrower’s expense for its defense with respect to any action
which, in the reasonable opinion of Lender or such other Indemnified Party, as
applicable, presents a conflict or potential conflict between Lender or such
other Indemnified Party that would make such separate representation advisable.
Any Indemnified Party will give Borrower prompt notice after such Indemnified
Party obtains actual knowledge of any potential claim by such Indemnified Party
for indemnification hereunder. The Indemnified Parties shall not settle or
compromise any action, proceeding or claim as to which it is indemnified
hereunder without notice to Borrower.
ARTICLE XIII: DEFAULTS
     Section 13.01. Events of Default. The Debt shall become immediately due at
the option of Lender upon any one or more of the following events (“Event of
Default”):
     (a) if the final payment or prepayment premium, if any, due under the Note
shall not be paid on Maturity;
     (b) if any monthly payment of interest and/or principal due under the Note
(other than the sums described in (a) above) shall not be fully paid on the date
upon which the same is due and payable thereunder;
     (c) if payment of any sum (other than the sums described in (a) above or
(b) above) required to be paid pursuant to the Note, this Security Instrument or
any other Loan Document shall not be paid within five (5) days after Lender
delivers written notice to Borrower that same is due and payable thereunder or
hereunder;
     (d) if Borrower, Guarantor or, if Borrower or Guarantor is a partnership,
any general partner of Borrower or Guarantor, or, if Borrower or Guarantor is a
limited liability company, any member of Borrower or Guarantor, shall institute
or cause to be instituted any proceeding for the termination or dissolution of
Borrower, Guarantor or any such general partner or member;
     (e) if the insurance policies required hereunder are not kept in full force
and effect, or if the insurance policies are not assigned and delivered to
Lender as herein provided;
     (f) if Borrower or Guarantor attempts to assign its rights under this
Security Instrument or any other Loan Document or any interest herein or
therein, or if any Transfer occurs other than in accordance with the provisions
hereof;
     (g) if any representation or warranty of Borrower or Guarantor made herein
or in any other Loan Document or in any certificate, report, financial statement
or other instrument or agreement furnished to Lender shall prove false or
misleading in any material respect;

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     (h) if Borrower, Guarantor or any general partner of Borrower or Guarantor
shall make an assignment (or with respect to Guarantor only, a general
assignment or any assignment which relates to the Property or any interest in
Borrower) for the benefit of creditors or shall admit in writing its inability
to pay its debts generally as they become due;
     (i) if a receiver, liquidator or trustee of Borrower, Guarantor or any
general partner of Borrower or Guarantor shall be appointed or if Borrower,
Guarantor or their respective general partners 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, Guarantor
or their respective general partners or if any proceeding for the dissolution or
liquidation of Borrower, Guarantor or their respective general partners shall be
instituted; however, if such appointment, adjudication, petition or proceeding
was involuntary and not consented to by Borrower, Guarantor or their respective
general partners, as applicable, upon the same not being discharged, stayed or
dismissed within sixty (60) days or if Borrower, Guarantor or their respective
general partners shall generally not be paying its debts as they become due;
     (j) if Borrower shall be in default beyond any notice or grace period, if
any, under any other mortgage or deed of trust or security agreement covering
any part of the Property without regard to its priority relative to this
Security Instrument; provided, however, this provision shall not be deemed a
waiver of the provisions of Article IX prohibiting further encumbrances
affecting the Property or any other provision of this Security Instrument;
     (k) if the Property becomes subject (i) to any lien which is superior to
the lien of this Security Instrument, other than a lien for real estate taxes
and assessments not due and payable, or (ii) to any mechanic’s, materialman’s or
other lien which is or is asserted to be superior to the lien of this Security
Instrument, and such lien shall remain undischarged (by payment, bonding, or
otherwise) for ten (10) days unless contested in accordance with the terms
hereof;
     (l) if Borrower discontinues the operation of the Property or any part
thereof for reasons other than repair or restoration arising from a casualty or
condemnation for ten (10) consecutive days or more;
     (m) except as permitted in this Security Instrument, any material
alteration, demolition or removal of any of the Improvements without the prior
consent of Lender;
     (n) if Borrower consummates a transaction which would cause this Security
Instrument or Lender’s rights under this Security Instrument, the Note or any
other Loan Document to constitute a non-exempt prohibited transaction under
ERISA or result in a violation of a state statute regulating government plans
subjecting Lender to liability for a violation of ERISA or a state statute;
     (o) if Borrower shall fail in the payment of any rent, additional rent or
other charge mentioned in or made payable by the Ground Lease when said rent or
other charge is due and payable subject to Borrower’s right, if any, to timely
and properly contest said rent or other charge, so long as (i) Borrower shall
not be in default under the Ground Lease for failure to pay

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said rent or other charge during the pendency of such contest and (ii) Borrower
is diligently and continuously contesting said rent or other charge;
     (p) if there shall occur any default by Borrower in the observance or
performance of any term, covenant or condition of the Ground Lease on the part
of Borrower to be observed or performed, and said default is not cured prior to
the expiration of any applicable grace period therein provided, or if any one or
more of the events referred to in the Ground Lease shall occur which would cause
the Ground Lease to terminate without notice or action by the Ground Lessor or
which would entitle the Ground Lessor to terminate the Ground Lease and the term
thereof by giving notice to Borrower, as lessee thereunder, or if the leasehold
estate created by the Ground Lease shall be surrendered or the Ground Lease
shall be terminated or cancelled for any reason or under any circumstances
whatsoever, or if any of the terms, covenants or conditions of the Ground Lease
shall in any manner be modified, changed, supplemented, altered, or amended
without the prior written consent of Lender, or if Borrower shall fail to
exercise any option to renew the Ground Lease or shall fail to or neglect to
pursue diligently all actions necessary to exercise such renewal rights, if any,
pursuant to the terms of the Ground Lease; or
     (q) if a default shall occur under any of the other terms, covenants or
conditions of the Note, this Security Instrument or any other Loan Document,
other than as set forth in (a) through (p) above, for ten (10) days after notice
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 or an additional sixty (60) days if Borrower is diligently and
continuously effectuating a cure of a curable non-monetary default, other than
as set forth in (a) through (n) above.
     Section 13.02. Remedies.
     (a) Upon the occurrence and during the continuance of any Event of Default,
Lender may, in addition to any other rights or remedies available to it
hereunder or under any other Loan Document, at law or in equity, take such
action, without notice or demand, as it reasonably deems advisable to protect
and enforce its rights against Borrower and in and to the Property including,
but not limited to, the following actions, each of which may be pursued singly,
concurrently or otherwise, at such time and in such order as Lender may
determine, in its sole discretion, without impairing or otherwise affecting any
other rights and remedies of Lender hereunder, at law or in equity: (i) declare
all or any portion of the unpaid Debt to be immediately due and payable;
provided, however, that upon the occurrence of any of the events specified in
Section 13.01(i), the entire Debt will be immediately due and payable without
notice or demand or any other declaration of the amounts due and payable; or
(ii) bring, or instruct Trustee to bring, an action to foreclose this Security
Instrument and without applying for a receiver for the Rents, but subject to the
rights of the tenants under the Leases, enter into or upon the Property or any
part thereof, either personally or by its agents, nominees or attorneys, and
dispossess Borrower and its agents and servants therefrom, and thereupon Lender
may (A) use, operate, manage, control, insure, maintain, repair, restore and
otherwise deal with all and every part of the Property and conduct the business
thereat, (B) make alterations, additions, renewals, replacements and
improvements to or on the Property or any part thereof, (C) exercise all rights
and powers of Borrower with respect to the Property or any part thereof, whether
in the name of Borrower or otherwise, including, without limitation, the right
to make, cancel, enforce or

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modify Leases, obtain and evict tenants, and demand, sue for, collect and
receive all earnings, revenues, rents, issues, profits and other income of the
Property and every part thereof and Borrower shall have no liability under this
clause (C) for any actions taken by Lender which are grossly negligent or which
constitute willful misconduct, and (D) apply the receipts from the Property or
any part thereof to the payment of the Debt, after deducting therefrom all
expenses (including, without limitation, reasonable attorneys’ fees and
disbursements) reasonably incurred in connection with the aforesaid operations
and all amounts necessary to pay the Impositions, insurance and other charges in
connection with the Property or any part thereof, as well as just and reasonable
compensation for the services of Lender’s third-party agents; or (iii) have an
appraisal or other valuation of the Property or any part thereof performed by an
Appraiser (and Borrower covenants and agrees it shall cooperate in causing any
such valuation or appraisal to be performed) and any cost or expense incurred by
Lender in connection therewith shall constitute a portion of the Debt and be
secured by this Security Instrument and shall be immediately due and payable to
Lender with interest, at the Default Rate, until the date of receipt by Lender;
or (iv) sell, or instruct Trustee to sell, the Property or institute, or
instruct Trustee to institute, proceedings for the complete foreclosure of this
Security Instrument, or take such other action as may be allowed pursuant to
Legal Requirements, at law or in equity, for the enforcement of this Security
Instrument in which case the Property or any part thereof may be sold for cash
or credit in one or more parcels; or (v) with or without entry, and to the
extent permitted and pursuant to the procedures provided by applicable Legal
Requirements, institute proceedings for the partial foreclosure of this Security
Instrument, or take such other action as may be allowed pursuant to Legal
Requirements, at law or in equity, for the enforcement of this Security
Instrument for the portion of the Debt then due and payable, subject to the lien
of this Security Instrument continuing unimpaired and without loss of priority
so as to secure the balance of the Debt not then due; or (vi) sell, or instruct
Trustee to sell, the Property or any part thereof and any or all estate, claim,
demand, right, title and interest of Borrower therein and rights of redemption
thereof, pursuant to power of sale or otherwise, at one or more sales, in whole
or in parcels, in any order or manner, at such time and place, upon such terms
and after such notice thereof as may be required or permitted by law, at the
discretion of Lender, and in the event of a sale, by foreclosure or otherwise,
of less than all of the Property, this Security Instrument shall continue as a
lien on the remaining portion of the Property; or (vii) institute an action,
suit or proceeding in equity for the specific performance of any covenant,
condition or agreement contained in the Loan Documents, or any of them; or
(viii) recover judgment on the Note or any guaranty either before, during or
after (or in lieu of) any proceedings for the enforcement of this Security
Instrument; or (ix) apply, or direct Trustee to apply, ex parte, for the
appointment of a custodian, trustee, receiver, keeper, liquidator or conservator
of the Property or any part thereof, irrespective of the adequacy of the
security for the Debt and without regard to the solvency of Borrower or of any
Person liable for the payment of the Debt, to which appointment Borrower does
hereby consent and such receiver or other official shall have all rights and
powers permitted by applicable law and such other rights and powers as the court
making such appointment may confer, but the appointment of such receiver or
other official shall not impair or in any manner prejudice the rights of Lender
to receive the Rent with respect to any of the Property pursuant to this
Security Instrument or the Assignment; or (x) require, at Lender’s option,
Borrower to pay monthly in advance to Lender, or any receiver appointed to
collect the Rents, the fair and reasonable rental value for the use and
occupation of any portion of the Property occupied by Borrower and may require
Borrower to vacate and surrender possession to Lender of the

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Property or to such receiver and Borrower may be evicted by summary proceedings
or otherwise; or (xi) without notice to Borrower (A) apply all or any portion of
the cash collateral in any Sub-Account and Escrow Account, including any
interest and/or earnings therein, to carry out the obligations of Borrower under
this Security Instrument and the other Loan Documents, to protect and preserve
the Property and for any other purpose permitted under this Security Instrument
and the other Loan Documents (but in all events subject to Lender’s obligations
pursuant to Section 5.05 hereof) and/or (B) have all or any portion of such cash
collateral immediately paid to Lender to be applied against the Debt in the
order and priority set forth in the Note (but in all events subject to Lender’s
obligations pursuant to Section 5.05 hereof); or (xii) pursue any or all such
other rights or remedies as Lender and Trustee may have under applicable law or
in equity; provided, however, that the provisions of this Section 13.02(a) shall
not be construed to extend or modify any of the notice requirements or grace
periods provided for hereunder or under any of the other Loan Documents.
Borrower hereby waives, to the fullest extent permitted by Legal Requirements,
any defense Borrower might otherwise raise or have by the failure to make any
tenants parties defendant to a foreclosure proceeding and to foreclose their
rights in any proceeding instituted by Lender or Trustee.
     (b) Any time after and during the continuance of an Event of Default
Trustee, at the request of Lender, shall have the power to sell the Property or
any part thereof at public auction, in such manner, at such time and place, upon
such terms and conditions, and upon such public notice as Lender may deem best
for the interest of Lender, or as may be required or permitted by applicable
law, consisting of advertisement in a newspaper of general circulation in the
jurisdiction and for such period as applicable law may require and at such other
times and by such other methods, if any, as may be required by law to convey the
Property by Lender’s assignment of ground lease with special warranty of title,
to and at the cost of the purchaser, who shall not be liable to see to the
application of the purchase money. The proceeds or avails of any sale made under
or by virtue of this Section 13.02, together with any other sums which then may
be held by Lender under this Security Instrument, whether under the provisions
of this Section 13.02 or otherwise, shall be applied as follows:
     First: To the payment of the third-party costs and expenses reasonably
incurred in connection with any such sale and to advances, fees and expenses,
including, without limitation, reasonable fees and expenses of Lender’s and
Trustee’s legal counsel as applicable, and of any judicial proceedings wherein
the same may be made, and of all expenses, liabilities and advances reasonably
made or incurred by Lender or Trustee under this Security Instrument, together
with interest as provided herein on all such advances made by Lender, and all
Impositions, except any Impositions or other charges subject to which the
Property shall have been sold;
     Second: To the payment of the whole amount then due, owing and unpaid under
the Note for principal and interest thereon, with interest on such unpaid
principal at the Default Rate from the date of the occurrence of the earliest
Event of Default that formed a basis for such sale until the same is paid;
     Third: To the payment of any other portion of the Debt required to be paid
by Borrower pursuant to any provision of this Security Instrument, the Note, or
any of the other Loan Documents; and

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     Fourth: The surplus, if any, to Borrower unless otherwise required by Legal
Requirements.
     Lender and any receiver or custodian of the Property or any part thereof
shall be liable to account for only those rents, issues, proceeds and profits
actually received by it.
     (c) Lender or Trustee, as applicable, may adjourn from time to time any
sale by it to be made under or by virtue of this Security Instrument by
announcement at the time and place appointed for such sale or for such adjourned
sale or sales and, except as otherwise provided by any applicable provision of
Legal Requirements, Lender or Trustee, without further notice or publication,
may make such sale at the time and place to which the same shall be so
adjourned.
     (d) Upon the completion of any sale or sales made by Lender or Trustee
under or by virtue of this Section 13.02, Lender or Trustee, as applicable, or
any officer of any court empowered to do so, shall execute and deliver to the
accepted purchaser or purchasers a good and sufficient instrument, or good and
sufficient instruments, granting, conveying, assigning and transferring all
estate, right, title and interest in and to the property and rights sold. Lender
is hereby irrevocably appointed the true and lawful attorney-in-fact of Borrower
(coupled with an interest), in its name and stead, to make all necessary
conveyances, assignments, transfers and deliveries of the property and rights so
sold and for that purpose Lender may execute all necessary instruments of
conveyance, assignment, transfer and delivery, and may substitute one or more
Persons with like power, Borrower hereby ratifying and confirming all that its
said attorney-in-fact or such substitute or substitutes shall lawfully do by
virtue hereof. Nevertheless, Borrower, if so requested by Lender, shall ratify
and confirm any such sale or sales by executing and delivering to Lender, or to
such purchaser or purchasers all such instruments as may be advisable, in the
sole judgement of Lender, for such purpose, and as may be designated in such
request. Any such sale or sales made under or by virtue of this Section 13.02,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or a judgment or decree of foreclosure and sale, shall
operate to divest all the estate, right, title, interest, claim and demand
whatsoever, whether at law or in equity, of Borrower in and to the property and
rights so sold, and shall, to the fullest extent permitted under Legal
Requirements, be a perpetual bar, both at law and in equity against Borrower and
against any and all Persons claiming or who may claim the same, or any part
thereof, from, through or under Borrower.
     (e) In the event of any sale made under or by virtue of this Section 13.02
(whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or a judgment or decree of foreclosure and sale), the
entire Debt immediately thereupon shall, anything in the Loan Documents to the
contrary notwithstanding, become due and payable.
     (f) Upon any sale made under or by virtue of this Section 13.02 (whether
made under the power of sale herein granted or under or by virtue of judicial
proceedings or a judgment or decree of foreclosure and sale), Lender may bid for
and acquire the Property or any part thereof and in lieu of paying cash therefor
may make settlement for the purchase price by crediting upon the Debt the net
sales price after deducting therefrom the expenses of the sale and the costs of
the action.

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     (g) No recovery of any judgment by Lender and no levy of an execution under
any judgment upon the Property or any part thereof or upon any other property of
Borrower shall release the lien of this Security Instrument upon the Property or
any part thereof, or any liens, rights, powers or remedies of Lender hereunder,
but such liens, rights, powers and remedies of Lender shall continue unimpaired
until all amounts due under the Note, this Security Instrument and the other
Loan Documents are paid in full.
     (h) Upon the exercise by Lender of any power, right, privilege, or remedy
pursuant to this Security Instrument which requires any consent, approval,
registration, qualification, or authorization of any Governmental Authority
(including, if applicable, Ground Lessor), Borrower agrees to execute and
deliver, or will cause the execution and delivery of, all applications,
certificates, instruments, assignments and other documents and papers that
Lender or any purchaser of the Property may be required to obtain for such
governmental consent, approval, registration, qualification, or authorization
and Lender is hereby irrevocably appointed the true and lawful attorney-in-fact
of Borrower (coupled with an interest), in its name and stead, to execute all
such applications, certificates, instruments, assignments and other documents
and papers.
     (i) Nothing contained in this Security Instrument or any other Loan
Document shall waive any defense by Borrower that Lender and/or Trustee has
failed to comply with the terms of this Security Instrument and the other Loan
Documents.
     Section 13.03. Payment of Debt After Default. If, following the occurrence
of any Event of Default, Borrower shall tender payment of an amount sufficient
to satisfy the Debt in whole or in part at any time prior to a foreclosure sale
of the Property, and if at the time of such tender prepayment of the principal
balance of the Note is not permitted by the Note or this Security Instrument,
Borrower shall, in addition to the entire Debt, also pay to Lender a sum equal
to (a) all accrued interest on the Note and all other fees, charges and sums due
and payable hereunder, (b) all costs and expenses in connection with the
enforcement of Lender’s rights hereunder, and (c) a prepayment charge (the
“Prepayment Charge”) equal to the greater of (i) 2% of the Principal Amount and
(ii) the present value of a series of payments each equal to the Payment
Differential (as hereinafter defined) and payable on each Payment Date over the
remaining original term of the Note and on the Payment Date occurring two months
prior to the Maturity Date, discounted at the Reinvestment Yield (as hereinafter
defined) for the number of months remaining as of the date of such prepayment to
each such Payment Date and the Payment Date occurring two months prior to the
Maturity Date. The term “Payment Differential” shall mean an amount equal to
(i) the Interest Rate less the Reinvestment Yield, divided by (ii) twelve
(12) and multiplied by (iii) the Principal Amount after application of the
constant monthly payment due under the Note on the date of such prepayment,
provided that the Payment Differential shall in no event be less than zero. The
term “Reinvestment Yield” shall mean an amount equal to the lesser of (i) the
yield on the U.S. Treasury issue (primary issue) with a maturity date closest to
the Payment Date occurring two months prior to the Maturity Date, or (ii) the
yield on the U.S. Treasury issue (primary issue) with a term equal to the
remaining average life of the indebtedness evidenced by the Note, with each such
yield being based on the bid price for such issue as published in the Wall
Street Journal on the date that is fourteen (14) days prior to the date of such
prepayment set forth in the notice of prepayment (or, if such bid price is not
published on that date, the next preceding date on which such bid price is so

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published) and converted to a monthly compounded nominal yield. In addition to
the amounts described above, if, during the first (1st) Loan Year, Borrower
shall tender payment of an amount sufficient to satisfy the Debt in whole or in
part following the occurrence of any Event of Default, Borrower shall, in
addition to the entire Debt, also pay to Lender a sum equal to three percent
(3%) of the Principal Amount. Failure of Lender to require any of these payments
shall not constitute a waiver of the right to require the same in the event of
any subsequent default or to exercise any other remedy available to Lender
hereunder, under any other Loan Document or at law or in equity. In the event
that any prepayment charge is due hereunder, Lender shall deliver to Borrower a
statement setting forth the amount and determination of the prepayment fee, and,
provided that Lender shall have in good faith applied the formula described
above, Borrower shall not have the right to challenge the calculation or the
method of calculation set forth in any such statement in the absence of manifest
error, which calculation may be made by Lender on any day during the fifteen
(15) day period preceding the date of such prepayment. Lender shall not be
obligated or required to have actually reinvested the prepaid principal balance
at the Reinvestment Yield or otherwise as a condition to receiving the
prepayment charge. If at the time of such tender, prepayment of the principal
balance of the Note is permitted, such tender by Borrower shall be deemed to be
a voluntary prepayment of the principal balance of the Note, and Borrower shall,
in addition to the entire Debt, also pay to Lender the applicable prepayment
consideration specified in the Note and this Security Instrument.
Notwithstanding the foregoing, Lender acknowledges that, pursuant to
Section 15.01, the Loan may be prepaid at any time in accordance with said
Section 15.01 and that upon the occurrence of an Event of Default the only
prepayment charge due pursuant to this Section 13.03 will be as set forth in
Section 15.01.
     Section 13.04. Possession of the Property. Upon the occurrence and during
the continuance of any Event of Default and the acceleration of the Debt or any
portion thereof, Borrower, if an occupant of the Property or any part thereof,
upon demand of Lender, shall immediately surrender possession of the Property
(or the portion thereof so occupied) to Lender, and if Borrower is permitted to
remain in possession, the possession shall be as a month-to-month tenant of
Lender and, on demand, Borrower shall pay to Lender monthly, in advance, a
reasonable rental for the space so occupied and in default thereof Borrower may
be dispossessed. The covenants herein contained may be enforced by a receiver of
the Property or any part thereof. Nothing in this Section 13.04 shall be deemed
to be a waiver of the provisions of this Security Instrument making the Transfer
of the Property or any part thereof without Lender’s prior written consent an
Event of Default.
     Section 13.05. Interest After Default. If any amount due under the Note,
this Security Instrument or any of the other Loan Documents is not paid within
any applicable notice and grace period after same is due, whether such date is
the stated due date, any accelerated due date or any other date or at any other
time specified under any of the terms hereof or thereof, then, in such event,
Borrower shall pay interest on the amount not so paid from and after the date on
which such amount first becomes due at the Default Rate; and such interest shall
be due and payable at such rate until the earlier of the cure of all Events of
Default or the payment of the entire amount due to Lender, whether or not any
action shall have been taken or proceeding commenced to recover the same or to
foreclose this Security Instrument. All unpaid and accrued interest shall be
secured by this Security Instrument as part of the Debt. Nothing in this Section

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13.05 or in any other provision of this Security Instrument shall constitute an
extension of the time for payment of the Debt.
     Section 13.06. Borrower’s Actions After Default. After the happening of any
Event of Default and immediately upon the commencement of any action, suit or
other legal proceedings by Lender to obtain judgment for the Debt, or of any
other nature in aid of the enforcement of the Loan Documents, Borrower will
(a) after receipt of notice of the institution of any such action, waive the
issuance and service of process and enter its voluntary appearance in such
action, suit or proceeding, and (b) if required by Lender, consent to the
appointment of a receiver or receivers of the Property or any part thereof and
of all the earnings, revenues, rents, issues, profits and income thereof.
     Section 13.07. Control by Lender After Default. Notwithstanding the
appointment during the continuance of an Event of Default of any custodian,
receiver, liquidator or trustee of Borrower, or of any of its property, or of
the Property or any part thereof, to the extent permitted by Legal Requirements,
Lender shall be entitled to obtain possession and control of all property now
and hereafter covered by this Security Instrument and the Assignment in
accordance with the terms hereof.
     Section 13.08. Right to Cure Defaults. (a) Upon the occurrence and during
the continuance of any Event of Default, Lender or its agents may, but without
any obligation to do so and without notice to or demand on Borrower and without
releasing Borrower from any obligation hereunder, make or do the same in such
manner and to such extent as Lender may deem necessary to protect the security
hereof. Lender and its agents are authorized to enter upon the Property or any
part thereof for such purposes, or appear in, defend, or bring any action or
proceedings to protect Lender’s interest in the Property or any part thereof or
to foreclose this Security Instrument or collect the Debt, and the cost and
expense thereof (including reasonable attorneys’ fees to the extent permitted by
law), with interest as provided in this Section 13.08, shall constitute a
portion of the Debt and shall be immediately due and payable to Lender upon
demand. All such costs and expenses incurred by Lender or its agents in
remedying such Event of Default or in appearing in, defending, or bringing any
such action or proceeding shall bear interest at the Default Rate, for the
period from the date so demanded to the date of payment to Lender. All such
costs and expenses incurred by Lender or its agents together with interest
thereon calculated at the above rate shall be deemed to constitute a portion of
the Debt and be secured by this Security Instrument.
     (b) If Lender makes any payment or advance that Lender is authorized by
this Security Instrument to make in the place and stead of Borrower (i) relating
to the Impositions or tax liens asserted against the Property, Lender may do so
according to any bill, statement or estimate procured from the appropriate
public office without inquiry into the accuracy of the bill, statement or
estimate or into the validity of any of the Impositions or the tax liens or
claims thereof; (ii) relating to any apparent or threatened adverse title, lien,
claim of lien, encumbrance, claim or charge, Lender will be the sole judge of
the legality or validity of same; or (iii) relating to any other purpose
authorized by this Security Instrument but not enumerated in this Section 13.08,
Lender may do so whenever, in its judgment and discretion, the payment or
advance seems necessary or desirable to protect the Property and the full
security interest intended to be created by this Security Instrument. In
connection with any payment or advance made pursuant

