Exhibit 10.2

 

 

LOAN AGREEMENT

 

 

Dated as of January 28, 2011

Between

EACH OF THE PARTIES SET FORTH ON EXHIBIT A ATTACHED HERETO,

as Borrower

and

CITIGROUP GLOBAL MARKETS REALTY CORP.,

as Lender

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TABLE OF CONTENTS

 

          Page   ARTICLE 1 DEFINITIONS; PRINCIPLES OF CONSTRUCTION      1   
Section 1.1    Definitions      1    Section 1.2    Principles of Construction
     18    ARTICLE 2 GENERAL TERMS      18    Section 2.1    Loan Commitment;
Disbursement to Borrower      18    Section 2.2    The Loan      18   
Section 2.3    Disbursement to Borrower      18    Section 2.4    The Note and
the other Loan Documents      18    Section 2.5    Interest Rate      18   
Section 2.6    Loan Payments      19    Section 2.7    Prepayments      20   
Section 2.8    Defeasance      21    Section 2.9    Release of Property      23
   ARTICLE 3 REPRESENTATIONS AND WARRANTIES      26    Section 3.1    Legal
Status and Authority      26    Section 3.2    Validity of Documents      26   
Section 3.3    Litigation      26    Section 3.4    Agreements      26   
Section 3.5    Financial Condition      27    Section 3.6    Disclosure      27
   Section 3.7    No Plan Assets      27    Section 3.8    Not a Foreign Person
     27    Section 3.9    Intentionally Omitted      27    Section 3.10   
Business Purposes      27    Section 3.11    Borrower Offices      27   
Section 3.12    Status of Property      27    Section 3.13    Financial
Information      28    Section 3.14    Condemnation      29    Section 3.15   
Separate Lots      29    Section 3.16    Insurance      29    Section 3.17   
Use of Property      29    Section 3.18    Leases and Rent Roll      29   
Section 3.19    Filing and Recording Taxes      30    Section 3.20    Management
Agreement      30   

 

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Section 3.21    Illegal Activity/Forfeiture      30    Section 3.22    Taxes   
  30    Section 3.23    Permitted Encumbrances      30    Section 3.24    Third
Party Representations      30    Section 3.25    Non-Consolidation Opinion
Assumptions      30    Section 3.26    Federal Reserve Regulations      30   
Section 3.27    Investment Company Act      30    Section 3.28    Fraudulent
Conveyance      31    Section 3.29    Embargoed Person      31    Section 3.30
   Patriot Act      31    Section 3.31    Organizational Chart      32   
Section 3.32    Bank Holding Company      32    Section 3.33    Intentionally
Omitted      32    Section 3.34    Property Document Representations      32   
Section 3.35    No Change in Facts or Circumstances; Disclosure      32   
ARTICLE 4 BORROWER COVENANTS      33    Section 4.1    Existence      33   
Section 4.2    Legal Requirements      33    Section 4.3    Maintenance and Use
of Property      33    Section 4.4    Waste      34    Section 4.5    Taxes and
Other Charges      34    Section 4.6    Litigation      34    Section 4.7   
Access to Property      34    Section 4.8    Notice of Default      34   
Section 4.9    Cooperate in Legal Proceedings      35    Section 4.10   
Performance by Borrower      35    Section 4.11    Illegal Activity/Forfeiture
     35    Section 4.12    Books and Records      35    Section 4.13    Estoppel
Certificates      36    Section 4.14    Leases and Rents      37    Section 4.15
   Management Agreement      38    Section 4.16    Payment for Labor and
Materials      39    Section 4.17    Performance of Other Agreements      40   
Section 4.18    Debt Cancellation      40    Section 4.19    ERISA      40   
Section 4.20    No Joint Assessment      40    Section 4.21    Alterations     
40   

 

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Section 4.22    Property Document Covenants      41    Section 4.23    Embargoed
Person/Patriot Act Protocols of Guarantor      41    ARTICLE 5 ENTITY COVENANTS
     41    Section 5.1    Single Purpose Entity/Separateness      41   
Section 5.2    Independent Director      45    Section 5.3    Change of Name,
Identity or Structure      45    Section 5.4    Business and Operations      46
   ARTICLE 6 NO SALE OR ENCUMBRANCE      46    Section 6.1    Transfer
Definitions      46    Section 6.2    No Sale/Encumbrance      46    Section 6.3
   Permitted Equity Transfers      47    Section 6.4    Permitted Property
Transfer (Assumption)      48    Section 6.5    Lender’s Rights      49   
Section 6.6    OFAC, Patriot Act and Transfers      49    ARTICLE 7 INSURANCE;
CASUALTY; CONDEMNATION; RESTORATION      50    Section 7.1    Insurance      50
   Section 7.2    Casualty      53    Section 7.3    Condemnation      53   
Section 7.4    Restoration      54    ARTICLE 8 RESERVE FUNDS      57   
Section 8.1    Immediate Repair Funds      57    Section 8.2    Replacement
Reserve Funds      57    Section 8.3    Intentionally Omitted      58   
Section 8.4    Operating Expense Funds      58    Section 8.5    Excess Cash
Flow Funds      59    Section 8.6    Tax and Insurance Funds      59   
Section 8.7    The Accounts Generally      59    ARTICLE 9 CASH MANAGEMENT     
61    Section 9.1    Establishment of Certain Accounts      61    Section 9.2   
Deposits into the Restricted Account; Maintenance of Restricted Account      61
   Section 9.3    Disbursements from the Cash Management Account      62   
Section 9.4    Withdrawals from the Debt Service Account      63    Section 9.5
   Payments Received Under this Agreement      63    ARTICLE 10 EVENTS OF
DEFAULT; REMEDIES      63    Section 10.1    Event of Default      63   
Section 10.2    Remedies      65   

 

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ARTICLE 11 SECONDARY MARKET      67    Section 11.1    Securitization      67   
Section 11.2    Disclosure      68    Section 11.3    Reserves/Escrows      69
   Section 11.4    Servicer      69    Section 11.5    Rating Agency Costs     
69    Section 11.6    Mezzanine Option      69    Section 11.7    Conversion to
Registered Form      70    ARTICLE 12 INDEMNIFICATIONS      70    Section 12.1
   General Indemnification      70    Section 12.2    Mortgage and Intangible
Tax Indemnification      71    Section 12.3    ERISA Indemnification      71   
Section 12.4    Duty to Defend, Legal Fees and Other Fees and Expenses      71
   Section 12.5    Survival      71    Section 12.6    Environmental Indemnity
     71    ARTICLE 13 EXCULPATION      71    Section 13.1    Exculpation      71
   ARTICLE 14 NOTICES      73    Section 14.1    Notices      73    ARTICLE 15
FURTHER ASSURANCES      74    Section 15.1    Replacement Documents      74   
Section 15.2    Recording of Security Instrument, etc.      74    Section 15.3
   Further Acts, etc.      74    Section 15.4    Changes in Tax, Debt, Credit
and Documentary Stamp Laws      75    ARTICLE 16 WAIVERS      75    Section 16.1
   Remedies Cumulative; Waivers      75    Section 16.2    Modification, Waiver
in Writing      75    Section 16.3    Delay Not a Waiver      76    Section 16.4
   Waiver of Trial by Jury      76    Section 16.5    Waiver of Notice      76
   Section 16.6    Remedies of Borrower      76    Section 16.7   
Cross-Default; Cross-Collateralization; Marshalling and Other Matters      76   
Section 16.8    Waiver of Statute of Limitations      77    Section 16.9   
Waiver of Counterclaim      77    Section 16.10    Sole Discretion of Lender   
  77    ARTICLE 17 MISCELLANEOUS      77    Section 17.1    Survival      77   

 

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Section 17.2    Governing Law      77    Section 17.3    Headings      78   
Section 17.4    Severability      78    Section 17.5    Preferences      79   
Section 17.6    Expenses      79    Section 17.7    Cost of Enforcement      79
   Section 17.8    Schedules Incorporated      79    Section 17.9    Offsets,
Counterclaims and Defenses      80    Section 17.10    No Joint Venture or
Partnership; No Third Party Beneficiaries      80    Section 17.11    Publicity
     81    Section 17.12    Conflict; Construction of Documents; Reliance     
81    Section 17.13    Entire Agreement      81    Section 17.14    Liability   
  81    Section 17.15    Duplicate Originals; Counterparts      81    Section
17.16    Contributions and Waivers      81    Section 17.17    Knowledge      84
  

 

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LOAN AGREEMENT

THIS LOAN AGREEMENT, dated as of January 28, 2011 (as amended, restated,
replaced, supplemented or otherwise modified from time to time, this
“Agreement”), between CITIGROUP GLOBAL MARKETS REALTY CORP., having an address
at 388 Greenwich Street, 19th Floor, New York, New York 10013 (together with its
successors and/or assigns, “Lender”) and EACH OF THE PARTIES SET FORTH ON
EXHIBIT A ATTACHED HERETO, each a Delaware limited liability company having its
principal place of business at 111 Corporate Drive, Suite 120, Ladera Ranch, CA
92694 (together with its successors and/or assigns, “Borrower”).

RECITALS:

Borrower desires to obtain the Loan (defined below) from Lender.

Lender is willing to make the Loan to Borrower, subject to and in accordance
with the terms of this Agreement and the other Loan Documents (defined below).

In consideration of the making of the Loan by Lender and the covenants,
agreements, representations and warranties set forth in this Agreement, the
parties hereto hereby covenant, agree, represent and warrant as follows:

ARTICLE 1

DEFINITIONS; PRINCIPLES OF CONSTRUCTION

Section 1.1     Definitions.

For all purposes of this Agreement, except as otherwise expressly required or
unless the context clearly indicates a contrary intent:

“Acceptable LLC” shall mean a limited liability company formed under Delaware or
Maryland law which (i) has at least one springing member or “Special Member” (as
defined below), which, upon the dissolution of all of the members or the
withdrawal or the disassociation of all of the members from such limited
liability company, shall immediately become the sole member of such limited
liability company, and (ii) otherwise meets the Rating Agency criteria then
applicable to such entities.

“Account Collateral” shall mean (i) the Accounts, and all cash, checks, drafts,
certificates and instruments, if any, from time to time deposited or held in the
Accounts from time to time; (ii) any and all amounts invested in Permitted
Investments; (iii) all interest, dividends, cash, instruments and other property
from time to time received, receivable or otherwise payable in respect of, or in
exchange for, any or all of the foregoing; and (iv) to the extent not covered by
clauses (i) - (iii) above, all “proceeds” (as defined under the UCC as in effect
in the State in which the Accounts are located) of any or all of the foregoing.

“Accounts” shall mean the Cash Management Account, the Debt Service Account, the
Restricted Account, the Tax Account, the Insurance Account, the Replacement
Reserve Account, the Immediate Repair Account, the Excess Cash Flow Account, the
Operating Expense Account and any other account established by this Agreement or
the other Loan Documents.

“Act” is defined in Section 5.1 hereof.

“Affiliate” shall mean, as to any Person, any other Person that, directly or
indirectly, is in Control of, is Controlled by or is under common Control with
such Person or is a director or officer of such Person or of an Affiliate of
such Person.

“Affiliated Manager” shall mean any property manager of any Individual Property
in which Borrower, Guarantor, any SPE Component Entity (if any) or any Affiliate
of such entities has, directly or indirectly, any legal, beneficial or economic
interest.

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“ALTA” shall mean American Land Title Association, or any successor thereto.

“Alteration Threshold” shall mean an amount equal to 5% of the then-outstanding
principal balance of the Loan.

“Allocated Loan Amount” shall mean, for an Individual Property, the amount set
forth on Schedule V attached hereto.

“Annex” shall have the meaning set forth in Section 3.30 hereof.

“Applicable Contribution” shall have the meaning set forth in Section 17.16
hereof.

“Approved Accounting Method” shall mean GAAP, federal tax basis accounting
(consistently applied) or such other method of accounting, consistently applied,
as may be reasonably acceptable to Lender.

“Approved Annual Budget” shall have the meaning set forth in Section 4.12
hereof.

“Approved Appraiser” shall mean any of the following appraisers provided there
has been no material adverse change to such appraiser’s financial condition,
operations or ability to conduct its business in the ordinary course since the
Closing Date: (i) Cushman & Wakefield and (ii) CB Richard Ellis.

“Approved Extraordinary Expense” shall mean an operating expense of any
Individual Property not set forth on the Approved Annual Budget but approved by
Lender in writing (which such approval shall not be unreasonably withheld or
delayed).

“Approved ID Provider” shall mean each of CT Corporation, Corporation Service
Company, National Registered Agents, Inc., Wilmington Trust Company, Stewart
Management Company and Lord Securities Corporation; provided, that, (A) the
foregoing shall only be deemed Approved ID Providers to the extent acceptable to
the Rating Agencies and (B) additional national providers of Independent
Directors may be deemed added to the foregoing hereunder to the extent approved
in writing by Lender and the Rating Agencies.

“Approved Operating Expense” shall mean an operating expense of any Individual
Property set forth on the Approved Annual Budget.

“Assignment of Management Agreement” shall mean, with respect to each Individual
Property, that certain Conditional Assignment of Management Agreement dated as
of the date hereof among Lender, Borrower and Manager, as the same may be
amended, restated, replaced, extended, renewed, supplemented or otherwise
modified from time to time.

“Award” shall mean any compensation paid by any Governmental Authority in
connection with a Condemnation in respect of all or any part of any Individual
Property.

“Bank” shall be deemed to refer to the bank or other institution maintaining the
Restricted Account pursuant to the Restricted Account Agreement.

“Bankruptcy Code” shall mean Title 11 of the United States Code entitled
“Bankruptcy”, as amended from time to time, and any successor statute or
statutes and all rules and regulations from time to time promulgated thereunder,
and any comparable foreign laws relating to bankruptcy, insolvency or creditors’
rights.

“Bankruptcy Event” shall mean the occurrence of any one or more the of the
following: (i) Borrower files a voluntary petition under the Bankruptcy Code or
any other Creditors Rights Laws; (ii) any Borrower Party files, or joins in the
filing of, an involuntary petition against Borrower under the Bankruptcy Code or
any other Creditors Rights Laws, or solicits or causes to be solicited
petitioning creditors for any involuntary petition against Borrower from any
Person; (iii) Borrower files an answer consenting to or otherwise acquiescing in
or joining in any involuntary petition filed against it, by any other Person
under the Bankruptcy Code or any other Creditors Rights

 

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Laws, or solicits or causes to be solicited petitioning creditors for any
involuntary petition from any Person; (iv) any Borrower Party consents to or
acquiesces in or joins in an application for the appointment of a custodian,
receiver, trustee, or examiner for Borrower or any portion of the Property;
(v) Borrower makes an assignment for the benefit of creditors, or admits, in
writing or in any legal proceeding, its insolvency or inability to pay its debts
as they become due; (vi) the substantive consolidation of any Restricted Party
with any other entity in connection with any proceeding under the Bankruptcy
Code or any other Creditors Rights Laws involving Guarantor or its subsidiaries;
(vii) any Restricted Party contesting or opposing any motion made by Lender to
obtain relief from the automatic stay or seeking to reinstate the automatic stay
in the event of any proceeding under the Bankruptcy Code or any other Creditors
Rights Laws involving Guarantor or its subsidiaries; and (viii) in the event
Lender receives less than the full value of its claim in any proceeding under
the Bankruptcy Code or any other Creditors Rights Laws, Guarantor or any of its
Affiliates receiving an equity interest or other financial benefit of any kind
as a result of a “new value” plan or equity contribution.

“Benefit Amount” shall have the meaning set forth in Section 17.16 hereof.

“Borrower Party” and “Borrower Parties” shall mean each of Borrower and
Guarantor.

“Business Day” shall mean a day on which commercial banks are not authorized or
required by applicable law to close in New York, New York.

“Cash Flow Adjustments” shall mean, with respect to the determination of
Operating Expenses in connection with the calculation of Underwritable Cash
Flow, adjustments as may be reasonably made by Lender to reflect (i) actual or
imminent increases for Taxes and Insurance Premiums, (ii) management fees equal
to the greater of (x) six percent of Gross Rents and (y) actual management fees
payable under the Management Agreement and (iii) items of a non-recurring
nature.

“Cash Management Account” shall have the meaning set forth in Section 9.1
hereof.

“Casualty” shall have the meaning set forth in Section 7.2.

“Casualty Consultant” shall have the meaning set forth in Section 7.4 hereof.

“Closing Date” shall mean the date of the funding of the Loan.

“Condemnation” shall mean a temporary or permanent taking by any Governmental
Authority as the result, in lieu or in anticipation, of the exercise of the
right of condemnation or eminent domain, of all or any part of any Individual
Property, or any interest therein or right accruing thereto, including any right
of access thereto or any change of grade affecting any Individual Property or
any part thereof.

“Condemnation Net Proceeds” shall mean the Net Proceeds described in subsection
(ii) of the definition of “Net Proceeds” as set forth herein.

“Condemnation Payment” shall have the meaning set forth in Section 7.3 hereof.

“Contribution” shall have the meaning set forth in Section 17.16 hereof.

“Control” shall mean the power to direct the management and policies of an
entity, directly or indirectly, whether through the ownership of voting
securities or other beneficial interests, by contract or otherwise.

“Covered Rating Agency Information” shall mean any Provided Information
furnished to the Rating Agencies in connection with issuing, monitoring and/or
maintaining the Securities.

“Creditors Rights Laws” shall mean any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to its debts
or debtors.

 

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“Debt” shall mean the outstanding principal amount set forth in, and evidenced
by, this Agreement and the Note together with all interest accrued and unpaid
thereon and all other sums due to Lender in respect of the Loan under the Note,
this Agreement or the other Loan Documents (including, without limitation, all
costs and expenses payable to Lender thereunder).