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to this Section 13.08, Lender has the option and is authorized, but in no event
shall be obligated, to obtain a continuation report of title prepared by a title
insurance company. The payments and the advances made by Lender pursuant to this
Section 13.08 and the cost and expenses of said title report will be due and
payable by Borrower on demand, together with interest at the Default Rate, and
will be secured by this Security Instrument.
     Section 13.09. Late Payment Charge. If any portion of the Debt is not paid
in full on or before the day on which it is due and payable hereunder, Borrower
shall pay to Lender an amount equal to five percent (5%) of such unpaid portion
of the Debt (“Late Charge”) to defray the expense incurred by Lender in handling
and processing such delinquent payment, and such amount shall constitute a part
of the Debt.
     Section 13.10. Recovery of Sums Required to Be Paid. Lender shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due and payable hereunder
(after the expiration of any grace period or the giving of any notice herein
provided, if any), without regard to whether or not the balance of the Debt
shall be due, and without prejudice to the right of Lender thereafter to bring
an action of foreclosure, or any other action, for a default or defaults by
Borrower existing at the time such earlier action was commenced.
     Section 13.11. Marshalling and Other Matters. Borrower hereby waives, to
the fullest extent permitted by law, the benefit of all appraisement, valuation,
stay, extension, reinstatement, redemption (both equitable and statutory) and
homestead laws now or hereafter in force and all rights of marshalling in the
event of any sale hereunder of the Property or any part thereof or any interest
therein. Further, Borrower hereby expressly waives any and all rights of
redemption from sale under any order or decree of foreclosure of this Security
Instrument on behalf of Borrower, whether equitable or statutory and on behalf
of each and every Person acquiring any interest in or title to the Property or
any part thereof subsequent to the date of this Security Instrument and on
behalf of all Persons to the fullest extent permitted by applicable law.
     Section 13.12. Tax Reduction Proceedings. During the continuance of an
Event of Default, Borrower shall be deemed to have appointed Lender as its
attorney-in-fact to seek a reduction or reductions in the assessed valuation of
the Property for real property tax purposes or for any other purpose and to
prosecute any action or proceeding in connection therewith. This power, being
coupled with an interest, shall be irrevocable for so long as any part of the
Debt remains unpaid and any Event of Default shall be continuing.
     Section 13.13. General Provisions Regarding Remedies. (a) Right to
Terminate Proceedings. Lender or Trustee may terminate or rescind any proceeding
or other action brought in connection with its exercise of the remedies provided
in Section 13.02 at any time before the conclusion thereof, as determined in
Lender’s sole discretion and without prejudice to Lender or Trustee.
     (b) No Waiver or Release. The failure of Lender or Trustee to exercise any
right, remedy or option provided in the Loan Documents shall not be deemed a
waiver of such right, remedy or option or of any covenant or obligation
contained in the Loan Documents. No acceptance by Lender of any payment after
the occurrence of an Event of Default and no

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payment by Lender of any payment or obligation for which Borrower is liable
hereunder shall be deemed to waive or cure any Event of Default. No sale of all
or any portion of the Property, no forbearance on the part of Lender, and no
extension of time for the payment of the whole or any portion of the Debt or any
other indulgence given by Lender to Borrower or any other Person, shall operate
to release or in any manner affect the interest of Lender in the Property or the
liability of Borrower to pay the Debt. No waiver by Lender shall be effective
unless it is in writing and then only to the extent specifically stated.
     (c) No Impairment; No Releases. The interests and rights of Lender under
the Loan Documents shall not be impaired by any indulgence, including (i) any
renewal, extension or modification which Lender may grant with respect to any of
the Debt; (ii) any surrender, compromise, release, renewal, extension, exchange
or substitution which Lender may grant with respect to the Property or any
portion thereof; or (iii) any release or indulgence granted to any maker,
endorser, guarantor or surety of any of the Debt.
ARTICLE XIV: COMPLIANCE WITH REQUIREMENTS
     Section 14.01. Compliance with Legal Requirements. (a) Borrower shall
promptly comply with all present and future Legal Requirements, foreseen and
unforeseen, ordinary and extraordinary, whether requiring structural or
nonstructural repairs or alterations including, without limitation, all zoning,
subdivision, building, safety and environmental protection, land use and
development Legal Requirements, all Legal Requirements which may be applicable
to the curbs adjoining the Property or to the use or manner of use thereof, and
all rent control, rent stabilization and all other similar Legal Requirements
relating to rents charged and/or collected in connection with the Leases.
     (b) Borrower shall have the right to contest by appropriate legal
proceedings diligently conducted in good faith, without cost or expense to
Lender or Trustee, the validity or application of any Legal Requirement and to
suspend compliance therewith if permitted under applicable Legal Requirements,
provided (i) failure to comply therewith may not subject Lender or Trustee to
any civil or criminal liability, (ii) prior to and during such contest, Borrower
shall furnish to Lender security reasonably satisfactory to Lender, in its
discretion, against loss or injury by reason of such contest or non-compliance
with such Legal Requirement, (iii) no Default or Event of Default shall exist
during such proceedings and such contest shall not otherwise violate any of the
provisions of any of the Loan Documents, (iv) such contest shall not, (unless
Borrower shall comply with the provisions of clause (ii) of this
Section 14.01(b)) subject the Property to any lien or encumbrance the
enforcement of which is not suspended or otherwise affect the priority of the
lien of this Security Instrument, (v) such contest shall not affect the
ownership, use or occupancy of the Property, (vi) the Property or any part
thereof or any interest therein shall not be in any danger of being sold,
forfeited or lost by reason of such contest by Borrower, (vii) Borrower shall
give Lender prompt notice of the commencement of such proceedings and, upon
request by Lender, notice of the status of such proceedings and/or confirmation
of the continuing satisfaction of the conditions set forth in clauses (i) —
(vi) of this Section 14.01(b), and (viii) upon a final determination of such
proceeding, Borrower shall take all steps necessary to comply with any
requirements arising therefrom.

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     (c) Borrower shall at all times comply with all applicable Legal
Requirements with respect to the construction, use and maintenance of any vaults
adjacent to the Property. If by reason of the failure to pay taxes, assessments,
charges, permit fees, franchise taxes or levies of any kind or nature, the
continued use of the vaults adjacent to Property or any part thereof is
discontinued, Borrower nevertheless shall, with respect to any vaults which may
be necessary for the continued use of the Property, take such steps (including
the making of any payment) to ensure the continued use of vaults or
replacements.
     Section 14.02. Compliance with Recorded Documents; No Future Grants.
Borrower shall promptly perform and observe or cause to be performed and
observed, all of the material terms, covenants and conditions of all Property
Agreements and all things necessary to preserve intact and unimpaired any and
all appurtenances or other interests or rights affecting the Property.
ARTICLE XV: PREPAYMENT
     Section 15.01. Prepayment. (a) Except as set forth in this Section 15.01 or
as otherwise specifically provided in the Loan Documents, no prepayment of the
Debt may be made in whole or in part.
     (b) Borrower may prepay the Loan in whole, but not in part, as of the last
day of an Interest Accrual Period in accordance with the following provisions:
     (i) Lender shall have received from Borrower, not less than thirty
(30) days’, nor more than ninety (90) days’, prior written notice specifying the
date proposed for such prepayment and the amount which is to be prepaid.
     (ii) Borrower shall also pay to Lender all interest due through and
including the last day of the Interest Accrual Period in which such prepayment
is being made, together with any and all other amounts due and owing pursuant to
the terms of the Note, this Security Instrument or the other Loan Documents.
     (iii) Any partial prepayment shall be in a minimum amount not less than
$25,000 and shall be in whole multiples of $1,000 in excess thereof.
     (iv) In the event that the Loan is prepaid on or prior to the Payment Date
in December, 2011, Borrower shall pay to Lender, together with such prepayment
and all other amounts due in connection therewith, a non-refundable amount which
shall be deemed earned by Lender upon the funding of the Loan and shall not
count to or be credited to payment of the Principal Amount, any interest thereon
or any other amounts payable under the Note, the Security Instrument or any of
the Loan Documents, equal to the greater of (x) one percent (1%) of the
Principal Amount being repaid and (y) the Yield Maintenance Premium. For the
purposes hereof, the term “Yield Maintenance Premium” shall mean the premium
which shall be the product of (A) a fraction, the numerator of which is the
positive excess, if any, of (1) the present value of all future payments of
principal and interest due pursuant to the Note, including the principal amount
due at maturity, to be made on the Note before the prepayment in question,
discounted at an interest rate per annum equal to the average yield for “This
Week” as

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reported by the Federal Reserve Board in Federal Reserve Statistical Release
H.15 (519) (the “Treasury Constant Maturity Yield Index”) published during the
second full week preceding the date on which such premium is payable for
instruments having a maturity coterminous with the Payment Date occurring in
December, 2011 (the “Lockout Expiration Date”), over (2) the Principal Amount
evidenced by the Note immediately before such prepayment, and the denominator of
which is the Principal Amount evidenced by the Note immediately prior to the
prepayment, and (B) the Principal Amount evidenced by the Note being prepaid;
provided, however, that if there is no Treasury Constant Maturity Yield Index
for instruments having a maturity coterminous with the Lockout Expiration Date,
then the index referred to in (1) above shall be equal to the weighted average
yield to maturity of the Treasury Constant Maturity Yield Indices with
maturities next longer and shorter than such remaining average life to maturity,
calculated by averaging (and rounding upward to the nearest whole multiple of
1/100 of 1% per annum, if the average is not such a multiple) the yields of the
relevant Treasury Constant Maturity Yield Indices (rounded, if necessary, to the
nearest 1/100 of 1% with any figure of 1/200 of 1% or above rounded upward).
Subsequent to the Payment Date occurring in December, 2011, no sum shall be due
pursuant to this paragraph 15.01(b)(iv).
ARTICLE XVI: ENVIRONMENTAL COMPLIANCE
     Section 16.01. Covenants, Representations and Warranties.
     (a) Borrower has not, at any time, and, to Borrower’s knowledge after due
inquiry and investigation, except as set forth in the Environmental Report, no
other Person has at any time, handled, buried, stored, retained, refined,
transported, processed, manufactured, generated, produced, spilled, allowed to
seep, leak, escape or leach, or pumped, poured, emitted, emptied, discharged,
injected, dumped, transferred or otherwise disposed of or dealt with Hazardous
Materials on, to or from the Premises or any other real property owned and/or
occupied by Borrower other than Permitted Materials, and Borrower does not
intend to and shall not use the Property or any part thereof or any such other
real property for the purpose of handling, burying, storing, retaining,
refining, transporting, processing, manufacturing, generating, producing,
spilling, seeping, leaking, escaping, leaching, pumping, pouring, emitting,
emptying, discharging, injecting, dumping, transferring or otherwise disposing
of or dealing with Hazardous Materials, except for use and storage for use of
heating oil, cleaning fluids, pesticides and other substances customarily used
in the operation of properties that are being used for the same purposes as the
Property is presently being used, provided such use and/or storage for use is in
compliance with the requirements hereof and the other Loan Documents and does
not give rise to liability under applicable Legal Requirements or Environmental
Statutes or be the basis for a lien against the Property or any part thereof
(collectively, “Permitted Materials”). In addition, without limitation to the
foregoing provisions, Borrower represents and warrants that, to the best of its
knowledge, after due inquiry and investigation, except as previously disclosed
in writing to Lender, including the Environmental Report, there is no asbestos
in, on, over, or under all or any portion of the fire-proofing or any other
portion of the Property.
     (b) Borrower, after due inquiry and investigation, knows of no seepage,
leak, escape, leach, discharge, injection, release, emission, spill, pumping,
pouring, emptying or dumping of

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Hazardous Materials into waters on, under or adjacent to the Property or any
part thereof or any other real property owned and/or occupied by Borrower, or
onto lands from which such Hazardous Materials might seep, flow or drain into
such waters, except as disclosed in the Environmental Report and other than
Permitted Materials.
     (c) Borrower shall not permit any Hazardous Materials to be handled,
buried, stored, retained, refined, transported, processed, manufactured,
generated, produced, spilled, allowed to seep, leak, escape or leach, or to be
pumped, poured, emitted, emptied, discharged, injected, dumped, transferred or
otherwise disposed of or dealt with on, under, to or from the Property or any
portion thereof at any time, except for use and storage for use of Permitted
Materials.
     (d) Other than as described in the Environmental Report, Borrower
represents and warrants that no actions, suits, or proceedings have been
commenced, or are pending, or to the knowledge of Borrower, are threatened with
respect to any Legal Requirement governing the use, manufacture, storage,
treatment, transportation, or processing of Hazardous Materials with respect to
the Property or any part thereof. Borrower has received no written notice of,
and, except as disclosed in the Environmental Report, after due inquiry, has no
knowledge of any fact, condition, occurrence or circumstance which with notice
or passage of time or both would give rise to a claim under or pursuant to any
Environmental Statute pertaining to Hazardous Materials on, in, under or
originating from the Property or any part thereof or any other real property
owned or occupied by Borrower or arising out of the conduct of Borrower,
including, without limitation, pursuant to any Environmental Statute.
     (e) Borrower has not waived any Person’s liability with regard to Hazardous
Materials in, on, under or around the Property, nor has Borrower retained or
assumed, contractually or by operation of law, any other Person’s liability
relative to Hazardous Materials or any claim, action or proceeding relating
thereto.
     (f) In the event that there shall be filed a lien against the Property or
any part thereof pursuant to any Environmental Statute pertaining to Hazardous
Materials, Borrower shall, within sixty (60) days or, in the event that the
applicable Governmental Authority has commenced steps to cause the Premises or
any part thereof to be sold pursuant to the lien, within fifteen (15) days, from
the date that Borrower receives notice of such lien, either (i) pay the claim
and remove the lien from the Property, or (ii) furnish (A) a bond satisfactory
to Lender in the amount of the claim out of which the lien arises, (B) a cash
deposit in the amount of the claim out of which the lien arises, or (C) other
security reasonably satisfactory to Lender in an amount sufficient to discharge
the claim out of which the lien arises.
     (g) Borrower represents and warrants that (i) except as disclosed in the
Environmental Report, Borrower has no knowledge of any violation of any
Environmental Statute or any Environmental Problem in connection with the
Property, nor has Borrower been requested or required by any Governmental
Authority to perform any remedial activity or other responsive action in
connection with any Environmental Problem, and (ii) neither the Property nor any
other property owned by Borrower is included or, to Borrower’s best knowledge,
after due inquiry and investigation, proposed for inclusion on the National
Priorities List issued pursuant to CERCLA by the United States Environmental
Protection Agency (the “EPA”) or on the inventory of other potential “Problem”
sites issued by the EPA or has been identified by the

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EPA as a potential CERCLA site or included or, to Borrower’s knowledge, after
due inquiry and investigation, proposed for inclusion on any list or inventory
issued pursuant to any other Environmental Statute, if any, or issued by any
other Governmental Authority. Borrower covenants that Borrower will comply with
all Environmental Statutes affecting or imposed upon Borrower or the Property.
     (h) Borrower covenants that it shall promptly notify Lender of the presence
and/or release of any Hazardous Materials (except for use and storage for use of
Permitted Materials) and of any request for information or any inspection of the
Property or any part thereof by any Governmental Authority with respect to any
Hazardous Materials and provide Lender with copies of such request and any
response to any such request or inspection. Borrower covenants that it shall, in
compliance with applicable Legal Requirements, conduct and complete all
investigations, studies, sampling and testing (and promptly shall provide Lender
with copies of any such studies and the results of any such test) and all
remedial, removal and other actions necessary to clean up and remove all
Hazardous Materials in, on, over, under, from or affecting the Property or any
part thereof in accordance with all such Legal Requirements applicable to the
Property or any part thereof to the reasonable satisfaction of Lender.
     (i) Following the occurrence and during the continuance of an Event of
Default hereunder, and without regard to whether Lender shall have taken
possession of the Property or a receiver has been requested or appointed or any
other right or remedy of Lender has or may be exercised hereunder or under any
other Loan Document, Lender shall have the right (but no obligation) to conduct
such investigations, studies, sampling and/or testing of the Property or any
part thereof as Lender may, in its discretion, determine to conduct, relative to
Hazardous Materials. All costs and expenses incurred in connection therewith
including, without limitation, consultants’ fees and disbursements and
laboratory fees, shall constitute a part of the Debt and shall, upon demand by
Lender, be immediately due and payable and shall bear interest at the Default
Rate from the date so demanded by Lender until reimbursed. Borrower shall, at
its sole cost and expense, fully and expeditiously cooperate in all such
investigations, studies, samplings and/or testings including, without
limitation, providing all relevant information and making knowledgeable people
available for interviews.
     (j) Other than as described in the Environmental Report, Borrower
represents and warrants that all paint and painted surfaces existing within the
interior or on the exterior of the Improvements are not flaking, peeling,
cracking, blistering, or chipping, and do not contain lead or are maintained in
a condition that prevents exposure of young children to lead-based paint, as of
the date hereof, and that the current inspections, operation, and maintenance
program at the Property with respect to lead-based paint is consistent with FNMA
guidelines and sufficient to ensure that all painted surfaces within the
Property shall be maintained in a condition that prevents exposure of tenants to
lead-based paint. To Borrower’s knowledge, there are currently no claims for
adverse health effects from exposure on the Property to lead-based paint or
requests for the investigation, assessment or removal of lead-based paint at the
Property.
     (k) Borrower represents and warrants that except in accordance with all
applicable Environmental Statutes and as disclosed in the Environmental Report,
(i) no underground treatment or storage tanks or pumps or water, gas, or oil
wells are or have been located about the Property, (ii) no PCBs or transformers,
capacitors, ballasts or other equipment that contain

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dielectric fluid containing PCBs are located about the Property, (iii) no
insulating material containing urea formaldehyde is located about the Property,
and (iv) no asbestos-containing material is located about the Property.
     Section 16.02. Environmental Indemnification. Borrower shall defend,
indemnify and hold harmless the Indemnified Parties for, from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature, known or unknown, contingent or otherwise,
whether incurred or imposed within or outside the judicial process, including,
without limitation, reasonable attorneys’ and consultants’ fees and
disbursements and investigations and laboratory fees arising out of, or in any
way related to any Environmental Problem, including without limitation:
     (a) the presence, disposal, escape, seepage, leakage, spillage, discharge,
emission, release or threat of release of any Hazardous Materials in, on, over,
under, from or affecting the Property or any part thereof whether or not
disclosed by the Environmental Report;
     (b) any personal injury (including wrongful death, disease or other health
condition related to or caused by, in whole or in part, any Hazardous Materials)
or property damage (real or personal) arising out of or related to any Hazardous
Materials in, on, over, under, from or affecting the Property or any part
thereof whether or not disclosed by the Environmental Report;
     (c) any action, suit or proceeding brought or threatened, settlement
reached, or order of any Governmental Authority relating to such Hazardous
Material whether or not disclosed by the Environmental Report; and/or
     (d) any violation of the provisions, covenants, representations or
warranties of Section 16.01 hereof or of any Legal Requirement which is based on
or in any way related to any Hazardous Materials in, on, over, under, from or
affecting the Property or any part thereof including, without limitation, the
cost of any work performed and materials furnished in order to comply therewith
whether or not disclosed by the Environmental Report.
     Notwithstanding the foregoing provisions of this Section 16.02 to the
contrary, Borrower shall have no obligation to indemnify Lender for
(i) liabilities, claims, damages, penalties, causes of action, costs and
expenses relative to the foregoing which result directly from (A) Lender’s
willful misconduct or gross negligence or (B) any Hazardous Materials initially
placed in, on or under the Property or any other condition relating to Hazardous
Materials created after foreclosure, delivery of a deed in lieu or other taking
of title to the Property by Lender or its successors and assigns. Any amounts
payable to Lender by reason of the application of this Section 16.02 shall be
secured by this Security Instrument and shall, upon demand by Lender, become
immediately due and payable and shall bear interest at the Default Rate from the
date so demanded by Lender until paid.
     This indemnification shall survive the termination of this Security
Instrument whether by repayment of the Debt, foreclosure or deed in lieu
thereof, assignment, or otherwise. The indemnity provided for in this
Section 16.02 shall not be included in any exculpation of Borrower or its
principals from personal liability provided for in this Security Instrument or
in any of the other Loan Documents. Nothing in this Section 16.02 shall be
deemed to deprive

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Lender of any rights or remedies otherwise available to Lender, including,
without limitation, those rights and remedies provided elsewhere in this
Security Instrument or the other Loan Documents.
ARTICLE XVII: ASSIGNMENTS
     Section 17.01. Participations and Assignments. Lender, at its sole cost and
expense, shall have the right to assign this Security Instrument and/or any of
the Loan Documents, and to transfer, assign or sell participations and
subparticipations (including blind or undisclosed participations and
subparticipations) in the Loan Documents and the obligations hereunder to any
Person; provided, however, that no such participation shall increase, decrease
or otherwise affect either Borrower’s or Lender’s obligations under this
Security Instrument or the other Loan Documents.
ARTICLE XVIII: MISCELLANEOUS
     Section 18.01. Right of Entry. Lender and its agents shall have the right
to enter and inspect the Property or any part thereof at all reasonable times,
and, except in the event of an emergency, upon reasonable notice and to inspect
Borrower’s books and records and to make abstracts and reproductions thereof,
all at the cost and expense of Lender so long as there is no continuing Default.
     Section 18.02. Cumulative Rights. The rights of Lender under this Security
Instrument shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Lender shall not be limited exclusively to the rights and remedies
herein stated but shall be entitled, subject to the terms of this Security
Instrument, to every right and remedy now or hereafter afforded by law.
     Section 18.03. Liability. If Borrower consists of more than one Person, the
obligations and liabilities of each such Person hereunder shall be joint and
several.
     Section 18.04. Exhibits Incorporated. The information set forth on the
cover hereof, and the Exhibits annexed hereto, are hereby incorporated herein as
a part of this Security Instrument with the same effect as if set forth in the
body hereof.
     Section 18.05. Severable Provisions. If any term, covenant or condition of
the Loan Documents including, without limitation, the Note or this Security
Instrument, is held to be invalid, illegal or unenforceable in any respect, such
Loan Document shall be construed without such provision.
     Section 18.06. Duplicate Originals. This Security Instrument may be
executed in any number of duplicate originals and each such duplicate original
shall be deemed to constitute but one and the same instrument.
     Section 18.07. No Oral Change. The terms of this Security Instrument,
together with the terms of the Note and the other Loan Documents, constitute the
entire understanding and agreement of the parties hereto and supersede all prior
agreements, understandings and

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negotiations between Borrower and Lender with respect to the Loan. This Security
Instrument, and any provisions hereof, may not be modified, amended, waived,
extended, changed, discharged or terminated orally or by any act on the part of
Borrower or Lender, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
     Section 18.08. Waiver of Counterclaim, Etc. 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, AND, TO THE
EXTENT PERMITTED BY APPLICABLE LAW, WAIVES TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER OR IN ANY
COUNTERCLAIM BORROWER MAY BE PERMITTED TO ASSERT HEREUNDER OR WHICH MAY BE
ASSERTED BY LENDER OR ITS AGENTS, AGAINST BORROWER, OR IN ANY MATTERS WHATSOEVER
ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS SECURITY INSTRUMENT OR THE
DEBT.
     Section 18.09. Headings; Construction of Documents; Etc. The table of
contents, headings and captions of various paragraphs of this Security
Instrument are for convenience of reference only and are not to be construed as
defining or limiting, in any way, the scope or intent of the provisions hereof.
Borrower acknowledges that it was represented by competent counsel in connection
with the negotiation and drafting of this Security Instrument and the other Loan
Documents and that neither this Security Instrument nor the other Loan Documents
shall be subject to the principle of construing the meaning against the Person
who drafted same.
     Section 18.10. Sole Discretion of Lender. Whenever 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 that arrangements or terms are satisfactory or not satisfactory shall be
in the sole discretion of Lender and shall be final and conclusive, except as
may be otherwise specifically provided herein.
     Section 18.11. 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 Security Instrument or the other Loan Documents specifically and
expressly provides 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.
     Section 18.12. Covenants Run with the Land. All of the grants, covenants,
terms, provisions and conditions herein shall run with the Premises, shall be
binding upon Borrower and shall inure to the benefit of Lender, subsequent
holders of this Security Instrument and their successors and assigns. Without
limitation to any provision hereof, the term “Borrower” shall include and refer
to the borrower named herein, any subsequent owner of the Property, and its
respective heirs, executors, legal representatives, successors and assigns. The
representations, warranties and agreements contained in this Security Instrument
and the other Loan Documents are intended solely for the benefit of the parties
hereto, shall confer no rights hereunder, whether legal or equitable, in any
other Person and no other Person shall be entitled to rely thereon.