“Debt Service” shall mean, with respect to any particular period of time,
interest and principal payments due under the Note or, in the event only a
portion of the Loan is the subject of the Defeasance Event, the Undefeased Note,
for such period.

“Debt Service Account” shall have the meaning set forth in Section 9.1 hereof.

“Debt Service Coverage Ratio” shall mean, with respect to all Properties and in
the aggregate, the ratio calculated by Lender on a monthly basis of (i) the
Underwritable Cash Flow to (ii) the aggregate amount of debt service under the
Note, or in the event only a portion of the Loan has been subject of a prior
Defeasance Event, the Undefeased Note, which would be due for the twelve
(12) month period immediately preceding the date of calculation; provided, that,
the foregoing shall be calculated by Lender (A) based upon actual amount of debt
service which would be due for such period under the Note, or in the event only
a portion of the Loan has been the subject of a prior Defeasance Event, the
Undefeased Note and (B) assuming that the Loan had been in place for the
entirety of said period.

“Deemed Approval Requirements” shall mean, with respect to any matter, that
(i) no Event of Default shall have occurred and be continuing (either at the
date of any notices specified below or as of the effective date of any deemed
approval), (ii) Borrower shall have sent Lender a written request for approval
with respect to such matter in accordance with the applicable terms and
conditions hereof (the “Initial Notice”), which such Initial Notice shall have
been (A) accompanied by any and all required information and documentation
relating thereto as may be reasonably required in order to approve or disapprove
such matter (the “Approval Information”) and (B) marked in bold lettering with
the following language: “LENDER’S RESPONSE IS REQUIRED WITHIN TEN (10) BUSINESS
DAYS OF RECEIPT OF THIS NOTICE PURSUANT TO THE TERMS OF A LOAN AGREEMENT BETWEEN
THE UNDERSIGNED AND LENDER” and the envelope containing the Initial Notice shall
have been marked “PRIORITY-DEEMED APPROVAL MAY APPLY”; (iii) Lender shall have
failed to respond to the Initial Notice within the aforesaid time-frame;
(iv) Borrower shall have submitted a second request for approval with respect to
such matter in accordance with the applicable terms and conditions hereof (the
“Second Notice”), which such Second Notice shall have been (A) accompanied by
the Approval Information and (B) marked in bold lettering with the following
language: “LENDER’S RESPONSE IS REQUIRED WITHIN FIVE (5) BUSINESS DAYS OF
RECEIPT OF THIS NOTICE PURSUANT TO THE TERMS OF A LOAN AGREEMENT BETWEEN THE
UNDERSIGNED AND LENDER” and the envelope containing the Second Notice shall have
been marked “PRIORITY-DEEMED APPROVAL MAY APPLY”; and (v) Lender shall have
failed to respond to the Second Notice within the aforesaid time-frame. For
purposes of clarification, Lender requesting in writing additional and/or
clarified information, in addition to approving or denying any request (in whole
or in part), shall be deemed a response by Lender for purposes of the foregoing.

“Default” shall mean the occurrence of any event hereunder or under the Note or
the other Loan Documents which, but for the giving of notice or passage of time,
or both, would be an Event of Default.

“Default Rate” shall mean, with respect to the Loan, a rate per annum equal to
the lesser of (i) the Maximum Legal Rate, or (ii) five percent (5%) above the
Interest Rate.

“Default Yield Maintenance Premium” shall mean an amount equal to the Yield
Maintenance Premium except that when calculating the Yield Maintenance Premium,
the reference to “Interest Rate” in the definition of “Calculated Payments”
shall be deemed to mean and refer to the “Default Rate”.

“Defeasance Approval Item” shall have the meaning set forth in Section 2.8
hereof.

“Defeasance Collateral” shall mean “government securities” within the meaning of
Treasury Regulation Section 1.860G-2(a)(8)(i), which provide payments (i) on or
prior to, but as close as possible to, the Business Day

 

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immediately preceding all Monthly Payment Dates and other scheduled payment
dates, if any, hereunder after the Defeasance Date and up to and including the
Maturity Date, and (ii) in amounts equal to or greater than the Scheduled
Defeasance Payments relating to such Monthly Payment Dates and other scheduled
payment dates.

“Defeasance Date” shall have the meaning set forth in Section 2.8 hereof.

“Defeasance Event” shall have the meaning set forth in Section 2.8 hereof.

“Defeasance Collateral Account” shall have the meaning set forth in Section 2.8
hereof.

“Defeased Note” shall have the meaning set forth in Section 2.8 hereof.

“Disclosure Documents” shall mean, collectively and as applicable, any offering
circular, prospectus, prospectus supplement, private placement memorandum or
other offering document, in each case, in connection with a Securitization.

“Eligibility Requirements” means, with respect to any Person, that such Person
(i) has total assets (in name or under management) in excess of six hundred
million dollars ($600,000,000) and (except with respect to an advisory firm or
similar fiduciary) capital/statutory surplus or shareholder’s equity of two
hundred and fifty million dollars ($250,000,000) and (ii) is regularly engaged
in the business of making or owning commercial real estate loans or commercial
properties.

“Eligible Account” shall mean a separate and identifiable account from all other
funds held by the holding institution that is either (a) an account or accounts
maintained with a federal or state-chartered depository institution or trust
company which complies with the definition of Eligible Institution or (b) a
segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution or trust
company, is subject to regulations substantially similar to 12 C.F.R. §9.10(b),
having in either case a combined capital and surplus of at least $50,000,000 and
subject to supervision or examination by federal and state authority. An
Eligible Account will not be evidenced by a certificate of deposit, passbook or
other instrument.

“Eligible Institution” shall mean (a) a depository institution or trust company
insured by the Federal Deposit Insurance Corporation (i) the short term
unsecured debt obligations or commercial paper of which are rated at least
“A-1+” (or its equivalent) from each of the Rating Agencies (in the case of
accounts in which funds are held for thirty (30) days or less) and (ii) the
senior unsecured debt obligations of which are rated at least “AA” (or its
equivalent) from each of the Rating Agencies (in the case of accounts in which
funds are held for more than thirty (30) days) or (b) such other depository
institution otherwise approved by the Rating Agencies from time-to-time.

“Embargoed Person” shall have the meaning set forth in Section 3.29 hereof.

“Environmental Indemnity” shall mean that certain Environmental Indemnity
Agreement, dated as of the date hereof, executed by Borrower and Guarantor in
connection with the Loan for the benefit of Lender, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

“Environmental Laws” shall have the meaning set forth in the Environmental
Indemnity.

“Equity Collateral” shall have the meaning set forth in Section 11.6 hereof.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the
same may heretofore have been or shall be amended, restated, replaced or
otherwise modified.

“Event of Default” shall have the meaning set forth in Section 10.1 hereof.

“Excess Cash Flow” shall have the meaning set forth in Section 9.3 hereof.

 

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“Excess Cash Flow Account” shall have the meaning set forth in Section 8.5
hereof.

“Excess Cash Flow Funds” shall have the meaning set forth in Section 8.5 hereof.

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

“Exculpated Parties” shall have the meaning set forth in Section 13.1 hereof.

“Existing Cell Tower Leases” shall mean that certain (i) PCS Site Agreement
dated October 7, 1997 by and between Security Self Storage, Inc.,
predecessor-in-interest to SSTI 8080 Steilen DR, LLC, as Landlord, and SprintCom
Inc., predecessor-in-interest to STC Two LLC, as Tenant, as amended by that
certain Addendum #2 dated June 11, 1998, as further amended by that certain
First Amendment to PCS Site Agreement dated August 28, 2006 and as further
amended by that certain Second Amendment to PCS Site Agreement dated
December 17, 2008, and (ii) Land Lease Agreement dated October 11, 1996, by and
between Downtown Mini Storage Partners, DBA, predecessor-in-interest to SSTI
1120 S Las Vegas BLVD, LLC, as Landlord, and AAT Communications Corporation, as
predecessor-in-interest to SBA Structures, Inc., as Tenant, as amended by that
certain Amendment I dated November 24, 1997.

“Existing Loan” shall mean the loan evidenced by that certain $4,975,000
Consolidated, Amended and Restated Promissory Note dated as of March 16, 2009,
by SSTI 15 McClure Dr, LLC , a Delaware limited liability company, and SSTI 1742
Pass Rd, LLC, a Delaware limited liability company, as maker, and payable to the
order of BB&T Real Estate Funding, LLC.

“Fitch” shall mean Fitch, Inc.

“Flood Insurance Acts” shall have the meaning set forth in Section 7.1 hereof.

“Funding Borrower” shall have the meaning set forth in Section 17.16 hereof.

“GAAP” shall mean generally accepted accounting principles in the United States
of America as of the date of the applicable financial report.

“Governmental Authority” shall mean any court, board, agency, commission, office
or other authority of any nature whatsoever for any governmental unit (federal,
state, county, district, municipal, city or otherwise) whether now or hereafter
in existence.

“Gross Rents” shall mean an amount equal to annual rental income reflected in a
current rent roll for all Tenants paying rent pursuant to Leases which are in
full force and effect. Gross Rents may be adjusted by Lender in its reasonable
discretion to account for items of a non-recurring nature. For the avoidance of
doubt, Gross Rents shall exclude any rental income from any Tenant that has not
paid rent for more than sixty (60) days.

“Guarantor” shall mean Strategic Storage Trust, Inc., a Maryland corporation.

“Guaranty” shall mean that certain Limited Recourse Guaranty executed by
Guarantor and dated as of the date hereof.

“Immediate Repair Account” shall have the meaning set forth in Section 8.1
hereof.

“Immediate Repair Funds” shall have the meaning set forth in Section 8.1 hereof.

“Immediate Repairs” shall have the meaning set forth in Section 8.1 hereof.

“Improvements” shall have the meaning set forth in the granting clause of each
Security Instrument.

 

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“Indebtedness” shall mean, for any Person, without duplication: (i) all
indebtedness of such Person for borrowed money, for amounts drawn under a letter
of credit, or for the deferred purchase price of property for which such Person
or its assets is liable, (ii) all unfunded amounts under a loan agreement,
letter of credit, or other credit facility for which such Person would be liable
if such amounts were advanced thereunder, (iii) all amounts required to be paid
by such Person as a guaranteed payment to partners or a preferred or special
dividend, including any mandatory redemption of shares or interests, (iv) all
indebtedness guaranteed by such Person, directly or indirectly, (v) all
obligations under leases that constitute capital leases for which such Person is
liable, and (vi) all obligations of such Person under interest rate swaps, caps,
floors, collars and other interest hedge agreements, in each case whether such
Person is liable contingently or otherwise, as obligor, guarantor or otherwise,
or in respect of which obligations such Person otherwise assures a creditor
against loss.

“Indemnified Parties” shall mean (a) Lender, (b) any successor owner or holder
of the Loan or participations in the Loan, (c) any Servicer or prior Servicer of
the Loan, (d) any Investor or any prior Investor in any Securities, (e) any
trustees, custodians or other fiduciaries who hold or who have held a full or
partial interest in the Loan for the benefit of any Investor or other third
party, (f) any receiver or other fiduciary appointed in a foreclosure or other
Creditors Rights Laws proceeding, (g) any officers, directors, shareholders,
partners, members, employees, agents, servants, representatives, contractors,
subcontractors, Affiliates or subsidiaries of any and all of the foregoing, and
(h) the heirs, legal representatives, successors and assigns of any and all of
the foregoing (including, without limitation, any successors by merger,
consolidation or acquisition of all or a substantial portion of the Indemnified
Parties’ assets and business), in all cases whether during the term of the Loan
or as part of or following a foreclosure of the Loan.

“Independent Director” shall have the meaning set forth in Section 5.2 hereof.

“Insurance Account” shall have the meaning set forth in Section 8.6 hereof.

“Insurance Premiums” shall have the meaning set forth in Section 7.1 hereof.

“Individual Property” shall mean each parcel of real property, the Improvements
thereon and all Personal Property owned by any Borrower and encumbered by a
Security Instrument, together with all rights pertaining to such Property and
Improvements, as more particularly described in Article 1 of each Security
Instrument and referred to therein as the “Property”.

“Institutional Lender” shall mean one or more of the following:

(A) a real estate investment trust, bank, saving and loan association,
investment bank, insurance company, trust company, commercial credit
corporation, pension plan, pension fund or pension advisory firm, mutual fund,
government entity or plan, provided that any such Person referred to in this
clause (A) satisfies the Eligibility Requirements;

(B) an investment company, money management firm or “qualified institutional
buyer” within the meaning of Rule 144A under the Securities Act or an
institutional “accredited investor” within the meaning of Regulation D under the
Securities Act, provided that any such Person referred to in this clause
(B) satisfies the Eligibility Requirements;

(C) an institution substantially similar to any of the foregoing entities
described in clauses (A) or (B) that satisfies the Eligibility Requirements;

(D) any entity Controlled by any of the entities described in clauses (A),
(B) or (C). For purposes of this clause (D) only, “Control” means the ownership,
directly or indirectly, in the aggregate of more than fifty percent (50%) of the
beneficial ownership interests of an entity and the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of an entity, whether through the ability to exercise voting power, by
contract or otherwise; and

 

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(E) an investment fund, limited liability company, limited partnership or
general partnership where a Permitted Fund Manager or an entity that is
otherwise an Institutional Lender under clauses (A), (B), (C), or (D) of this
definition acts as the general partner, managing member or fund manager and at
least 50% of the equity interests in such investment vehicle are owned, directly
or indirectly, by one or more entities that are otherwise Institutional Lenders
under clauses (A), (B), (C), or (D) of this definition.

“Interest Accrual Period” shall mean the period beginning on (and including) the
sixth (6th) day of each calendar month during the term of the Loan and ending on
(and including) the fifth (5th) day of the next succeeding calendar month.

“Interest Bearing Accounts” shall mean the following Reserve Accounts: the
Immediate Repair Account, Replacement Reserve Account, Operating Expense Account
and the Excess Cash Flow Account.

“Interest Rate” shall mean a rate per annum equal to five and seventy-seven
hundredths percent (5.77%).

“Interest Shortfall” shall have the meaning set forth in Section 2.7 hereof.

“Investor” shall mean any investor or potential investor in the Loan (or any
portion thereof or interest therein) in connection with any Secondary Market
Transaction.

“IRS Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time or any successor statute.

“Land” shall have the meaning set forth in each Security Instrument.

“Lease” shall have the meaning set forth in the Security Instrument.

“Legal Requirements” shall mean, with respect to Borrower or any Individual
Property, all federal, state, county, municipal and other governmental statutes,
laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions
of Governmental Authorities affecting Borrower or such Individual Property or
any part thereof, or the construction, use, alteration or operation thereof, or
any part thereof, whether now or hereafter enacted and in force, including,
without limitation, the Americans with Disabilities Act of 1990, and all
permits, licenses and authorizations and regulations relating thereto, and all
covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Borrower, at any time in force
affecting Borrower or such Individual Property or any part thereof, including,
without limitation, any which may (i) require repairs, modifications or
alterations in or to such Individual Property or any part thereof, or (ii) in
any way limit the use and enjoyment thereof.

“Liabilities” shall have the meaning set forth in Section 11.2 hereof.

“Loan” shall mean the loan made by Lender to Borrower pursuant to this
Agreement.

“Loan Bifurcation” shall have the meaning set forth in Section 11.1 hereof.

“Loan Documents” shall mean, collectively, this Agreement, the Note, the
Security Instruments, the Environmental Indemnity, the Assignments of Management
Agreement, the Guaranty and all other documents executed and/or delivered by
Borrower, Manager and/or Guarantor, as applicable, in connection with the Loan,
as each of the same may be amended, restated, replaced, extended, renewed,
supplemented or otherwise modified from time to time.

“Loan to Value Ratio” shall mean, as of the date of its calculation, the ratio
of (i) the sum of the outstanding principal amount of the undefeased portion of
the Loan as of the date of such calculation to (ii) the value of the Properties.
The value of the Properties for purposes of this definition shall be based on
recent full narrative appraisals commissioned by Lender at Borrower’s expense
and issued by an Approved Appraiser (or if no Approved Appraiser exists, an
appraiser reasonably acceptable to Lender).

 

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“Losses” shall mean any and all claims, suits, liabilities (including, without
limitation, strict liabilities), actions, proceedings, obligations, debts,
damages, losses, costs, expenses, fines, penalties, charges, fees, judgments,
awards, amounts paid in settlement of whatever kind or nature (including but not
limited to legal fees and other costs of defense).

“Major Lease” shall mean as to any Individual Property (i) any Lease which,
individually or when aggregated with all other leases at such Individual
Property with the same Tenant or its Affiliate, either (A) accounts for five
percent (5.0%) or more of the total rental income for all the Properties
then-encumbered by a Security Instrument, or (B) demises 50,000 square feet or
more of any Individual Property’s gross leasable area, (ii) except for the
Existing Cell Tower Leases, any Lease which contains any option, offer, right of
first refusal or other similar entitlement to acquire all or any portion of any
Individual Property, or (iii) any instrument guaranteeing or providing credit
support for any Lease meeting the requirements of (i) and/or (ii) above. As of
the date hereof, Borrower and Lender acknowledge that no Major Lease exists.

“Management Agreement” shall mean, with respect to any Individual Property, the
management agreement entered into by and between Borrower and Manager, pursuant
to which Manager is to provide management and other services with respect to
such Individual Property, as the same may be amended, restated, replaced,
extended, renewed, supplemented or otherwise modified from time to time.

“Manager” shall mean Strategic Storage Property Management, LLC, a Delaware
limited liability company, or such other entity selected as the manager of the
Property or any Individual Property in accordance with the terms of this
Agreement or the other Loan Documents.

“Material Adverse Effect” shall mean a material adverse effect on (i) any
Individual Property, (ii) the business, profits, prospects, management,
operations or condition (financial or otherwise) of Borrower, Guarantor, or any
Individual Property, (iii) the enforceability, validity, perfection or priority
of the lien of any Security Instrument or the other Loan Documents, or (iv) the
ability of Borrower and/or Guarantor to perform its obligations under any
Security Instrument or the other Loan Documents.

“Maturity Date” shall mean February 6, 2021, or such other date on which the
final payment of the principal amount of the Loan becomes due and payable as
herein provided, whether at such stated maturity date, by declaration of
acceleration, or otherwise.

“Maximum Legal Rate” shall mean the maximum non-usurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the indebtedness evidenced by the Note and as provided
for herein or the other Loan Documents, under the laws of such state or states
whose laws are held by any court of competent jurisdiction to govern the
interest rate provisions of the Loan.

“Member” is defined in Section 5.1 hereof.

“Mezzanine Borrower” shall have the meaning set forth in Section 11.6 hereof.

“Mezzanine Option” shall have the meaning set forth in Section 11.6 hereof.

“Minimum Disbursement Amount” shall mean Twenty-Five Thousand and No/100 Dollars
($25,000).

“Monthly Debt Service Payment Amount” shall mean for the Monthly Payment Date
occurring in March, 2011, and for each Monthly Payment Date occurring
thereafter, a constant monthly payment of $170,335.82.

“Monthly Insurance Deposit” shall have the meaning set forth in Section 8.6
hereof.

“Monthly Payment Date” shall mean the sixth (6th) day of every calendar month
occurring during the term of the Loan.

“Monthly Tax Deposit” shall have the meaning set forth in Section 8.6 hereof.

 

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

“Net Proceeds” shall mean: (i) the net amount of all insurance proceeds payable
as a result of a Casualty to any Individual Property, after deduction of
reasonable costs and expenses (including, but not limited to, reasonable
attorneys’ fees), if any, in collecting such insurance proceeds, or (ii) the net
amount of the Award, after deduction of reasonable costs and expenses
(including, but not limited to, reasonable attorneys’ fees), if any, in
collecting such Award (“Condemnation Net Proceeds”).

“Net Proceeds Deficiency” shall have the meaning set forth in Section 7.4
hereof.

“New Manager” shall have the meaning set forth in Section 4.15 hereof.

“New Non-Consolidation Opinion” shall mean a substantive non-consolidation
opinion provided by outside counsel acceptable to Lender and the Rating Agencies
and otherwise in form and substance acceptable to Lender and the Rating
Agencies.

“Non-Conforming Policy” shall have the meaning set forth in Section 7.1 hereof.

“Non-Consolidation Opinion” shall mean that certain substantive
non-consolidation opinion delivered to Lender by Connolly Bove Lodge & Hutz LLP
in connection with the closing of the Loan.

“Note” shall mean that certain Promissory Note of even date herewith in the
principal amount of $29,125,000.00, made by Borrower in favor of Lender, as the
same may be amended, restated, replaced, extended, renewed, supplemented,
severed, split, or otherwise modified from time to time, including any Defeased
Note and Undefeased Note that may exist from time to time.

“Obligations” shall have the meaning set forth in Section 17.16 hereof.

“OFAC” shall have the meaning set forth in Section 3.30 hereof.

“Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower
which is signed by a Responsible Officer of Borrower, the manager of Borrower
(on behalf of Borrower), or any other authorized signatory of Borrower
reasonably acceptable to Borrower.

“Operating Expense Account” shall have the meaning set forth in Section 8.4
hereof.

“Operating Expense Funds” shall have the meaning set forth in Section 8.4
hereof.

“Operating Expenses” shall mean the total of all expenditures, computed in
accordance with the Approved Accounting Method, of whatever kind relating to the
operation, maintenance and management of the Properties that are incurred on a
regular monthly or other periodic basis, including without limitation, (and
without duplication) (a) utilities, ordinary repairs and maintenance, insurance,
license fees, property taxes and assessments, advertising expenses, payroll and
related taxes, computer processing charges, management fees (equal to the
greater of (x) six percent (6%) of Gross Rents during the applicable time period
or (y) actual management fees payable under the Management Agreement during the
applicable time period), operational equipment or other lease payments as
approved by Lender, but specifically excluding (i) depreciation, (ii) Debt
Service, (iii) non-recurring or extraordinary expenses, and (iv) deposits into
the Reserve Funds; and (b) normalized capital expenditures equal to $127,522 per
annum.

“Operating Income” shall mean all income, computed in accordance with the
Approved Accounting Method, derived from the ownership and operation of the
Properties from whatever source, including, but not limited to common area
maintenance, real estate tax recoveries, utility recoveries, other miscellaneous
expense recoveries, base rent and percentage rent, rent concessions or credits,
if any, and other miscellaneous income, but excluding sales, use and occupancy
or other taxes on receipts required to be accounted for by Borrower to any
Governmental Authority, refunds and uncollectible accounts, sales of furniture,
fixtures and equipment, interest

 

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income from any source other than the escrow accounts and/or reserve accounts
required pursuant to this Agreement or the other Loan Documents, insurance
proceeds (other than business interruption or other loss of income insurance),
Awards, unforfeited security deposits, utility and other similar deposits, any
income or rents from Tenants not paying rent for sixty (60) days or more, income
from Tenants in bankruptcy, non-recurring or extraordinary income, including,
without limitation lease termination payments, and any disbursements to Borrower
from the Reserve Funds. Operating Income shall not be diminished as a result of
any Security Instrument or the creation of any intervening estate or interest in
any Individual Property or any part thereof.

“Operating Partnership” shall mean Strategic Storage Operating Partnership,
L.P., a Delaware limited partnership.

“Other Charges” shall mean all maintenance charges, impositions other than
Taxes, and any other charges, vault charges and license fees for the use of
vaults, chutes and similar areas adjoining any Individual Property, now or
hereafter levied or assessed or imposed against such Individual Property or any
part thereof.

“Patriot Act” shall have the meaning set forth in Section 3.30 hereof.

“Permitted Encumbrances” shall mean, with respect to any Individual Property,
collectively, (a) the lien and security interests created by this Agreement and
the other Loan Documents, (b) all liens, encumbrances and other matters
disclosed in the Title Insurance Policy, (c) liens, if any, for Taxes imposed by
any Governmental Authority not yet due or delinquent and (d) such other title
and survey exceptions as Lender has approved or may approve in writing in
Lender’s sole discretion.

“Permitted Equipment Leases” shall mean equipment leases or other similar
instruments entered into with respect to the Personal Property; provided, that,
in each case, such equipment leases or similar instruments (i) are entered into
on commercially reasonable terms and conditions in the ordinary course of
Borrower’s business and (ii) relate to Personal Property which is (A) used in
connection with the operation and maintenance of any Individual Property in the
ordinary course of Borrower’s business and (B) readily replaceable without
material interference or interruption to the operation of such Individual
Property.

“Permitted Investments” shall mean any one or more of the following obligations
or securities acquired at a purchase price of not greater than par, including
those issued by Servicer, the trustee under any Securitization or any of their
respective Affiliates, payable on demand or having a maturity date not later
than the Business Day immediately prior to the first Monthly Payment Date
following the date of acquiring such investment and meeting one of the
appropriate standards set forth below:

(i) obligations of, or obligations fully guaranteed as to payment of principal
and interest by, the United States or any agency or instrumentality thereof
provided such obligations are backed by the full faith and credit of the United
States of America including, without limitation, obligations of: the U.S.
Treasury (all direct or fully guaranteed obligations), the Farmers Home
Administration (certificates of beneficial ownership), the General Services
Administration (participation certificates), the U.S. Maritime Administration
(guaranteed Title XI financing), the Small Business Administration (guaranteed
participation certificates and guaranteed pool certificates), the U.S.
Department of Housing and Urban Development (local authority bonds) and the
Washington Metropolitan Area Transit Authority (guaranteed transit bonds);
provided, however, that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (B) if rated by S&P, must not have an “r” highlighter affixed to their
rating, (C) if such investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a fixed spread (if any)
and must move proportionately with that index, and (D) such investments must not
be subject to liquidation prior to their maturity;

(ii) Federal Housing Administration debentures;

(iii) obligations of the following United States government sponsored agencies:
Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit System
(consolidated systemwide bonds and

 

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notes), the Federal Home Loan Banks (consolidated debt obligations), the Federal
National Mortgage Association (debt obligations) the Financing Corp. (debt
obligations), and the Resolution Funding Corp. (debt obligations); provided,
however, that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (B) if rated by S&P, must not have an “r” highlighter affixed to their
rating, (C) if such investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a fixed spread (if any)
and must move proportionately with that index, and (D) such investments must not
be subject to liquidation prior to their maturity;

(iv) federal funds, unsecured certificates of deposit, time deposits, bankers’
acceptances and repurchase agreements with maturities of not more than 365 days
of any bank, the short term obligations of which at all times are rated in the
highest short term rating category by each Rating Agency (or, if not rated by
all Rating Agencies, rated by at least one Rating Agency in the highest short
term rating category and otherwise acceptable to each other Rating Agency, as
confirmed in writing that such investment would not, in and of itself, result in
a downgrade, qualification or withdrawal of the initial, or, if higher, then
current ratings assigned to the Securities); provided, however, that the
investments described in this clause must (A) have a predetermined fixed dollar
of principal due at maturity that cannot vary or change, (B) if rated by S&P,
must not have an “r” highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate must be tied to
a single interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be subject to
liquidation prior to their maturity;

(v) fully Federal Deposit Insurance Corporation-insured demand and time deposits
in, or certificates of deposit of, or bankers’ acceptances issued by, any bank
or trust company, savings and loan association or savings bank, the short term
obligations of which at all times are rated in the highest short term rating
category by each Rating Agency (or, if not rated by all Rating Agencies, rated
by at least one Rating Agency in the highest short term rating category and
otherwise acceptable to each other Rating Agency, as confirmed in writing that
such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current ratings
assigned to the Securities); provided, however, that the investments described
in this clause must (A) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if rated by S&P, must not have an “r”
highlighter affixed to their rating, (C) if such investments have a variable
rate of interest, such interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to liquidation prior to
their maturity;

(vi) debt obligations with maturities of not more than 365 days and at all times
rated by each Rating Agency (or, if not rated by all Rating Agencies, rated by
at least one Rating Agency and otherwise acceptable to each other Rating Agency,
as confirmed in writing that such investment would not, in and of itself, result
in a downgrade, qualification or withdrawal of the initial, or, if higher, then
current ratings assigned to the Securities) in its highest long-term unsecured
rating category; provided, however, that the investments described in this
clause must (A) have a predetermined fixed dollar of principal due at maturity
that cannot vary or change, (B) if rated by S&P, must not have an “r”
highlighter affixed to their rating, (C) if such investments have a variable
rate of interest, such interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to liquidation prior to
their maturity;

(vii) commercial paper (including both non-interest-bearing discount obligations
and interest-bearing obligations payable on demand or on a specified date not
more than one year after the date of issuance thereof) with maturities of not
more than 365 days and that at all times is rated by each Rating Agency (or, if
not rated by all Rating Agencies, rated by at least one Rating Agency and
otherwise acceptable to each other Rating Agency, as confirmed in writing that
such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current ratings
assigned to the Securities) in its highest short-term unsecured debt rating;
provided, however, that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (B) if rated by S&P, must not have an “r” highlighter affixed to their
rating, (C) if such investments have a variable rate of interest, such interest
rate must be tied to a single interest rate

 

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index plus a fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to liquidation prior to
their maturity;

(viii) units of taxable money market funds, which funds are regulated investment
companies, seek to maintain a constant net asset value per share and invest
solely in obligations backed by the full faith and credit of the United States,
which funds have the highest rating available from each Rating Agency (or, if
not rated by all Rating Agencies, rated by at least one Rating Agency and
otherwise acceptable to each other Rating Agency, as confirmed in writing that
such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current ratings
assigned to the Securities) for money market funds; and

(ix) any other security, obligation or investment which has been approved as a
Permitted Investment in writing by (a) Lender and (b) each Rating Agency, as
evidenced by a written confirmation that the designation of such security,
obligation or investment as a Permitted Investment will not, in and of itself,
result in a downgrade, qualification or withdrawal of the initial, or, if
higher, then current ratings assigned to the Securities by such Rating Agency;

provided, however, that no obligation or security shall be a Permitted
Investment if (A) such obligation or security evidences a right to receive only
interest payments or (B) the right to receive principal and interest payments on
such obligation or security are derived from an underlying investment that
provides a yield to maturity in excess of 120% of the yield to maturity at par
of such underlying investment.

“Permitted Prepaid Rents” shall mean, for each Loan Year and for the Borrowers
collectively, certain Rents paid more than one (1) month in advance of their
respective due dates in an aggregate amount not to exceed 5% of the total Gross
Rents payable under Leases for all the Individual Properties then encumbered by
a Security Instrument. For the avoidance of doubt, the Rents permitted to be
received in any Loan Year by all Borrowers (in the aggregate) more than one
(1) month in advance of their respective due dates shall not exceed the
Permitted Prepaid Rents.

“Person” shall mean any individual, corporation, partnership, joint venture,
limited liability company, estate, trust, unincorporated association, any
federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.

“Personal Property” shall have the meaning set forth in the granting clause of
each Security Instrument.

“Policies” shall have the meaning specified in Section 7.1 hereof.

“Permitted Fund Manager” shall mean any Person that on the date of determination
is (i) any nationally-recognized manager of investment funds investing in debt
or equity interests relating to commercial real estate, (ii) investing through a
fund with committed capital of at least two hundred fifty million dollars
($250,000,000) and (iii) not subject to a Proceeding.

“Proceeding” shall mean any case, proceeding or other action under any existing
or future law of any Creditors Rights Laws.

“Prohibited Transfer” shall have the meaning set forth in Section 6.2 hereof.

“Properties” shall mean, collectively, each and every Individual Property which
is subject to the terms of this Agreement, to the extent that the same is
encumbered by the Security Instrument and has not been released therefrom
pursuant to the terms hereof.

“Property” shall mean, as the context may require, the Properties or an
Individual Property.

“Property Document” shall mean, individually or collectively (as the context may
require), the REA.

 

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“Property Document Event” shall mean any event which would, directly or
indirectly, cause a default termination right, right of first refusal, first
offer or any other similar right, cause any termination fees to be due or would
cause a Material Adverse Effect to occur under any Property Document (in each
case, beyond any applicable notice and cure periods under the applicable
Property Document); provided, however, any of the foregoing shall not be deemed
a Property Document Event to the extent Lender’s prior written consent is
obtained with respect to the same, not to be unreasonably withheld or delayed.

“Provided Information” shall mean any information provided by or on behalf of
any Borrower Party in connection with the Loan, the Property, such Borrower
Party and/or any related matter or Person.

“Prudent Lender Standard” shall, with respect to any matter, be deemed to have
been met if the matter in question (i) prior to a Securitization, is reasonably
acceptable to Lender and (ii) after a Securitization, would be acceptable to a
prudent lender of securitized commercial mortgage loans.

“Qualified Insurer” shall have the meaning set forth in Section 7.1 hereof.

“Qualified Manager” shall have the meaning set forth in the Assignment of
Management Agreement.

“Rating Agencies” shall mean each of S&P, Moody’s, Fitch, and any other
nationally-recognized statistical rating agency designated by Lender (and any
successor to any of the foregoing); provided, that, the foregoing shall only be
deemed to be included within the definition of “Rating Agencies” hereunder to
the extent that the same have rated (or are reasonably anticipated by Lender to
rate) the Securities.

“Rating Agency Confirmation” shall mean (i) prior to a Securitization, that
Lender has (in consultation with the Rating Agencies (if required by Lender))
approved the matter in question in writing and (ii) from and after a
Securitization, a written affirmation from each of the Rating Agencies (obtained
at Borrower’s sole cost and expense to the extent required pursuant to
Section 11.5 hereof) that the credit rating of the Securities by such Rating
Agency immediately prior to the occurrence of the event with respect to which
such Rating Agency Confirmation is sought will not be qualified, downgraded or
withdrawn as a result of the occurrence of such event, which affirmation may be
granted or withheld in such Rating Agency’s sole and absolute discretion.

“REA” shall mean, individually or collectively (as the context requires), each
reciprocal easement or similar agreement affecting any Individual Property as
more particularly described on Schedule IV hereto (if any), any amendment,
restatement, replacement or other modification thereof, any future reciprocal
easement or similar agreement affecting any Individual Property entered into in
accordance with the applicable terms and conditions hereof and any amendment,
restatement, replacement or other modification thereof.

“Registrar” shall have the meaning set forth in Section 11.7 hereof.

“Regulation AB” shall mean Regulation AB under the Securities Act and the
Exchange Act, as such Regulation may be amended from time to time.

“Reimbursement Contribution” shall have the meaning set forth in Section 17.16
hereof.

“Related Loan” shall mean a loan to an Affiliate of Borrower or secured by a
Related Property, that is included in a Securitization with the Loan (or any
portion thereof or interest therein).

“Related Property” shall mean a parcel 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 any Individual
Property.

“Release Date” shall mean the earlier to occur of (i) the fourth anniversary of
the Closing Date and (ii) the date that is two (2) years from the “startup day”
(within the meaning of Section 860G(a)(9) of the IRS Code) of the REMIC Trust
established in connection with the last Securitization involving any portion of
or interest in the Loan.

 

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“Release Price” shall mean, for each Individual Property, one hundred
twenty-five percent (125%) of the Allocated Loan Amount for such Individual
Property.

“REMIC Requirements” shall mean any applicable legal requirements relating to
any REMIC Trust (including, without limitation, any constraints, rules and/or
other regulations and/or requirements relating to the servicing, modification
and/or other similar matters with respect to the Loan (or any portion thereof
and/or interest therein)).