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     Section 18.13. Applicable Law. THIS SECURITY INSTRUMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA.
     Section 18.14. Security Agreement. (a) (i) This Security Instrument is both
a real property mortgage, deed to secure debt or deed of trust, as applicable,
and a “security agreement” within the meaning of the UCC. The Property includes
both real and personal property and all other rights and interests, whether
tangible or intangible in nature, of Borrower in the Property. This Security
Instrument is filed as a fixture filing and covers goods which are or are to
become fixtures on the Property. Borrower by executing and delivering this
Security Instrument has granted to Lender, as security for the Debt, a security
interest in the Property to the full extent that the Property may be subject to
the UCC (said portion of the Property so subject to the UCC being called in this
Section 18.14 the “Collateral”). If an Event of Default shall occur and be
continuing, Lender, in addition to any other rights and remedies which it may
have, shall have and may exercise immediately and without demand, any and all
rights and remedies granted to a secured party upon default under the UCC,
including, without limiting the generality of the foregoing, the right to take
possession of the Collateral or any part thereof, and to take such other
measures as Lender may deem necessary for the care, protection and preservation
of the Collateral. Upon request or demand of Lender during the continuance of an
Event of Default, Borrower shall, at its expense, assemble the Collateral and
make it available to Lender at a convenient place acceptable to Lender. Borrower
shall pay to Lender on demand any and all expenses, including reasonable legal
expenses and attorneys’ fees, incurred or paid by Lender in protecting its
interest in the Collateral and in enforcing its rights hereunder with respect to
the Collateral. Any disposition pursuant to the UCC of so much of the Collateral
as may constitute personal property shall be considered commercially reasonable
if made pursuant to a public sale which is advertised at least twice in a
newspaper in which sheriff’s sales are advertised in the county where the
Premises is located. Any notice of sale, disposition or other intended action by
Lender with respect to the Collateral given to Borrower in accordance with the
provisions hereof at least ten (10) days prior to such action, shall constitute
reasonable notice to Borrower. The proceeds of any disposition of the
Collateral, or any part thereof, may be applied by Lender to the payment of the
Debt in such priority and proportions as Lender in its discretion shall deem
proper. It is not necessary that the Collateral be present at any disposition
thereof. Lender shall have no obligation to clean-up or otherwise prepare the
Collateral for disposition.
     (ii) The mention in a financing statement filed in the records normally
pertaining to personal property of any portion of the Property shall not
derogate from or impair in any manner the intention of this Security Instrument.
Lender hereby declares that all items of Collateral are part of the real
property encumbered hereby to the fullest extent permitted by law, regardless of
whether any such item is physically attached to the Improvements or whether
serial numbers are used for the better identification of certain items.
Specifically, the mention in any such financing statement of any items included
in the Property shall not be construed to alter, impair or impugn any rights of
Lender as determined by this Security Instrument or the priority of Lender’s
lien upon and security interest in the Property in the event that notice of
Lender’s priority of interest as to any portion of the Property is required to
be filed in accordance with the UCC to be effective

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against or take priority over the interest of any particular class of persons,
including the federal government or any subdivision or instrumentality thereof.
No portion of the Collateral constitutes or is the proceeds of “Farm Products”,
as defined in the UCC.
     (iii) If Borrower is at any time a beneficiary under a letter of credit now
or hereafter issued in favor of Borrower, Borrower shall promptly notify Lender
thereof and, at the request and option of Lender, Borrower shall, pursuant to an
agreement in form and substance satisfactory to Lender, either (A) arrange for
the issuer and any confirmer of such letter of credit to consent to an
assignment to Lender of the proceeds of any drawing under the letter of credit
or (B) arrange for Lender to become the transferee beneficiary of the letter of
credit, with Lender agreeing, in each case, that the proceeds of any drawing
under the letter to credit are to be applied as provided in this Security
Instrument.
     (iv) Borrower and Lender acknowledge that for the purposes of Article 9 of
the UCC, the law of the State of California shall be the law of the jurisdiction
of the bank in which the Central Account is located.
     (v) Lender may comply with any applicable Legal Requirements in connection
with the disposition of the Collateral, and Lender’s compliance therewith will
not be considered to adversely affect the commercial reasonableness of any sale
of the Collateral.
     (vi) Lender may sell the Collateral without giving any warranties as to the
Collateral. Lender may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like. This procedure will not be considered
to adversely affect the commercial reasonableness of any sale of the Collateral.
     (vii) If Lender sells any of the Collateral upon credit, Borrower will be
credited only with payments actually made by the purchaser, received by Lender
and applied to the indebtedness of Borrower. In the event the purchaser of the
Collateral fails to fully pay for the Collateral, Lender may resell the
Collateral and Borrower will be credited with the proceeds of such sale.
     (b) Borrower hereby irrevocably appoints Lender as its attorney-in-fact,
coupled with an interest, to file with the appropriate public office on its
behalf any financing or other statements signed only by Lender, as secured
party, or, to the extent permitted under the UCC, unsigned, in connection with
the Collateral covered by this Security Instrument.
     Section 18.15. Actions and Proceedings. Lender has the right to appear in
and defend any action or proceeding brought with respect to the Property in its
own name or, if required by Legal Requirements or, if in Lender’s reasonable
judgment, it is necessary, in the name and on behalf of Borrower, which Lender
believes will adversely affect the Property or this Security Instrument and to
bring any action or proceedings, in its name or in the name and on behalf of
Borrower, which Lender, in its reasonable discretion, decides should be brought
to protect its interest in the Property.
     Section 18.16. Usury Laws. This Security Instrument and the Note are
subject to the express condition, and it is the expressed intent of the parties,
that at no time shall Borrower be

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obligated or required to pay interest on the principal balance due under the
Note at a rate which could subject the holder of the Note to either civil or
criminal liability as a result of being in excess of the maximum interest rate
which Borrower is permitted by law to contract or agree to pay. If by the terms
of this Security Instrument or the Note, Borrower is at any time required or
obligated to pay interest on the principal balance due under the Note at a rate
in excess of such maximum rate, such rate of interest shall be deemed to be
immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed to have been payments in
reduction of the principal balance of the Note. No application to the principal
balance of the Note pursuant to this Section 18.16 shall give rise to any
requirement to pay any prepayment fee or charge of any kind due hereunder, if
any.
     Section 18.17. Remedies of Borrower. In the event that a claim or
adjudication is made that Lender has acted unreasonably or unreasonably delayed
acting in any case where by law or under the Note, this Security Instrument or
the Loan Documents, it has an obligation to act reasonably or promptly, Lender
shall not be liable for any monetary damages, and Borrower’s remedies shall be
limited to injunctive relief or declaratory judgment.
     Section 18.18. Offsets, Counterclaims and Defenses. Any assignee of this
Security Instrument, the Assignment and the Note shall take the same free and
clear of all offsets, counterclaims or defenses which are unrelated to the Note,
the Assignment or this Security Instrument which Borrower may otherwise have
against any assignor of this Security Instrument, the Assignment and the Note
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 this
Security Instrument, the Assignment or the Note 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 18.19. No Merger. If Borrower’s and Lender’s estates become the
same including, without limitation, upon the delivery of a deed by Borrower in
lieu of a foreclosure sale, or upon a purchase of the Property by Lender in a
foreclosure sale, this Security Instrument and the lien created hereby shall not
be destroyed or terminated by the application of the doctrine of merger and in
such event Lender shall continue to have and enjoy all of the rights and
privileges of Lender as to the separate estates; and, as a consequence thereof,
upon the foreclosure of the lien created by this Security Instrument, any Leases
or subleases then existing and created by Borrower shall not be destroyed or
terminated by application of the law of merger or as a result of such
foreclosure unless Lender or any purchaser at any such foreclosure sale shall so
elect. No act by or on behalf of Lender or any such purchaser shall constitute a
termination of any Lease or sublease unless Lender or such purchaser shall give
written notice thereof to such lessee or sublessee.
     Section 18.20. Restoration of Rights. In case Lender shall have proceeded
to enforce any right under this Security Instrument by foreclosure sale, entry
or otherwise, and such proceedings shall have been discontinued or abandoned for
any reason or shall have been determined adversely, then, in every such case,
Borrower and Lender shall be restored to their former positions and rights
hereunder with respect to the Property subject to the lien hereof.

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     Section 18.21. Waiver of Statute of Limitations. The pleadings of any
statute of limitations as a defense to any and all obligations secured by this
Security Instrument are hereby waived to the full extent permitted by Legal
Requirements.
     Section 18.22. Advances. This Security Instrument shall cover any and all
advances made pursuant to the Loan Documents, rearrangements and renewals of the
Debt and all extensions in the time of payment thereof, even though such
advances, extensions or renewals be evidenced by new promissory notes or other
instruments hereafter executed and irrespective of whether filed or recorded.
Likewise, the execution of this Security Instrument shall not impair or affect
any other security which may be given to secure the payment of the Debt, and all
such additional security shall be considered as cumulative. The taking of
additional security, execution of partial releases of the security, or any
extension of time of payment of the Debt shall not diminish the force, effect or
lien of this Security Instrument and shall not affect or impair the liability of
Borrower and shall not affect or impair the liability of any maker, surety, or
endorser for the payment of the Debt.
     Section 18.23. Application of Default Rate Not a Waiver. Application of the
Default Rate shall not be deemed to constitute a waiver of any Default or Event
of Default or any rights or remedies of Lender under this Security Instrument,
any other Loan Document or applicable Legal Requirements, or a consent to any
extension of time for the payment or performance of any obligation with respect
to which the Default Rate may be invoked.
     Section 18.24. Intervening Lien. To the fullest extent permitted by law,
any agreement hereafter made pursuant to this Security Instrument shall be
superior to the rights of the holder of any intervening lien.
     Section 18.25. No Joint Venture or Partnership. Borrower and Lender intend
that the relationship created hereunder be solely that of mortgagor and
mortgagee or grantor and beneficiary or borrower and lender, as the case may be.
Nothing herein 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.
     Section 18.26. Time of the Essence. Time shall be of the essence in the
performance of all obligations of Borrower hereunder.
     Section 18.27. Borrower’s Obligations Absolute. Borrower acknowledges that
Lender and/or certain Affiliates of Lender are engaged in the business of
financing, owning, operating, leasing, managing, and brokering real estate and
in other business ventures which may be viewed as adverse to or competitive with
the business, prospect, profits, operations or condition (financial or
otherwise) of Borrower. Except as set forth to the contrary in the Loan
Documents, all sums payable by Borrower hereunder shall be paid without notice
or demand, counterclaim, set-off, deduction or defense and without abatement,
suspension, deferment, diminution or reduction, and the obligations and
liabilities of Borrower hereunder shall in no way be released, discharged, or
otherwise affected (except as expressly provided herein) by reason of: (a) any
damage to or destruction of or any Taking of the Property or any portion
thereof; (b) any restriction or prevention of or interference with any use of
the Property or any portion thereof;

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(c) any title defect or encumbrance or any eviction from the Premises or any
portion thereof by title paramount or otherwise; (d) any bankruptcy proceeding
relating to Borrower, any General Partner, or any guarantor or indemnitor, or
any action taken with respect to this Security Instrument or any other Loan
Document by any trustee or receiver of Borrower or any such General Partner,
guarantor or indemnitor, or by any court, in any such proceeding; (e) any claim
which Borrower has or might have against Lender; (f) any default or failure on
the part of Lender to perform or comply with any of the terms hereof or of any
other agreement with Borrower; or (g) any other occurrence whatsoever, whether
similar or dissimilar to the foregoing, whether or not Borrower shall have
notice or knowledge of any of the foregoing.
     Section 18.28. Publicity. All promotional news releases, publicity or
advertising by Manager, Borrower or their respective Affiliates through any
media intended to reach the general public shall not refer to the Loan Documents
or the financing evidenced by the Loan Documents, or to Lender or to any of its
Affiliates without the prior written approval of Lender or such Affiliate, as
applicable, in each instance, such approval not to be unreasonably withheld or
delayed. Lender shall be authorized to provide information relating to the
Property, the Loan and matters relating thereto to rating agencies,
underwriters, potential securities investors, auditors, regulatory authorities
and to any Persons which may be entitled to such information by operation of law
and may use basic transaction information (including, without limitation, the
name of Borrower, the name and address of the Property and the Loan Amount) in
press releases or other marketing materials.
     Section 18.29. Securitization Opinions. In the event the Loan is included
as an asset of a Securitization by Lender or any of its Affiliates, Borrower
shall, within ten (10) Business Days after Lender’s written request therefor,
deliver opinions in form and substance and delivered by counsel reasonably
acceptable to Lender and each Rating Agency, as may be reasonably required by
Lender and/or the Rating Agency in connection with such securitization.
Borrower’s failure to deliver the opinions required hereby within such ten
(10) Business Day period shall constitute an “Event of Default” hereunder. The
cost of any “bringdown” opinion of any legal opinion given in connection with
the origination of the Loan will be paid by Borrower. The reasonable cost of any
other opinion requested by Lender and/or any Rating Agency will be paid by
Lender. Notwithstanding the foregoing, Borrower shall not be required to deliver
a “10b-5” or “REMIC” Opinion in connection with any Securitization.
     Section 18.30. Cooperation with Rating Agencies. Borrower covenants and
agrees that in the event the Loan is to be included as an asset of a
Securitization, Borrower shall, so long as the following may be accomplished at
no material expense to Borrower and with no more than an insignificant
allocation of Borrower’s time (a) gather any information reasonably required by
each Rating Agency in connection with such a Securitization to the extent in
Borrower’s possession or control or reasonably obtainable by Borrower, (b) at
Lender’s request, meet with representatives of each Rating Agency to discuss the
business and operations of the Property, and (c) cooperate with the reasonable
requests of each Rating Agency and Lender in connection with all of the
foregoing as well as in connection with all other matters and the preparation of
any offering documents with respect thereto, including, without limitation,
entering into any amendments or modifications to this Security Instrument or to
any other Loan Document which may be requested by Lender to conform to Rating
Agency or market standards for a Securitization provided that no such
modification shall modify (a) the interest rate payable under

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the Note, (b) the stated maturity of the Note, (c) the amortization of principal
under the Note, (d) Section 18.32 hereof, (e) any other material economic term
of the Loan, (f) expand the scope of representation made hereunder or (g) any
provision, the effect of which would materially increase Borrower’s obligations
or materially decrease Borrower’s rights under the Loan Documents. Borrower
acknowledges that the information provided by Borrower to Lender may be
incorporated into the offering documents for a Securitization and to the fullest
extent permitted, Borrower irrevocably waives all rights, if any, to prohibit
such disclosures including, without limitation, any right of privacy. Lender and
each Rating Agency shall be entitled to rely on the information supplied by, or
on behalf of, Borrower, and Borrower indemnifies and holds harmless the
Indemnified Parties, their Affiliates and each Person who controls such Persons
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as same may be amended from time to time, for,
from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature, known or
unknown, contingent or otherwise, whether incurred or imposed within or outside
the judicial process, including, without limitation, reasonable attorneys’ fees
and disbursements that arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in such information or
arise out of or are based upon the omission or alleged omission (collectively,
“Securities Liabilities”); provided, however, that Borrower will be liable under
the foregoing indemnity only to the extent that such Securities Liabilities
arise out of, or are based upon, any such untrue statement or omission made
therein in reliance upon, and in conformity with, information furnished to
Lender by or on behalf of Borrower or its Affiliates in connection with the
preparation of the disclosure documents or in connection with the underwriting
of the Loan; and provided further, however, that with respect to information
provided by third parties and with respect to statements made in the disclosure
documents that are based upon information provided by third parties, Borrower
will be liable only if Borrower or its Affiliates knew that such information was
false or omitted to state a material fact known to Borrower and necessary to
make the statements made, in light of the circumstances under which they were
made, not misleading.
     Section 18.31. Securitization Financials. Borrower covenants and agrees
that, upon Lender’s written request therefor in connection with a
Securitization, Borrower shall, at Borrower’s sole cost and expense, promptly
deliver (a) audited financial statements and related documentation prepared by
an Independent certified public accountant that satisfy securities laws and
requirements for use in a public registration statement (which may include up to
three (3) years of historical audited financial statements) and (b) if, at the
time one or more Disclosure Documents are being prepared in connection with a
Securitization, Lender expects that Borrower alone or Borrower and one or more
of its Affiliates collectively, or the Property alone or the Property and any
other parcel(s) of real property, together with improvements thereon and
personal property related thereto, that is “related”, within the meaning of the
definition of Significant Obligor, to the Property (a “Related Property”)
collectively, will be a Significant Obligor, Borrower shall furnish to Lender
upon request (i) the selected financial data or, if applicable, net operating
income, required under Item 1112(b)(1) of Regulation AB and meeting the
requirements thereof, if Lender expects that the principal amount of the Loan,
together with any loans made to an Affiliate of Borrower or secured by a Related
Property that is included in a Securitization with the Loan (a “Related Loan”),
as of the cut-off date for such Securitization may, or if the principal amount
of the Loan together with any Related Loans as of the cut-off date for such
Securitization and at any time during which the Loan and any Related Loans are

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included in a Securitization does, equal or exceed ten percent (10%) (but less
than twenty percent (20%)) of the aggregate principal amount of all mortgage
loans included or expected to be included, as applicable, in the Securitization
or (ii) the financial statements required under Item 1112(b)(2) of Regulation AB
and meeting the requirements thereof, if Lender expects that the principal
amount of the Loan together with any Related Loans as of the cut-off date for
such Securitization may, or if the principal amount of the Loan together with
any Related Loans as of the cut-off date for such Securitization and at any time
during which the Loan and any Related Loans are included in a Securitization
does, equal or exceed twenty percent (20%) of the aggregate principal amount of
all mortgage loans included or expected to be included, as applicable, in the
Securitization. Such financial data or financial statements shall be furnished
to Lender within ten (10) Business Days after notice from Lender in connection
with the preparation of Disclosure Documents for the Securitization and, with
respect to the data or financial statements required pursuant to clause
(b) hereof, (A) not later than thirty (30) days after the end of each fiscal
quarter of Borrower and (B) not later than seventy-five (75) days after the end
of each Fiscal Year; provided, however, that Borrower shall not be obligated to
furnish financial data or financial statements pursuant to clauses (A) or (B) of
this sentence with respect to any period for which a filing pursuant to the
Securities Exchange Act of 1934 in connection with or relating to the
Securitization is not required.
     Section 18.32. Exculpation. Notwithstanding anything herein or in any other
Loan Document to the contrary, except as otherwise set forth in this
Section 18.32 to the contrary, Lender shall not enforce the liability and
obligation of Borrower or (a) if Borrower or any of its direct or indirect
owners is a partnership, its or their constituent partners or any of their
respective partners, (b) if Borrower or any of its direct or indirect owners is
a trust, its or their beneficiaries or any of their respective Partners (as
hereinafter defined), (c) if Borrower or any of its direct or indirect owners is
a corporation, any of its or their shareholders, directors, principals, officers
or employees, or (d) if Borrower or any of its direct or indirect owners is a
limited liability company, any of its or their members (the Persons described in
the foregoing clauses (a) — (d), as the case may be, are hereinafter referred to
as the “Partners”) to perform and observe the obligations contained in this
Security Instrument or any of the other Loan Documents by any action or
proceeding, including, without limitation, any action or proceeding wherein a
money judgment shall be sought against Borrower or the Partners, except that
Lender may bring a foreclosure action, action for specific performance, or other
appropriate action or proceeding (including, without limitation, an action to
obtain a deficiency judgment) solely for the purpose of enabling Lender to
realize upon (i) Borrower’s interest in the Property, (ii) the Rent to the
extent received by Borrower during the existence of an Event of Default (all
Rent covered by this clause (ii) being hereinafter referred to as the “Recourse
Distributions”) and not applied towards the operation or maintenance of the
Property, and (iii) any other collateral then subject to the Loan Documents (the
collateral described in the foregoing clauses (i) — (iii) is hereinafter
referred to as the “Default Collateral”); provided, however, that any judgment
in any such action or proceeding shall be enforceable against Borrower only to
the extent of any such Default Collateral. The provisions of this Section shall
not, however, (a) impair the validity of the Debt evidenced by the Note or in
any way affect or impair the lien of this Security Instrument or any of the
other Loan Documents or the right of Lender to foreclose this Security
Instrument following the occurrence of an Event of Default; (b) impair the right
of Lender to name Borrower as a party defendant in any action or suit for
judicial foreclosure and sale under this Security Instrument; (c) affect the
validity or enforceability of the Note, this Security Instrument,

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or any of the other Loan Documents, or impair the right of Lender to seek a
personal judgment against Guarantor to the extent contained in the Guaranty;
(d) impair the right of Lender to obtain the appointment of a receiver;
(e) impair the enforcement of the Assignment; (f) impair the right of Lender to
bring suit for a monetary judgment with respect to fraud or material
misrepresentation by Borrower, or any Affiliate of Borrower in connection with
this Security Instrument, the Note or the other Loan Documents, and the
foregoing provisions shall not modify, diminish or discharge the liability of
Borrower with respect to same; (g) impair the right of Lender to bring suit for
a monetary judgment to obtain the Recourse Distributions received by Borrower;
(h) impair the right of Lender to bring suit for a monetary judgment with
respect to Borrower’s misappropriation of tenant security deposits or Rent
collected more than one (1) month in advance and not applied to the operation of
the Property, and the foregoing provisions shall not modify, diminish or
discharge the liability of Borrower; (i) impair the right of Lender to obtain
Loss Proceeds due to Lender pursuant to this Security Instrument; (j) impair the
right of Lender to enforce the provisions of Sections 2.02(g), 12.01, 16.01 or
16.02, inclusive of this Security Instrument, even after repayment in full by
Borrower of the Debt or to bring suit for a monetary judgment against Borrower
with respect to any obligation set forth in said Sections; (k) prevent or in any
way hinder Lender from exercising, or constitute a defense, or counterclaim, or
other basis for relief in respect of the exercise of, any other remedy against
any or all of the collateral securing the Note as provided in the Loan
Documents; (l) impair the right of Lender to bring suit for a monetary judgment
with respect to any misapplication or conversion of Loss Proceeds, and the
foregoing provisions shall not modify, diminish or discharge the liability of
Borrower; (m) impair the right of Lender to sue for, seek or demand a deficiency
judgment against Borrower solely for the purpose of foreclosing the Property or
any part thereof, or realizing upon the Default Collateral; provided, however,
that any such deficiency judgment referred to in this clause (m) shall be
enforceable against Borrower only to the extent of any of the Default
Collateral; (n) impair the ability of Lender to bring suit for a monetary
judgment with respect to arson or waste to or of the Property or damage to the
Property resulting from the gross negligence or willful misconduct of Borrower
or, to the extent that there is sufficient cash flow, failure to pay any
Imposition, or in lieu thereof, deposit a sum equal to any Impositions into the
Basic Carrying Costs Sub-Account; (o) impair the right of Lender to bring a suit
for a monetary judgment in the event of the exercise of any right or remedy
under any federal, state or local forfeiture laws resulting in the loss of the
lien of this Security Instrument, or the priority thereof, against the Property;
(p) be deemed a waiver of any right which Lender may have under Sections 506(a),
506(b), 1111(b) or any other provision of the Bankruptcy Code to file a claim
for the full amount of the Debt or to require that all collateral shall continue
to secure all of the Debt; (q) impair the right of Lender to bring suit for
monetary judgment with respect to any actual losses resulting from any claims,
actions or proceedings initiated by Borrower (or any Affiliate of Borrower)
alleging that the relationship of Borrower and Lender is that of joint
venturers, partners, tenants in common, joint tenants or any relationship other
than that of debtor and creditor; (r) impair the right of Lender to bring suit
for a monetary judgment in the event of a Transfer in violation of the
provisions of Article IX hereof; (s) impair the right of Lender to bring suit
for a monetary judgment in the event that Borrower moves its principal place of
business or its books and records relating to the Property which are governed by
the UCC, or changes its name, its jurisdiction of organization, type of
organization or other legal structure or, if it has one, organizational
identification number, without first giving Lender thirty (30) days prior
written notice; (t) impair the right of Lender to bring suit for a monetary
judgment in the

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event that Borrower changes its name of otherwise does anything which would make
the information set forth in any UCC Financing Statements relating to the
Property materially misleading without giving Lender thirty (30) days prior
written notice thereof; or (u) impair the right of Lender to bring suit for a
monetary judgment in the event that Borrower consents to any modification,
change, supplement, alteration or amendment of the Ground Lease without Lender’s
prior written consent, which shall not be unreasonably withheld, or termination
of the Ground Lease without Lender’s prior written consent, which consent shall
be subject to Lender’s sole and absolute discretion. The provisions of this
Section 18.32 shall be inapplicable to Borrower if (a) any proceeding, action,
petition or filing under the Bankruptcy Code, or any similar state or federal
law now or hereafter in effect relating to bankruptcy, reorganization or
insolvency, or the arrangement or adjustment of debts, shall be (A) filed by
Borrower or Guarantor or (B) filed against Borrower or Guarantor and consented
to or acquiesced in by Borrower or Guarantor or if any Affiliate of Borrower or
Guarantor, or if Borrower or Guarantor or any Affiliate of either of them shall
institute any proceeding for Borrower’s dissolution or liquidation, or Borrower
or Guarantor shall make an assignment for the benefit of creditors, or
(b) Borrower or any Affiliate contests or in any material way interferes in bad
faith with, directly or indirectly (collectively, a “Contest”), any foreclosure
action, UCC sale or other material remedy exercised by Lender upon the
occurrence of any Event of Default whether by making any motion, bringing any
counterclaim (other than a compulsory counterclaim), claiming any defense,
seeking any injunction or other restraint, commencing any action, or otherwise
(provided that if any such Person obtains a non-appealable order successfully
asserting a Contest, Borrower shall have no liability under this clause (b) and
provided, further, that the liability under this clause (b) shall be limited to
the actual and consequential costs, expenses and damages of Lender which result,
directly or indirectly, from any such Contest), in which event Lender shall have
recourse against all of the assets of Borrower including, without limitation,
any right, title and interest of Borrower in and to the Property, and any
Recourse Distributions received by Guarantor or Borrower (but excluding the
other assets of such Guarantor to the extent Lender would not have had recourse
thereto other than in accordance with the provisions of this Section 18.32).
     Section 18.33. Concerning the Trustee. Trustee shall be under no duty to
take any action hereunder except as expressly required hereunder or by law, or
to perform any act which would involve Trustee in any expense or liability or to
institute or defend any suit in respect hereof, unless properly indemnified to
Trustee’s reasonable satisfaction. Trustee, by acceptance of this Security
Instrument, covenants to perform and fulfill the trusts herein created, being
liable, however, only for gross negligence or willful misconduct, and hereby
waives any statutory fee and agrees to accept reasonable compensation, in lieu
thereof, for any services rendered by Trustee in accordance with the terms
hereof. Trustee may resign at any time by written instrument to that effect
delivered to Lender. Lender may remove Trustee at any time or from time to time
and select a successor trustee. In the event of the death, removal, resignation,
refusal to act, or inability to act of Trustee, or in its sole discretion for
any reason whatsoever Lender may, without notice and without specifying any
reasons therefor and without applying to any court, select and appoint a
successor trustee, by an instrument recorded wherever this Security Instrument
is recorded, and all powers, rights, duties and authority of Trustee, as
aforesaid, shall thereupon become vested in such successor. Such substitute
trustee shall not be required to give bond for the faithful performance of the
duties of Trustee hereunder unless required by Lender. The procedure provided
for in this Section 18.33 for substitution of Trustee

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shall be in addition to and not in exclusion of any other provisions for
substitution, by law or otherwise.
     Section 18.34. Trustee’s Fees. Borrower shall pay all costs, fees and
expenses incurred by Trustee and Trustee’s agents and counsel in connection with
the performance by Trustee of Trustee’s duties hereunder, and all such costs,
fees and expenses shall be secured by this Security Instrument.
     Section 18.35. Mezzanine Loan Option. (a) Lender, at its sole cost and
expense, shall have the right at any time to divide the Loan into two or more
parts (the “Mezzanine Option”): a “mortgage loan” and one or more “mezzanine
loans.” The principal amount of the mortgage loan plus the principal amount of
the mezzanine loan(s) shall equal the outstanding principal balance of the Loan
immediately prior to the creation of the mortgage loan and the mezzanine
loan(s). In effectuating the foregoing, Lender will make one or more loans to
one or more entities that will be the direct or indirect equity owner(s) of
Borrower as described in Section 18.35(b) (collectively, the “Mezzanine
Borrower(s)”). The Mezzanine Borrower(s) will contribute the amount of the
mezzanine loan(s) to Borrower (in its capacity as borrower under the mortgage
loan, “mortgage borrower”) and the mortgage borrower will apply the contribution
to pay down the Loan to the mortgage loan amount. The mortgage loan and the
mezzanine loan(s) will be on the same terms and subject to the same conditions
set forth in the Loan Documents except as follows. The mezzanine loan(s) shall
be made pursuant to Lender’s standard mezzanine loan documents.
     (b) Lender shall have the right to establish different interest rates and
debt service payments for the mortgage loan and the mezzanine loan(s) and to
require the payment of the mortgage loan and the mezzanine loan(s) in such order
of priority as may be designated by Lender; provided, that (i) the total loan
amounts for the mortgage loan and the mezzanine loan(s) shall equal the amount
of the Loan immediately prior to the creation of the mortgage loan and the
mezzanine loan(s), (ii) the weighted average interest rate of the mortgage loan
and the mezzanine loan(s) shall on the date created equal the interest rate
which was applicable to the Loan immediately prior to creation of the mortgage
loan and mezzanine loan(s) and (iii) the debt service payments on the mortgage
loan note and the mezzanine loan note(s) shall on the date created equal the
debt service payment which was due under the Loan immediately prior to creation
of a mortgage loan and a mezzanine loan(s).
     (c) The Mezzanine Borrower(s) shall be special purpose, bankruptcy remote
entities pursuant to applicable Rating Agency criteria and shall own directly or
indirectly one hundred percent (100%) of the mortgage borrower. The security for
the mezzanine loan(s) shall be a pledge of one hundred percent (100%) of the
direct and indirect ownership interests in the mortgage borrower.
     (d) Borrower shall cooperate with all reasonable requests of Lender in
order to convert the Loan into a mortgage loan and one or more mezzanine loans
and shall execute and deliver such documents as shall reasonably be required by
Lender in connection therewith, including, without limitation, the delivery of
non-consolidation, enforceability, authorization and execution opinions and an
“Eagle 9” or “UCC plus” (or equivalent) UCC insurance policy and

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the modification of organizational documents and loan documents and the transfer
of the membership interest in Borrower to the Mezzanine Borrower(s).
     It shall be an Event of Default if Borrower fails to comply with any of the
terms, covenants or conditions of this Section 18.35 after expiration of ten
(10) Business Days notice thereof.
     Section 18.36. Component Notes. Lender, without in any way limiting
Lender’s other rights hereunder, in its sole and absolute discretion, shall have
the right at any time to require Borrower to execute and deliver “component”
notes (including senior and junior notes), which notes may be paid in such order
of priority as may be designated by Lender, provided that (a) the aggregate
principal amount of such “component” notes shall equal the outstanding principal
balance of the Loan immediately prior to the creation of such “component” notes,
(b) the weighted average interest rate of all such “component” notes shall on
the date created equal the interest rate which was applicable to the Loan
immediately prior to the creation of such “component” notes, (c) the debt
service payments on all such “component” notes shall on the date created equal
the debt service payment which was due under the Loan immediately prior to the
creation of such component notes and (d) the other terms and provisions of each
of the “component” notes shall be identical in substance and substantially
similar in form to the Loan Documents. Borrower shall cooperate with all
reasonable requests of Lender in order to establish the “component” notes and
shall execute and deliver such documents as shall reasonably be required by
Lender in connection therewith, all in form and substance reasonably
satisfactory to Lender, including, without limitation, the severance of security
documents if requested. It shall be an Event of Default if Borrower fails to
comply with any of the terms, covenants or conditions of this Section 18.36
after the expiration of ten (10) Business Days after notice thereof.
     Section 18.37. Certain Matters Relating to Property Located in the State of
California. With respect to the Property which is located in the State of
California, notwithstanding anything contained herein:
     (a) Power of Sale. Lender may deliver to Trustee a written declaration of
an Event of Default and demand for sale which requests that Trustee record and
serve a written notice of default and of election to cause the Property to be
sold, and cause any or all of the Property to be sold under the power of sale
granted by this Security Instrument in the manner hereinbelow specified in this
Section 18.37.
     (i) Declaration of Default; Acceptance. Lender shall (1) deliver to Trustee
a written declaration of an Event of Default which recites facts which
demonstrate Borrower’s default, and a demand that Trustee sell the Property, and
(2) deposit the Note and this Security Instrument, if required by law, with
Trustee. Trustee shall accept Lender’s declaration of an Event of Default as
true and as demonstrative of Borrower’s default, and shall record and serve a
written notice of default and of election to cause the Property to be sold in
the manner required by applicable law.
     (ii) Rescission of Notice of Default. Lender may rescind any notice of
default at any time before Trustee’s sale by executing a notice of rescission
and recording it. The

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recordation of the notice will constitute a cancellation of any prior
declaration of an Event of Default and demand for sale and of any acceleration
of maturity of the Debt affected by any prior declaration or notice of an Event
of Default. The exercise by Lender of the right of rescission will not
constitute a waiver of any default then existing or subsequently occurring, or
impair the right of Lender to execute other declarations of default and demand
for sale, or notices of default and of election to cause the Property to be
sold, nor otherwise affect the Note or this Security Instrument, or any of the
rights, obligations or remedies of Lender or Trustee hereunder or under
applicable law.
     (iii) Date of Trustee’s Sale. If, after the expiration of any period of
time provided by applicable law, Borrower’s Event of Default has not been cured
and Borrower’s Debt has not been reinstated in the manner required by applicable
law, Trustee shall establish a date for the sale of the Property and record and
serve a notice of sale in the manner required by applicable law.
     (iv) Trustee’s Sale. If, on or before the date scheduled for the sale of
the Property, Borrower’s Event of Default has not been cured and the Debt has
not been reinstated, Trustee, without demand on Borrower, shall sell the
Property at the time and place fixed by Trustee in the notice of sale, either as
a whole or in separate parcels, and in such order as Trustee may determine, at
public auction, and to any Person, including Borrower, Lender or Trustee. The
Property shall be sold to the highest bidder for cash payable at the time of
sale. Notwithstanding the foregoing, instead of paying cash for the Property,
Lender may credit the amount of its auction sale bid by the amount of the Debt,
or any fraction thereof, including, without limitation, Trustee’s cost and
expenses from the sale of the Property. Lender will be entitled to bid, at any
trustee’s or foreclosure sale of the Property, the amount of the Environmental
Damages (as hereinafter defined), any costs incurred by Lender with respect to
any Environmental Problem and interest in addition to the amount of other Debt
as a credit bid, the equivalent of cash. Furthermore, if a bid has been made by
Lender in the amount of the Debt, other than Debt for Environmental Damages and
any costs incurred by Lender with respect to any Environmental Problem incurred
by Lender, any Debt comprised of the Environmental Damages and any costs
incurred by Lender with respect to any Environmental Problem shall not be
discharged by virtue of the full credit bid and shall remain an obligation of
Borrower to be satisfied under this Security Instrument.
     (v) Delivery of Deed. Trustee shall deliver to the purchaser of the
Property a deed which conveys title to the Property without any covenant or
warranty, express or implied. The recitals in the deed of any matters or facts
shall be conclusive proof of their truthfulness.
     (vi) Postponement of Trustee’s Sale. Trustee may postpone the sale of all
or any portion of the Property in accordance with California Civil Code §2924g,
by public announcement at the time and place of sale, and from time to time
thereafter Trustee may postpone such sale by public announcement at the time
fixed by the preceding postponement or as otherwise allowed by said statute.

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     (vii) Application of Sale Proceeds. The proceeds of Trustee’s public
auction of the Property shall be applied in the following manner: (1) payment of
the portion of the Debt attributable to the costs and expenses of the sale;
(2) repayment of the portion of the Debt attributable to any sums expended or
advanced by Lender (other than the Environmental Damages and costs incurred by
Lender with respect to any Environmental Problem) under the terms of this
Security Instrument, plus interest at the Default Rate; (3) payment of all other
Debt and all other obligations of Borrower secured by this Security Instrument,
in any order that Lender chooses; (4) repayment of the portion of the Debt
attributable to the Environmental Damages and costs incurred by Lender with
respect to any Environmental Problem under the terms of this Security
Instrument, plus interest at the Default Rate; and (5) the remainder, if any, to
satisfy the outstanding balance of obligations secured by any junior
encumbrances in the order of their priority, then to Borrower or Borrower’s
successor in interest.
     (viii) Proof of Compliance with the Law. If there is a sale of the
Property, or any part of it, and the execution of a deed for it, the recital of
default and of recording notice of breach and election of sale, and of the
elapsing of the required time between the recording and the following notice,
and of the sale should be made, will be conclusive proof of the default,
recording, election, elapsing of time, and the due giving of notice, and that
the sale was regularly and validly made on proper demand by Lender. Any deed
with these recitals will be effectual and conclusive against Borrower, its
successors, and assigns, and all other Persons. The receipt for the purchase
money recited or in any deed executed to the purchaser will be sufficient
discharge to the purchaser from all obligations to see to the proper application
of the purchase money.
     (b) Acceptance by Trustee. Trustee accepts this trust when this Security
Instrument, duly executed and acknowledged, is made a public record as provided
by law. Trustee is not obligated to notify any party hereto of pending sale
under any other deed of trust or of any action or proceeding in which Borrower,
Lender or Trustee shall be a party unless brought by Trustee.
     (c) Rights and Duties. It shall be no part of the duty of Trustee to see to
any recording, filing or registration of this Security Instrument or any other
instrument in addition or supplemental hereto, or to give any notice thereof, or
to see to the payment of or be under any duty in respect of any tax or
assessment or other governmental charge which may be levied or assessed on the
Property, or any part thereof, or against Trustee, or to see to the performance
or observance by Borrower of any of the covenants and agreements contained
herein. Trustee shall not be responsible for the execution, acknowledgement or
validity of this Security Instrument or of any instrument in addition or
supplemental hereto or for the sufficiency of the security purported to be
created hereby, and makes no representation in respect thereof or in respect of
the rights of Lender. Trustee shall have the right to advice of counsel upon any
matters arising hereunder and shall be fully protected in relying as to legal
matters on the advice of counsel. Trustee shall not incur any personal liability
hereunder except for its own gross negligence or willful misconduct and Trustee
shall have the right to rely on any instrument, document or signature
authorizing or supporting any action taken or proposed to be taken by Trustee
hereunder and believed by Trustee in good faith to be genuine.

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     (d) Subrogation to Existing Liens; Vendor’s Lien. To the extent that
proceeds of the Note are used to pay Debt secured by any outstanding lien,
security interest, charge or prior encumbrance against the Property, such
proceeds have been advanced by Lender at Trustee’s request, and Lender shall be
subrogated to any and all rights, security interests and liens owned by any
owner or holder of such outstanding liens, security interests, charges or
encumbrances, however remote, irrespective of whether said liens, security
interests, charges or encumbrances are released, and all of the same are
recognized as valid and subsisting and are renewed and continued and merged
herein to secure the Debt, but the terms and provisions of this Security
Instrument shall govern and control the manner and terms of enforcement of the
liens, security interests, charges and encumbrances to which Lender is
subrogated hereunder. It is expressly understood that, in consideration of the
payment of such indebtedness by Lender, Borrower hereby waives and releases all
demands and causes of action for offsets and payments in connection with the
said indebtedness. If all or any portion of the proceeds of the loan evidenced
by the Note or of any other secured indebtedness has been advanced for the
purpose of paying the purchase price for all or a part of the Property, no
vendor’s lien is waived; and Lender shall have, and is hereby granted, a
vendor’s lien on the Property as cumulative additional security for the secured
indebtedness. Lender may foreclose under this Security Instrument or under the
vendor’s lien without waiving the other or may foreclose under both.
     (e) Substitute Trustee. Trustee may resign by an instrument in writing
addressed to Lender, or Trustee may be removed at any time with or without cause
by an instrument in writing executed by Lender. In case of the death,
resignation, removal or disqualification of Trustee, or if for any reason Lender
shall deem it desirable to appoint a substitute or successor trustee to act
instead of the herein named trustee or any substitute or successor trustee, then
Lender shall have the right and is hereby authorized and empowered to appoint a
successor trustee, or a substitute trustee, without other formality than
appointment and designation in writing executed by Lender, and the authority
hereby conferred shall extend to the appointment of other successor and
substitute trustees successively until the Debt secured hereby has been paid in
full, or until the Property is fully and finally sold hereunder. In the event
that the Debt is owned by more than one person or entity, the holder or holders
of not less than a majority in amount of such indebtedness shall have the right
and authority to make the appointment of a successor or substitute trustee as
provided for in the preceding sentence or to remove Trustee as provided in the
first sentence of this Section 18.37(e). Such appointment and designation by
Lender, or by the holder or holders of not less than a majority of the Debt
secured hereby, shall be full evidence of the right and authority to make the
same and of all facts therein recited. If Lender is a corporation or association
or trust and such appointment is executed in its behalf by an officer or trustee
of such corporation or association or trust, such appointment shall be
conclusively presumed to be executed with authority and shall be valid and
sufficient without proof of any action by the board of directors or any superior
officer of the corporation or association or trust. Upon the making of any such
appointment and designation, all of the estate and title of Trustee in the
Property shall vest in the named successor or substitute trustee, and it shall
thereupon succeed to and shall hold, possess and execute, all of the rights,
powers, privileges, immunities and duties herein conferred upon Trustee; but,
nevertheless, upon the written request of Lender or of the successor or
substitute trustee, the trustee ceasing to act shall execute and deliver an
instrument transferring to such successor or substitute trustee all of the
estate and title in the Property of the trustee so ceasing to act, together with
all the rights, powers, privileges, immunities and duties herein conferred upon
the Trustee, and shall duly assign,

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transfer and deliver any of the properties and moneys held by said trustee
hereunder to said successor or substitute trustee. All references herein to
“Trustee” shall be deemed to refer to Trustee (including any successor or
substitute appointed and designated as herein provided) from time to time acting
hereunder.
     (f) No Liability of Trustee. TRUSTEE SHALL NOT BE LIABLE FOR ANY ERROR OF
JUDGMENT OR ACT DONE BY TRUSTEE IN GOOD FAITH, OR BE OTHERWISE RESPONSIBLE OR
ACCOUNTABLE UNDER ANY CIRCUMSTANCES WHATSOEVER (INCLUDING TRUSTEE’S NEGLIGENCE),
EXCEPT FOR TRUSTEE’S GROSS NEGLIGENCE OR MISCONDUCT. Trustee shall have the
right to rely on any instrument, document or signature authorizing or supporting
any action taken or proposed to be taken by it hereunder, believed by it in good
faith to be genuine. All moneys received by Trustee shall, until used or applied
as herein provided, be held in trust for the purposes for which they were
received, but need not be segregated in any manner from any other moneys (except
to the extent required by law), and Trustee shall be under no liability for
interest on any moneys received by it hereunder. Trustee hereby ratifies and
confirms any and all acts which the herein-named Trustee or its successor or
successors, substitute or substitutes, in this trust, shall do lawfully by
virtue hereof.
     (g) Judgment on Environmental Provision.
     (i) Judgment Sought. Pursuant to California Code of Civil Procedure §736,
Lender may bring an action (as such term is defined in California Code of Civil
Procedure §22) for breach of contract against Borrower for breach of any
provision contained in Article XVI hereof (the “Environmental Provision”), for
the recovery of the Environmental Damages listed in Section (ii) hereof, and for
the enforcement of the Environmental Provision, whether the Environmental
Provision is or was contained in or secured by this Security Instrument and
whether or not this Security Instrument has been discharged, reconveyed or
foreclosed upon. Notwithstanding the foregoing, no injunction for the
enforcement of an Environmental Provision may be issued after (x) satisfaction
of the Debt or (y) transfer of Borrower’s right, title and interest in and to
the “Real Property Security” (as such term is defined in California Code of
Civil Procedure §736(f)(4) in a bona fide transaction to an unaffiliated third
party for fair value.
     (ii) Damages. The damages that Lender may recover pursuant to Section
(i) above shall be limited to reimbursement or indemnification of the following
(collectively, the “Environmental Damages”): (w) if not pursuant to an order of
any Governmental Authority relating to the cleanup, remediation, or other
response action required by any applicable rule promulgated by a Governmental
Authority, those costs relating to a reasonable and good faith cleanup,
remediation, or other response action concerning a Release (such term shall have
the meaning ascribed to it under California Civil Code §2929.5 and under
California Civil Code of Procedure §726.5 and §736) or threatened release of
Hazardous Materials which is anticipated by the Environmental Provision; (x) if
pursuant to an order of any Governmental Authority which is anticipated by the
Environmental Provision, all amounts reasonably advanced in good faith by Lender
in connection therewith, provided that Lender negotiated, or attempted to
negotiate, in good faith to minimize the amounts it was required to advance
under the order; (y)

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indemnification against all liabilities of Lender to any third party relating to
the breach and not arising from acts, omissions or other conduct which occur
after Borrower is no longer an owner or operator of the “Real Property Security”
in accordance with the standards set forth in California Code of Civil Procedure
§726.5(d) (for the purposes of this Section (ii), the term “owner or operator”
means those persons described in §101(20)(A) of CERCLA); and (z) attorneys’ fees
and costs incurred by Lender relating to the breach. Notwithstanding the
foregoing, the Environmental Damages recoverable by Lender shall not include
(w) any part of the principal amount or accrued interest of the Debt, except for
any amounts advanced by Lender to cure or mitigate the breach of any
Environmental Provision that is added to the principal amount, and contractual
interest thereon, or (x) amounts which relate to a Release which was knowingly
permitted, caused or contributed to by Lender or any affiliate or agent of
Lender.
     (h) Waiver of Lien. Pursuant to the terms of California Code of Civil
Procedure §726.5, Lender may (i) waive its lien against (A) any parcel of “Real
Property Security” that is “environmentally impaired” (as such term is defined
in California Code of Civil Procedure §726.5(e)(3)), or is an “affected parcel”
(as such term is defined in California Code Civil Procedure §726.5(e)(1)), and
(B) all or any portion of the personal property attached to such parcels and
(ii) exercise (A) the rights and remedies of an unsecured creditor including
reduction of its claim against Borrower to judgment and (B) any other rights and
remedies permitted by law. As between Lender and Borrower, for purposes of
California Code of Civil Procedure §726.5, Borrower shall have the burden of
proving that (1) the Release or threatened Release was not (x) knowingly or
negligently caused or contributed to, or (y) knowingly or willfully permitted or
acquiesced to, by Borrower or any related party (as such term is defined in
California Code of Civil Procedure §726.5(e)(6)), or any affiliate or agent of
Borrower or any related party, and (2) in conjunction with the making, renewal
or modification of the Debt, (x) neither Borrower, any related party nor any
affiliate or agent of Borrower or any related party had actual knowledge or
notice of the Release or threatened Release of any Hazardous Materials, or
(y) if such a person had knowledge or notice of the Release or threatened
Release, Borrower made written disclosure thereof to Lender after Lender’s
written request for information concerning the environmental condition of the
Real Property Security (provided that Lender shall be deemed to have knowledge
of any matter disclosed in the Environmental Reports), or (z) Lender otherwise
obtained actual knowledge thereof prior to the making, renewal or modification
of the Debt.
     (i) Reconveyance Upon Payment of Debt. In the event that Borrower shall
cause to be paid the entire Debt and perform in full all of its obligations
under the Loan Documents, Lender shall release and shall cause Trustee to
release the Property from the lien of this Security Instrument and to reconvey
(without warranty by or recourse against Trustee or Lender) the Property to
Borrower. Upon Trustee’s receipt of Lender’s request for reconveyance, Trustee
shall reconvey, without warranty, the Property or that portion held. When the
Property has been fully reconveyed, the last reconveyance will operate as a
reassignment of all future Rents to the Person legally entitled.
     (j) Environmental Addendum.

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     (i) Lender shall have the right, but not the obligation, to enter upon the
Property, from time to time upon prior reasonable notice, and in its sole and
absolute discretion, to conduct inspections of the Property and the activities
conducted thereon to determine the compliance with all Environmental Statutes,
the presence of Hazardous Materials and the existence of any potential damages
as a result of the condition of the Property in the event that Lender reasonably
believes that there are Hazardous Materials on the Property that are not in
compliance with applicable Environmental Requirements. In furtherance thereof,
Borrower hereby grants to Lender and its agents, employees and qualified
consultants and contractors, the right to enter upon the Property and to perform
such tests on the Property (including invasive tests) as are reasonably
necessary. Lender shall conduct such inspections and tests at reasonable times,
shall use its best efforts to minimize interference with the operation of the
Property and agrees to restore the condition of the Property, but Lender shall
not be liable for any interference caused thereby unless due to the gross
negligence or willful misconduct or omission of Lender. In furtherance of the
purposes above, without limitation of any of Lender’s other rights, Lender may:
(x) obtain a court order to enforce Lender’s right to enter and inspect the
Property under California Civil Code §2929.5, to which the reasonable, good
faith decision of Lender as to whether there exists any Hazardous Materials on
or about the Property in violation of any Environmental Statutes, or a breach by
Borrower of any environmental provision of this Security Instrument or any of
the other Loan Documents, will be deemed reasonable and conclusive as between
the parties; and (y) have a receiver be appointed under California Code of Civil
Procedure §564 to enforce Lender’s right to enter and inspect the Property for
the purpose set forth above.
     (ii) Borrower and Lender agree that: (x) this paragraph is intended as
Lender’s written request for information and Borrower’s written response
concerning the environmental condition of the Property as provided in California
Code of Civil Procedure §726.5; and (y) each representation, warranty or
covenant, or indemnity made by Borrower in this Security Instrument or in the
other Loan Documents that relates to the environmental condition of the Property
is intended by Borrower and Lender to be an “environmental provision” for the
purposes of California Code of Civil Procedure §736 and will survive the payment
of the Debt and the termination or expiration of this Security Instrument and
will not be affected by Lender’s acquisition of any interest in the Property,
whether by full credit bid at foreclosure, deed in lieu of that, or otherwise.
If there is any transfer of any portion of Borrower’s interest in the Property,
any successor-in-interest to Borrower agrees by its succession to that interest
that the written request made pursuant to this paragraph will be deemed remade
to the successor-in-interest without any further or additional action on the
part of Lender and that by assuming the Debt secured by this Security Instrument
or by accepting the interest of Borrower subject to the lien of this Security
Instrument, the successor remakes each of the representations and warranties in
this Security Instrument and agrees to be bound by each covenant in this
Security Instrument, including but not limited to any indemnity provision.
     (k) Financing Statement. This Security Instrument shall also constitute a
financing statement pursuant to UCC §9502, and shall be filed as a fixture
filing in the Official Records of the County Recorder of the County in which the
Property is located and covers goods which are or are to become fixtures on the
Property.

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     (l) Border Zone Property. Borrower represents and warrants that the
Property has not been designated as Border Zone Property under the provisions of
California Health and Safety Code §25220 et seq. or any regulation adopted in
accordance therewith and there has been no occurrence or condition on any real
property adjoining or in the vicinity of the Property that is reasonably likely
to cause the Property or any part thereof to be designated as Border Zone
Property.
     (m) Waiver of Statutory Regulation. By initialing below, Borrower waives
any right under California Civil Code §2954.10 or otherwise to prepay the Note,
in whole or in part, without a Prepayment Charge (as described in Section 13.03
and Article XV hereof). Borrower acknowledges that prepayment of the Note may
result in Lender’s incurring additional losses, costs, expenses, and
liabilities, including, but not limited to, lost revenue and lost profits.
Borrower therefore agrees to pay any prepayment charges on the terms and
conditions provided herein, including, without limitation, upon any Event of
Default attributable to the transfer or conveyance of any right, title, or
interest in the Property to the extent the same would be due pursuant to Section
13.03 or Article XV hereof.
     BORROWER AGREES THAT LENDER’S WILLINGNESS TO MAKE THE LOAN AT THE INTEREST
RATE FOR THE TERM SET FORTH HEREIN CONSTITUTES ADEQUATE CONSIDERATION, GIVEN
INDIVIDUAL WEIGHT BY BORROWER, FOR THIS WAIVER AND AGREEMENT.
[Borrower’s Initials]

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     IN WITNESS WHEREOF, Borrower has duly executed this Security Instrument the
day and year first above written.

                          Borrower’s Organizational
Identification Number: 199822200005       MARITIME HOTEL ASSOCIATES, L.P., a
California
limited partnership    
 
                                By:   Hyde Street Hospitality, LLC, a Delaware
limited
liability company, its general partner    
 
                                    By:   Kimpton Group Holding LLC, a Delaware
limited liability
company, its sole member    
 
                       
 
              By:   /s/ Gregory J. Wolkom
 
Name: Gregory J. Wolkom
Title: CFO    

 

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Acknowledgment

     
State Of California
  ) 
 
  ) ss:
County Of San Francisco
  ) 

     On February, 9, 2007, before me, Jessie Holland personally appeared Gregory
Wolkom, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his authorized capacity, and
that by his signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
     WITNESS my hand and official seal.
Signature /s/ Jessie Holland         (seal)

 

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EXHIBIT A
Legal Description of Premises

 

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EXHIBIT B
SUMMARY OF RESERVES

                  Monthly Installment Reserve Items   Initial Deposit Amount  
Amount
Basic Carrying Costs
       
•    Taxes
  $0    $48,500 
•    Insurance Premiums
  $0    $TBD 
•    Ground Rents
  $0    $TBD 
 
       
Initial Engineering Deposits
      Not Applicable
•    Immediate Repairs
  $0     
•    Environmental Remediation
  $0     
 
       
Recurring Replacement Reserve Monthly Installment
  Not Applicable   $70,983.36 

 

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EXHIBIT C

 

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EXHIBIT D
Required Engineering Work
None.

 

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EXHIBIT E
Form of Direction Letter
[Letterhead of Landlord]
[Name and Address of tenant]
Re: [Address of Premises]
Dear tenant:
     You are hereby directed to make all future payments of rent and other sums
due to Landlord under the Lease payable as follows:

                  Payable To:   Borrower and Wachovia Bank, National
Association, as secured party    
 
               
 
  ABA #                            
 
               
 
  Account #                            
 
               
 
  Address:                            
 
                         
 
                         

     Please take particular care in making the check payable only to the
above-mentioned names because only checks made payable to the referenced names
will be credited against sums due by you to landlord. Until otherwise advised in
writing by Landlord and the above-mentioned bank (or its successor), you should
continue to make your payments for rent and other sums as directed by the terms
of this letter.
     Thank you in advance for your cooperation with this change in payment
procedures.

             
 
  By:        
 
     
 
   
 
                     

 

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EXHIBIT F
CREDIT CARD PAYMENT DIRECTION LETTER
[Date]
                                                                         
            
                                                                           
          
                                                                           
          
Re:                                                                     
             (the “Company”)
Gentlemen:
     _____________________________ (the “Processor”) has entered into
arrangements pursuant to which Processor acts as credit card processing service
provider with respect to certain credit card and debit card sales by Company and
makes payments to Company in respect of such sales as set forth in the [Merchant
Services Bankcard Agreement], dated _______________ between Processor and
Company (and together with any replacement agreement thereto, referred to herein
as the “Card Processing Agreement”).
     Please be advised that Company has entered or is about to enter into
financing arrangements with _____________________________ (the “Lender”)
pursuant to which Lender may from time to time make loans and advances and
provide other financial accommodations to Company, secured by, among other
things, all of Company’s right, title and interest in and to all deposit and
other bank accounts and proceeds of the foregoing, including all amounts at any
time payable by Processor to Company pursuant to the Card Processing Agreement
or otherwise.
     Notwithstanding anything to the contrary contained in the Card Processing
Agreement or any prior instructions to Processor, unless and until Processor
receives written instructions from Lender to the contrary, effective as of the
day after the date of Processor’s written acknowledgement below all amounts
payable by Processor to Company pursuant to the Card Processing Agreement or
otherwise shall be sent by federal funds wire transfer or electronic depository
transfer to the following bank account of Lender:
________________ (the “Bank”)
ABA Number: _____________________
For the Account of: _____________________________
its successors and assigns
Account Number: ___________________
Attn: __________________, Fax: __________________
___________________________

 

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     In the event Processor at any time receives any other instructions from
Lender with respect to the disposition of amounts payable by or through
Processor to Company pursuant to the Card Processing Agreement or otherwise,
Processor is hereby irrevocably authorized and directed to follow such
instructions, without inquiry as to Lender’s right or authority to give such
instructions. Company and Lender acknowledge that (a) any instructions from
Lender to Processor to change the account to which funds must be sent by a vice
president or other officer of Lender to _____________________________; (b) such
instructions shall only provide for funds to be sent to a single deposit account
of Lender, in a manner with respect to the nature of the funds transfer and at
times consistent with the payment practices of Processor as then in effect,
unless otherwise agreed by Processor. The Company agrees to hold harmless
Processor for any action taken by Processor in accordance with the terms of this
letter and the Card Processing Agreement; and Lender shall complete such account
change forms as Processor may require. The Company hereby acknowledges that the
account set forth above is owned by Company but is under the control of Lender.
     Lender and Company hereby confirm and agree as follows: (i) the Card
Processing Agreement is in full force and effect and (ii) this Payment Direction
Letter does not prohibit or limit any rights Processor possesses under the Card
Processing Agreement, including but not limited to Processor’s right to debit,
offset or charge back any amount owing to Processor under the Card Processing
Agreement or any replacement or renewal thereof, against funds sent to or to be
sent to the above referenced bank account.
     This Payment Direction Letter cannot be changed, modified, or terminated,
except by written agreement signed by Lender, Company and Processor. Processor
agrees to use reasonable efforts to ensure payment instructions are followed,
but Lender and Company herein acknowledge that Processor shall incur no
liability for changes or modifications wherein Processor has received
instructions from Company or Lender to change deposit instructions. The terms of
this Payment Direction Letter shall be governed by the laws of the State of New
York.
     Please acknowledge your receipt of, and agreement to, the foregoing by
signing in the space provided below.