“REMIC Trust” shall mean any “real estate mortgage investment conduit” within
the meaning of Section 860D of the IRS Code that holds any interest in all or
any portion of the Loan.

“Rent Roll” shall have the meaning set forth in Section 3.18 hereof.

“Rent Loss Proceeds” shall have the meaning set forth in Section 7.1 hereof.

“Rents” shall have the meaning set forth in each Security Instrument with
respect to each Individual Property.

“Replacement Reserve Account” shall have the meaning set forth in Section 8.2
hereof.

“Replacement Reserve Funds” shall have the meaning set forth in Section 8.2
hereof.

“Replacement Reserve Monthly Deposit” shall have the meaning set forth in
Section 8.2 hereof.

“Replacements” for any period shall mean amounts expended for replacements
and/or alterations to any Individual Property; provided; that, the same are
(i) required to be capitalized according to the Approved Accounting Method and
(ii) reasonably approved by Lender.

“Reporting Failure” shall have the meaning set forth in Section 4.12 hereof.

“Required Financial Item” shall have the meaning set forth in Section 4.12
hereof.

“Reserve Accounts” shall mean the Tax Account, the Insurance Account, the
Replacement Reserve Account, the Immediate Repair Account, the Excess Cash Flow
Account, the Operating Expense Account and any other escrow account established
by this Agreement or the other Loan Documents (but specifically excluding the
Cash Management Account, the Restricted Account and the Debt Service Account.).

“Reserve Funds” shall mean the Tax and Insurance Funds, the Replacement Reserve
Funds, the Immediate Repair Funds, the Excess Cash Flow Funds, the Operating
Expense Funds and any other escrow funds established by this Agreement or the
other Loan Documents.

“Responsible Officer” means with respect to a Person, the chairman of the board,
president, chief operating officer, chief financial officer, treasurer, vice
president, manager, managing member or general partner of such Person or such
other similar officer of such Person reasonably acceptable to Lender.

“Restoration” shall mean the repair and restoration of an Individual Property
after a Casualty or Condemnation as nearly as possible to the condition the
Property was in immediately prior to such Casualty or Condemnation, with such
alterations as may be approved by Lender.

“Restoration Retainage” shall have the meaning set forth in Section 7.4 hereof.

“Restoration Threshold” shall mean an amount equal to 5% of the Allocated Loan
Amount for the affected Individual Property.

“Restricted Account” shall have the meaning set forth in Section 9.1 hereof.

 

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“Restricted Account Agreement” shall mean that certain Deposit Account Control
Agreement by and among Borrower, Lender and Wells Fargo Bank, National
Association, dated as of the date hereof.

“Restricted Party” shall have the meaning set forth in Section 6.1 hereof.

“Sale or Pledge” shall have the meaning set forth in Section 6.1 hereof.

“Scheduled Defeasance Payments” shall mean scheduled payments of interest and
principal hereunder for the entire outstanding principal balance and accrued
interest of the Note in the case of a Defeasance Event for the entire
outstanding principal balance of the Loan, or the Defeased Note in the case of a
Defeasance Event for only a portion of the outstanding principal balance of the
Loan, as applicable, in either case for all Monthly Payment Dates occurring
after the Defeasance Date and up to and including the Maturity Date (including
the entire outstanding principal balance and accrued interest on the Note in the
case of a Defeasance Event for the entire outstanding principal balance of the
Loan, or the Defeased Note in the case of a Defeasance Event for only a portion
of the outstanding principal balance of the Loan, as applicable, in either case,
as of the Maturity Date) and all payments required after the Defeasance Date, if
any, under the Loan Documents for servicing fees, rating surveillance charges
(to the extent applicable) and other similar charges.

“Secondary Market Transaction” shall have the meaning set forth in Section 11.1
hereof.

“Securities” shall have the meaning set forth in Section 11.1 hereof.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Securitization” shall have the meaning set forth in Section 11.1 hereof.

“Security Agreement” shall mean a pledge and security agreement in form and
substance satisfying the Prudent Lender Standard pursuant to which Borrower
grants Lender a perfected, first priority security interest in the Defeasance
Collateral Account and the Defeasance Collateral.

“Security Instrument” shall mean, with respect to each Individual Property, that
certain first priority Mortgage, Assignment of Leases and Rents and Security
Agreement, Mortgage and Security Agreement, Open-End Mortgage and Security
Agreement, Deed of Trust, Assignment of Leases and Rents and Security Agreement,
Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture
Filing, or Deed to Secure Debt, Assignment of Leases and Rents and Security
Agreement, each dated as of the date hereof, executed and delivered by Borrower
as security for the Loan and encumbering such Individual Property, as the same
may be amended, restated, replaced, supplemented or otherwise modified from time
to time.

“Servicer” shall have the meaning set forth in Section 11.4 hereof.

“Severed Loan Documents” shall have the meaning set forth in Article 10.2(d).

“Significant Obligor” shall have the meaning set forth in Item 1101(k) of
Regulation AB under the Securities Act.

“Single Purpose Entity” shall mean an entity whose structure and organizational
and governing documents are otherwise in form and substance acceptable to the
Rating Agencies and satisfying the Prudent Lender Standard.

“Special Member” is defined in Section 5.1 hereof.

“SPE Component Entity” shall have the meaning set forth in Section 5.1 hereof.

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

 

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“State” shall mean, with respect to an Individual Property, the state in which
such Individual Property or any part thereof is located.

“Successor Borrower” shall have the meaning set forth in Section 2.8 hereof.

“Survey” shall mean that certain survey of any Individual Property certified and
delivered to Lender in connection with the closing of the Loan.

“Tax Account” shall have the meaning set forth in Section 8.6 hereof.

“Tax and Insurance Funds” shall have the meaning set forth in Section 8.6
hereof.

“Taxes” shall mean all taxes, assessments, water rates, sewer rents, and other
governmental impositions, including, without limitation, vault charges and
license fees for the use of vaults, chutes and similar areas adjoining the Land,
now or hereafter levied or assessed or imposed against any Individual Property
or any part thereof.

“Tenant” shall mean any Person leasing, subleasing or otherwise occupying any
portion of any Individual Property under a Lease or other occupancy agreement
with Borrower.

“Title Insurance Policy” shall mean, with respect to each Individual Property,
that certain ALTA mortgagee title insurance policy issued with respect to such
Individual Property and insuring the lien of the Security Instrument.

“Trigger Period” shall mean a period commencing upon the earlier of (i) the
occurrence and continuance of an Event of Default or (ii) the Debt Service
Coverage Ratio being less than 1.20 to 1.00, and ending upon the occurrence of
the applicable Triggering Termination Event.

“Trigger Termination Event” shall mean (x) with regard to any Trigger Period
commenced in connection with clause (i) of the definition of Trigger Period
above, upon the cure (if applicable) of such Event of Default, and (y) with
regard to any Trigger Period commenced in connection with clause (ii) of the
definition of Trigger Period above, upon the date that the Debt Service Coverage
Ratio is equal to or greater than 1.25 to 1.00 for one (1) full calendar quarter
(provided that no Event of Default shall have occurred and be continuing during
and at the time of expiration of such period). In the event a Trigger Period is
caused by the occurrence of more than one event, such Trigger Period shall not
terminate unless all applicable Trigger Termination Events cease to exist as
provided above.

“True Up Payment” shall mean a payment into the applicable Reserve Account of a
sum which, together with any applicable monthly deposits into the applicable
Reserve Account, will be sufficient to discharge the obligations and liabilities
for which such Reserve Account was established as and when reasonably
appropriate. The amount of the True Up Payment shall be determined by Lender in
its reasonable discretion.

“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in
effect in the State in which an Individual Property is located.

“Undefeased Note” shall have the meaning set forth in Section 2.8 hereof.

“Underwritable Cash Flow” shall mean an amount calculated by Lender on a monthly
basis equal to the (i) lesser of (x) Gross Rents and (y) the trailing twelve
(12) months Operating Income, less (ii) the trailing twelve (12) months
Operating Expenses subject to Lender’s application of the Cash Flow Adjustments.
Lender’s calculation of Underwritable Cash Flow (including determination of
items that do not qualify as Operating Income or Operating Expenses) shall be
calculated by Lender in good faith.

“Updated Information” shall have the meaning set forth in Section 11.1 hereof.

“U.S. Obligations” shall mean direct full faith and credit obligations of the
United States of America that are not subject to prepayment, call or early
redemption.

 

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“Yield Maintenance Premium” shall mean an amount equal to the greater of (a) an
amount equal to 1% of the amount prepaid; or (b) an amount equal to the present
value as of the date on which the prepayment is made of the Calculated Payments
(as defined below) from the date on which the prepayment is made through the
Maturity Date determined by discounting such payments at the Discount Rate (as
defined below). As used in this definition, the term “Calculated Payments” shall
mean the monthly payments of interest only which would be due based on the
principal amount of the Loan being prepaid on the date on which prepayment is
made and assuming an interest rate per annum equal to the difference (if such
difference is greater than zero) between (y) the Interest Rate and (z) the Yield
Maintenance Treasury Rate (as defined below). As used in this definition, the
term “Discount Rate” shall mean the rate which, when compounded monthly, is
equivalent to the Yield Maintenance Treasury Rate (as defined below), when
compounded semi-annually. As used in this definition, the term “Yield
Maintenance Treasury Rate” shall mean the yield calculated by Lender by the
linear interpolation of the yields, as reported in the Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading “U.S.
Government Securities/Treasury Constant Maturities” for the week ending prior to
the date on which prepayment is made, of U.S. Treasury Constant Maturities with
maturity dates (one longer or one shorter) most nearly approximating the
Maturity Date. In the event Release H.15 is no longer published, Lender shall
select a comparable publication to determine the Yield Maintenance Treasury
Rate. In no event, however, shall Lender be required to reinvest any prepayment
proceeds in U.S. Treasury obligations or otherwise. Lender shall notify Borrower
of the amount and the basis of determination of the required prepayment
consideration.

Section 1.2     Principles of Construction.

(a) All references to sections and schedules are to sections and schedules in or
to this Agreement unless otherwise specified. All uses of the word “including”
shall mean “including, without limitation” unless the context shall indicate
otherwise. Unless otherwise specified, the words “hereof,” “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specified, all meanings attributed to defined terms
herein shall be equally applicable to both the singular and plural forms of the
terms so defined.

(b) All covenants, representations, terms and conditions contained in this
Agreement applicable to (i) Borrower shall be deemed to apply to each Borrower
individually and (ii) Property, Properties or Individual Property shall be
deemed to apply to each Individual Property individually. It shall constitute an
Event of Default if any covenant, representation, term or condition contained in
this Agreement is breached (beyond any applicable notice and cure periods) with
respect to any single Borrower or Individual Property.

ARTICLE 2

GENERAL TERMS

Section 2.1     Loan Commitment; Disbursement to Borrower.

Section 2.2     The Loan. Subject to and upon the terms and conditions set forth
herein, Lender hereby agrees to make and Borrower hereby agrees to accept the
Loan on the Closing Date.

Section 2.3     Disbursement to Borrower. Borrower may request and receive only
one borrowing hereunder in respect of the Loan and any amount borrowed and
repaid hereunder in respect of the Loan may not be re-borrowed.

Section 2.4     The Note and the other Loan Documents. The Loan shall be
evidenced by the Note and this Agreement and secured by this Agreement and the
other Loan Documents.

Section 2.5     Interest Rate.

(a) Interest on the outstanding principal balance of the Loan shall accrue from
the Closing Date at the Interest Rate until repaid in accordance with the
applicable terms and conditions hereof.

 

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(b) Intentionally Omitted.

(c) In the event that, and for so long as, any Event of Default shall have
occurred and be continuing, (i) the outstanding principal balance of the Loan
and, to the extent permitted by applicable law, overdue interest in respect of
the Loan, shall each accrue interest at the Default Rate, calculated from the
date such payment was due without regard to any grace or cure periods contained
herein, (ii) without limitation of any rights or remedies contained herein
and/or in any other Loan Document, any interest accrued at the Default Rate in
excess of the interest component of the Monthly Debt Service Payment Amount
shall, to the extent not already paid and/or due and payable hereunder, be due
and payable on each Monthly Payment Date and (iii) all references herein and/or
in any other Loan Document to the “Interest Rate” shall, as to the obligation to
pay interest on any sums due hereunder during the continuance of an Event of
Default, be deemed to refer to the Default Rate.

(d) Interest on the outstanding principal balance of the Loan shall be
calculated by multiplying (a) the actual number of days elapsed in the period
for which the calculation is being made by (b) a daily rate based on a three
hundred sixty (360) day year (that is, the Interest Rate or the Default Rate, as
then applicable, expressed as an annual rate divided by 360) by (c) the
outstanding principal balance. The accrual period for calculating interest due
on each Monthly Payment Date shall be the Interest Accrual Period immediately
prior to such Monthly Payment Date. Borrower understands and acknowledges that
such interest accrual requirement results in more interest accruing on the Loan
than if either a thirty (30) day month and a three hundred sixty (360) day year
or the actual number of days and a three hundred sixty-five (365) day year were
used to compute the accrual of interest on the Loan.

(e) This Agreement and the other Loan Documents are subject to the express
condition that at no time shall Borrower be required to pay interest on the
principal balance of the Loan at a rate which could subject Lender to either
civil or criminal liability as a result of being in excess of the Maximum Legal
Rate. If by the terms of this Agreement or the other Loan Documents, Borrower is
at any time required or obligated to pay interest on the principal balance due
hereunder at a rate in excess of the Maximum Legal Rate, the Interest Rate or
the Default Rate, as the case may be, shall be deemed to be immediately reduced
to the Maximum Legal Rate and all previous payments in excess of the Maximum
Legal Rate shall be deemed to have been payments in reduction of principal and
not on account of the interest due hereunder. All sums paid or agreed to be paid
to Lender for the use, forbearance, or detention of the sums due under the Loan,
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term of the Loan until payment
in full so that the rate or amount of interest on account of the Loan does not
exceed the Maximum Legal Rate from time to time in effect and applicable to the
Loan for so long as the Loan is outstanding.

Section 2.6     Loan Payments.

(a) Borrower shall make a payment to Lender of interest only on the Closing Date
for the period from (and including) the Closing Date through (but excluding) the
sixth (6th) day of either (i) the month in which the Closing Date occurs (if
such Closing Date is after the first day of such month, but prior to the sixth
(6th) day of such month) or (ii) if the Closing Date is after the sixth
(6th) day of the then current calendar month, the month following the month in
which the Closing Date occurs; provided, however, if the Closing Date is the
sixth (6th) day of a calendar month, no such separate payment of interest shall
be due. Borrower shall make a payment to Lender of interest and, to the extent
applicable, principal in the amount of the Monthly Debt Service Payment Amount
on the Monthly Payment Date occurring in March, 2011, and on each Monthly
Payment Date thereafter to and including the Maturity Date. Each payment shall
be applied first to accrued and unpaid interest and the balance to principal.
The non-interest only portion of Monthly Debt Service Payment Amount required
hereunder is based upon a thirty (30) year amortization schedule.

(b) Intentionally Omitted.

(c) Borrower shall pay to Lender on the Maturity Date the then outstanding
principal balance of the Loan, all accrued and unpaid interest thereon and all
other amounts due hereunder and under the Note, the Security Instruments and the
other Loan Documents.

 

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(d) If any regularly scheduled monthly payment of Debt Service or any regularly
scheduled monthly deposit to any Reserve Account is not paid by Borrower on the
date on which it is due, Borrower shall pay to Lender upon demand an amount
equal to the lesser of five percent (5%) of such unpaid sum or the maximum
amount permitted by applicable law in order to defray the expense incurred by
Lender in handling and processing such delinquent payment and to compensate
Lender for the loss of the use of such delinquent payment. Any such amount shall
be secured by the Security Instruments and the other Loan Documents.

(e)

(i) Except as otherwise specifically provided herein, all payments and
prepayments under this Agreement and the Note shall be made to Lender not later
than 1:00 P.M., New York City time, on the date when due and shall be made in
lawful money of the United States of America in immediately available funds at
Lender’s office, and any funds received by Lender after such time shall, for all
purposes hereof, be deemed to have been paid on the next succeeding Business
Day.

(ii) Whenever any payment to be made hereunder or under any other Loan Document
shall be stated to be due on a day which is not a Business Day, the due date
thereof shall be deemed to be the immediately preceding Business Day.

(iii) All payments required to be made by Borrower hereunder or under the Note
or the other Loan Documents shall be made irrespective of, and without deduction
for, any setoff, claim or counterclaim and shall be made irrespective of any
defense thereto.

Section 2.7     Prepayments.

(a) Except as otherwise provided herein, Borrower shall not have the right to
prepay the Loan in whole or in part. After the Monthly Payment Date occurring
three (3) months prior to the Maturity Date (the “Permitted Prepayment Date”),
Borrower may, provided no Event of Default has occurred and is continuing, at
its option and upon thirty (30) days prior notice to Lender (or such shorter
period of time as may be permitted by Lender in its sole discretion), prepay the
Debt in whole on any date without payment of the Yield Maintenance Premium. Any
prepayment received by Lender on a date other than a Monthly Payment Date shall
include interest which would have accrued thereon to the next Monthly Payment
Date (such amounts, the “Interest Shortfall”) and such amounts (i.e. principal
and interest prepaid by Borrower) shall be held by Lender as collateral security
for the Loan in an interest bearing Eligible Account at an Eligible Institution,
with interest accruing on such amounts to the benefit of Borrower; such amounts
prepaid shall be applied to the Loan on the next Monthly Payment Date, with any
interest on such funds paid to Borrower on such date provided no Event of
Default then exists.