                  Very truly yours,    
 
                _________________________ (the “Company”)    
 
           
 
  By:        
 
     
 
Name:    
 
      Title:    
 
           
 
  Date:        
 
     
 
   

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EXHIBIT G
GROUND LEASE

1.   Historic Lease (HL-SAFR001-98), effective as of October 16, 2000, by and
between Ground Lessor and Borrower.

2.   First Amendment to Historic Lease (HL-SAFR001-98), effective as of
January 16, 2001, by and between Ground Lessor and Borrower.

3.   Second Amendment to Historic Lease (HL-SAFR001-98), effective as of
January 18, 2001, by and between Ground Lessor and Borrower.

4.   Third Amendment to Historic Lease (HL-SAFR001-98), effective as of
January 22, 2001, by and between Ground Lessor and Borrower.

5.   Fourth Amendment to Historic Lease (HL-SAFR001-98), effective as of
January 24, 2001, by and between Ground Lessor and Borrower.

6.   Fifth Amendment to Historic Lease (HL-SAFR001-98), effective as of
January 29, 2001, by and between Ground Lessor and Borrower.

7.   Sixth Amendment to Historic Lease (HL-SAFR001-98), effective as of
February 1, 2001, by and between Ground Lessor and Borrower.

8.   Seventh Amendment to Historic Lease (HL-SAFR001-98) effective as of 12:00
(noon) Pacific Standard Time February 6, 2001, by and between Ground Lessor and
Borrower.

9.   Eighth Amendment to Historic Lease (HL-SAFR001-98), effective as of
August 10, 2001, by and between Ground Lessor and Borrower.

10   Ninth Amendment to Historic Lease (HL-SAFR001-98) effective as of May 14,
2004, by and between Ground Lessor and Borrower.

 

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INDEX

          PAGE
ARTICLE I: DEFINITIONS
  5
 
   
Section 1.01. Certain Definitions.
  5
 
   
ARTICLE II: REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER
  24
 
   
Section 2.01. Payment of Debt. Borrower will pay the Debt at the time and in the
manner provided in the Note and the other Loan Documents, all in lawful money of
the United States of America in immediately available funds.
  24
 
   
Section 2.02. Representations, Warranties and Covenants of Borrower. Borrower
represents and warrants to and covenants with Lender:
  24
 
   
Section 2.03. Further Acts, etc. Borrower will, at the cost of Borrower, and
without expense to Lender, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages or deeds of trust, as
applicable, assignments, notices of assignments, transfers and assurances as
Lender or Trustee shall, from time to time, reasonably require for the better
assuring, conveying, assigning, transferring, and confirming unto Lender and
Trustee the property and rights hereby mortgaged, given, granted, bargained,
sold, alienated, enfeoffed, conveyed, confirmed, pledged, assigned and
hypothecated, or which Borrower may be or may hereafter become bound to convey
or assign to Lender and Trustee, or for carrying out or facilitating the
performance of the terms of this Security Instrument or for filing, registering
or recording this Security Instrument and, on demand, will execute and deliver
and hereby authorizes Lender to execute in the name of Borrower or without the
signature of Borrower to the extent Lender may lawfully do so, one or more
financing statements, chattel mortgages or comparable security instruments to
evidence more effectively the lien hereof upon the Property. Borrower grants to
Lender an irrevocable power of attorney coupled with an interest for the purpose
of protecting, perfecting, preserving and realizing upon the interests granted
pursuant to this Security Instrument and to effect the intent hereof, all as
fully and effectually as Borrower might or could do; and Borrower hereby
ratifies all that Lender shall lawfully do or cause to be done by virtue hereof;
provided, however, that Lender shall not exercise such power of attorney unless
and until Borrower fails to take the required action within the five
(5) Business Day time period stated above unless the failure to so exercise,
could, in Lender’s reasonable judgment, result in a Material Adverse Effect.
Upon (a) receipt of an affidavit of an officer of Lender as to the loss, theft,
destruction or mutilation of the Note or any other Loan Document which is not of
public record, (b) receipt of an indemnity of Lender related to losses resulting
solely from the issuance of a replacement note or other applicable Loan Document
and (c) in the case of any such mutilation, upon surrender and cancellation of
such Note or other
   

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          PAGE
applicable Loan Document, Borrower will issue, in lieu thereof, a replacement
Note or other applicable Loan Document, dated the date of such lost, stolen,
destroyed or mutilated Note or other Loan Document in the same principal amount
thereof and otherwise of like tenor.
  35
 
   
Section 2.04. Recording of Security Instrument, etc. Borrower forthwith upon the
execution and delivery of this Security Instrument and thereafter, from time to
time, will cause this Security Instrument, and any security instrument creating
a lien or security interest or evidencing the lien hereof upon the Property and
each instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully protect the lien or security interest
hereof upon, and the interest of Lender in, the Property. Borrower will pay all
filing, registration or recording fees, and all expenses incident to the
preparation, execution and acknowledgment of this Security Instrument, any
mortgage or deed of trust, as applicable, supplemental hereto, any security
instrument with respect to the Property and any instrument of further assurance,
and all federal, state, county and municipal, taxes, duties, imposts,
assessments and charges arising out of or in connection with the execution and
delivery of this Security Instrument, any mortgage or deed of trust, as
applicable, supplemental hereto, any security instrument with respect to the
Property or any instrument of further assurance, except where prohibited by law
to do so, in which event Lender may declare the Debt to be immediately due and
payable. Borrower shall hold harmless and indemnify Lender and Trustee, and
their successors and assigns, against any liability incurred as a result of the
imposition of any tax on the making and recording of this Security Instrument.
  35
 
   
Section 2.05. Representations, Warranties and Covenants Relating to the
Property. Borrower represents and warrants to and covenants with Lender with
respect to the Property as follows:
  36
 
   
Section 2.06. Removal of Lien. (a) Borrower shall, at its expense, maintain this
Security Instrument as a first lien on the Property and shall keep the Property
free and clear of all liens and encumbrances of any kind and nature other than
the Permitted Encumbrances. Borrower shall, within ten (10) days following the
filing thereof, promptly discharge of record, by bond or otherwise, any such
liens and, promptly upon request by Lender, shall deliver to Lender evidence
reasonably satisfactory to Lender of the discharge thereof.
  42
 
   
Section 2.07. Cost of Defending and Upholding this Security Instrument Lien. If
any action or proceeding is commenced to which Lender or Trustee is made a party
relating to the Loan Documents and/or the Property or Lender’s or Trustee’s
interest therein or in which it becomes necessary to defend or uphold the lien
of this Security Instrument or any other Loan Document, Borrower shall, on
written demand, reimburse Lender and/or Trustee, as applicable, for all expenses
(including, without limitation, reasonable attorneys’ fees and disbursements)
incurred by Lender and/or Trustee, as applicable, in connection therewith, and
   

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          PAGE
such sum, together with interest thereon at the Default Rate from and after such
demand until fully paid, shall constitute a part of the Debt.
  43
 
   
Section 2.08. Use of the Property. Borrower will use, or cause to be used, the
Property for such use as is permitted pursuant to the Ground Lease and
applicable Legal Requirements including, without limitation, under the
certificate of occupancy applicable to the Property, and which is required by
the Loan Documents. Borrower shall not suffer or permit the Property or any
portion thereof to be used by the public, any tenant, or any Person not subject
to a Lease, in a manner as is reasonably likely to impair Borrower’s title to
the Property, or in such manner as may give rise to a claim or claims of adverse
usage or adverse possession by the public, or of implied dedication of the
Property or any part thereof.
  43
 
   
Section 2.09. Financial Reports. (a) Borrower will keep and maintain or will
cause to be kept and maintained on a Fiscal Year basis, in accordance with GAAP
and The Uniform System of Accounts (or such other accounting basis reasonably
acceptable to Lender) consistently applied, proper and accurate books, tax
returns, records and accounts reflecting (i) all of the financial affairs of
Borrower and Guarantor and (ii) all items of income and expense in connection
with the operation of the Property or in connection with any services, equipment
or furnishings provided in connection with the operation thereof, whether such
income or expense may be realized by Borrower or by any other Person whatsoever,
excepting lessees unrelated to and unaffiliated with Borrower who have leased
from Borrower portions of the Premises for the purpose of occupying the same.
Lender shall have the right from time to time at all times during normal
business hours upon reasonable notice to examine such books, tax returns,
records and accounts at the office of Borrower or other Person maintaining such
books, tax returns, records and accounts and to make such copies or extracts
thereof as Lender shall desire, provided that (i) Borrower shall have a right to
have a representative present at all times and (ii) Lender shall do so in a
manner so as to avoid disruption to the operation of the Hotel or to Manager’s
management thereof. After the occurrence and during the continuation of an Event
of Default, Borrower shall pay any reasonable costs and expenses incurred by
Lender to examine Borrower’s and Guarantor’s accounting records with respect to
the Property, as Lender shall determine to be necessary or appropriate in the
protection of Lender’s interest.
  44
 
   
Section 2.10. Litigation. Borrower will give prompt written notice to Lender of
any litigation or governmental proceedings pending or threatened (in writing)
against Borrower which could reasonably have a Material Adverse Effect.
  46
 
   
Section 2.11. Updates of Representations. Borrower shall deliver to Lender
within ten (10) Business Days of the request of Lender an Officer’s Certificate
updating all of the representations and warranties contained in this Security
Instrument and the other Loan Documents and certifying that all of the
representations and warranties contained in this Security Instrument and the
other
   

- 3 -

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          PAGE
Loan Documents, as updated pursuant to such Officer’s Certificate, are true,
accurate and complete as of the date of such Officer’s Certificate or shall set
forth the exceptions to representations and/or warranties in reasonable detail,
as applicable, and, upon Lender’s request for further information with respect
to such exceptions, shall provide Lender such additional information as Lender
may reasonably request. Notwithstanding the foregoing, provided that no Event of
Default has occurred and is continuing, Borrower shall not be required to
deliver the foregoing Officer’s Certificate more than three (3) times during the
term of the Loan and, subsequent to a Securitization, in no event more than one
(1) time in any calendar year.
  46
 
   
Section 2.12. Ground Lease. (a) Borrower will comply in all material respects
with the terms and conditions of the Ground Lease. Borrower will not do or
permit anything to be done, the doing of which, or refrain from doing anything,
the omission of which, will impair or tend to impair the security of the
Premises under the Ground Lease or will be grounds for declaring a forfeiture of
the Ground Lease.
  47
 
   
ARTICLE III: INSURANCE AND CASUALTY RESTORATION
  50
 
   
Section 3.01. Insurance Coverage. Borrower shall, at its expense, maintain the
following insurance coverages with respect to the Property during the term of
this Security Instrument:
  50
 
   
Section 3.02. Policy Terms. (a) All insurance required by this Article III shall
be in the form (other than with respect to Sections 3.01(a)(vi) and (vii) above
when insurance in those two sub-sections is placed with a governmental agency or
instrumentality on such agency’s forms) and amount and with deductibles as, from
time to time, shall be reasonably acceptable to Lender, under valid and
enforceable policies issued by financially responsible insurers authorized to do
business in the State where the Property is located, with a general
policyholder’s service rating of not less than A and a financial rating of not
less than XIII as rated in the most currently available Best’s Insurance Reports
(or the equivalent, if such rating system shall hereafter be altered or
replaced) and shall have a claims paying ability rating and/or financial
strength rating, as applicable, of not less than “AA” (or its equivalent), or
such lower claims paying ability rating and/or financial strength rating, as
applicable, as Lender shall, in its sole and absolute discretion, consent to,
from a Rating Agency (one of which after a Securitization in which Standard &
Poor’s rates any securities issued in connection with such Securitization, shall
be Standard & Poor’s). Originals or certified copies of all insurance policies
shall be delivered to and held by Lender. All such policies (except policies for
worker’s compensation) shall name Lender, its successors and/or assigns as an
additional named insured, with respect to the insurance required pursuant to
Section 3.01(a)(iii) above, shall provide for loss payable to Lender, its
successors and/or assigns and shall contain (or have attached): (i) standard
“non-contributory mortgagee” endorsement or its equivalent relating, inter alia,
to recovery by Lender notwithstanding the negligent or willful acts or
   

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          PAGE
omissions of Borrower; (ii) a waiver of subrogation endorsement as to Lender;
(iii) an endorsement indicating that neither Lender nor Borrower shall be or be
deemed to be a co-insurer with respect to any casualty risk insured by such
policies and shall provide for a deductible per loss of an amount not more than
$10,000, and (iv) a provision that such policies shall not be canceled,
terminated, denied renewal or amended, including, without limitation, any
amendment reducing the scope or limits of coverage, without at least thirty
(30) days’ prior written notice to Lender in each instance. Not less than thirty
(30) days, or, with respect to non-payment of premiums, ten (10) days, prior to
the expiration dates of the insurance policies obtained pursuant to this
Security Instrument, originals or certified copies of renewals of such policies
(or certificates evidencing such renewals) bearing notations evidencing the
payment of premiums or accompanied by other reasonable evidence of such payment
(which premiums shall not be paid by Borrower through or by any financing
arrangement which would entitle an insurer to terminate a policy unless Borrower
has on deposit in the Basic Carrying Costs Escrow Account an amount, as
reasonably determined by Lender, equal to not less than one-fourth of the annual
insurance premium with respect to the insurance required by this Article III)
shall be delivered by Borrower to Lender. Borrower shall not carry separate
insurance, concurrent in kind or form or contributing in the event of loss, with
any insurance required under this Article III.
  53
 
   
Section 3.03. Assignment of Policies. (a) Borrower hereby assigns to Lender the
proceeds of all insurance (other than worker’s compensation and liability
insurance) obtained pursuant to this Security Instrument, all of which proceeds
shall be payable to Lender as collateral and further security for the payment of
the Debt and the performance of Borrower’s obligations hereunder and under the
other Loan Documents, and Borrower hereby authorizes and directs the issuer of
any such insurance to make payment of such proceeds directly to Lender. Except
as otherwise expressly provided in Section 3.04 or elsewhere in this Article
III, Lender shall have the option, in its discretion, and without regard to the
adequacy of its security, to apply all or any part of the proceeds it may
receive pursuant to this Article in such manner as Lender may elect to any one
or more of the following: (i) the payment of the Debt, whether or not then due,
in any proportion or priority as Lender, in its discretion, may elect, (ii) the
repair or restoration of the Property, (iii) the cure of any Default or (iv) the
reimbursement of the costs and expenses of Lender incurred pursuant to the terms
hereof in connection with the recovery of the Insurance Proceeds. Nothing herein
contained shall be deemed to excuse Borrower from repairing or maintaining the
Property as provided in this Security Instrument or restoring all damage or
destruction to the Property, regardless of the sufficiency of the Insurance
Proceeds, and the application or release by Lender of any Insurance Proceeds
shall not cure or waive any Default or notice of Default.
  54
 
   
Section 3.04. Casualty Restoration. (a) (i) In the event of any damage to or
destruction of the Property, Borrower shall give prompt written notice to Lender
(which notice shall set forth Borrower’s good faith estimate of the cost of
   

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          PAGE
repairing or restoring such damage or destruction, or if Borrower cannot
reasonably estimate the anticipated cost of restoration, Borrower shall
nonetheless give Lender prompt notice of the occurrence of such damage or
destruction, and will diligently proceed to obtain estimates to enable Borrower
to quantify the anticipated cost and time required for such restoration,
whereupon Borrower shall promptly notify Lender of such good faith estimate)
and, provided that restoration does not violate any Legal Requirements, Borrower
shall promptly commence and diligently prosecute to completion the repair,
restoration or rebuilding of the Property so damaged or destroyed to a condition
such that the Property shall be at least equal in value to that immediately
prior to the damage to the extent practicable, in full compliance with all Legal
Requirements and the provisions of all Leases, and in accordance with Section
3.04(b) below. Such repair, restoration or rebuilding of the Property are
sometimes hereinafter collectively referred to as the “Work”.
  55
 
   
Section 3.05. Compliance with Insurance Requirements. Borrower promptly shall
comply with, and shall cause the Property to comply with, all Insurance
Requirements, even if such compliance requires structural changes or
improvements or would result in interference with the use or enjoyment of the
Property or any portion thereof; provided, however, Borrower shall have a right
to contest in good faith and with diligence such Insurance Requirements provided
(a) no Event of Default shall exist during such contest and such contest shall
not subject the Property or any portion thereof to any lien or affect the
priority of the lien of this Security Instrument, (b) failure to comply with
such Insurance Requirements will not subject Lender, Trustee or any of their
agents, employees, officers or directors to any civil or criminal liability,
(c) such contest will not cause any reduction in insurance coverage then
existing on the Property, (d) such contest shall not affect the ownership, use
or occupancy of the Property, (e) the Property or any part thereof or any
interest therein shall not be in any danger of being sold, forfeited or lost by
reason of such contest by Borrower, (f) Borrower has given Lender prompt notice
of such contest and, upon request by Lender from time to time, notice of the
status of such contest by Borrower and/or information of the continuing
satisfaction of the conditions set forth in clauses (a) through (e) of this
Section 3.05, (g) upon a final determination of such contest, Borrower shall
promptly comply with the requirements thereof, and (h) prior to and during such
contest, Borrower shall furnish to Lender security satisfactory to Lender, in
its reasonable discretion, against loss or injury by reason of such contest or
the non-compliance with such Insurance Requirement (and if such security is
cash, Lender shall deposit the same in an interest-bearing account and interest
accrued thereon, if any, shall be deemed to constitute a part of such security
for purposes of this Security Instrument, but Lender (i) makes no representation
or warranty as to the rate or amount of interest, if any, which may accrue
thereon and shall have no liability in connection therewith and (ii) shall not
be deemed to be a trustee or fiduciary with respect to its receipt of any such
security and any such security may be commingled with other monies of Lender).
If Borrower shall use the Property or any portion thereof in any manner which
permits the insurer to cancel any insurance required to be provided hereunder,
Borrower immediately shall
   

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          PAGE
obtain a substitute policy which shall satisfy the requirements of this Security
Instrument and which shall be effective on or prior to the date on which any
such other insurance policy shall be canceled. Borrower shall not by any action
or omission invalidate any insurance policy required to be carried hereunder
unless such policy is replaced as aforesaid, or materially increase the premiums
on any such policy above the normal premium charged for such policy. Borrower
shall cooperate with Lender in obtaining for Lender the benefits of any
Insurance Proceeds lawfully or equitably payable to Lender in connection with
the transaction contemplated hereby.
  59
 
   
Section 3.06. Event of Default During Restoration. Notwithstanding anything to
the contrary contained in this Security Instrument including, without
limitation, the provisions of this Article III, if, at the time of any casualty
affecting the Property or any part thereof, or at any time during any Work, or
at any time that Lender is holding or is entitled to receive any Insurance
Proceeds pursuant to this Security Instrument, either a Default of which
Borrower has been given notice or an Event of Default exists and is continuing,
Lender shall then have no obligation to make such proceeds available for Work
(unless, provided no Event of Default exists, the disbursement of such Insurance
Proceeds will cure the Default, in which event Lender shall disburse Insurance
Proceeds for Work) and Lender shall have the right and option, to be exercised
in its sole and absolute discretion and election, with respect to the Insurance
Proceeds, either to retain and apply such proceeds in reimbursement for the
actual costs, fees and expenses incurred by Lender in accordance with the terms
hereof in connection with the adjustment of the loss and, after the occurrence
of an Event of Default, any balance toward payment of the Debt in such priority
and proportions as Lender, in its sole discretion, shall deem proper, or towards
the Work, upon such terms and conditions as Lender shall determine, or to cure
such Event of Default, or to any one or more of the foregoing as Lender, in its
sole and absolute discretion, may determine. If Lender shall receive and retain
such Insurance Proceeds, the lien of this Security Instrument shall be reduced
only by the amount thereof received, after reimbursement to Lender of expenses
of collection, and actually applied by Lender in reduction of the principal sum
payable under the Note in accordance with the Note.
  60
 
   
Section 3.07. Application of Proceeds to Debt Reduction. (a) No damage to the
Property, or any part thereof, by fire or other casualty whatsoever, whether
such damage be partial or total, shall relieve Borrower from its liability to
pay in full the Debt and to perform its obligations under this Security
Instrument and the other Loan Documents.
  61
 
   
ARTICLE IV: IMPOSITIONS
  61
 
   
Section 4.01. Payment of Impositions, Utilities and Taxes, etc. Subject to any
right to contest pursuant to the terms of the Loan Documents and Lender’s
obligations pursuant to Article V hereof, Borrower shall pay or cause to be paid
all Impositions at least five (5) days prior to the date upon which any fine,
   

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          PAGE
penalty, interest or cost for nonpayment is imposed, and furnish to Lender, upon
request, receipted bills of the appropriate taxing authority or other
documentation reasonably satisfactory to Lender evidencing the payment thereof.
If Borrower shall fail to pay any Imposition in accordance with this Section and
is not contesting or causing a contesting of such Imposition in accordance with
Section 4.04 hereof, or if there are insufficient funds in the Basic Carrying
Costs Escrow Account to pay any Imposition, Lender shall have the right, but
shall not be obligated, to pay that Imposition, and Borrower shall repay to
Lender, on demand, any amount paid by Lender, with interest thereon at the
Default Rate from the date of the advance thereof to the date of repayment, and
such amount shall constitute a portion of the Debt secured by this Security
Instrument.
  61
 
   
Section 4.02. Deduction from Value. In the event of the passage after the date
of this Security Instrument of any Legal Requirement deducting from the value of
the Property for the purpose of taxation, any lien thereon or changing in any
way the Legal Requirements now in force for the taxation of this Security
Instrument and/or the Debt for federal, state or local purposes, or the manner
of the operation of any such taxes so as to adversely affect the interest of
Lender, or imposing any tax or other charge on any Loan Document, then Borrower
will pay such tax, with interest and penalties thereon, if any, within the
statutory period. In the event the payment of such tax or interest and penalties
by Borrower would be unlawful, or taxable to Lender or unenforceable or provide
the basis for a defense of usury, then in any such event, Lender shall have the
option, by written notice of not less than thirty (30) days, to declare the Debt
immediately due and payable, with no prepayment fee or charge of any kind.
  62
 
   
Section 4.03. No Joint Assessment. Borrower shall not consent to or initiate the
joint assessment of the Premises or the Improvements (a) with any other real
property constituting a separate tax lot and Borrower represents and covenants
that the Premises and the Improvements are and shall remain a separate tax lot
or (b) 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 the Property as a single lien.
  62
 
   
Section 4.04. Right to Contest. Borrower shall have the right, after prior
notice to Lender, at its sole expense, to contest by appropriate legal
proceedings diligently conducted in good faith, without cost or expense to
Lender or any of its agents, employees, officers or directors, the validity,
amount or application of any Imposition or any charge described in Section 4.01,
provided that (a) no Event of Default shall exist during such proceedings and
such contest shall not (unless Borrower shall comply with clause (d) of this
Section 4.04) subject the Property or any portion thereof to any lien or affect
the priority of the lien of this Security Instrument, (b) failure to pay such
Imposition or charge will not subject Lender, Trustee or any of their agents,
employees, officers or directors to any civil or criminal liability, (c) the
contest suspends enforcement of the Imposition or charge (unless Borrower first
pays the Imposition or charge), (d) prior to and
   

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during such contest, Borrower shall furnish to Lender security satisfactory to
Lender, in its reasonable discretion, against loss or injury by reason of such
contest or the non-payment of such Imposition or charge (and if such security is
cash, Lender may deposit the same in an interest-bearing account and interest
accrued thereon, if any, shall be deemed to constitute a part of such security
for purposes of this Security Instrument, but Lender (i) makes no representation
or warranty as to the rate or amount of interest, if any, which may accrue
thereon and shall have no liability in connection therewith and (ii) shall not
be deemed to be a trustee or fiduciary with respect to its receipt of any such
security and any such security may be commingled with other monies of Lender),
(e) such contest shall not affect the ownership, use or occupancy of the
Property, (f) the Property or any part thereof or any interest therein shall not
be in any danger of being sold, forfeited or lost by reason of such contest by
Borrower, (g) Borrower has given Lender notice of the commencement of such
contest and upon request by Lender, from time to time, notice of the status of
such contest by Borrower and/or confirmation of the continuing satisfaction of
clauses (a) through (f) of this Section 4.04, and (h) upon a final determination
of such contest, Borrower shall promptly comply with the requirements thereof.
Upon completion of any contest, Borrower shall immediately pay the amount due,
if any, and deliver to Lender proof of the completion of the contest and payment
of the amount due, if any, following which Lender shall return the security, if
any, deposited with Lender pursuant to clause (d) of this Section 4.04. Borrower
shall not pay any Imposition in installments unless permitted by applicable
Legal Requirements, and shall, upon the request of Lender, deliver copies of all
notices and bills relating to any Imposition or other charge covered by this
Article IV to Lender.
  62
 
   
Section 4.05. No Credits on Account of the Debt. Borrower will not claim or
demand or be entitled to any credit or credits on account of the Debt for any
part of the Impositions assessed against the Property or any part thereof and no
deduction shall otherwise be made or claimed from the taxable value of the
Property, or any part thereof, by reason of this Security Instrument or the
Debt. In the event such claim, credit or deduction shall be required by Legal
Requirements, Lender shall have the option, by written notice of not less than
thirty (30) days, to declare the Debt immediately due and payable, and Borrower
hereby agrees to pay such amounts not later than thirty (30) days after such
notice.
  63
 
   
Section 4.06. Documentary Stamps. If, at any time, the United States of America,
any State or Commonwealth thereof or any subdivision of any such State shall
require revenue or other stamps to be affixed to the Note, this Security
Instrument or any other Loan Document, or impose any other tax or charges on the
same, Borrower will pay the same, with interest and penalties thereon, if any.
  63
 
   
ARTICLE V: CENTRAL CASH MANAGEMENT
  63
 
   
Section 5.01. Cash Flow. Borrower hereby acknowledges and agrees that the Rents
(which for the purposes of this Section 5.01 shall not include security deposits
from tenants under Leases held by Borrower and not applied towards
   

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Rent) derived from the Property and Loss Proceeds shall be utilized to fund the
Sub-Accounts. Borrower shall give each tenant under a Space Lease an irrevocable
direction in the form of Exhibit E attached hereto and made a part hereof to
deliver all rent payments made by tenants and other payments constituting Rent
directly into the Rent Account. All payments constituting Rent, other than
payments received from tenants under a Lease and payments made by credit cards,
shall be delivered to Manager. Manager shall collect all of such Rent and shall
deposit such funds, within three (3) Business Days after receipt thereof in the
Rent Account, the name and address of the bank in which such account is located
and the account number of which to be identified in writing by Manager to
Lender. Borrower shall cause Manager to give to the bank in which the Rent
Account is located an irrevocable written instruction, in form and substance
acceptable to Lender, that, upon receipt of notice from Lender that an Event of
Default exists (the “Trigger Notice”), all funds deposited in such account shall
be automatically transferred through automated clearing house funds (“ACH”) or
by Federal wire to the Central Account prior to 5:00 p.m. (New York City time)
on a daily basis. Provided that the bank in which the Rent Account is located
has not received a Trigger Notice, all sums on deposit in the Rent Account shall
be transferred on a daily basis to an account designated in writing by Borrower
(the “Borrower Account”). Within two (2) Business Days of the Closing Date,
Borrower shall deliver to Lender a copy of the irrevocable notice which Borrower
delivered to the bank in which the Rent Account is located pursuant to the
provisions of this Section 5.01, the receipt of which is acknowledged in writing
by such bank. Additionally, Borrower shall, or shall cause Manager to send to
each respective credit card company or credit card clearing bank with which
Borrower or Manager has entered into merchant’s agreements (each, a “Credit Card
Company”) a direction letter in the form of Exhibit F annexed hereto and made a
part hereof (the “Credit Card Payment Direction Letter”) directing such Credit
Card Company to make all payments due in connection with goods or services
furnished at or in connection with the Property by Federal wire or through ACH
directly to the Rent Account. Without the prior written consent of Lender,
neither Borrower nor Manager shall (i) terminate, amend, revoke or modify any
Credit Card Payment Direction Letter in any manner or (ii) direct or cause any
Credit Card Company to pay any amount in any manner other than as specifically
provided in the related Credit Card Payment Direction Letter. Lender may elect
to change the financial institution in which the Central Account shall be
maintained; however, Lender shall give Borrower and the bank in which the Rent
Account is located not fewer than five (5) Business Days’ prior notice of such
change. Neither Borrower nor Manager shall change such bank or the Rent Account
without the prior written consent of Lender, which shall not be unreasonably
withheld, conditioned or delayed. All fees and charges of the bank(s) in which
the Rent Account and the Central Account are located shall be paid by Borrower.
Promptly following the cure of any Event of Default which resulted in Lender
giving a Trigger Notice, Lender shall inform the bank holding the Rent Account
of the cure of such Event of Default, and at Borrower’s sole cost and expense
take all such actions and execute and deliver all such documents
   

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and instruments as are reasonably required to restore Borrower’s right to daily
withdrawals from the Rent Account.
  63
 
   
Section 5.02. Establishment of Accounts. Lender has established the Escrow
Accounts and the Central Account in the name of Lender as secured party and
Borrower has established the Rent Account in the joint names of Lender, as
secured party, and Borrower. The Escrow Accounts, the Rent Account and the
Central Account shall be under the sole dominion and control of Lender and funds
held therein shall not constitute trust funds. Borrower hereby irrevocably
directs and authorizes Lender to withdraw funds from the Rent Account and to
deposit into and withdraw funds from the Central Account and the Escrow
Accounts, all in accordance with the terms and conditions of this Security
Instrument. Borrower shall have no right of withdrawal in respect of the Central
Account, the Rent Account or the Escrow Accounts, except to the extent expressly
provided for in this Agreement, including without limitation as provided for in
Section 5.01. Each transfer of funds to be made hereunder shall be made only to
the extent that funds are on deposit in the Rent Account, the Central Account or
the affected Sub-Account or Escrow Account, and Lender shall have no
responsibility to make additional funds available in the event that funds on
deposit are insufficient. The Central Account shall contain the Basic Carrying
Costs Sub-Account, the Debt Service Payment Sub-Account, the Recurring
Replacement Reserve Sub Account, the Management Fee Sub-Account and the
Operations and Maintenance Expense Sub-Account, each of which accounts shall be
Eligible Accounts or book-entry sub-accounts of an Eligible Account (each a
“Sub-Account” and collectively, the “Sub-Accounts”) to which certain funds shall
be allocated and from which disbursements shall be made pursuant to the terms of
this Security Instrument. Sums held in the Escrow Accounts may be commingled
with other monies held by Lender.
  64
 
   
Section 5.03. Intentionally Omitted.
  65
 
   
Section 5.04. Servicing Fees. Provided that no Default has occurred and is
continuing, Borrower shall have no obligation to reimburse Lender for servicing
fees incurred in connection with the ordinary, routine servicing of the Loan;
provided, however, that Borrower shall reimburse Lender for (a) any and all
costs and expenses incurred after the occurrence of a Default of which Borrower
has been given notice or an Event of Default and (b) as otherwise provided for
in this Security Instrument. Additionally, in the event that Borrower requests
more than one disbursement from an Escrow Account in any month and Lender, in
its sole and absolute discretion, consents to such disbursement, Borrower shall
pay Lender a disbursement fee in the amount of $250.00 with respect to each
Escrow Account from which the additional disbursement is sought.
  65
 
   
Section 5.05. Monthly Funding of Sub-Accounts and Escrow Accounts. (a) On or
before each Payment Date during the term of the Loan, commencing on the first
(1st) Payment Date occurring after the month in which the Loan is initially
funded, Borrower shall pay or cause to be paid to the Central Account all sums
   

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required to be deposited in the Sub-Accounts pursuant to this Section 5.05(a)
and all funds transferred or deposited into the Central Account shall be
allocated among the Sub-Accounts as follows and in the following priority:
  65
 
   
Section 5.06. Payment of Basic Carrying Costs. Borrower hereby agrees to pay all
Basic Carrying Costs (without regard to the amount of money in the Basic
Carrying Costs Sub-Account or the Basic Carrying Costs Escrow Account). At least
ten (10) Business Days prior to the due date of any Basic Carrying Costs, and
not more frequently than once each month, Borrower may notify Lender in writing
and request that Lender pay such Basic Carrying Costs on behalf of Borrower on
or prior to the due date thereof, and, provided that no Event of Default has
occurred and that there are sufficient funds available in the Basic Carrying
Costs Escrow Account, Lender shall make such payments out of the Basic Carrying
Costs Escrow Account before same shall be delinquent. Together with each such
request, Borrower shall furnish Lender with bills and all other documents
necessary, as reasonably determined by Lender, for the payment of the Basic
Carrying Costs which are the subject of such request. Borrower’s obligation to
pay (or cause Lender to pay) Basic Carrying Costs pursuant to this Security
Instrument shall include, to the extent permitted by applicable law, Impositions
resulting from future changes in law which impose upon Lender an obligation to
pay any property taxes or other Impositions or which otherwise adversely affect
Lender’s interests. Notwithstanding the foregoing, in the event that Lender
receives a tax bill directly from a Governmental Authority relating to any Real
Estate Taxes, Lender shall pay all sums due thereunder prior to the date such
Real Estate Taxes would accrue late charges or interest thereon or within ten
(10) Business Days of the receipt of such tax bill, whichever is later. In
making any payment of Real Estate Taxes, Lender may rely on any bill, statement
or estimate obtained from the applicable Governmental Authority without inquiry
into the accuracy of such bill, statement or estimate or into the validity of
any Real Estate Taxes or claim with respect thereto.
  66
 
   
Section 5.07. Intentionally Omitted.
  67
 
   
Section 5.08. Recurring Replacement Reserve Escrow Account. Borrower hereby
agrees to pay all Recurring Replacement Expenditures with respect to the
Property (without regard to the amount of money then available in the Recurring
Replacement Reserve Sub-Account or the Recurring Replacement Reserve Escrow
Account). Provided that (a) Lender has received written notice from Borrower at
least five (5) Business Days prior to the due date of any payment relating to
Recurring Replacement Expenditures and not more frequently than once each month,
and further provided that no Event of Default has occurred and is continuing,
(b) there are sufficient funds available in the Recurring Replacement Reserve
Escrow Account, and (c) Borrower shall have theretofore furnished Lender with
lien waivers (which lien waivers may be conditional pending final payment, if
applicable), copies of bills, invoices and other reasonable documentation as may
be required by Lender to establish that the Recurring Replacement Expenditures
which are the subject of such request
   

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represent amounts due for completed or partially completed additions,
replacements, capital work and improvements performed at the Property, then
Lender shall make such payments out of the Recurring Replacement Reserve Escrow
Account.
  67
 
   
Section 5.09. Operation and Maintenance Expense Escrow Account. Borrower hereby
agrees to pay all Operating Expenses with respect to the Property (without
regard to the amount of money then available in the Operation and Maintenance
Expense Sub-Account or the Operation and Maintenance Expense Escrow Account).
All funds allocated to the Operation and Maintenance Expense Escrow Account
shall be held by Lender pursuant to the provisions of this Security Instrument.
Any sums held in the Operation and Maintenance Expense Escrow Account shall be
disbursed to Borrower within five (5) Business Days of receipt by Lender from
Borrower of (a) a written request for such disbursement which shall indicate the
Operating Expenses (exclusive of Basic Carrying Costs and any Required
Management Fee payable to Borrower, or to any Affiliate of Borrower) for which
the requested disbursement is to pay and (b) an Officer’s Certificate stating
that no Operating Expenses with respect to the Property are more than sixty
(60) days past due; provided, however, in the event that Borrower legitimately
disputes any invoice for an Operating Expense, and (i) no Event of Default has
occurred and is continuing hereunder, (ii) Borrower shall have set aside
adequate reserves for the payment of such disputed sums together with all
interest and late fees thereon, (iii) Borrower has complied with all the
requirements of this Security Instrument relating thereto, and (iv) the
contesting of such sums shall not constitute a default under any other
instrument, agreement, or document to which Borrower is a party (other than any
agreement with the vendor with respect to which the unpaid Operating Expenses
relates), then Borrower may, after certifying to Lender as to items (i) through
(iv) hereof, contest such invoice. Together with each such request, Borrower
shall furnish Lender with bills and all other documents necessary for the
payment of the Operating Expenses which are the subject of such request.
Borrower may request a disbursement from the Operation and Maintenance Expense
Escrow Account no more than one (1) time per calendar month. Should an Event of
Default occur and be continuing, the sums on deposit in the Operation and
Maintenance Expense Sub-Account or the Operation and Maintenance Expense Escrow
Account shall be applied by Lender in payment of any Operating Expenses for the
Property or, if Lender has accelerated the outstanding Principal Amount, may be
applied to the payment of the Debt or any other charges affecting all or any
portion of the Property as Lender, in its sole discretion, may determine;
provided, however, that no such application shall be deemed to have been made by
operation of law or otherwise until actually made by Lender as herein provided.
  68
 
   
Section 5.10. Intentionally Omitted.
  68
 
   
Section 5.11. Management Fee Escrow Account. Borrower hereby agrees to pay all
Required Management Fees (without regard to the amount of money then available
in the Management Fee Sub-Account or the Management Fee Escrow
   

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          PAGE
Account). All funds allocated to the Management Fee Escrow Account shall be held
by Lender pursuant to the provisions of this Security Instrument. Any sums held
in the Management Fee Escrow Account shall be disbursed to Borrower within five
(5) Business Days of receipt by Lender from Borrower of (a) a written request
for such disbursement which shall indicate the Required Management Fee for which
the requested disbursement is to pay and (b) an Officer’s Certificate stating
that no Required Management Fees are more than sixty (60) days past due;
provided, however, in the event that Borrower legitimately disputes any invoice
for a Required Management Fee, and (i) no Event of Default has occurred and is
continuing hereunder, (ii) Borrower shall have set aside adequate reserves for
the payment of such disputed sums together with all interest and late fees
thereon, (iii) Borrower has complied with all the requirements of this Security
Instrument relating thereto, and (iv) the contesting of such sums shall not
constitute a default under any other instrument, agreement, or document to which
Borrower is a party, then Borrower may, after certifying to Lender as to items
(i) through (iv) hereof, contest such invoice. Together with each such request,
Borrower shall furnish Lender with bills and all other documents necessary for
the payment of the Required Management Fees which are the subject of such
request. Borrower may request a disbursement from the Management Fee Escrow
Account no more than one (1) time per calendar month. Should an Event of Default
occur, the sums on deposit in the Management Fee Sub-Account or the Management
Fee Escrow Account shall be applied by Lender in payment of any Required
Management Fee or, if Lender has accelerated the outstanding Principal Amount,
may be applied to the payment of the Debt or any other charges affecting all or
any portion of the Property as Lender, in its sole discretion, may determine;
provided, however, that no such application shall be deemed to have been made by
operation of law or otherwise until actually made by Lender as herein provided.
  68
 
   
Section 5.12. Performance of Engineering Work. (a) Borrower shall promptly
commence and diligently thereafter pursue to completion (without regard to the
amount of money then available in the Engineering Escrow Account) the Required
Engineering Work prior to the six (6) month anniversary of the Closing Date.
After Borrower completes an item of Required Engineering Work, Borrower may
submit to Lender an invoice therefor with lien waivers (which may be conditional
pending payment, if applicable) and a statement from the Engineer, reasonably
acceptable to Lender, indicating that the portion of the Required Engineering
Work in question has been completed in compliance with all Legal Requirements,
and Lender shall, within twenty (20) days thereafter, although in no event more
frequently than once each month, reimburse such amount to Borrower from the
Engineering Escrow Account; provided, however, that Borrower shall not be
reimbursed out of the Engineering Escrow Account more than the amount set forth
on Exhibit D hereto as the amount allocated to the portion of the Required
Engineering Work for which reimbursement is sought.
  69
 
   
Section 5.13. Loss Proceeds. In the event of a casualty to the Property, except
to the extent Lender elects, or is required pursuant to Article III hereof to
make all or any portion of the Insurance Proceeds available to Borrower for
restoration,
   

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Lender and Borrower shall cause all such Insurance Proceeds to be paid by the
insurer directly to the Central Account, whereupon Lender shall, after deducting
Lender’s costs of recovering and paying out such Insurance Proceeds, including
without limitation, reasonable attorneys’ fees, apply same to reduce the Debt in
accordance with the terms of the Note; provided, however, that if Lender elects,
or is deemed to have elected, or is otherwise required pursuant to the terms of
this Security Instrument, to make all or a portion of the Insurance Proceeds
available for restoration, all Insurance Proceeds in respect of rent loss,
business interruption or similar coverage shall be maintained in the Central
Account, to be applied by Lender in the same manner as Rent received with
respect to the operation of the Property; provided, further, however, that in
the event that the Insurance Proceeds with respect to such rent loss, business
interruption or similar insurance policy are paid in a lump sum in advance,
Lender shall hold such Insurance Proceeds in a segregated interest-bearing
escrow account, which shall be an Eligible Account, shall estimate, in Lender’s
reasonable discretion, the number of months required for Borrower to restore the
damage caused by the casualty, shall divide the aggregate rent loss, business
interruption or similar Insurance Proceeds by such number of months, and shall
disburse from such bank account into the Central
   
Account each month during the performance of such restoration such monthly
installment of said Insurance Proceeds until such time as the Debt Service
Coverage for two (2) consecutive calendar quarters, the first of which shall not
occur prior to the applicable casualty, shall equal the Required Debt Service
Coverage or greater, at which time, after receipt of a written request from
Borrower, all sums held by Lender which related to rent loss, business
interruption insurance or similar Insurance Proceeds shall be disbursed to
Borrower. In the event that Insurance Proceeds are to be applied toward
restoration, Lender shall hold such funds in a segregated bank account at the
Bank, which shall be an Eligible Account, and shall disburse same in accordance
with the provisions of Section 3.04 hereof. Except to the extent Lender elects,
or is required pursuant to Section 6.01 hereof to make all or a portion of the
Condemnation Proceeds available to Borrower for restoration, Lender and Borrower
shall cause all such Condemnation Proceeds to be paid to the Central Account,
whereupon Lender shall, after deducting Lender’s costs of recovering and paying
out such Condemnation Proceeds, including without limitation, reasonable
attorneys’ fees, apply same to reduce the Debt in accordance with the terms of
the Note; provided, however, that any Condemnation Proceeds received in
connection with a temporary Taking shall be maintained in the Central Account,
to be applied by Lender in the same manner as Rent received with respect to the
operation of the Property; provided, further, however, that in the event that
the Condemnation Proceeds of any such temporary Taking are paid in a lump sum in
advance, Lender shall hold such Condemnation Proceeds in a segregated
interest-bearing bank account, which shall be an Eligible Account, shall
estimate, in Lender’s reasonable discretion, the number of months that the
Property shall be affected by such temporary Taking, shall divide the aggregate
Condemnation Proceeds in connection with such temporary Taking by such number of
months, and shall disburse from such bank account into the Central
   

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Account each month during the pendency of such temporary Taking such monthly
installment of said Condemnation Proceeds. In the event that Condemnation
Proceeds are to be applied toward restoration, Lender shall hold such funds in a
segregated bank account at the Bank, which shall be an Eligible Account, and
shall disburse same in accordance with the provisions of Section 3.04 hereof. If
any Loss Proceeds are received by Borrower, such Loss Proceeds shall be received
in trust for Lender, shall be segregated from other funds of Borrower, and shall
be forthwith paid into the Central Account, or paid to Lender to hold in a
segregated bank account at the Bank, in each case to be applied or disbursed in
accordance with the foregoing. Any Loss Proceeds made available to Borrower for
restoration in accordance herewith, to the extent not used by Borrower in
connection with, or to the extent they exceed the cost of, such restoration,
shall be deposited into the Central Account, to be held by Lender as additional
collateral for the Loan, until such time, if any, at any time subsequent to the
completion of the Work, the Debt Service Coverage is 1.2:1.0 or greater for two
(2) consecutive calendar quarters and provided a Default does not exist, at the
request of Borrower, such excess Loss Proceeds shall be disbursed to Borrower
provided any such Loss Proceeds still remain in the Central Account.
  70
 
   
ARTICLE VI: CONDEMNATION
  71
 
   
Section 6.01. Condemnation. (a) Borrower shall notify Lender promptly of the
commencement or threat of any Taking of the Property or any portion thereof.
Lender is hereby irrevocably appointed as Borrower’s attorney-in-fact, coupled
with an interest, with exclusive power to collect, receive and retain the
proceeds of any such Taking as to which Borrower is or may be entitled and to
make any compromise or settlement in connection with such proceedings (subject
to Borrower’s reasonable approval, except after the occurrence of an Event of
Default, in which event Borrower’s approval shall not be required), subject to
the provisions of this Security Instrument; provided, however, that Borrower may
participate in any such proceedings (without regard to the extent of the Taking)
and Borrower shall be authorized and entitled to compromise or settle any such
proceeding with respect to Condemnation Proceeds in an amount less than five
percent (5%) of the Loan Amount. Borrower shall execute and deliver to Lender
any and all instruments reasonably required in connection with any such
proceeding promptly after request therefor by Lender. Except as set forth above,
Borrower shall not adjust, compromise, settle or enter into any agreement with
respect to such proceedings without the prior consent of Lender. All
Condemnation Proceeds are hereby assigned to and shall be paid to Lender to be
applied in accordance with the terms hereof. With respect to Condemnation
Proceeds in an amount in excess of five percent (5%) of the Loan Amount,
Borrower hereby authorizes Lender to compromise, settle, collect and receive
such Condemnation Proceeds, and to give proper receipts and acquittance
therefor. Subject to the provisions of this Article VI, Lender may apply such
Condemnation Proceeds (less any cost to Lender of recovering and paying out such
proceeds, including, without limitation, reasonable attorneys’ fees and
disbursements and costs allocable to inspecting any repair, restoration or
   

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rebuilding work and the plans and specifications therefor) toward the payment of
the Debt or to allow such proceeds to be used for the Work.
  71
 
   
ARTICLE VII: LEASES AND RENTS
  73
 
   
Section 7.01. Assignment. (a) Borrower does hereby bargain, sell, assign and set
over unto Lender, all of Borrower’s interest in the Leases and Rents pursuant to
the terms hereof. The assignment of Leases and Rents in this Section 7.01 is an
absolute, unconditional and present assignment from Borrower to Lender and not
an assignment for security and the existence or exercise of Borrower’s revocable
license to collect Rent shall not operate to subordinate this assignment to any
subsequent assignment. The exercise by Lender of any of its rights or remedies
pursuant to this Section 7.01 shall not be deemed to make Lender a
mortgagee-in-possession. In addition to the provisions of this Article VII,
Borrower shall comply with all terms, provisions and conditions of the
Assignment.
  73
 
   
Section 7.02. Management of Property. (a) Borrower shall manage the Property or
cause the Property to be managed in a manner which is consistent with the
Approved Manager Standard. All Space Leases shall provide for rental rates
comparable to then existing local market rates for comparable space in hotel
properties and terms and conditions which constitute good and prudent business
practice and are consistent with prevailing market terms and conditions for
comparable space in hotel properties, and shall be arms-length transactions. All
Space Leases shall be on a form reasonably acceptable to Lender and shall
provide that they are subordinate to this Security Instrument and that the
lessees thereunder attorn to Lender. Borrower shall deliver copies of all
Leases, amendments, modifications and renewals thereof to Lender. All proposed
Leases for the Property shall be subject to the prior written approval of
Lender, provided, however that Borrower may enter into new leases with unrelated
third parties without obtaining the prior consent of Lender provided that:
(i) the proposed leases conform with the requirements of this Section 7.02;
(ii) the space to be leased pursuant to such proposed lease together with any
space leased or to be leased to an Affiliate of the tenant thereunder does not
exceed 5,000 square feet; and (iii) the term of the proposed lease inclusive of
all extensions and renewals, does not exceed five (5) years or, if all
extensions and renewals are at the then prevailing market rates, does not exceed
ten (10) years.
  74
 
   
ARTICLE VIII: MAINTENANCE AND REPAIR
  76
 
   
Section 8.01. Maintenance and Repair of the Property; Alterations; Replacement
of Equipment. Borrower hereby covenants and agrees:
  76
 
   
ARTICLE IX: TRANSFER OR ENCUMBRANCE OF THE PROPERTY
  78
 
   
Section 9.01. Other Encumbrances. Borrower shall not further encumber or permit
the further encumbrance in any manner (whether by grant of a pledge, security
interest or otherwise) of the Property or any part thereof or interest
   

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          PAGE
therein, including, without limitation, of the Rents therefrom other than
Permitted Liens. In addition, Borrower shall not further encumber and shall not
permit the further encumbrance in any manner (whether by grant of a pledge,
security interest or otherwise) of Borrower or any direct or indirect interest
in Borrower except as expressly permitted pursuant to this Security Instrument.
  78
 
   
Section 9.02. No Transfer. Borrower acknowledges that Lender has examined and
relied on the expertise of Borrower and, if applicable, each General Partner, 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 Borrower acknowledges that Lender has a valid interest in maintaining
the value of the Property. Borrower shall not Transfer, nor permit any Transfer,
without the prior written consent of Lender, which consent Lender may withhold
in its sole and absolute discretion. 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 a 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.
  78
 
   
Section 9.03. Due on Sale. Lender may declare the Debt immediately due and
payable upon any Transfer or further encumbrance without Lender’s consent
without regard to whether any impairment of its security or any increased risk
of default hereunder can be demonstrated. This provision shall apply to every
Transfer or further encumbrance of the Property or any part thereof or interest
in the Property or in Borrower regardless of whether voluntary or not, or
whether or not Lender has consented to any previous Transfer or further
encumbrance of the Property or interest in Borrower.
  78
 
   
Section 9.04. Permitted Transfer. Notwithstanding the foregoing provisions of
this Article IX, a sale, conveyance or transfer of the Property in its entirety
(hereinafter, “Sale”) shall be permitted hereunder provided that each of the
following terms and conditions are satisfied:
  79
 
   
ARTICLE X: CERTIFICATES
  80
 
   
Section 10.01. Estoppel Certificates. (a) After request by Lender, Borrower,
within fifteen (15) days and at its expense, will furnish Lender with a
statement, duly acknowledged and certified, setting forth (i) the amount of the
original principal amount of the Note, and the unpaid principal amount of the
Note, (ii) the rate of interest of the Note, (iii) the date payments of interest
and/or principal were last paid, (iv) any offsets or defenses to the payment of
the Debt, and, if any are alleged, the nature thereof, (v) that the Note, this
Security Instrument and the other Loan Documents have not been modified or if
modified, giving particulars of such modification and (vi) that there has
occurred and is then continuing no
   

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          PAGE
Event of Default or if such Event of Default exists, the nature thereof, the
period of time it has existed, and the action being taken to remedy such Event
of Default.
  80
 
   
ARTICLE XI: NOTICES
  81
 
   
Section 11.01. Notices. Any notice, demand, statement, request or consent made
hereunder shall be in writing and delivered personally or sent to the party to
whom the notice, demand or request is being made by Federal Express or other
nationally recognized overnight delivery service, as follows and shall be deemed
given when delivered personally or one (1) Business Day after being deposited
with Federal Express or such other nationally recognized delivery service:
  81
 
   
ARTICLE XII: INDEMNIFICATION
  82
 
   
Section 12.01. Indemnification Covering Property. In addition, and without
limitation, to any other provision of this Security Instrument or any other Loan
Document, Borrower shall protect, indemnify and save harmless Lender, Trustee
and their successors and assigns, and each of their agents, employees, officers,
directors, stockholders, partners and members (collectively, “Indemnified
Parties”) for, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature, known or unknown, contingent or otherwise, whether incurred or imposed
within or outside the judicial process, including, without limitation,
reasonable attorneys’ fees and disbursements imposed upon or incurred by or
asserted against any of the Indemnified Parties by reason of (a) ownership of
this Security Instrument, the Assignment, the Property or any part thereof or
any interest therein or receipt of any Rents; (b) any accident, injury to or
death of any person or loss of or damage to property occurring in, on or about
the Property or any part thereof or on the adjoining sidewalks, curbs, parking
areas, streets or ways; (c) any use, nonuse or condition in, on or about, or
possession, alteration, repair, operation, maintenance or management of, the
Property or any part thereof or on the adjoining sidewalks, curbs, parking
areas, streets or ways; (d) any failure on the part of Borrower to perform or
comply with any of the terms of this Security Instrument or the Assignment;
(e) performance of any labor or services or the furnishing of any materials or
other property in respect of the Property or any part thereof; (f) any claim by
brokers, finders or similar Persons claiming to be entitled to a commission in
connection with any Lease or other transaction involving the Property or any
part thereof; (g) any Imposition including, without limitation, any Imposition
attributable to the execution, delivery, filing, or recording of any Loan
Document, Lease or memorandum thereof; (h) any lien or claim arising on or
against the Property or any part thereof under any Legal Requirement or any
liability asserted against any of the Indemnified Parties with respect thereto;
(i) any claim arising out of or in any way relating to any tax or other
imposition on the making and/or recording of this Security Instrument, the Note
or any of the other Loan Documents; (j) a Default under Sections 2.02(f),
2.02(g), 2.02(k), 2.02(t) or 2.02(w) hereof, (k) the failure of any Person to
file timely with the Internal Revenue Service an accurate Form 1099-B, Statement
for Recipients of
   