(b) On each date on which Lender actually receives a distribution of Net
Proceeds, Lender shall make such Net Proceeds available to Borrower for
Restoration to the extent Lender is obligated to do so under this Agreement and
if Lender does not otherwise make Net Proceeds available to Borrower for
Restoration, Lender shall apply the Net Proceeds to prepay the Debt in an amount
equal to one hundred percent (100%) of such Net Proceeds. Borrower shall make
the Condemnation Payment as and to the extent required hereunder. No Yield
Maintenance Premium shall be due in connection with any prepayment made with
respect to a Casualty or Condemnation hereunder. Any prepayment received by
Lender pursuant to this Section 2.7(b) on a date other than a Monthly Payment
Date shall be held by Lender as collateral security for the Loan in an interest
bearing, Eligible Account, at an Eligible Institution, with such interest
accruing to the benefit of Borrower, and shall be applied by Lender on the next
Monthly Payment Date. In the event of any prepayment made pursuant to this
Section 2.7(b) or in connection with a Condemnation Payment, Borrower shall have
the right to prepay an additional portion of the Loan in accordance with the
terms of Section 2.9.3 hereof and this Section 2.7.

(c) If concurrently with or after an Event of Default, payment of all or any
part of the principal of the Loan is tendered by Borrower, a purchaser at
foreclosure or any other Person, or if all or any portion of the Debt is
recovered by Lender after such Event of Default, such tender shall be deemed an
attempt to circumvent the prohibition against prepayment set forth herein and
Borrower, such purchaser at foreclosure or other Person shall pay the Default
Yield Maintenance Premium, in addition to the outstanding principal balance, all
accrued and

 

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unpaid interest and other amounts payable under the Loan Documents.
Notwithstanding anything to the contrary contained herein or in any other Loan
Document, any prepayment of the Debt shall be applied to the Debt in such order
and priority as may be determined by Lender in its sole discretion.

Section 2.8     Defeasance.

(a) Provided no Event of Default shall have occurred and remain uncured,
Borrower shall have the right at any time after the Release Date and prior to
the Maturity Date to voluntarily defease all, or any portion of, the entire Loan
and obtain a release of the lien of the applicable Security Instrument or
Security Instruments (hereinafter, a “Defeasance Event”), subject to the
satisfaction of the following conditions precedent:

(i) Borrower shall provide Lender not less than thirty (30) days notice (or such
shorter period of time if permitted by Lender in its sole discretion) but not
more than ninety (90) days notice specifying a date (the “Defeasance Date”) on
which the Defeasance Event is to occur;

(ii) Unless otherwise agreed to in writing by Lender, Borrower shall pay to
Lender (A) all payments of principal and interest due and payable on the Loan to
and including the Defeasance Date (provided, that, if such Defeasance Date is
not a Monthly Payment Date, Borrower shall also pay to Lender all payments of
principal and interest due on the Loan to and including the next occurring
Monthly Payment Date); (B) all other sums, if any, due and payable under the
Note, this Agreement, the Security Instruments and the other Loan Documents
through and including the Defeasance Date (or, if the Defeasance Date is not a
Monthly Payment Date, the next occurring Monthly Payment Date); (C) all escrow,
closing, recording, legal, Rating Agency and other fees, costs and expenses paid
or incurred by Lender or its agents in connection with the Defeasance Event, the
release of the lien of the applicable Security Instrument on the applicable
Individual Property, the review of the proposed Defeasance Collateral and the
preparation of the Security Agreement, the Defeasance Collateral Account and
related documentation; and (D) any revenue, documentary stamp, intangible or
other taxes, charges or fees due in connection with the transfer or assumption
of the Note or the Defeasance Event;

(iii) Borrower shall deposit the Defeasance Collateral into the Defeasance
Collateral Account and otherwise comply with the provisions of Section 2.8(d)
hereof;

(iv) Borrower shall execute and deliver to Lender a Security Agreement in
respect of the Defeasance Collateral Account and the Defeasance Collateral;

(v) In the event only a portion of the Loan is the subject of the Defeasance
Event, Borrower shall prepare all necessary documents to modify this Agreement
and to amend and restate the Note and issue two substitute notes for the Note,
one note having a principal balance equal to the defeased portion of the
original Note and a maturity date equal to the Maturity Date (the “Defeased
Note”) and the other note having a principal balance equal to the undefeased
portion of the original Note and a maturity date equal to the Maturity Date (the
“Undefeased Note”). The Defeased Note and the Undefeased Note shall have
identical terms as the original Note except for the principal balance. A
Defeased Note cannot be the subject of any further Defeasance Event. The
Undefeased Note may be the subject of a further Defeasance Event in accordance
with the terms and provisions of this Section 2.8 (the term “Note”, as used in
this clause (v) for such purpose, being deemed to refer to the Undefeased Note
that is the subject of further defeasance), provided, however, that no such
partial defeasance shall take place unless the conditions outlined in
Section 2.9.2 are satisfied;

(vi) Borrower shall deliver to Lender (i) an opinion of counsel for Borrower
that is standard in commercial lending transactions and subject only to
customary qualifications, assumptions and exceptions opining, among other
things, that (A) Lender has a legal and valid perfected first priority security
interest in the Defeasance Collateral Account and the Defeasance Collateral;
(B) if a Securitization has occurred (1) the REMIC Trust formed pursuant to such
Securitization and/or any subsequent or prior Securitization of the Loan (or any
portion thereof or interest therein) will each not fail to maintain their
respective status as a “real estate mortgage investment conduit” within the
meaning of Section 860D of the

 

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IRS Code as a result of a Defeasance Event pursuant to this Section 2.8 and
(2) the Defeasance Event would not (I) constitute a “significant modification”
of the Loan within the meaning of Treasury Regulation Section 1.1001-3(b) or
(II) cause the Loan to fail to be a “qualified mortgage” within the meaning of
Section 860(a)(3)(A) of the IRS Code; (C) the Defeasance Event will not result
in a deemed exchange for purposes of the IRS Code and will not adversely affect
the status of the Note as indebtedness for federal income tax purposes; and
(D) delivery of the Defeasance Collateral and the grant of a security interest
therein to Lender shall not constitute an avoidable preference under Section 547
of the Bankruptcy Code or applicable state law; and (ii) a New Non-Consolidation
Opinion with respect to Successor Borrower;

(vii) Borrower shall deliver to Lender a Rating Agency Confirmation as to the
Defeasance Event;

(viii) Borrower shall deliver an Officer’s Certificate certifying that the
requirements set forth in this Section 2.8 have been satisfied;

(ix) Borrower shall deliver a certificate of a nationally recognized public
accounting firm acceptable to Lender certifying that the Defeasance Collateral
will generate monthly amounts equal to or greater than the Scheduled Defeasance
Payments; and

(x) Borrower shall deliver such other certificates, opinions, documents and
instruments as Lender may reasonably request.

(b) Intentionally Omitted.

(c) Intentionally Omitted.

(d) On or before the date on which Borrower delivers the Defeasance Collateral,
Borrower shall open at any Eligible Institution an Eligible Account (the
“Defeasance Collateral Account”). The Defeasance Collateral Account shall
contain only (i) Defeasance Collateral, and (ii) cash from interest and
principal paid on the Defeasance Collateral. All cash from interest and
principal payments paid on the Defeasance Collateral shall be paid over to
Lender on each Monthly Payment Date and applied first to accrued and unpaid
interest and then to principal. Any cash from interest and principal paid on the
Defeasance Collateral not needed to pay the Scheduled Defeasance Payments shall
be (i) paid to Borrower or Successor Borrower (as applicable) and/or (ii) to the
extent permitted by applicable REMIC Requirements, retained in the Defeasance
Collateral Account. Borrower shall cause the Eligible Institution at which the
Defeasance Collateral is deposited to enter an agreement with Borrower and
Lender, satisfactory to Lender in its sole discretion, pursuant to which such
Eligible Institution shall agree to hold and distribute the Defeasance
Collateral in accordance with this Agreement (such Agreement, the “Defeasance
Collateral Account Agreement”). Borrower or Successor Borrower (as applicable)
shall be the owner of the Defeasance Collateral Account and shall report all
income accrued on Defeasance Collateral for federal, state and local income tax
purposes in its income tax return. Borrower shall prepay all cost and expenses
associated with opening and maintaining the Defeasance Collateral Account.
Lender shall not in any way be liable by reason of any insufficiency in the
Defeasance Collateral Account.

(e) In connection with a Defeasance Event under this Section 2.8, successor
entity (the “Successor Borrower”) shall be established, which Successor Borrower
shall be (i) Single Purpose Entity and (ii) at Lender’s option and in its sole
discretion, established and/or designated by Lender or, if Lender does not so
elect, established and/or designated by Borrower. The right of Lender hereunder
to designate and/or establish Successor Borrower may, at the option and in the
sole discretion of the initial named Lender hereunder, be retained by the
initial named Lender hereunder notwithstanding any Secondary Market Transaction.
Borrower shall transfer and assign all obligations, rights and duties under and
to the Note or the Defeased Note, as applicable, Security Agreement and
Defeasance Collateral Account Agreement, together with the Defeasance Collateral
to such Successor Borrower. Such Successor Borrower shall assume the obligations
under the Note or the Defeased Note, as applicable, the Defeasance Collateral
Account Agreement and the Security Agreement in a manner acceptable to Lender
and the Rating Agencies and Borrower shall be relieved of its obligations under
the Loan Documents relating to the Note or the Defeased Note, as applicable
(other than those obligations which by their terms survive a repayment,
defeasance or other satisfaction of the Loan and/or a transfer of the Properties
in connection with Lender’s exercise of its

 

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remedies under the Loan Documents). Borrower shall pay all costs and expenses
incurred by Lender and Successor Borrower, including attorneys’ fees and
expenses, incurred in connection with the foregoing (including, without
limitation, Lender’s costs of establishing and/or designating Successor
Borrower, if any).

(f) Notwithstanding anything to the contrary contained in this Section 2.8, the
parties hereto hereby acknowledge and agree that after the Securitization of the
Loan (or any portion thereof or interest therein), with respect to any Lender
approval or similar discretionary rights over any matters contained in this
Section 2.8 (any such matter, a “Defeasance Approval Item”), such rights shall
be construed such that Lender shall only be permitted to withhold its consent or
approval with respect to any Defeasance Approval Item if the same fails to meet
the Prudent Lender Standard.

Section 2.9     Release of Property.

Except as set forth in Section 2.8 hereof and this Section 2.9, no repayment,
prepayment or defeasance of all or any portion of the Loan shall cause, give
rise to a right to require, or otherwise result in, the release of any Lien of
any Security Instrument on any Individual Property.

2.9.1 Release of the Properties.

(a) After the Release Date, if Borrower has elected to defease the entire Loan
and all the applicable requirements of Section 2.8 hereof and this Section 2.9
have been satisfied, all of the Properties shall be released from the Lien of
their respective Security Instruments, and the Defeasance Collateral, pledged
pursuant to the Security Agreement, shall be the sole source of collateral
securing the Note.

(b) In connection with the release of the lien, Borrower shall submit to Lender,
not less than thirty (30) days prior to the Defeasance Date (or such shorter
time as is acceptable to Lender in its sole discretion), a release of lien (and
related Loan Documents) for execution by Lender. Such release shall be in a form
appropriate in the jurisdiction in which each Individual Property is located and
that contains standard provisions protecting the rights of the releasing lender.
In addition, Borrower shall provide all other documentation Lender reasonably
requires to be delivered by Borrower in connection with such release, together
with an Officer’s Certificate certifying that such documentation (i) is in
compliance with all Legal Requirements, and (ii) will effect such release in
accordance with the terms of this Agreement. Borrower shall pay all costs, taxes
and expenses associated with the release of the lien of the Security Instrument,
including Lender’s reasonable attorneys’ fees.

2.9.2 Release of an Individual Property.

After the Release Date, if Borrower has elected to (x) defease a portion of the
Loan and the applicable requirements of Section 2.8 hereof and this Section 2.9
have been satisfied or (y) after the Permitted Prepayment Date, prepay a portion
of the Loan and the applicable requirements of Section 2.7 have been satisfied,
and provided that no Event of Default shall then exist, Borrower may obtain the
release of an Individual Property from the Lien of the Security Instrument
thereon (and related Loan Documents) and the release of Borrower’s obligations
under the Loan Documents with respect to such Individual Property (other than
those expressly stated to survive), upon the satisfaction of each of the
following conditions:

(a) The amount of the outstanding principal balance of the Loan to be defeased
in accordance with Section 2.8 hereof (or prepaid in accordance with Section 2.7
hereof) shall equal or exceed the Release Price for the applicable Individual
Property, and such defeasance shall be deemed a voluntary defeasance (or, in the
case of a prepayment, such prepayment shall be deemed to be a voluntary
prepayment) for all purposes hereunder;

(b) Borrower shall provide Lender with at least thirty (30) days but no more
than ninety (90) days prior written notice of its request to obtain a release of
the Individual Property;

(c) Borrower shall defease (or prepay) the portion of the Note equal to the
Release Price of the Individual Property being released (together with all
accrued and unpaid interest on the principal amount being defeased or prepaid,
as applicable) in accordance with the terms and conditions of Sections 2.8
hereof;

 

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(d) Borrower shall submit to Lender, not less than thirty (30) days prior to the
Defeasance Date (or, in the case of a prepayment, the prepayment date), a
release of Lien (and related Loan Documents) for such Individual Property for
execution by Lender. Such release shall be in a form appropriate in each State
in which the Individual Property is located and that would be satisfactory to a
prudent institutional lender and shall contain standard provisions, if any,
protecting the rights of the releasing lender. In addition, Borrower shall
provide all other documentation Lender reasonably requires to be delivered by
Borrower in connection with such release, together with an Officer’s Certificate
certifying that such documentation (i) is in compliance with all applicable
Legal Requirements, (ii) will, following execution by Lender and recordation
thereof, effect such releases in accordance with the terms of this Agreement,
and (iii) will not impair or otherwise adversely affect the liens, security
interests and other rights of Lender under the Loan Documents not being released
(or as to the parties to the Loan Documents and Properties subject to the Loan
Documents not being released);

(e) After giving effect to such release, Lender shall have determined that the
Debt Service Coverage Ratio for the Properties then remaining subject to the
liens of the Security Instruments shall be at least equal to the greater of
(i) the Debt Service Coverage Ratio for the twelve (12) full calendar months on
the Closing Date (i.e., 1.60:1.00) (assuming the Loan was outstanding), and
(ii) the Debt Service Coverage Ratio for all of the then remaining Properties
(including the Individual Property to be released) for the twelve (12) full
calendar months immediately preceding the release of the Individual Property;

(f) After giving effect to such release, Lender shall have determined that the
Loan to Value Ratio for the Properties then remaining subject to the liens of
the Security Instruments shall be at least equal to the lesser of (i) the Loan
to Value Ratio on the Closing Date (i.e., 50%) (assuming the Loan was
outstanding), and (ii) the Loan to Value Ratio for all of the then remaining
Properties (including the Individual Property to be released) immediately
preceding the release of the Individual Property;

(g) After giving effect to such release, Borrower shall not have collected Rents
more than one (1) month in advance for the Properties then remaining subject to
the lien of a Security Instrument in excess of Permitted Prepaid Rents for said
Properties;

(h) If a Securitization has occurred, Lender shall have received an opinion of
counsel that the release will not constitute a “significant modification” of the
Loan under Section 1001 of the IRS Code or otherwise cause a tax to be imposed
on a “prohibited transaction” by any REMIC Trust, which opinion shall be in form
and substance (i) reasonably satisfactory to the Rating Agencies and their
counsel and (ii) that would be reasonably satisfactory to Lender using the
Prudent Lender Standard;

(i) Lender shall have received evidence that the Individual Property to be
released shall be conveyed to a Person other than Borrower or SPE Component
Entity, and that the requirements of Article 5 shall continue to be satisfied
after giving effect to such release; and

(j) Lender shall have received payment of all Lender’s costs and expenses,
including due diligence review costs and reasonable counsel fees and
disbursements incurred in connection with the release of the Individual Property
from the lien of the related Security Instrument and the review and approval of
the documents and information required to be delivered in connection therewith.