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              PAGE  
Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be
required in connection with the Loan, or to supply a copy thereof in a timely
fashion to the recipient of the proceeds of the Loan; (l) the claims of any
lessee or any Person acting through or under any lessee or otherwise arising
under or as a consequence of any Lease or (m) the failure to pay any insurance
premiums. Notwithstanding the foregoing provisions of this Section 12.01 to the
contrary, Borrower shall have no obligation to indemnify the Indemnified Parties
pursuant to this Section 12.01 for liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses relative to the foregoing which
result from Lender’s, and its successors’ or assigns’, willful misconduct or
gross negligence or if the condition or event which gave rise to liability first
arose or accrued following the date of transfer of title to the Property to
Lender in connection with any foreclosure of the Property or acceptance by
Lender of a deed-in-lieu thereof. Any amounts payable to Lender by reason of the
application of this Section 12.01 shall constitute a part of the Debt secured by
this Security Instrument and the other Loan Documents and shall become
immediately due and payable and shall bear interest at the Default Rate from the
date the liability, obligation, claim, cost or expense is sustained by Lender,
as applicable, until paid. The provisions of this Section 12.01 shall survive
the termination of this Security Instrument whether by repayment of the Debt,
foreclosure or delivery of a deed in lieu thereof, assignment or otherwise. In
case any action, suit or proceeding is brought against any of the Indemnified
Parties by reason of any occurrence of the type set forth in (a) through
(m) above, Borrower shall, at Borrower’s expense, take all commercially
reasonable steps to resist and defend such action, suit or proceeding or will
cause the same to be resisted and defended by counsel at Borrower’s expense for
the insurer of the liability or by counsel designated by Borrower (unless
reasonably disapproved by Lender promptly after Lender has been notified of such
counsel); provided, however, that nothing herein shall compromise the right of
Lender (or any other Indemnified Party) to appoint its own counsel at Borrower’s
expense for its defense with respect to any action which, in the reasonable
opinion of Lender or such other Indemnified Party, as applicable, presents a
conflict or potential conflict between Lender or such other Indemnified Party
that would make such separate representation advisable. Any Indemnified Party
will give Borrower prompt notice after such Indemnified Party obtains actual
knowledge of any potential claim by such Indemnified Party for indemnification
hereunder. The Indemnified Parties shall not settle or compromise any action,
proceeding or claim as to which it is indemnified hereunder without notice to
Borrower.
    82  
 
       
ARTICLE XIII: DEFAULTS
    83  
 
       
Section 13.01. Events of Default. The Debt shall become immediately due at the
option of Lender upon any one or more of the following events (“Event of
Default”):
    83  
 
       
Section 13.02. Remedies. (a) Upon the occurrence and during the continuance of
any Event of Default, Lender may, in addition to any other rights or remedies
       

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              PAGE  
available to it hereunder or under any other Loan Document, at law or in equity,
take such action, without notice or demand, as it reasonably deems advisable to
protect and enforce its rights against Borrower and in and to the Property
including, but not limited to, the following actions, each of which may be
pursued singly, concurrently or otherwise, at such time and in such order as
Lender may determine, in its sole discretion, without impairing or otherwise
affecting any other rights and remedies of Lender hereunder, at law or in
equity: (i) declare all or any portion of the unpaid Debt to be immediately due
and payable; provided, however, that upon the occurrence of any of the events
specified in Section 13.01(i), the entire Debt will be immediately due and
payable without notice or demand or any other declaration of the amounts due and
payable; or (ii) bring, or instruct Trustee to bring, an action to foreclose
this Security Instrument and without applying for a receiver for the Rents, but
subject to the rights of the tenants under the Leases, enter into or upon the
Property or any part thereof, either personally or by its agents, nominees or
attorneys, and dispossess Borrower and its agents and servants therefrom, and
thereupon Lender may (A) use, operate, manage, control, insure, maintain,
repair, restore and otherwise deal with all and every part of the Property and
conduct the business thereat, (B) make alterations, additions, renewals,
replacements and improvements to or on the Property or any part thereof,
(C) exercise all rights and powers of Borrower with respect to the Property or
any part thereof, whether in the name of Borrower or otherwise, including,
without limitation, the right to make, cancel, enforce or modify Leases, obtain
and evict tenants, and demand, sue for, collect and receive all earnings,
revenues, rents, issues, profits and other income of the Property and every part
thereof and Borrower shall have no liability under this clause (C) for any
actions taken by Lender which are grossly negligent or which constitute willful
misconduct, and (D) apply the receipts from the Property or any part thereof to
the payment of the Debt, after deducting therefrom all expenses (including,
without limitation, reasonable attorneys’ fees and disbursements) reasonably
incurred in connection with the aforesaid operations and all amounts necessary
to pay the Impositions, insurance and other charges in connection with the
Property or any part thereof, as well as just and reasonable compensation for
the services of Lender’s third-party agents; or (iii) have an appraisal or other
valuation of the Property or any part thereof performed by an Appraiser (and
Borrower covenants and agrees it shall cooperate in causing any such valuation
or appraisal to be performed) and any cost or expense incurred by Lender in
connection therewith shall constitute a portion of the Debt and be secured by
this Security Instrument and shall be immediately due and payable to Lender with
interest, at the Default Rate, until the date of receipt by Lender; or
(iv) sell, or instruct Trustee to sell, the Property or institute, or instruct
Trustee to institute, proceedings for the complete foreclosure of this Security
Instrument, or take such other action as may be allowed pursuant to Legal
Requirements, at law or in equity, for the enforcement of this Security
Instrument in which case the Property or any part thereof may be sold for cash
or credit in one or more parcels; or (v) with or without entry, and to the
extent permitted and pursuant to the procedures provided by applicable Legal
Requirements, institute proceedings for the partial
       

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              PAGE  
foreclosure of this Security Instrument, or take such other action as may be
allowed pursuant to Legal Requirements, at law or in equity, for the enforcement
of this Security Instrument for the portion of the Debt then due and payable,
subject to the lien of this Security Instrument continuing unimpaired and
without loss of priority so as to secure the balance of the Debt not then due;
or (vi) sell, or instruct Trustee to sell, the Property or any part thereof and
any or all estate, claim, demand, right, title and interest of Borrower therein
and rights of redemption thereof, pursuant to power of sale or otherwise, at one
or more sales, in whole or in parcels, in any order or manner, at such time and
place, upon such terms and after such notice thereof as may be required or
permitted by law, at the discretion of Lender, and in the event of a sale, by
foreclosure or otherwise, of less than all of the Property, this Security
Instrument shall continue as a lien on the remaining portion of the Property; or
(vii) institute an action, suit or proceeding in equity for the specific
performance of any covenant, condition or agreement contained in the Loan
Documents, or any of them; or (viii) recover judgment on the Note or any
guaranty either before, during or after (or in lieu of) any proceedings for the
enforcement of this Security Instrument; or (ix) apply, or direct Trustee to
apply, ex parte, for the appointment of a custodian, trustee, receiver, keeper,
liquidator or conservator of the Property or any part thereof, irrespective of
the adequacy of the security for the Debt and without regard to the solvency of
Borrower or of any Person liable for the payment of the Debt, to which
appointment Borrower does hereby consent and such receiver or other official
shall have all rights and powers permitted by applicable law and such other
rights and powers as the court making such appointment may confer, but the
appointment of such receiver or other official shall not impair or in any manner
prejudice the rights of Lender to receive the Rent with respect to any of the
Property pursuant to this Security Instrument or the Assignment; or (x) require,
at Lender’s option, Borrower to pay monthly in advance to Lender, or any
receiver appointed to collect the Rents, the fair and reasonable rental value
for the use and occupation of any portion of the Property occupied by Borrower
and may require Borrower to vacate and surrender possession to Lender of the
Property or to such receiver and Borrower may be evicted by summary proceedings
or otherwise; or (xi) without notice to Borrower (A) apply all or any portion of
the cash collateral in any Sub-Account and Escrow Account, including any
interest and/or earnings therein, to carry out the obligations of Borrower under
this Security Instrument and the other Loan Documents, to protect and preserve
the Property and for any other purpose permitted under this Security Instrument
and the other Loan Documents (but in all events subject to Lender’s obligations
pursuant to Section 5.05 hereof) and/or (B) have all or any portion of such cash
collateral immediately paid to Lender to be applied against the Debt in the
order and priority set forth in the Note (but in all events subject to Lender’s
obligations pursuant to Section 5.05 hereof); or (xii) pursue any or all such
other rights or remedies as Lender and Trustee may have under applicable law or
in equity; provided, however, that the provisions of this Section 13.02(a) shall
not be construed to extend or modify any of the notice requirements or grace
periods provided for hereunder or under any of the other Loan Documents.
Borrower hereby waives, to the fullest extent
       

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              PAGE  
permitted by Legal Requirements, any defense Borrower might otherwise raise or
have by the failure to make any tenants parties defendant to a foreclosure
proceeding and to foreclose their rights in any proceeding instituted by Lender
or Trustee.
    85  
 
       
Section 13.03. Payment of Debt After Default. If, following the occurrence of
any Event of Default, Borrower shall tender payment of an amount sufficient to
satisfy the Debt in whole or in part at any time prior to a foreclosure sale of
the Property, and if at the time of such tender prepayment of the principal
balance of the Note is not permitted by the Note or this Security Instrument,
Borrower shall, in addition to the entire Debt, also pay to Lender a sum equal
to (a) all accrued interest on the Note and all other fees, charges and sums due
and payable hereunder, (b) all costs and expenses in connection with the
enforcement of Lender’s rights hereunder, and (c) a prepayment charge (the
“Prepayment Charge”) equal to the greater of (i) 2% of the Principal Amount and
(ii) the present value of a series of payments each equal to the Payment
Differential (as hereinafter defined) and payable on each Payment Date over the
remaining original term of the Note and on the Payment Date occurring two months
prior to the Maturity Date, discounted at the Reinvestment Yield (as hereinafter
defined) for the number of months remaining as of the date of such prepayment to
each such Payment Date and the Payment Date occurring two months prior to the
Maturity Date. The term “Payment Differential” shall mean an amount equal to
(i) the Interest Rate less the Reinvestment Yield, divided by (ii) twelve
(12) and multiplied by (iii) the Principal Amount after application of the
constant monthly payment due under the Note on the date of such prepayment,
provided that the Payment Differential shall in no event be less than zero. The
term “Reinvestment Yield” shall mean an amount equal to the lesser of (i) the
yield on the U.S. Treasury issue (primary issue) with a maturity date closest to
the Payment Date occurring two months prior to the Maturity Date, or (ii) the
yield on the U.S. Treasury issue (primary issue) with a term equal to the
remaining average life of the indebtedness evidenced by the Note, with each such
yield being based on the bid price for such issue as published in the Wall
Street Journal on the date that is fourteen (14) days prior to the date of such
prepayment set forth in the notice of prepayment (or, if such bid price is not
published on that date, the next preceding date on which such bid price is so
published) and converted to a monthly compounded nominal yield. In addition to
the amounts described above, if, during the first (1st) Loan Year, Borrower
shall tender payment of an amount sufficient to satisfy the Debt in whole or in
part following the occurrence of any Event of Default, Borrower shall, in
addition to the entire Debt, also pay to Lender a sum equal to three percent
(3%) of the Principal Amount. Failure of Lender to require any of these payments
shall not constitute a waiver of the right to require the same in the event of
any subsequent default or to exercise any other remedy available to Lender
hereunder, under any other Loan Document or at law or in equity. In the event
that any prepayment charge is due hereunder, Lender shall deliver to Borrower a
statement setting forth the amount and determination of the prepayment fee, and,
provided that Lender shall have in good faith applied the formula described
above, Borrower shall not have the right to challenge the
       

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              PAGE  
calculation or the method of calculation set forth in any such statement in the
absence of manifest error, which calculation may be made by Lender on any day
during the fifteen (15) day period preceding the date of such prepayment. Lender
shall not be obligated or required to have actually reinvested the prepaid
principal balance at the Reinvestment Yield or otherwise as a condition to
receiving the prepayment charge. If at the time of such tender, prepayment of
the principal balance of the Note is permitted, such tender by Borrower shall be
deemed to be a voluntary prepayment of the principal balance of the Note, and
Borrower shall, in addition to the entire Debt, also pay to Lender the
applicable prepayment consideration specified in the Note and this Security
Instrument. Notwithstanding the foregoing, Lender acknowledges that, pursuant to
Section 15.01, the Loan may be prepaid at any time in accordance with said
Section 15.01 and that upon the occurrence of an Event of Default the only
prepayment charge due pursuant to this Section 13.03 will be as set forth in
Section 15.01.
    89  
 
       
Section 13.04. Possession of the Property. Upon the occurrence and during the
continuance of any Event of Default and the acceleration of the Debt or any
portion thereof, Borrower, if an occupant of the Property or any part thereof,
upon demand of Lender, shall immediately surrender possession of the Property
(or the portion thereof so occupied) to Lender, and if Borrower is permitted to
remain in possession, the possession shall be as a month-to-month tenant of
Lender and, on demand, Borrower shall pay to Lender monthly, in advance, a
reasonable rental for the space so occupied and in default thereof Borrower may
be dispossessed. The covenants herein contained may be enforced by a receiver of
the Property or any part thereof. Nothing in this Section 13.04 shall be deemed
to be a waiver of the provisions of this Security Instrument making the Transfer
of the Property or any part thereof without Lender’s prior written consent an
Event of Default.
    90  
 
       
Section 13.05. Interest After Default. If any amount due under the Note, this
Security Instrument or any of the other Loan Documents is not paid within any
applicable notice and grace period after same is due, whether such date is the
stated due date, any accelerated due date or any other date or at any other time
specified under any of the terms hereof or thereof, then, in such event,
Borrower shall pay interest on the amount not so paid from and after the date on
which such amount first becomes due at the Default Rate; and such interest shall
be due and payable at such rate until the earlier of the cure of all Events of
Default or the payment of the entire amount due to Lender, whether or not any
action shall have been taken or proceeding commenced to recover the same or to
foreclose this Security Instrument. All unpaid and accrued interest shall be
secured by this Security Instrument as part of the Debt. Nothing in this
Section 13.05 or in any other provision of this Security Instrument shall
constitute an extension of the time for payment of the Debt.
    90  
 
       
Section 13.06. Borrower’s Actions After Default. After the happening of any
Event of Default and immediately upon the commencement of any action, suit or
other legal proceedings by Lender to obtain judgment for the Debt, or of any
other nature in aid of the enforcement of the Loan Documents, Borrower will
(a) after
       

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              PAGE  
receipt of notice of the institution of any such action, waive the issuance and
service of process and enter its voluntary appearance in such action, suit or
proceeding, and (b) if required by Lender, consent to the appointment of a
receiver or receivers of the Property or any part thereof and of all the
earnings, revenues, rents, issues, profits and income thereof.
    91  
 
       
Section 13.07. Control by Lender After Default. Notwithstanding the appointment
during the continuance of an Event of Default of any custodian, receiver,
liquidator or trustee of Borrower, or of any of its property, or of the Property
or any part thereof, to the extent permitted by Legal Requirements, Lender shall
be entitled to obtain possession and control of all property now and hereafter
covered by this Security Instrument and the Assignment in accordance with the
terms hereof.
    91  
 
       
Section 13.08. Right to Cure Defaults. (a) Upon the occurrence and during the
continuance of any Event of Default, Lender or its agents may, but without any
obligation to do so and without notice to or demand on Borrower and without
releasing Borrower from any obligation hereunder, make or do the same in such
manner and to such extent as Lender may deem necessary to protect the security
hereof. Lender and its agents are authorized to enter upon the Property or any
part thereof for such purposes, or appear in, defend, or bring any action or
proceedings to protect Lender’s interest in the Property or any part thereof or
to foreclose this Security Instrument or collect the Debt, and the cost and
expense thereof (including reasonable attorneys’ fees to the extent permitted by
law), with interest as provided in this Section 13.08, shall constitute a
portion of the Debt and shall be immediately due and payable to Lender upon
demand. All such costs and expenses incurred by Lender or its agents in
remedying such Event of Default or in appearing in, defending, or bringing any
such action or proceeding shall bear interest at the Default Rate, for the
period from the date so demanded to the date of payment to Lender. All such
costs and expenses incurred by Lender or its agents together with interest
thereon calculated at the above rate shall be deemed to constitute a portion of
the Debt and be secured by this Security Instrument.
    91  
 
       
Section 13.09. Late Payment Charge. If any portion of the Debt is not paid in
full on or before the day on which it is due and payable hereunder, Borrower
shall pay to Lender an amount equal to five percent (5%) of such unpaid portion
of the Debt (“Late Charge”) to defray the expense incurred by Lender in handling
and processing such delinquent payment, and such amount shall constitute a part
of the Debt.
    92  
 
       
Section 13.10. Recovery of Sums Required to Be Paid. Lender shall have the right
from time to time to take action to recover any sum or sums which constitute a
part of the Debt as the same become due and payable hereunder (after the
expiration of any grace period or the giving of any notice herein provided, if
any), without regard to whether or not the balance of the Debt shall be due, and
without prejudice to the right of Lender thereafter to bring an action of
foreclosure, or any
       

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              PAGE  
other action, for a default or defaults by Borrower existing at the time such
earlier action was commenced.
    92  
 
       
Section 13.11. Marshalling and Other Matters. Borrower hereby waives, to the
fullest extent permitted by law, the benefit of all appraisement, valuation,
stay, extension, reinstatement, redemption (both equitable and statutory) and
homestead laws now or hereafter in force and all rights of marshalling in the
event of any sale hereunder of the Property or any part thereof or any interest
therein. Further, Borrower hereby expressly waives any and all rights of
redemption from sale under any order or decree of foreclosure of this Security
Instrument on behalf of Borrower, whether equitable or statutory and on behalf
of each and every Person acquiring any interest in or title to the Property or
any part thereof subsequent to the date of this Security Instrument and on
behalf of all Persons to the fullest extent permitted by applicable law.
    92    
Section 13.12. Tax Reduction Proceedings. During the continuance of an Event of
Default, Borrower shall be deemed to have appointed Lender as its
attorney-in-fact to seek a reduction or reductions in the assessed valuation of
the Property for real property tax purposes or for any other purpose and to
prosecute any action or proceeding in connection therewith. This power, being
coupled with an interest, shall be irrevocable for so long as any part of the
Debt remains unpaid and any Event of Default shall be continuing.
    92  
 
       
Section 13.13. General Provisions Regarding Remedies.
    92  
 
       
ARTICLE XIV: COMPLIANCE WITH REQUIREMENTS
    93  
 
       
Section 14.01. Compliance with Legal Requirements. (a) Borrower shall promptly
comply with all present and future Legal Requirements, foreseen and unforeseen,
ordinary and extraordinary, whether requiring structural or nonstructural
repairs or alterations including, without limitation, all zoning, subdivision,
building, safety and environmental protection, land use and development Legal
Requirements, all Legal Requirements which may be applicable to the curbs
adjoining the Property or to the use or manner of use thereof, and all rent
control, rent stabilization and all other similar Legal Requirements relating to
rents charged and/or collected in connection with the Leases.
    93  
 
       
Section 14.02. Compliance with Recorded Documents; No Future Grants. Borrower
shall promptly perform and observe or cause to be performed and observed, all of
the material terms, covenants and conditions of all Property Agreements and all
things necessary to preserve intact and unimpaired any and all appurtenances or
other interests or rights affecting the Property.
    94  
 
       
ARTICLE XV: PREPAYMENT
    94  

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              PAGE  
 
       
Section 15.01. Prepayment. (a) Except as set forth in this Section 15.01 or as
otherwise specifically provided in the Loan Documents, no prepayment of the Debt
may be made in whole or in part.
    94  
 
       
ARTICLE XVI: ENVIRONMENTAL COMPLIANCE
    95  
 
       
Section 16.01. Covenants, Representations and Warranties. (a) Borrower has not,
at any time, and, to Borrower’s knowledge after due inquiry and investigation,
except as set forth in the Environmental Report, no other Person has at any
time, handled, buried, stored, retained, refined, transported, processed,
manufactured, generated, produced, spilled, allowed to seep, leak, escape or
leach, or pumped, poured, emitted, emptied, discharged, injected, dumped,
transferred or otherwise disposed of or dealt with Hazardous Materials on, to or
from the Premises or any other real property owned and/or occupied by Borrower
other than Permitted Materials, and Borrower does not intend to and shall not
use the Property or any part thereof or any such other real property for the
purpose of handling, burying, storing, retaining, refining, transporting,
processing, manufacturing, generating, producing, spilling, seeping, leaking,
escaping, leaching, pumping, pouring, emitting, emptying, discharging,
injecting, dumping, transferring or otherwise disposing of or dealing with
Hazardous Materials, except for use and storage for use of heating oil, cleaning
fluids, pesticides and other substances customarily used in the operation of
properties that are being used for the same purposes as the Property is
presently being used, provided such use and/or storage for use is in compliance
with the requirements hereof and the other Loan Documents and does not give rise
to liability under applicable Legal Requirements or Environmental Statutes or be
the basis for a lien against the Property or any part thereof (collectively,
“Permitted Materials”). In addition, without limitation to the foregoing
provisions, Borrower represents and warrants that, to the best of its knowledge,
after due inquiry and investigation, except as previously disclosed in writing
to Lender, including the Environmental Report, there is no asbestos in, on,
over, or under all or any portion of the fire-proofing or any other portion of
the Property.
    95  
 
       
Section 16.02. Environmental Indemnification. Borrower shall defend, indemnify
and hold harmless the Indemnified Parties for, from and against any claims,
demands, penalties, fines, liabilities, settlements, damages, costs and expenses
of whatever kind or nature, known or unknown, contingent or otherwise, whether
incurred or imposed within or outside the judicial process, including, without
limitation, reasonable attorneys’ and consultants’ fees and disbursements and
investigations and laboratory fees arising out of, or in any way related to any
Environmental Problem, including without limitation:
    98  
 
       
ARTICLE XVII: ASSIGNMENTS
    99  
 
       
Section 17.01. Participations and Assignments. Lender, at its sole cost and
expense, shall have the right to assign this Security Instrument and/or any of
the Loan Documents, and to transfer, assign or sell participations and
       

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              PAGE  
subparticipations (including blind or undisclosed participations and
subparticipations) in the Loan Documents and the obligations hereunder to any
Person; provided, however, that no such participation shall increase, decrease
or otherwise affect either Borrower’s or Lender’s obligations under this
Security Instrument or the other Loan Documents.
    99  
 
       
ARTICLE XVIII: MISCELLANEOUS
    99  
 
       
Section 18.01. Right of Entry. Lender and its agents shall have the right to
enter and inspect the Property or any part thereof at all reasonable times, and,
except in the event of an emergency, upon reasonable notice and to inspect
Borrower’s books and records and to make abstracts and reproductions thereof,
all at the cost and expense of Lender so long as there is no continuing Default.
    99  
 
       
Section 18.02. Cumulative Rights. The rights of Lender under this Security
Instrument shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. No act of Lender shall be construed as an
election to proceed under any one provision herein to the exclusion of any other
provision. Lender shall not be limited exclusively to the rights and remedies
herein stated but shall be entitled, subject to the terms of this Security
Instrument, to every right and remedy now or hereafter afforded by law.
    99  
 
       
Section 18.03. Liability. If Borrower consists of more than one Person, the
obligations and liabilities of each such Person hereunder shall be joint and
several.
    99  
 
       
Section 18.04. Exhibits Incorporated. The information set forth on the cover
hereof, and the Exhibits annexed hereto, are hereby incorporated herein as a
part of this Security Instrument with the same effect as if set forth in the
body hereof.
    99  
 
       
Section 18.05. Severable Provisions. If any term, covenant or condition of the
Loan Documents including, without limitation, the Note or this Security
Instrument, is held to be invalid, illegal or unenforceable in any respect, such
Loan Document shall be construed without such provision.
    99  
 
       
Section 18.06. Duplicate Originals. This Security Instrument may be executed in
any number of duplicate originals and each such duplicate original shall be
deemed to constitute but one and the same instrument.
    99  
 
       
Section 18.07. No Oral Change. The terms of this Security Instrument, together
with the terms of the Note and the other Loan Documents, constitute the entire
understanding and agreement of the parties hereto and supersede all prior
agreements, understandings and negotiations between Borrower and Lender with
respect to the Loan. This Security Instrument, and any provisions hereof, may
not be modified, amended, waived, extended, changed, discharged or terminated
orally or by any act on the part of Borrower or Lender, but only by an agreement
in writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.
    99  

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              PAGE  
 
       
Section 18.08. Waiver of Counterclaim, Etc. 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, AND, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER OR IN ANY COUNTERCLAIM BORROWER
MAY BE PERMITTED TO ASSERT HEREUNDER OR WHICH MAY BE ASSERTED BY LENDER OR ITS
AGENTS, AGAINST BORROWER, OR IN ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY
WAY CONNECTED WITH THIS SECURITY INSTRUMENT OR THE DEBT.
    100  
 
       
Section 18.09. Headings; Construction of Documents; etc. The table of contents,
headings and captions of various paragraphs of this Security Instrument are for
convenience of reference only and are not to be construed as defining or
limiting, in any way, the scope or intent of the provisions hereof. Borrower
acknowledges that it was represented by competent counsel in connection with the
negotiation and drafting of this Security Instrument and the other Loan
Documents and that neither this Security Instrument nor the other Loan Documents
shall be subject to the principle of construing the meaning against the Person
who drafted same.
    100  
 
       
Section 18.10. Sole Discretion of Lender. Whenever 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 that arrangements or terms are satisfactory or not satisfactory shall be
in the sole discretion of Lender and shall be final and conclusive, except as
may be otherwise specifically provided herein.
    100  
 
       
Section 18.11. 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 Security Instrument or the other Loan Documents specifically and expressly
provides 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.
    100  
 
       
Section 18.12. Covenants Run with the Land. All of the grants, covenants, terms,
provisions and conditions herein shall run with the Premises, shall be binding
upon Borrower and shall inure to the benefit of Lender, subsequent holders of
this Security Instrument and their successors and assigns. Without limitation to
any provision hereof, the term “Borrower” shall include and refer to the
borrower named herein, any subsequent owner of the Property, and its respective
heirs, executors, legal representatives, successors and assigns. The
representations, warranties and agreements contained in this Security Instrument
and the other Loan Documents are intended solely for the benefit of the parties
hereto, shall confer no rights hereunder, whether legal or equitable, in any
other Person and no other Person shall be entitled to rely thereon.
    100  

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              PAGE  
 
       
Section 18.13. Applicable Law. THIS SECURITY INSTRUMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA.
    101  
 
       
Section 18.14. Security Agreement. (a) (i) This Security Instrument is both a
real property mortgage, deed to secure debt or deed of trust, as applicable, and
a “security agreement” within the meaning of the UCC. The Property includes both
real and personal property and all other rights and interests, whether tangible
or intangible in nature, of Borrower in the Property. This Security Instrument
is filed as a fixture filing and covers goods which are or are to become
fixtures on the Property. Borrower by executing and delivering this Security
Instrument has granted to Lender, as security for the Debt, a security interest
in the Property to the full extent that the Property may be subject to the UCC
(said portion of the Property so subject to the UCC being called in this Section
18.14 the “Collateral”). If an Event of Default shall occur and be continuing,
Lender, in addition to any other rights and remedies which it may have, shall
have and may exercise immediately and without demand, any and all rights and
remedies granted to a secured party upon default under the UCC, including,
without limiting the generality of the foregoing, the right to take possession
of the Collateral or any part thereof, and to take such other measures as Lender
may deem necessary for the care, protection and preservation of the Collateral.
Upon request or demand of Lender during the continuance of an Event of Default,
Borrower shall, at its expense, assemble the Collateral and make it available to
Lender at a convenient place acceptable to Lender. Borrower shall pay to Lender
on demand any and all expenses, including reasonable legal expenses and
attorneys’ fees, incurred or paid by Lender in protecting its interest in the
Collateral and in enforcing its rights hereunder with respect to the Collateral.
Any disposition pursuant to the UCC of so much of the Collateral as may
constitute personal property shall be considered commercially reasonable if made
pursuant to a public sale which is advertised at least twice in a newspaper in
which sheriff’s sales are advertised in the county where the Premises is
located. Any notice of sale, disposition or other intended action by Lender with
respect to the Collateral given to Borrower in accordance with the provisions
hereof at least ten (10) days prior to such action, shall constitute reasonable
notice to Borrower. The proceeds of any disposition of the Collateral, or any
part thereof, may be applied by Lender to the payment of the Debt in such
priority and proportions as Lender in its discretion shall deem proper. It is
not necessary that the Collateral be present at any disposition thereof. Lender
shall have no obligation to clean-up or otherwise prepare the Collateral for
disposition.
    101  
 