2.9.3 Net Proceeds Release.

Provided no Event of Default has occurred and is continuing, at any time during
the term of the Loan, if after a Casualty or Condemnation affecting any
Individual Property, Lender does not make any Net Proceeds available to Borrower
for the restoration of the applicable Individual Property pursuant to the terms
hereof (the amount of such Net Proceeds not made available being referred to
herein as the “Retained Net Proceeds Amount”), Borrower may prepay a portion of
the Loan in accordance with the terms of this Section 2.9.3 and Section 2.7 and
obtain the release of (i) the Lien of such Security Instrument and
(ii) Borrower’s obligations under the Loan Documents with respect to the
Individual Property encumbered by such Security Instrument (other than those
expressly stated to survive), but only upon the satisfaction of each of the
following conditions:

 

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(a) Borrower shall prepay a portion of the outstanding principal balance of the
Loan in accordance with Section 2.7 hereof (after giving effect to the Retained
Net Proceeds Amount) in an amount, if any, sufficient to cause the requirements
of Sections 2.9.3(e) and (f) to be satisfied after giving effect to such
release. Such prepayment shall be deemed to be a voluntary prepayment) for all
purposes hereunder. In connection with such prepayment, Borrower shall also pay
the Interest Shortfall relating to any prepayment made pursuant to this
Section 2.9.3, together with any other sums then due under the Loan Documents;

(b) Borrower shall provide Lender with at least thirty (30) days but no more
than ninety (90) days prior written notice of its request to obtain a release of
the Individual Property;

(c) Intentionally omitted;

(d) Borrower shall submit to Lender, not less than thirty (30) days prior to the
prepayment date, a release of Lien (and related Loan Documents) for such
Individual Property for execution by Lender. Such release shall be in a form
appropriate in each State in which the Individual Property is located and that
would be satisfactory to a prudent institutional lender and shall contain
standard provisions, if any, protecting the rights of the releasing lender. In
addition, Borrower shall provide all other documentation Lender reasonably
requires to be delivered by Borrower in connection with such release, together
with an Officer’s Certificate certifying that such documentation (i) is in
compliance with all applicable Legal Requirements, (ii) will, following
execution by Lender and recordation thereof, effect such releases in accordance
with the terms of this Agreement, and (iii) will not impair or otherwise
adversely affect the liens, security interests and other rights of Lender under
the Loan Documents not being released (or as to the parties to the Loan
Documents and Properties subject to the Loan Documents not being released);

(e) After giving effect to such release, Lender shall have determined that the
Debt Service Coverage Ratio for the Properties then remaining subject to the
liens of the Security Instruments shall be at least equal to the greater of
(i) the Debt Service Coverage Ratio for the twelve (12) full calendar months on
the Closing Date (i.e., 1.60:1.00) (assuming the Loan was outstanding), and
(ii) the Debt Service Coverage Ratio for all of the then remaining Properties
(including the Individual Property to be released) for the twelve (12) full
calendar months immediately preceding the release of the Individual Property;

(f) After giving effect to such release, Lender shall have determined that the
Loan to Value Ratio for the Properties then remaining subject to the liens of
the Security Instruments shall be at least equal to the lesser of (i) the Loan
to Value Ratio on the Closing Date (i.e., 50%) (assuming the Loan was
outstanding), and (ii) the Loan to Value Ratio for all of the then remaining
Properties (including the Individual Property to be released) immediately
preceding the release of the Individual Property;

(g) After giving effect to such release, Borrower shall not have collected Rents
more than one (1) month in advance for the Properties then remaining subject to
the lien of a Security Instrument in excess of Permitted Prepaid Rents for said
Properties;

(h) If a Securitization has occurred, Lender shall have received an opinion of
counsel that the release will not constitute a “significant modification” of the
Loan under Section 1001 of the IRS Code or otherwise cause a tax to be imposed
on a “prohibited transaction” by any REMIC Trust, which opinion shall be in form
and substance (i) reasonably satisfactory to the Rating Agencies and their
counsel and (ii) that would be reasonably satisfactory to Lender using the
Prudent Lender Standard;

(i) Lender shall have received evidence that the Individual Property to be
released shall be conveyed to a Person other than Borrower or SPE Component
Entity, and that the requirements of Article 5 shall continue to be satisfied
after giving effect to such release; and

(j) Lender shall have received payment of all Lender’s costs and expenses,
including due diligence review costs and reasonable counsel fees and
disbursements incurred in connection with the release of the Individual Property
from the lien of the related Security Instrument and the review and approval of
the documents and information required to be delivered in connection therewith.

 

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ARTICLE 3

REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as of the Closing Date that:

Section 3.1     Legal Status and Authority. Borrower (a) is duly organized,
validly existing and in good standing under the laws of its state of formation;
(b) is duly qualified to transact business and is in good standing in the State;
and (c) has all necessary approvals, governmental and otherwise, and full power
and authority to own, operate and lease the Properties. Borrower has full power,
authority and legal right to mortgage, grant, bargain, sell, pledge, assign,
warrant, transfer and convey the Properties pursuant to the terms hereof and to
keep and observe all of the terms of this Agreement, the Note, the Security
Instruments and the other Loan Documents on Borrower’s part to be performed.

Section 3.2     Validity of Documents. (a) The execution, delivery and
performance of this Agreement, the Note, the Security Instruments and the other
Loan Documents by Borrower and Guarantor and the borrowing evidenced by the Note
and this Agreement (i) are within the power and authority of such parties;
(ii) have been authorized by all requisite organizational action of such
parties; (iii) have received all necessary approvals and consents, corporate,
governmental or otherwise; (iv) will not violate, conflict with, result in a
breach of or constitute (with notice or lapse of time, or both) a material
default under any provision of law, any order or judgment of any court or
Governmental Authority, any license, certificate or other approval required to
operate the Properties, any applicable organizational documents, or any
applicable indenture, agreement or other instrument including, without
limitation, the Management Agreement; (v) will not result in the creation or
imposition of any lien, charge or encumbrance whatsoever upon any of its assets,
except the lien and security interest created hereby and by the other Loan
Documents; and (vi) will not require any authorization or license from, or any
filing with, any Governmental Authority (except for the recordation of the
Security Instruments in appropriate land records in the State and except for
Uniform Commercial Code filings relating to the security interest created
hereby), (b) this Agreement, the Note, the Security Instruments and the other
Loan Documents have been duly executed and delivered by Borrower and Guarantor,
as applicable, and (c) this Agreement, the Note, the Security Instruments and
the other Loan Documents constitute the legal, valid and binding obligations of
Borrower and Guarantor, as applicable. The Loan Documents are not subject to any
right of rescission, set-off, counterclaim or defense by Borrower or Guarantor,
including the defense of usury, nor would the operation of any of the terms of
the Loan Documents, or the exercise of any right thereunder, render the Loan
Documents unenforceable (except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar Creditor’s
Rights Laws, and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law)). Neither
Borrower nor Guarantor has asserted any right of rescission, set-off,
counterclaim or defense with respect to the Loan Documents.

Section 3.3     Litigation. There is no action, suit or proceeding, judicial,
administrative or otherwise (including any condemnation or similar proceeding),
pending or, to the Borrower’s knowledge, threatened or contemplated against
Borrower, or Guarantor or against or affecting any Individual Property that has
not either (i) been disclosed to Lender by Borrower in writing in connection
with the closing of the Loan or (ii) been fully covered by insurance.

Section 3.4     Agreements. Borrower is not a party to any agreement or
instrument or subject to any restriction which would have a Material Adverse
Effect. Borrower is not in default in any material respect in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which it is a party or by which
Borrower or any Individual Property is bound. Borrower has no material financial
obligation under any agreement or instrument to which Borrower is a party or by
which Borrower or any Individual Property is otherwise bound, other than
(a) obligations incurred in the ordinary course of the operation of the
Properties and (b) obligations under this Agreement, the Security Instruments,
the Note and the other Loan Documents. There is no agreement or instrument to
which Borrower is a party or by which Borrower is bound that would require the
subordination in right of payment of any of Borrower’s obligations hereunder or
under the Note to an obligation owed to another party.

 

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Section 3.5     Financial Condition.

(a) Borrower is solvent and Borrower has received reasonably equivalent value
for the granting of the Security Instrument. No proceeding under Creditors
Rights Laws with respect to any Borrower Party has been initiated.

(b) In the last ten (10) years, no (i) petition in bankruptcy has been filed by
or against any Borrower Party and (ii) Borrower Party has ever made any
assignment for the benefit of creditors or taken advantage of any Creditors
Rights Laws.

(c) No Borrower Party is contemplating either the filing of a petition by it
under any Creditor’s Rights Laws or the liquidation of its assets or property
and Borrower has no knowledge of any Person contemplating the filing of any such
petition against any Borrower Party.

Section 3.6     Disclosure. Borrower has disclosed to Lender all material facts
and has not failed to disclose any material fact of which Borrower has knowledge
that could cause any representation or warranty made herein to be materially
misleading.

Section 3.7     No Plan Assets. Borrower is not an “employee benefit plan,” as
defined in Section 3(3) of ERISA, subject to Title I of ERISA, and none of the
assets of Borrower constitutes or will constitute “plan assets” of one or more
such plans within the meaning of 29 C.F.R. Section 2510.3-101. In addition,
(a) Borrower is not a “governmental plan” within the meaning of Section 3(32) of
ERISA and (b) transactions by or with Borrower are not subject to state statutes
regulating investment of, and fiduciary obligations with respect to,
governmental plans similar to the provisions of Section 406 of ERISA or
Section 4975 of the IRS Code currently in effect, which prohibit or otherwise
restrict the transactions contemplated by this Agreement.

Section 3.8     Not a Foreign Person. Borrower is not a “foreign person” within
the meaning of § 1445(f)(3) of the IRS Code.

Section 3.9     Intentionally Omitted.

Section 3.10     Business Purposes. The Loan is solely for the business purpose
of Borrower, and is not for personal, family, household, or agricultural
purposes.

Section 3.11     Borrower Offices. Borrower’s principal place of business and
its chief executive office as of the date hereof is 111 Corporate Drive, Suite
120, Ladera Ranch, CA 92694. Borrower’s mailing address, as set forth in the
opening paragraph hereof or as changed in accordance with the provisions hereof,
is true and correct. Borrower’s organizational identification numbers, if any,
assigned by the state of its incorporation or organization are set forth in
Schedule 3.11 attached hereto. Borrowers’ federal tax identification number are
set forth on Schedule 3.11 attached hereto. Borrower is not subject to back-up
withholding taxes.

Section 3.12     Status of Property.

(a) Borrower has obtained all necessary certificates, licenses and other
approvals, governmental and otherwise, necessary for the operation of the
Properties and the conduct of its business and all required zoning, building
code, land use, environmental and other similar permits or approvals, all of
which are in full force and effect as of the date hereof and not subject to
revocation, suspension, forfeiture or modification, subject, however, to the
legal nonconforming use of the Properties identified on Schedule II attached
hereto.

(b) Each Individual Property and the present and contemplated use and occupancy
thereof are in full compliance with all applicable zoning ordinances, building
codes, land use laws, Environmental Laws and other similar Legal Requirements,
subject, however, to the legal nonconforming use of the Properties identified on
Schedule II attached hereto.

 

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(c) Each Individual Property is served by all utilities required for the current
or contemplated use thereof. All utility service is provided by public utilities
and each Individual Property has accepted or is equipped to accept such utility
service.

(d) All public roads and streets necessary for service of and access to each
Individual Property for the current or contemplated use thereof have been
completed, are serviceable and all-weather and are physically and legally open
for use by the public. Each Individual Property has either direct access to such
public roads or streets or access to such public roads or streets by virtue of a
perpetual easement or similar agreement inuring in favor of Borrower and any
subsequent owners of such Individual Property.

(e) Each Individual Property is served by public water and sewer systems.

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

(g) All costs and expenses of any and all labor, materials, supplies and
equipment used in the construction of the Improvements have been paid in full.
There are no mechanics’ or similar liens or claims which have been filed for
work, labor or material (and no rights are outstanding that under applicable
Legal Requirements could give rise to any such liens) affecting any Individual
Property which are or may be prior to or equal to the lien of the applicable
Security Instrument.

(h) Borrower has paid in full for, and is the owner of, all furnishings,
fixtures and equipment (other than Tenants’ property) used in connection with
the operation of the Properties, free and clear of any and all security
interests, liens or encumbrances, except the lien and security interest created
by this Agreement, the Note, the Security Instruments and the other Loan
Documents.

(i) All liquid and solid waste disposal, septic and sewer systems located on the
Properties are in a good and safe condition and repair and in compliance with
all Legal Requirements.

(j) Except as expressly disclosed on any Survey delivered in connection with
this Loan, no portion of the Improvements is located in an area identified by
the Federal Emergency Management Agency or any successor thereto as an area
having special flood hazards pursuant to the Flood Insurance Acts. No part of
any Individual Property consists of or is classified as wetlands, tidelands or
swamp and overflow lands.

(k) All the Improvements lie within the boundaries of the Land and any building
restriction lines applicable to the Land.

(l) To Borrower’s knowledge there are no pending or proposed special or other
assessments for public improvements or otherwise affecting any Individual
Property, nor are there any contemplated improvements to any Individual Property
that may result in such special or other assessments.

Section 3.13     Financial Information. All financial data, including, without
limitation, the balance sheets, statements of cash flow, statements of income
and operating expense and rent rolls, that have been delivered to Lender in
respect of Borrower, Guarantor and/or each Individual Property (a) are true,
complete and correct in all material respects, (b) accurately represent the
financial condition of Borrower, Guarantor or the Properties, as applicable, as
of the date of such reports, and (c) to the extent prepared or audited by an
independent certified public accounting firm, have been prepared in accordance
with the Approved Accounting Method throughout the periods covered, except as
disclosed therein. Borrower does not have any contingent liabilities,
liabilities for taxes, unusual

 

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forward or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments that are known to Borrower and reasonably likely to have
a Material Adverse Effect, except as referred to or reflected in said financial
statements. Since the date of such financial statements, there has been no
materially adverse change in the financial condition, operations or business of
Borrower, or Guarantor from that set forth in said financial statements.
Notwithstanding the foregoing provisions of this Section 3.13, with respect to
the financial information regarding Properties acquired in calendar year 2010
that has been provided to Lender prior to the closing of the Loan, said
financial information may be subject to adjustment by Borrower but only to
reallocate Borrower’s basis in the Improvements and intangible assets. For the
avoidance of doubt, cash Operating Expenses, cash revenues and Borrower’s
purchase price for the applicable Property, each as reflected in the financial
statements described in the preceding sentence, shall not be subject to
adjustment.

Section 3.14     Condemnation. No Condemnation or other proceeding has been
commenced or, to Borrower’s knowledge, is threatened or contemplated with
respect to all or any portion of any Individual Property or for the relocation
of the access to any Individual Property.

Section 3.15     Separate Lots. Each Individual Property is assessed for real
estate tax purposes as one or more wholly independent tax lot or lots, separate
from any adjoining land or improvements not constituting a part of such lot or
lots, and no other land or improvements is assessed and taxed together with such
Individual Property or any portion thereof.

Section 3.16     Insurance. Borrower has obtained and has delivered to Lender
certificates (or such other evidence acceptable to Lender) reflecting the
insurance coverages, amounts and other requirements set forth in this Agreement.
There are no present claims of any material nature under any of the Policies,
and to Borrower’s knowledge, no Person, including Borrower, has done, by act or
omission, anything which would impair the coverage of any of the Policies.

Section 3.17     Use of Property. Each Individual Property is used exclusively
as a self storage facility and other appurtenant and related uses.

Section 3.18     Leases and Rent Roll. Except as disclosed in the rent roll for
the Properties delivered to, certified to and approved by Lender in connection
with the closing of the Loan (the “Rent Roll”), (a) Borrower is the sole owner
of the entire lessor’s interest in the Leases; (b) the Leases are valid and
enforceable and in full force and effect; (c) all of the Leases are arms-length
agreements with bona fide, independent third parties; (d) no party under any
Lease is in default; (e) all Rents due have been paid in full and no Tenant is
in arrears in its payment of Rent; (f) the terms of all alterations,
modifications and amendments to the Leases are reflected in the certified
occupancy statement delivered to and approved by Lender; (g) none of the Rents
reserved in the Leases have been assigned or otherwise pledged or hypothecated,
other than in connection with the Loan; (h) not more than five percent (5%) of
annual Gross Rents for all of the Properties have been collected for more than
one (1) month in advance (except a security deposit shall not be deemed rent
collected in advance); (i) the premises demised under the Leases have been
completed, all improvements, repairs, alterations or other work required to be
furnished on the part of Borrower under the Leases have been completed, the
Tenants under the Leases have accepted the premises demised thereunder and have
taken possession of the same on a rent-paying basis and any payments, credits or
abatements required to be given by Borrower to the Tenants under the Leases have
been made in full; (j) there exist no offsets or defenses to the payment of any
portion of the Rents and Borrower has no monetary obligation to any Tenant under
any Lease; (k) Borrower has received no notice from any Tenant challenging the
validity or enforceability of any Lease; (l) there are no agreements with the
Tenants under the Leases other than expressly set forth in each Lease; (m) the
Leases are valid and enforceable against Borrower and the Tenants set forth
therein; (n) no Lease contains an option to purchase, right of first refusal to
purchase, right of first refusal to lease additional space at any Individual
Property, or any other similar provision; (o) no Person has any possessory
interest in, or right to occupy, any Individual Property except under and
pursuant to a Lease; (p) all security deposits relating to the Leases are
reflected on the Rent Roll and have been collected by Borrower; (q) no brokerage
commissions or finders fees are due and payable regarding any Lease; (r) no
event has occurred giving any Tenant the right to terminate its Lease or pay
reduced or alternative Rent to Borrower under any of the terms of such Lease,
such as a co-tenancy provision.

 

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Section 3.19     Filing and Recording Taxes. All mortgage, mortgage recording,
stamp, intangible or other similar tax required to be paid by any Person under
applicable Legal Requirements currently in effect in connection with the
execution, delivery, recordation, filing, registration, perfection or
enforcement of any of this Agreement, the Security Instruments, the Note and the
other Loan Documents, including, without limitation, the Security Instruments,
have been paid or will be paid on or before the Closing Date, and, under current
Legal Requirements, the Security Instruments and the other Loan Documents are
enforceable in accordance with their terms by Lender (or any subsequent holder
thereof), except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar Creditor’s Rights Laws, and by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).

Section 3.20     Management Agreement. The Management Agreement is in full force
and effect and there is no default thereunder by any party thereto and, to
Borrower’s knowledge, no event has occurred that, with the passage of time
and/or the giving of notice would constitute a default thereunder. As of the
date hereof, no management fees under the Management Agreement are due and
payable.

Section 3.21     Illegal Activity/Forfeiture.

(a) No portion of any Individual Property has been purchased, improved, equipped
or furnished by Borrower or any Affiliate of Borrower with proceeds of any
illegal activity and to Borrower’s knowledge, there are no illegal activities or
activities relating to controlled substances at any Individual Property.

(b) There has not been committed by Borrower or any Affiliate of Borrower or to
Borrower’s knowledge, any other Person in occupancy of or involved with the
operation or use of any Individual Property any act or omission affording the
federal government or any state or local government the right of forfeiture as
against such Individual Property or any part thereof or any monies paid in
performance of Borrower’s obligations under this Agreement, the Note, the
Security Instruments or the other Loan Documents.