       
Section 18.15. Actions and Proceedings. Lender has the right to appear in and
defend any action or proceeding brought with respect to the Property in its own
name or, if required by Legal Requirements or, if in Lender’s reasonable
judgment, it is necessary, in the name and on behalf of Borrower, which Lender
       

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              PAGE  
believes will adversely affect the Property or this Security Instrument and to
bring any action or proceedings, in its name or in the name and on behalf of
Borrower, which Lender, in its reasonable discretion, decides should be brought
to protect its interest in the Property.
    102  
 
       
Section 18.16. Usury Laws. This Security Instrument and the Note are subject to
the express condition, and it is the expressed intent of the parties, that at no
time shall Borrower be obligated or required to pay interest on the principal
balance due under the Note at a rate which could subject the holder of the Note
to either civil or criminal liability as a result of being in excess of the
maximum interest rate which Borrower is permitted by law to contract or agree to
pay. If by the terms of this Security Instrument or the Note, Borrower is at any
time required or obligated to pay interest on the principal balance due under
the Note at a rate in excess of such maximum rate, such rate of interest shall
be deemed to be immediately reduced to such maximum rate and the interest
payable shall be computed at such maximum rate and all prior interest payments
in excess of such maximum rate shall be applied and shall be deemed to have been
payments in reduction of the principal balance of the Note. No application to
the principal balance of the Note pursuant to this Section 18.16 shall give rise
to any requirement to pay any prepayment fee or charge of any kind due
hereunder, if any.
    102  
 
       
Section 18.17. Remedies of Borrower. In the event that a claim or adjudication
is made that Lender has acted unreasonably or unreasonably delayed acting in any
case where by law or under the Note, this Security Instrument or the Loan
Documents, it has an obligation to act reasonably or promptly, Lender shall not
be liable for any monetary damages, and Borrower’s remedies shall be limited to
injunctive relief or declaratory judgment.
    103  
 
       
Section 18.18. Offsets, Counterclaims and Defenses. Any assignee of this
Security Instrument, the Assignment and the Note shall take the same free and
clear of all offsets, counterclaims or defenses which are unrelated to the Note,
the Assignment or this Security Instrument which Borrower may otherwise have
against any assignor of this Security Instrument, the Assignment and the Note
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 this
Security Instrument, the Assignment or the Note 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.
    103  
 
       
Section 18.19. No Merger. If Borrower’s and Lender’s estates become the same
including, without limitation, upon the delivery of a deed by Borrower in lieu
of a foreclosure sale, or upon a purchase of the Property by Lender in a
foreclosure sale, this Security Instrument and the lien created hereby shall not
be destroyed or terminated by the application of the doctrine of merger and in
such event Lender shall continue to have and enjoy all of the rights and
privileges of Lender as to the separate estates; and, as a consequence thereof,
upon the foreclosure of the lien
       

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              PAGE  
created by this Security Instrument, any Leases or subleases then existing and
created by Borrower shall not be destroyed or terminated by application of the
law of merger or as a result of such foreclosure unless Lender or any purchaser
at any such foreclosure sale shall so elect. No act by or on behalf of Lender or
any such purchaser shall constitute a termination of any Lease or sublease
unless Lender or such purchaser shall give written notice thereof to such lessee
or sublessee.
    103  
 
       
Section 18.20. Restoration of Rights. In case Lender shall have proceeded to
enforce any right under this Security Instrument by foreclosure sale, entry or
otherwise, and such proceedings shall have been discontinued or abandoned for
any reason or shall have been determined adversely, then, in every such case,
Borrower and Lender shall be restored to their former positions and rights
hereunder with respect to the Property subject to the lien hereof.
    103  
 
       
Section 18.21. Waiver of Statute of Limitations. The pleadings of any statute of
limitations as a defense to any and all obligations secured by this Security
Instrument are hereby waived to the full extent permitted by Legal Requirements.
    104  
 
       
Section 18.22. Advances. This Security Instrument shall cover any and all
advances made pursuant to the Loan Documents, rearrangements and renewals of the
Debt and all extensions in the time of payment thereof, even though such
advances, extensions or renewals be evidenced by new promissory notes or other
instruments hereafter executed and irrespective of whether filed or recorded.
Likewise, the execution of this Security Instrument shall not impair or affect
any other security which may be given to secure the payment of the Debt, and all
such additional security shall be considered as cumulative. The taking of
additional security, execution of partial releases of the security, or any
extension of time of payment of the Debt shall not diminish the force, effect or
lien of this Security Instrument and shall not affect or impair the liability of
Borrower and shall not affect or impair the liability of any maker, surety, or
endorser for the payment of the Debt.
    104  
 
       
Section 18.23. Application of Default Rate Not a Waiver. Application of the
Default Rate shall not be deemed to constitute a waiver of any Default or Event
of Default or any rights or remedies of Lender under this Security Instrument,
any other Loan Document or applicable Legal Requirements, or a consent to any
extension of time for the payment or performance of any obligation with respect
to which the Default Rate may be invoked.
    104  
 
       
Section 18.24. Intervening Lien. To the fullest extent permitted by law, any
agreement hereafter made pursuant to this Security Instrument shall be superior
to the rights of the holder of any intervening lien.
    104  
 
       
Section 18.25. No Joint Venture or Partnership. Borrower and Lender intend that
the relationship created hereunder be solely that of mortgagor and mortgagee or
grantor and beneficiary or borrower and lender, as the case may be. Nothing
       

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              PAGE  
herein 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.
    104  
 
       
Section 18.26. Time of the Essence. Time shall be of the essence in the
performance of all obligations of Borrower hereunder.
    104  
 
       
Section 18.27. Borrower’s Obligations Absolute. Borrower acknowledges that
Lender and/or certain Affiliates of Lender are engaged in the business of
financing, owning, operating, leasing, managing, and brokering real estate and
in other business ventures which may be viewed as adverse to or competitive with
the business, prospect, profits, operations or condition (financial or
otherwise) of Borrower. Except as set forth to the contrary in the Loan
Documents, all sums payable by Borrower hereunder shall be paid without notice
or demand, counterclaim, set-off, deduction or defense and without abatement,
suspension, deferment, diminution or reduction, and the obligations and
liabilities of Borrower hereunder shall in no way be released, discharged, or
otherwise affected (except as expressly provided herein) by reason of: (a) any
damage to or destruction of or any Taking of the Property or any portion thereof
; (b) any restriction or prevention of or interference with any use of the
Property or any portion thereof; (c) any title defect or encumbrance or any
eviction from the Premises or any portion thereof by title paramount or
otherwise; (d) any bankruptcy proceeding relating to Borrower, any General
Partner, or any guarantor or indemnitor, or any action taken with respect to
this Security Instrument or any other Loan Document by any trustee or receiver
of Borrower or any such General Partner, guarantor or indemnitor, or by any
court, in any such proceeding; (e) any claim which Borrower has or might have
against Lender; (f) any default or failure on the part of Lender to perform or
comply with any of the terms hereof or of any other agreement with Borrower; or
(g) any other occurrence whatsoever, whether similar or dissimilar to the
foregoing, whether or not Borrower shall have notice or knowledge of any of the
foregoing.
    104  
 
       
Section 18.28. Publicity. All promotional news releases, publicity or
advertising by Manager, Borrower or their respective Affiliates through any
media intended to reach the general public shall not refer to the Loan Documents
or the financing evidenced by the Loan Documents, or to Lender or to any of its
Affiliates without the prior written approval of Lender or such Affiliate, as
applicable, in each instance, such approval not to be unreasonably withheld or
delayed. Lender shall be authorized to provide information relating to the
Property, the Loan and matters relating thereto to rating agencies,
underwriters, potential securities investors, auditors, regulatory authorities
and to any Persons which may be entitled to such information by operation of law
and may use basic transaction information (including, without limitation, the
name of Borrower, the name and address of the Property and the Loan Amount) in
press releases or other marketing materials.
    105  

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              PAGE  
 
       
Section 18.29. Securitization Opinions. In the event the Loan is included as an
asset of a Securitization by Lender or any of its Affiliates, Borrower shall,
within ten (10) Business Days after Lender’s written request therefor, deliver
opinions in form and substance and delivered by counsel reasonably acceptable to
Lender and each Rating Agency, as may be reasonably required by Lender and/or
the Rating Agency in connection with such securitization. Borrower’s failure to
deliver the opinions required hereby within such ten (10) Business Day period
shall constitute an “Event of Default” hereunder. The cost of any “bringdown”
opinion of any legal opinion given in connection with the origination of the
Loan will be paid by Borrower. The reasonable cost of any other opinion
requested by Lender and/or any Rating Agency will be paid by Lender.
Notwithstanding the foregoing, Borrower shall not be required to deliver a
“10b-5” or “REMIC” Opinion in connection with any Securitization.
    105  
 
       
Section 18.30. Cooperation with Rating Agencies. Borrower covenants and agrees
that in the event the Loan is to be included as an asset of a Securitization,
Borrower shall, so long as the following may be accomplished at no material
expense to Borrower and with no more than an insignificant allocation of
Borrower’s time (a) gather any information reasonably required by each Rating
Agency in connection with such a Securitization to the extent in Borrower’s
possession or control or reasonably obtainable by Borrower, (b) at Lender’s
request, meet with representatives of each Rating Agency to discuss the business
and operations of the Property, and (c) cooperate with the reasonable requests
of each Rating Agency and Lender in connection with all of the foregoing as well
as in connection with all other matters and the preparation of any offering
documents with respect thereto, including, without limitation, entering into any
amendments or modifications to this Security Instrument or to any other Loan
Document which may be requested by Lender to conform to Rating Agency or market
standards for a Securitization provided that no such modification shall modify
(a) the interest rate payable under the Note, (b) the stated maturity of the
Note, (c) the amortization of principal under the Note, (d) Section 18.32
hereof, (e) any other material economic term of the Loan, (f) expand the scope
of representation made hereunder or (g) any provision, the effect of which would
materially increase Borrower’s obligations or materially decrease Borrower’s
rights under the Loan Documents. Borrower acknowledges that the information
provided by Borrower to Lender may be incorporated into the offering documents
for a Securitization and to the fullest extent permitted, Borrower irrevocably
waives all rights, if any, to prohibit such disclosures including, without
limitation, any right of privacy. Lender and each Rating Agency shall be
entitled to rely on the information supplied by, or on behalf of, Borrower, and
Borrower indemnifies and holds harmless the Indemnified Parties, their
Affiliates and each Person who controls such Persons within the meaning of
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of
1934, as same may be amended from time to time, for, from and against any
claims, demands, penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature, known or unknown, contingent or otherwise,
whether incurred or imposed within or outside the judicial process, including,
without limitation, reasonable attorneys’ fees and
       

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              PAGE  
disbursements that arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in such information or
arise out of or are based upon the omission or alleged omission (collectively,
“Securities Liabilities”); provided, however, that Borrower will be liable under
the foregoing indemnity only to the extent that such Securities Liabilities
arise out of, or are based upon, any such untrue statement or omission made
therein in reliance upon, and in conformity with, information furnished to
Lender by or on behalf of Borrower or its Affiliates in connection with the
preparation of the disclosure documents or in connection with the underwriting
of the Loan; and provided further, however, that with respect to information
provided by third parties and with respect to statements made in the disclosure
documents that are based upon information provided by third parties, Borrower
will be liable only if Borrower or its Affiliates knew that such information was
false or omitted to state a material fact known to Borrower and necessary to
make the statements made, in light of the circumstances under which they were
made, not misleading.
    105  
 
       
Section 18.31. Securitization Financials. Borrower covenants and agrees that,
upon Lender’s written request therefor in connection with a Securitization,
Borrower shall, at Borrower’s sole cost and expense, promptly deliver
(a) audited financial statements and related documentation prepared by an
Independent certified public accountant that satisfy securities laws and
requirements for use in a public registration statement (which may include up to
three (3) years of historical audited financial statements) and (b) if, at the
time one or more Disclosure Documents are being prepared in connection with a
Securitization, Lender expects that Borrower alone or Borrower and one or more
of its Affiliates collectively, or the Property alone or the Property and any
other parcel(s) of real property, together with improvements thereon and
personal property related thereto, that is “related”, within the meaning of the
definition of Significant Obligor, to the Property (a “Related Property”)
collectively, will be a Significant Obligor, Borrower shall furnish to Lender
upon request (i) the selected financial data or, if applicable, net operating
income, required under Item 1112(b)(1) of Regulation AB and meeting the
requirements thereof, if Lender expects that the principal amount of the Loan,
together with any loans made to an Affiliate of Borrower or secured by a Related
Property that is included in a Securitization with the Loan (a “Related Loan”),
as of the cut-off date for such Securitization may, or if the principal amount
of the Loan together with any Related Loans as of the cut-off date for such
Securitization and at any time during which the Loan and any Related Loans are
included in a Securitization does, equal or exceed ten percent (10%) (but less
than twenty percent (20%)) of the aggregate principal amount of all mortgage
loans included or expected to be included, as applicable, in the Securitization
or (ii) the financial statements required under Item 1112(b)(2) of Regulation AB
and meeting the requirements thereof, if Lender expects that the principal
amount of the Loan together with any Related Loans as of the cut-off date for
such Securitization may, or if the principal amount of the Loan together with
any Related Loans as of the cut-off date for such Securitization and at any time
during which the Loan and any Related Loans are included in a Securitization
does, equal or exceed twenty percent (20%) of the
       

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              PAGE  
aggregate principal amount of all mortgage loans included or expected to be
included, as applicable, in the Securitization. Such financial data or financial
statements shall be furnished to Lender within ten (10) Business Days after
notice from Lender in connection with the preparation of Disclosure Documents
for the Securitization and, with respect to the data or financial statements
required pursuant to clause (b) hereof, (A) not later than thirty (30) days
after the end of each fiscal quarter of Borrower and (B) not later than
seventy-five (75) days after the end of each Fiscal Year; provided, however,
that Borrower shall not be obligated to furnish financial data or financial
statements pursuant to clauses (A) or (B) of this sentence with respect to any
period for which a filing pursuant to the Securities Exchange Act of 1934 in
connection with or relating to the Securitization is not required.
    106  
 
       
Section 18.32. Exculpation. Notwithstanding anything herein or in any other Loan
Document to the contrary, except as otherwise set forth in this Section 18.32 to
the contrary, Lender shall not enforce the liability and obligation of Borrower
or (a) if Borrower or any of its direct or indirect owners is a partnership, its
or their constituent partners or any of their respective partners, (b) if
Borrower or any of its direct or indirect owners is a trust, its or their
beneficiaries or any of their respective Partners (as hereinafter defined),
(c) if Borrower or any of its direct or indirect owners is a corporation, any of
its or their shareholders, directors, principals, officers or employees, or
(d) if Borrower or any of its direct or indirect owners is a limited liability
company, any of its or their members (the Persons described in the foregoing
clauses (a) — (d), as the case may be, are hereinafter referred to as the
“Partners”) to perform and observe the obligations contained in this Security
Instrument or any of the other Loan Documents by any action or proceeding,
including, without limitation, any action or proceeding wherein a money judgment
shall be sought against Borrower or the Partners, except that Lender may bring a
foreclosure action, action for specific performance, or other appropriate action
or proceeding (including, without limitation, an action to obtain a deficiency
judgment) solely for the purpose of enabling Lender to realize upon
(i) Borrower’s interest in the Property, (ii) the Rent to the extent received by
Borrower during the existence of an Event of Default (all Rent covered by this
clause (ii) being hereinafter referred to as the “Recourse Distributions”) and
not applied towards the operation or maintenance of the Property, and (iii) any
other collateral then subject to the Loan Documents (the collateral described in
the foregoing clauses (i) — (iii) is hereinafter referred to as the “Default
Collateral”); provided, however, that any judgment in any such action or
proceeding shall be enforceable against Borrower only to the extent of any such
Default Collateral. The provisions of this Section shall not, however,
(a) impair the validity of the Debt evidenced by the Note or in any way affect
or impair the lien of this Security Instrument or any of the other Loan
Documents or the right of Lender to foreclose this Security Instrument following
the occurrence of an Event of Default; (b) impair the right of Lender to name
Borrower as a party defendant in any action or suit for judicial foreclosure and
sale under this Security Instrument; (c) affect the validity or enforceability
of the Note, this Security Instrument, or any of the other Loan Documents, or
impair the right of Lender to
       

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seek a personal judgment against Guarantor to the extent contained in the
Guaranty; (d) impair the right of Lender to obtain the appointment of a
receiver; (e) impair the enforcement of the Assignment; (f) impair the right of
Lender to bring suit for a monetary judgment with respect to fraud or material
misrepresentation by Borrower, or any Affiliate of Borrower in connection with
this Security Instrument, the Note or the other Loan Documents, and the
foregoing provisions shall not modify, diminish or discharge the liability of
Borrower with respect to same; (g) impair the right of Lender to bring suit for
a monetary judgment to obtain the Recourse Distributions received by Borrower;
(h) impair the right of Lender to bring suit for a monetary judgment with
respect to Borrower’s misappropriation of tenant security deposits or Rent
collected more than one (1) month in advance and not applied to the operation of
the Property, and the foregoing provisions shall not modify, diminish or
discharge the liability of Borrower; (i) impair the right of Lender to obtain
Loss Proceeds due to Lender pursuant to this Security Instrument; (j) impair the
right of Lender to enforce the provisions of Sections 2.02(g), 12.01, 16.01 or
16.02, inclusive of this Security Instrument, even after repayment in full by
Borrower of the Debt or to bring suit for a monetary judgment against Borrower
with respect to any obligation set forth in said Sections; (k) prevent or in any
way hinder Lender from exercising, or constitute a defense, or counterclaim, or
other basis for relief in respect of the exercise of, any other remedy against
any or all of the collateral securing the Note as provided in the Loan
Documents; (l) impair the right of Lender to bring suit for a monetary judgment
with respect to any misapplication or conversion of Loss Proceeds, and the
foregoing provisions shall not modify, diminish or discharge the liability of
Borrower; (m) impair the right of Lender to sue for, seek or demand a deficiency
judgment against Borrower solely for the purpose of foreclosing the Property or
any part thereof, or realizing upon the Default Collateral; provided, however,
that any such deficiency judgment referred to in this clause (m) shall be
enforceable against Borrower only to the extent of any of the Default
Collateral; (n) impair the ability of Lender to bring suit for a monetary
judgment with respect to arson or waste to or of the Property or damage to the
Property resulting from the gross negligence or willful misconduct of Borrower
or, to the extent that there is sufficient cash flow, failure to pay any
Imposition, or in lieu thereof, deposit a sum equal to any Impositions into the
Basic Carrying Costs Sub-Account; (o) impair the right of Lender to bring a suit
for a monetary judgment in the event of the exercise of any right or remedy
under any federal, state or local forfeiture laws resulting in the loss of the
lien of this Security Instrument, or the priority thereof, against the Property;
(p) be deemed a waiver of any right which Lender may have under Sections 506(a),
506(b), 1111(b) or any other provision of the Bankruptcy Code to file a claim
for the full amount of the Debt or to require that all collateral shall continue
to secure all of the Debt; (q) impair the right of Lender to bring suit for
monetary judgment with respect to any actual losses resulting from any claims,
actions or proceedings initiated by Borrower (or any Affiliate of Borrower)
alleging that the relationship of Borrower and Lender is that of joint
venturers, partners, tenants in common, joint tenants or any relationship other
than that of debtor and creditor; (r) impair the right of
       

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Lender to bring suit for a monetary judgment in the event of a Transfer in
violation of the provisions of Article IX hereof; (s) impair the right of Lender
to bring suit for a monetary judgment in the event that Borrower moves its
principal place of business or its books and records relating to the Property
which are governed by the UCC, or changes its name, its jurisdiction of
organization, type of organization or other legal structure or, if it has one,
organizational identification number, without first giving Lender thirty
(30) days prior written notice; (t) impair the right of Lender to bring suit for
a monetary judgment in the event that Borrower changes its name of otherwise
does anything which would make the information set forth in any UCC Financing
Statements relating to the Property materially misleading without giving Lender
thirty (30) days prior written notice thereof; or (u) impair the right of Lender
to bring suit for a monetary judgment in the event that Borrower consents to any
modification, change, supplement, alteration or amendment of the Ground Lease
without Lender’s prior written consent, which shall not be unreasonably
withheld, or termination of the Ground Lease without Lender’s prior written
consent, which consent shall be subject to Lender’s sole and absolute
discretion. The provisions of this Section 18.32 shall be inapplicable to
Borrower if (a) any proceeding, action, petition or filing under the Bankruptcy
Code, or any similar state or federal law now or hereafter in effect relating to
bankruptcy, reorganization or insolvency, or the arrangement or adjustment of
debts, shall be (A) filed by Borrower or Guarantor or (B) filed against Borrower
or Guarantor and consented to or acquiesced in by Borrower or Guarantor or if
any Affiliate of Borrower or Guarantor, or if Borrower or Guarantor or any
Affiliate of either of them shall institute any proceeding for Borrower’s
dissolution or liquidation, or Borrower or Guarantor shall make an assignment
for the benefit of creditors, or (b) Borrower or any Affiliate contests or in
any material way interferes in bad faith with, directly or indirectly
(collectively, a “Contest”), any foreclosure action, UCC sale or other material
remedy exercised by Lender upon the occurrence of any Event of Default whether
by making any motion, bringing any counterclaim (other than a compulsory
counterclaim), claiming any defense, seeking any injunction or other restraint,
commencing any action, or otherwise (provided that if any such Person obtains a
non-appealable order successfully asserting a Contest, Borrower shall have no
liability under this clause (b) and provided, further, that the liability under
this clause (b) shall be limited to the actual and consequential costs, expenses
and damages of Lender which result, directly or indirectly, from any such
Contest), in which event Lender shall have recourse against all of the assets of
Borrower including, without limitation, any right, title and interest of
Borrower in and to the Property, and any Recourse Distributions received by
Guarantor or Borrower (but excluding the other assets of such Guarantor to the
extent Lender would not have had recourse thereto other than in accordance with
the provisions of this Section 18.32).
    107  
 
       
Section 18.33. Concerning the Trustee. Trustee shall be under no duty to take
any action hereunder except as expressly required hereunder or by law, or to
perform any act which would involve Trustee in any expense or liability or to
institute or defend any suit in respect hereof, unless properly indemnified to
       

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Trustee’s reasonable satisfaction. Trustee, by acceptance of this Security
Instrument, covenants to perform and fulfill the trusts herein created, being
liable, however, only for gross negligence or willful misconduct, and hereby
waives any statutory fee and agrees to accept reasonable compensation, in lieu
thereof, for any services rendered by Trustee in accordance with the terms
hereof. Trustee may resign at any time by written instrument to that effect
delivered to Lender. Lender may remove Trustee at any time or from time to time
and select a successor trustee. In the event of the death, removal, resignation,
refusal to act, or inability to act of Trustee, or in its sole discretion for
any reason whatsoever Lender may, without notice and without specifying any
reasons therefor and without applying to any court, select and appoint a
successor trustee, by an instrument recorded wherever this Security Instrument
is recorded, and all powers, rights, duties and authority of Trustee, as
aforesaid, shall thereupon become vested in such successor. Such substitute
trustee shall not be required to give bond for the faithful performance of the
duties of Trustee hereunder unless required by Lender. The procedure provided
for in this Section 18.33 for substitution of Trustee shall be in addition to
and not in exclusion of any other provisions for substitution, by law or
otherwise.
    109  
 
       
Section 18.34. Trustee’s Fees. Borrower shall pay all costs, fees and expenses
incurred by Trustee and Trustee’s agents and counsel in connection with the
performance by Trustee of Trustee’s duties hereunder, and all such costs, fees
and expenses shall be secured by this Security Instrument.
    110  
 
       
Section 18.35. Mezzanine Loan Option. (a) Lender, at its sole cost and expense,
shall have the right at any time to divide the Loan into two or more parts (the
“Mezzanine Option”): a “mortgage loan” and one or more “mezzanine loans.” The
principal amount of the mortgage loan plus the principal amount of the mezzanine
loan(s) shall equal the outstanding principal balance of the Loan immediately
prior to the creation of the mortgage loan and the mezzanine loan(s). In
effectuating the foregoing, Lender will make one or more loans to one or more
entities that will be the direct or indirect equity owner(s) of Borrower as
described in Section 18.35(b) (collectively, the “Mezzanine Borrower(s)”). The
Mezzanine Borrower(s) will contribute the amount of the mezzanine loan(s) to
Borrower (in its capacity as borrower under the mortgage loan, “mortgage
borrower”) and the mortgage borrower will apply the contribution to pay down the
Loan to the mortgage loan amount. The mortgage loan and the mezzanine loan(s)
will be on the same terms and subject to the same conditions set forth in the
Loan Documents except as follows. The mezzanine loan(s) shall be made pursuant
to Lender’s standard mezzanine loan documents.
    110  
 
       
Section 18.36. Component Notes. Lender, without in any way limiting Lender’s
other rights hereunder, in its sole and absolute discretion, shall have the
right at any time to require Borrower to execute and deliver “component” notes
(including senior and junior notes), which notes may be paid in such order of
priority as may be designated by Lender, provided that (a) the aggregate
principal amount of such “component” notes shall equal the outstanding principal
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of the Loan immediately prior to the creation of such “component” notes, (b) the
weighted average interest rate of all such “component” notes shall on the date
created equal the interest rate which was applicable to the Loan immediately
prior to the creation of such “component” notes, (c) the debt service payments
on all such “component” notes shall on the date created equal the debt service
payment which was due under the Loan immediately prior to the creation of such
component notes and (d) the other terms and provisions of each of the
“component” notes shall be identical in substance and substantially similar in
form to the Loan Documents. Borrower shall cooperate with all reasonable
requests of Lender in order to establish the “component” notes and shall execute
and deliver such documents as shall reasonably be required by Lender in
connection therewith, all in form and substance reasonably satisfactory to
Lender, including, without limitation, the severance of security documents if
requested. It shall be an Event of Default if Borrower fails to comply with any
of the terms, covenants or conditions of this Section 18.36 after the expiration
of ten (10) Business Days after notice thereof.
    111  
 
       
Section 18.37. Certain Matters Relating to Property Located in the State of
California. With respect to the Property which is located in the State of
California, notwithstanding anything contained herein:
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EXHIBITS

     
EXHIBIT A
  Legal Description of Premises  
EXHIBIT B
  Summary Of Reserves  
EXHIBIT C
  Cash Flow Statement  
EXHIBIT D
  Required Engineering Work  
EXHIBIT E
  Form of Direction Letter  
EXHIBIT F
  Underwritten Rent Escrow  
EXHIBIT G
  Credit Card Payment Direction Letter