Section 3.22     Taxes. Borrower has filed all federal, state, county,
municipal, and city income, personal property and other tax returns required to
have been filed by it and has paid all taxes and related liabilities which have
become due pursuant to such returns or pursuant to any assessments received by
it. Borrower knows of no basis for any additional assessment in respect of any
such taxes and related liabilities for prior years.

Section 3.23     Permitted Encumbrances. None of the Permitted Encumbrances,
individually or in the aggregate, materially interferes with the benefits of the
security intended to be provided by this Agreement, the Security Instruments,
the Note and the other Loan Documents materially and adversely affects the value
or marketability of any Individual Property, impairs the use or the operation of
any Individual Property or impairs Borrower’s ability to pay its obligations in
a timely manner.

Section 3.24     Third Party Representations. Each of the representations and
the warranties made by Guarantor in the other Loan Documents (if any) are true,
complete and correct in all material respects as of the date made.

Section 3.25     Non-Consolidation Opinion Assumptions. All of the assumptions
made in the Non-Consolidation Opinion, including, but not limited to, any
exhibits attached thereto, are true, complete and correct.

Section 3.26     Federal Reserve Regulations. No part of the proceeds of the
Loan will be used for the purpose of purchasing or acquiring any “margin stock”
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent with such
Regulation U or any other Regulations of such Board of Governors, or for any
purposes prohibited by Legal Requirements or by the terms and conditions of this
Agreement, the Security Instruments, the Note or the other Loan Documents.

Section 3.27     Investment Company Act. Borrower is not (a) an “investment
company” or a company “controlled” by an “investment company,” within the
meaning of the Investment Company Act of 1940, as

 

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amended; (b) a “holding company” or a “subsidiary company” of a “holding
company” or an “affiliate” of either a “holding company” or a “subsidiary
company” within the meaning of the Public Utility Holding Company Act of 1935,
as amended; or (c) subject to any other federal or state law or regulation which
purports to restrict or regulate its ability to borrow money.

Section 3.28     Fraudulent Conveyance. Borrower (a) has not entered into the
Loan or any Loan Document with the actual intent to hinder, delay, or defraud
any creditor and (b) received reasonably equivalent value in exchange for its
obligations under the Loan Documents. Giving effect to the Loan, the fair
saleable value of Borrower’s assets exceeds and will, immediately following the
execution and delivery of the Loan Documents, exceed Borrower’s total
liabilities, including, without limitation, subordinated, unliquidated, disputed
or contingent liabilities. The fair saleable value of Borrower’s assets is and
will, immediately following the execution and delivery of the Loan Documents, be
greater than Borrower’s probable liabilities, including the maximum amount of
its contingent liabilities or its debts as such debts become absolute and
matured. Borrower’s assets do not and, immediately following the execution and
delivery of the Loan Documents will not, constitute unreasonably small capital
to carry out its business as conducted or as proposed to be conducted. Borrower
does not intend to, and does not believe that it will, incur debts and
liabilities (including, without limitation, contingent liabilities and other
commitments) beyond its ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of obligations of
Borrower).

Section 3.29     Embargoed Person. To Borrower’s knowledge, as of the date
hereof, (a) none of the funds or other assets of any Borrower Party constitute
property of, or are beneficially owned, directly or indirectly, by any Person or
government subject to trade restrictions under U.S. law, including but not
limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701
et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any
Executive Orders or regulations promulgated thereunder with the result that the
investment in any such Borrower Party (whether directly or indirectly) is
prohibited by applicable law or the Loan made by Lender is in violation of
applicable law (“Embargoed Person”); (b) no Embargoed Person has any interest of
any nature whatsoever in any Borrower Party, with the result that the investment
in any such Borrower Party (whether directly or indirectly), is prohibited by
applicable law or the Loan is in violation of applicable law; and (c) none of
the funds of any Borrower Party have been derived from any unlawful activity
with the result that the investment in any such Borrower Party (whether directly
or indirectly), is prohibited by applicable law or the Loan is in violation of
applicable law. Any violation of the foregoing shall, at Lender’s option,
constitute an Event of Default hereunder. Notwithstanding anything to the
contrary contained herein, the provisions of this Section 3.29 shall not apply
to any direct or indirect owner of an interest in Guarantor.

Section 3.30     Patriot Act. Borrower hereby represents and warrants that each
Borrower Party and each and every Person that is an Affiliate of any Borrower
Party or that to Borrower’s knowledge (a) has an economic interest in any
Borrower Party, (b) has an interest in the transaction contemplated by this
Agreement or in the Property or (c) will participate, in any manner whatsoever,
in the Loan, is: (i) not a “blocked” Person listed in the Annex to Executive
Order Nos. 12947, 13099 and 13224 and all modifications thereto or thereof (as
used in this Section only, the “Annex”); (ii) in full compliance with the
requirements of the Patriot Act and all other requirements contained in the
rules and regulations of the Office of Foreign Assets Control, Department of the
Treasury (as used in this Section only, “OFAC”); (iii) operated under policies,
procedures and practices, if any, that are in compliance with the Patriot Act
and available to Lender for Lender’s review and inspection during normal
business hours and upon reasonable prior notice; (iv) not in receipt of any
notice from the Secretary of State or the Attorney General of the United States
or any other department, agency or office of the United States claiming a
violation or possible violation of the Patriot Act; (v) not listed as a
Specially Designated Terrorist or as a “blocked” Person on any lists maintained
by the OFAC pursuant to the Patriot Act or any other list of terrorists or
terrorist organizations maintained pursuant to any of the rules and regulations
of the OFAC issued pursuant to the Patriot Act or on any other list of
terrorists or terrorist organizations maintained pursuant to the Patriot Act;
(vi) not a Person who has been determined by competent authority to be subject
to any of the prohibitions contained in the Patriot Act; and (vii) not owned or
controlled by or now acting for or on behalf of any Person named in the Annex or
any other list promulgated under the Patriot Act or any other Person who has
been determined to be subject to the prohibitions contained in the Patriot Act
(each, a “Prohibited Person”). All capitalized words and phrases and all defined
terms used in the USA Patriot Act of 2001, 107 Public Law 56 (October 26, 2001)
and in other statutes and all orders, rules and regulations of the United States
government and its various executive departments, agencies and

 

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offices related to the subject matter of the Patriot Act, including Executive
Order 13224 effective September 24, 2001 (collectively referred to in this
Section and in Section 4.23 only as the “Patriot Act”) are incorporated into
this Section. Notwithstanding anything to the contrary contained herein, the
provisions of this Section 3.30 shall not apply to any direct or indirect owner
of an interest in Guarantor.

Section 3.31     Organizational Chart. The organizational chart attached as
Schedule III hereto, (the “Organizational Chart”) relating to Borrower and
certain Affiliates and other parties, is true, complete and correct on and as of
the date hereof.

Section 3.32     Bank Holding Company. Borrower is not a “bank holding company”
or a direct or indirect subsidiary of a “bank holding company” as defined in the
Bank Holding Company Act of 1956, as amended, and Regulation Y thereunder of the
Board of Governors of the Federal Reserve System.

Section 3.33     Intentionally Omitted.

Section 3.34 Property Document Representations. With respect to each Property
Document, Borrower hereby represents that, to its knowledge, (a) each Property
Document is in full force and effect and has not been amended, restated,
replaced or otherwise modified (except, in each case, as expressly set forth
herein, (b) there are no defaults under any Property Document by any party
thereto and, to Borrower’s knowledge, no event has occurred which, but for the
passage of time, the giving of notice, or both, would constitute a default under
any Property Document, (c) all rents, additional rents and other sums due and
payable under the Property Documents have been paid in full, (d) no party to any
Property Document has commenced any action or given or received any notice for
the purpose of terminating any Property Document, and (e) the representations
made in any estoppel or similar document delivered with respect to any Property
Document in connection with the Loan are true, complete and correct in all
material respects and are hereby incorporated by reference as if fully set forth
herein.

Section 3.35     No Change in Facts or Circumstances; Disclosure.

(a) To Borrower’s knowledge (after reasonable inquiry), all information
submitted by (or on behalf of) Borrower or Guarantor to Lender and in all
reports, certificates and other documents (other than financial information
which is covered in Section 3.13 hereof and other than the information which is
covered in Section 3.35(b) below) submitted in connection with the Loan or in
satisfaction of the terms thereof, in each case prepared by Borrower or any
Affiliate of Borrower, and all statements of fact made by Borrower and/or
Guarantor in this Agreement or in the other Loan Documents, are accurate,
complete and correct in all material respects. To Borrower’s knowledge, there
has been no material adverse change in any condition, fact, circumstance or
event that would make any such information inaccurate, incomplete or otherwise
misleading in any material respect or that otherwise would have a Material
Adverse Effect. Borrower has disclosed to Lender all material facts of which
Borrower has knowledge and has not failed to disclose any material fact that
could cause any representation or warranty made herein to be materially
misleading.

(b) To Borrower’s knowledge, all information submitted by (or on behalf of)
Borrower or Guarantor to Lender and in all reports, certificates and other
documents (other than financial information which is covered in Section 3.13
hereof) submitted in connection with the Loan or in satisfaction of the terms
thereof, in each case not prepared by Borrower or any Affiliate of Borrower, are
accurate, complete and correct in all material respects. To Borrower’s
knowledge, there has been no material adverse change in any condition, fact,
circumstance or event that would make any such information inaccurate,
incomplete or otherwise misleading in any material respect or that otherwise
would have a Material Adverse Effect. Borrower has disclosed to Lender all
material facts of which Borrower has knowledge and has not failed to disclose
any material fact that could cause any representation or warranty made herein to
be materially misleading.

Borrower agrees that, unless expressly provided otherwise, all of the
representations and warranties of Borrower set forth in this Article 3 and
elsewhere in this Agreement and the other Loan Documents shall survive for so
long as any portion of the Debt remains owing to Lender. All representations,
warranties, covenants and agreements made in this Agreement and in the other
Loan Documents shall be deemed to have been relied upon by Lender
notwithstanding any investigation heretofore or hereafter made by Lender or on
its behalf.

 

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ARTICLE 4

BORROWER COVENANTS

From the date hereof and until payment and performance in full of all
obligations of Borrower under this Agreement, the Security Instruments, the Note
and the other Loan Documents or the earlier release of the lien of the Security
Instruments (and all related obligations) in accordance with the terms of this
Agreement, the Security Instruments, the Note and the other Loan Documents,
Borrower hereby covenants and agrees with Lender that:

Section 4.1     Existence. Borrower will continuously maintain (a) its existence
and shall not dissolve or permit its dissolution, (b) its rights to do business
in the State and (c) its franchises and trade names, if any.

Section 4.2     Legal Requirements.

(a) Borrower shall promptly comply and shall cause the Properties to comply with
all Legal Requirements affecting the Properties or the use thereof, including,
without limitation, all Environmental Laws.

(b) Borrower shall from time to time, upon Lender’s request, provide Lender with
evidence reasonably satisfactory to Lender that each Individual Property
complies with all Legal Requirements or is exempt from compliance with Legal
Requirements.

(c) Borrower shall give prompt notice to Lender of the receipt by Borrower of
any notice related to a violation of any Legal Requirements and of the
commencement of any proceedings or investigations which relate to compliance
with Legal Requirements.

(d) After prior written notice to Lender, Borrower, at its own expense, may
contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the validity of any Legal Requirement, the
applicability of any Legal Requirement to Borrower or any Individual Property or
any alleged violation of any Legal Requirement, provided that (i) no Event of
Default has occurred and remains uncured; (ii) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any
instrument to which Borrower is subject and shall not constitute a default
thereunder and such proceeding shall be permitted by and conducted in accordance
with all applicable Legal Requirements; (iii) neither the applicable Individual
Property nor any part thereof or interest therein will be in danger of being
sold, forfeited, terminated, cancelled or lost; (iv) Borrower shall promptly
upon final determination thereof comply with any such Legal Requirement
determined to be valid or applicable or cure any violation of any Legal
Requirement; (v) such proceeding shall suspend the enforcement of the contested
Legal Requirement against Borrower or the applicable Individual Property; and
(vi) Borrower shall furnish such security as may be required in the proceeding,
or as may be reasonably requested by Lender, to insure compliance with such
Legal Requirement, together with all interest and penalties payable in
connection therewith. Lender may apply any such security or part thereof, as
necessary to cause compliance with such Legal Requirement at any time when, in
the reasonable judgment of Lender, the validity, applicability or violation of
such Legal Requirement is finally established or the applicable Individual
Property (or any part thereof or interest therein) shall be in danger of being
sold, forfeited, terminated, cancelled or lost.

Section 4.3     Maintenance and Use of Property. Borrower shall cause the
Properties to be maintained in a good and safe condition and repair. The
Improvements and the Personal Property shall not be removed, demolished or
materially altered (except for normal replacement of the Personal Property)
without the consent of Lender or as otherwise permitted pursuant to Section 4.21
hereof. Borrower shall (or shall cause) the prompt repair, replacement and/or
rebuilding of any part of any Individual Property which may be destroyed by any
casualty, or become damaged, worn or dilapidated or which may be affected by any
proceeding of the character referred to in Section 3.14 hereof, provided all Net
Proceeds are made available to Borrower, and shall complete and pay for (or
cause the completion and payment for) any structure at any time in the process
of construction or repair on the Land. Borrower shall not initiate, join in,
acquiesce in, or consent to any change in any private restrictive covenant,
zoning law or other public or private restriction, limiting or defining the uses
which may be made of any Individual Property or any part thereof. If under
applicable zoning provisions the use of all or any portion of any Individual
Property is or shall become a nonconforming use, Borrower will not cause or
permit the nonconforming

 

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use to be discontinued or the nonconforming Improvement to be abandoned without
the express written consent of Lender.

Section 4.4     Waste. Borrower shall not commit or suffer any waste of any
Individual Property or make any change in the use of any Individual Property
which will in any way materially increase the risk of fire or other hazard
arising out of the operation of any Individual Property, or take any action that
might invalidate or give cause for cancellation of any Policy, or do or permit
to be done thereon anything that may in any way impair the value of any
Individual Property or the security for the Loan. Borrower will not, without the
prior written consent of Lender, permit any drilling or exploration for or
extraction, removal, or production of any minerals from the surface or the
subsurface of any Individual Property, regardless of the depth thereof or the
method of mining or extraction thereof. With respect to any Borrower request for
Lender consent required under this Section 4.4, such request for approval shall
be deemed approved if the Deemed Approval Requirements are fully satisfied.

Section 4.5     Taxes and Other Charges.

(a) Borrower shall pay (or cause to be paid) all Taxes and Other Charges now or
hereafter levied or assessed or imposed against any Individual Property or any
part thereof as the same become due and payable; provided, however, prior to the
occurrence and continuance of an Event of Default, Borrower’s obligation to
directly pay Taxes shall be suspended for so long as Borrower complies with the
terms and provisions of Section 8.6 hereof. Borrower shall furnish to Lender
receipts for the payment of the Taxes and the Other Charges prior to the date
the same shall become delinquent (provided, however, that Borrower is not
required to furnish such receipts for payment of Taxes in the event that such
Taxes have been paid by Lender pursuant to Section 8.6 hereof). Borrower shall
not suffer and shall promptly cause to be paid and discharged any lien or charge
whatsoever which may be or become a lien or charge against any Individual
Property, and shall promptly pay for all utility services provided to any
Individual Property.

(b) After prior written notice to Lender, Borrower, at its own expense, may
contest (or permit to be contested) by appropriate legal proceeding, promptly
initiated and conducted in good faith and with due diligence, the amount or
validity or application in whole or in part of any Taxes or Other Charges,
provided that (i) no Event of Default has occurred and remains uncured;
(ii) such proceeding shall be permitted under and be conducted in accordance
with the provisions of any other instrument to which Borrower is subject and
shall not constitute a default thereunder and such proceeding shall be permitted
by and conducted in accordance with all applicable Legal Requirements;
(iii) neither the applicable Individual Property nor any part thereof or
interest therein will be in danger of being sold, forfeited, terminated,
canceled or lost; (iv) Borrower shall promptly upon final determination thereof
pay the amount of any such Taxes or Other Charges, together with all costs,
interest and penalties which may be payable in connection therewith; (v) such
proceeding shall suspend the collection of such contested Taxes or Other Charges
from the applicable Individual Property; and (vi) Borrower shall furnish such
security as may be required in the proceeding, or deliver to Lender such reserve
deposits as may be reasonably requested by Lender, to insure the payment of any
such Taxes or Other Charges, together with all interest and penalties thereon.
Lender may pay over any such cash deposit or part thereof held by Lender to the
claimant entitled thereto at any time when, in the reasonable judgment of
Lender, the entitlement of such claimant is established or the applicable
Individual Property (or part thereof or interest therein) shall be in danger of
being sold, forfeited, terminated, canceled or lost or there shall be any danger
of the lien of any Security Instrument being primed by any related lien.

Section 4.6     Litigation. Borrower shall give prompt written notice to Lender
of any litigation or governmental proceedings pending or threatened in writing
against Borrower which might have a Material Adverse Effect.

Section 4.7     Access to Property. Borrower shall permit agents,
representatives and employees of Lender to inspect any Individual Property or
any part thereof at reasonable hours upon reasonable advance notice.

Section 4.8     Notice of Default. Borrower shall promptly advise Lender of any
material adverse change in Borrower’s and/or Guarantor’s condition (financial or
otherwise) or of the occurrence of any Default or Event of Default of which
Borrower has knowledge.

 

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Section 4.9     Cooperate in Legal Proceedings. Borrower shall cooperate fully
with Lender with respect to any proceedings before any court, board or other
Governmental Authority which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the Note, any Security
Instrument or the other Loan Documents and, in connection therewith, permit
Lender, at its election, to participate in any such proceedings.

Section 4.10     Performance by Borrower. Borrower shall in a timely manner
observe, perform and fulfill each and every covenant, term and provision to be
observed and performed by Borrower under this Agreement, the Security
Instruments, the Note and the other Loan Documents.

Section 4.11     Illegal Activity/Forfeiture.

(a) No portion of any Individual Property will be purchased, improved, equipped
or furnished by Borrower or any Affiliate of Borrower with proceeds of any
illegal activity. Borrower and its Affiliates shall not perform, and Borrower
shall use commercially reasonable efforts to cause no other Person to perform,
any illegal activities or activities relating to controlled substances at any
Individual Property.

(b) There shall never be committed by Borrower or any Affiliate of Borrower, and
Borrower shall use commercially reasonable efforts to cause any other Person in
occupancy of or involved with the operation or use of any Individual Property
not to commit, any act or omission affording the federal government or any state
or local government the right of forfeiture as against such Individual Property
or any part thereof or any monies paid in performance of Borrower’s obligations
under this Agreement, the Note, the Security Instruments or the other Loan
Documents. Borrower hereby covenants and agrees that Borrower and its Affiliates
shall not, and Borrower shall use commercially reasonable efforts to cause any
other Person not, to commit, permit or suffer to exist any act or omission
affording such right of forfeiture.

Section 4.12     Books and Records.

(a) Borrower shall furnish to Lender.

(i) quarterly (and prior to a Securitization (if requested by Lender), monthly)
certified rent rolls within twenty (20) days after the end of each calendar
month or forty-five (45) days after the end of each calendar quarter, as
applicable;

(ii) quarterly (and prior to a Securitization, (if requested by Lender),
monthly) income statements and operating statements of the Properties (which
shall show major capital improvements for the period of calculation and
containing appropriate year-to-date information), within twenty (20) days after
the end of each calendar month or forty-five (45) days after the end of each
calendar, quarter, as applicable;

(iii) an annual balance sheet, income statement and statement of cash flow of
the Properties (which shall show major capital improvements for the period of
calculation and containing appropriate year-to-date information), in each case,
within ninety (90) days after the close of each fiscal year of Borrower;

(iv) by no later than January 15 of each calendar year, an annual operating
budget for the such calendar year presented on a monthly basis consistent with
the annual operating statement described above for each Individual Property,
including all proposed capital replacements and improvements, which such budget
shall (A) until the occurrence and continuance of a Trigger Period, be provided
to Lender for informational purposes and (B) after the occurrence and during the
continuance of a Trigger Period not take effect until approved by Lender (after
such approval has been given in writing, such approved budget shall be referred
to herein as the “Approved Annual Budget”). Any Borrower request for approval of
the budget (to the extent such approval is required hereunder) shall be deemed
approved if the Deemed Approval Requirements are fully satisfied. Until such
time that Lender approves (or is deemed to approve) the first Approved Annual
Budget after the commencement of the applicable Trigger Period, Approved
Operating Expenses for purposes of Section 8.4 shall be based on actual
Operating Expenses incurred during the

 

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preceding twelve (12) month period; thereafter, until such time that Lender
approves an Annual Budget, the most recent Approved Annual Budget shall apply;
provided, that such Approved Annual Budget shall be adjusted to reflect actual
increases in Taxes, Insurance Premiums, utilities expenses, and Other Charges
which are fixed in nature and otherwise non-discretionary; and

(v) by no later than twenty (20) days after and as of the end of each calendar
month during the period prior to Securitization, and thereafter by no later than
forty-five (45) days after and as of the end of each calendar quarter, a
calculation of the then current Debt Service Coverage Ratio, together with such
back-up information as Lender shall require.

(b) Upon request from Lender, Borrower shall furnish in a timely manner to
Lender, a property management report for the Properties, showing the number of
inquiries made and/or rental applications received from tenants or prospective
tenants and any other information reasonably requested by Lender, but no more
frequently than quarterly;

(c) Borrower shall, within twenty (20) days of request, furnish Lender (and
shall cause Guarantor to furnish to Lender) with such other additional financial
or management information (including State and Federal tax returns) as may, from
time to time, be reasonably required by Lender in form and substance reasonably
satisfactory to Lender. Borrower shall furnish to Lender and its agents
convenient facilities for the examination and audit of any such books and
records.

(d) Borrower agrees that (i) Borrower shall keep adequate books and records of
account and (ii) all Required Financial Items (defined below) to be delivered to
Lender pursuant to Section 4.12 shall: (A) be complete and correct in all
material respects; (B) present fairly the financial condition of the applicable
Person; (C) disclose all liabilities that are required to be reflected or
reserved against; (D) be prepared (1) in the substantially same form used in
connection with the closing of the Loan and attached to that certain Borrower’s
Certificate delivered by Borrower to Lender as of the date hereof and certified
by a Responsible Officer of Borrower (2) in hardcopy and electronic formats and
(3) in accordance with the Approved Accounting Method; and (E) upon request of
Lender during the continuance of an Event of Default, be audited by an
independent certified public accountant reasonably acceptable to Lender.
Borrower shall be deemed to warrant and represent that, as of the date of
delivery of any such financial statement, there has been no material adverse
change in financial condition, nor have any assets or properties been sold,
transferred, assigned, mortgaged, pledged or encumbered since the date of such
financial statement except as disclosed by Borrower in a writing delivered to
Lender. Borrower agrees that all Required Financial Items shall not contain any
misrepresentation or omission of a material fact.

(e) Borrower acknowledges the importance to Lender of the timely delivery of
each of the items required by this Section 4.12 and the other financial
reporting items required by this Agreement (each, a “Required Financial Item”
and, collectively, the “Required Financial Items”). In the event Borrower fails
to deliver to Lender any of the Required Financial Items within the time frame
specified herein (each such event, a “Reporting Failure”), which failure
continues for ten (10) days following notice from Lender to Borrower, the same
shall, at Lender’s option, constitute an immediate Event of Default hereunder
and, without limiting Lender’s other rights and remedies with respect to the
occurrence of such an Event of Default, Borrower shall pay to Lender the sum of
$2,500.00 per occurrence for each Reporting Failure. It shall constitute a
further Event of Default hereunder if any such payment is not received by Lender
within thirty (30) days of the date on which such payment is due, and Lender
shall be entitled to the exercise of all of its rights and remedies provided
hereunder.

Section 4.13     Estoppel Certificates.

(a) After request by Lender, Borrower, within ten (10) days of such request,
shall furnish Lender or any proposed assignee with a statement, duly
acknowledged and certified, setting forth (i) the original principal amount of
the Loan, (ii) the unpaid principal amount of the Loan, (iii) the rate of
interest of the Loan, (iv) the terms of payment and maturity date of the Loan,
(v) the date installments of interest and/or principal were last paid,
(vi) that, except as provided in such statement, no Event of Default exists,
(vii) that this Agreement, the Note, the Security Instruments and the other Loan
Documents are valid, legal and binding obligations and have not been modified or
if modified, giving particulars of such modification, (viii) whether any offsets
or defenses exist against

 

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the obligations secured hereby and, if any are alleged to exist, a detailed
description thereof, (ix) that all Leases are in full force and effect and have
not been modified (or if modified, setting forth all modifications), (x) the
date to which the Rents thereunder have been paid pursuant to the Leases,
(xi) whether or not, to the best knowledge of Borrower, any of the lessees under
the Leases are in default under the Leases, and, if any of the lessees are in
default, setting forth the specific nature of all such defaults, (xii) the
amount of security deposits held by Borrower under each Lease and that such
amounts are consistent with the amounts required under each Lease, and (xiii) as
to any other matters reasonably requested by Lender and reasonably related to
the Leases, the obligations created and evidenced hereby and by the Security
Instruments or any Individual Property.

(b) Borrower shall use its commercially reasonable efforts to deliver to Lender,
promptly upon request, duly executed estoppel certificates from any one or more
Tenants under any Major Lease as required by Lender attesting to such facts
regarding the Lease as Lender may require, including, but not limited to,
attestations that each Lease covered thereby is in full force and effect with no
defaults thereunder on the part of any party, that none of the Rents have been
paid more than one month in advance (except with respect to Permitted Prepaid
Rents and security deposits), no free rent or other concessions are due lessee
and that the lessee claims no defense or offset against the full and timely
performance of its obligations under the Lease.

(c) Borrower shall use commercially reasonable efforts to deliver to Lender,
promptly upon request, estoppel certificates from each party under any Property
Document in form and substance reasonably acceptable to Lender.

Section 4.14     Leases and Rents.

(a) All Leases and all renewals of Leases executed after the date hereof shall
(i) provide for rental rates comparable to existing local market rates for
similar properties, (ii) be on commercially reasonable terms with unaffiliated,
third parties (unless otherwise consented to by Lender), (iii) provide that such
Lease is subordinate to the applicable Security Instrument and that the lessee
will attorn to Lender and any purchaser at a foreclosure sale, (iv) not contain
any terms which would have a Material Adverse Effect and (v) with respect to the
Odgen Property, be on a form of lease that is commercially reasonable and
customary in the region where the Odgen Property is located. All Major Leases
and all renewals, amendments and modifications thereof executed after the date
hereof shall be subject to Lender’s prior approval, which approval shall not be
unreasonably withheld or delayed.

(b) Borrower (i) shall observe and perform the obligations imposed upon the
lessor under the Leases in a commercially reasonable manner; (ii) shall enforce
the terms, covenants and conditions contained in the Leases upon the part of the
lessee thereunder to be observed or performed in a commercially reasonable
manner, provided, however, Borrower shall not terminate or accept a surrender of
a Major Lease without Lender’s prior approval; (iii) shall not collect any of
the Rents more than one (1) month in advance (other than Permitted Prepaid
Rents); (iv) shall not execute any assignment of lessor’s interest in the Leases
or the Rents (except as contemplated by the Loan Documents); (v) shall not,
without Lender’s prior written consent, alter, modify or change any Major Lease
so as to change the amount of or payment date for rent, change the expiration
date, grant any option for additional space or term, materially reduce the
obligations of the lessee or increase the obligations of lessor; and (vi) shall
hold all security deposits under all Leases in accordance with Legal
Requirements. Upon request, Borrower shall furnish Lender with executed copies
of all Leases. Notwithstanding anything to the contrary contained in the
Restricted Account Agreement, Permitted Prepaid Rents may be disbursed from the
Restricted Account to Borrower for so long as no Trigger Period exists.

(c) Notwithstanding anything contained herein to the contrary, Borrower shall
not willfully withhold from Lender any information regarding renewal, extension,
amendment, modification, waiver of provisions of, termination, rental reduction
of, surrender of space of, or shortening of the term of, any Lease during the
term of the Loan.

(d) Borrower shall notify Lender in writing, within two (2) Business Days
following receipt thereof, of Borrower’s receipt of any early termination fee or
payment or other termination fee or payment paid by any Tenant that equals or is
greater than $20,000.00 under any Lease, and Borrower further covenants and
agrees that Borrower shall hold any such termination fee or payment in trust for
the benefit of Lender and that any use of such

 

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termination fee or payment shall be subject in all respects to Lender’s prior
written consent in Lender’s sole discretion (which consent may include, without
limitation, a requirement by Lender that such termination fee or payment be
placed in reserve with Lender to be disbursed by Lender for tenant improvement
and leasing commission costs with respect to the applicable Individual Property
and/or for payment of the Debt or otherwise in connection with the Loan
evidenced by the Note and/or the Properties, as so determined by Lender).

(e) To the extent that the Deemed Approval Requirements are fully satisfied in
connection with any Borrower request for Lender consent under this Section,
Lender’s approval shall be deemed given with respect to the matter for which
approval was requested.

Section 4.15     Management Agreement.

(a) Borrower shall (i) diligently perform, observe and enforce all of the terms,
covenants and conditions of the Management Agreement on the part of Borrower to
be performed, observed and enforced to the end that all things shall be done
which are necessary to keep unimpaired the rights of Borrower under the
Management Agreement and (ii) promptly notify Lender of the giving of any notice
to Borrower of any default by Borrower in the performance or observance of any
of the terms, covenants or conditions of the Management Agreement on the part of
Borrower to be performed and observed and deliver to Lender a true copy of each
such notice.

(b) Without Lender’s prior written consent, Borrower shall not surrender the
Management Agreement, consent to the assignment by Manager of its interest under
the Management Agreement, or terminate or cancel the Management Agreement or
modify, change, supplement, alter or amend the Management Agreement, in any
respect, either orally or in writing, and Borrower hereby assigns to Lender as
further security for the payment of the Debt and for the performance and
observance of the terms, covenants and conditions of this Agreement, all the
rights, privileges and prerogatives of Borrower to surrender the Management
Agreement or to terminate, cancel, modify, change, supplement, alter or amend
the Management Agreement in any respect, and any such surrender of the
Management Agreement or termination, cancellation, modification, change,
supplement, alteration or amendment of the Management Agreement without the
prior consent of Lender shall be void and of no force and effect.

(c) If Borrower shall default in the performance or observance of any material
term, covenant or condition of the Management Agreement on the part of Borrower
to be performed or observed, then, without limiting the generality of the other
provisions of this Agreement, and without waiving or releasing Borrower from any
of its obligations hereunder, Lender shall have the right, but shall be under no
obligation, to pay any sums and to perform any act or take any action as may be
appropriate to cause all the terms, covenants and conditions of the Management
Agreement on the part of Borrower to be performed or observed to be promptly
performed or observed on behalf of Borrower, to the end that the rights of
Borrower in, to and under the Management Agreement shall be kept unimpaired and
free from default. Lender and any Person designated by Lender shall have, and
are hereby granted, the right to enter upon any Individual Property at any time
and from time to time for the purpose of taking any such action. If Manager
shall deliver to Lender a copy of any notice sent to Borrower of default under
the Management Agreement, such notice shall constitute full protection to Lender
for any action taken or omitted to be taken by Lender in good faith, in reliance
thereon. Borrower shall notify Lender if Manager sub-contracts to a third party
or an Affiliate any or all of its management responsibilities under the
Management Agreement. Borrower shall, from time to time, use its best efforts to
obtain from Manager under the Management Agreement such certificates of estoppel
with respect to compliance by Borrower with the terms of the Management
Agreement as may be reasonably requested by Lender. Borrower shall exercise each
individual option, if any, to extend or renew the term of the Management
Agreement upon 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, which power of attorney shall be
irrevocable and shall be deemed to be coupled with an interest. In the event
that the Management Agreement is scheduled to expire at any time during the term
of the Loan, Borrower shall submit to Lender by no later than 60 days prior to
such expiration a draft replacement management agreement for approval in
accordance with the terms and conditions hereof. Borrower’s failure to submit
the same within such time-frame shall, at Lender’s option and following five
(5) days notice and opportunity to cure to Borrower, constitute an immediate
Event of Default. Any sums expended by Lender pursuant to this paragraph shall
bear interest at the Default Rate

 

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from the date such cost is incurred to the date of payment to Lender, shall be
deemed to constitute a portion of the Debt, shall be secured by the lien of the
Security Instruments and the other Loan Documents and shall be immediately due
and payable upon demand by Lender therefor.

(d) Borrower shall, from time to time, use its commercially reasonable efforts
to obtain from Manager under the Management Agreement such certificates of
estoppel with respect to compliance by Borrower with the terms of the Management
Agreement as may be requested by Lender.

(e) Intentionally Omitted.

(f) Without limitation of the foregoing, if the Management Agreement is
terminated or expires pursuant to the Assignment of Management Agreement or for
any other reason, then Lender, at its option, may require Borrower to engage, in
accordance with the terms and conditions set forth in the Assignment of
Management Agreement, a new manager (the “New Manager”) to manage any Individual
Property, which such New Manager shall be a Qualified Manager. New Manager shall
be engaged by Borrower pursuant to a written management agreement that complies
with the terms hereof and of the Assignment of Management Agreement and is
otherwise reasonably satisfactory to Lender in all respects. New Manager and
Borrower shall execute an Assignment of Management Agreement in the same form
used in connection with the closing of the Loan. Without limitation of the
foregoing, if required by Lender, Borrower shall, as a condition precedent to
Borrower’s engagement of such New Manager, obtain a Rating Agency Confirmation
with respect to such New Manager and management agreement. To the extent that
such New Manager is an Affiliated Manager, Borrower’s engagement of such New
Manager shall be subject to Borrower’s delivery to Lender of a New
Non-Consolidation Opinion with respect to such New Manager and new management
agreement.

(g) Any sums expended by Lender pursuant to this Section shall bear interest at
the Default Rate from the date such cost is incurred to the date of payment to
Lender, shall be deemed to constitute a portion of the Debt, shall be secured by
the lien of the Security Instrument and the other Loan Documents and shall be
immediately due and payable upon demand by Lender therefor.

Section 4.16     Payment for Labor and Materials.

(a) Subject to Section 4.16(b) and Section 10.1 below, Borrower will promptly
pay (or cause to be paid) when due all bills and costs for labor, materials, and
specifically fabricated materials incurred in connection with the Properties
(any such bills and costs, a “Work Charge”) and never permit to exist in respect
of any Individual Property or any part thereof any lien or security interest,
even though inferior to the liens and the security interests hereof, and in any
event never permit to be created or exist in respect of any Individual Property
or any part thereof any other or additional lien or security interest other than
the liens or security interests created hereby and by the Security Instruments,
except for the Permitted Encumbrances.

(b) After prior written notice to Lender, Borrower, at its own expense, may
contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the validity of any Work Charge, the
applicability of any Work Charge to Borrower or to any Individual Property or
any alleged non-payment of any Work Charge and defer paying the same, provided
that (i) no Event of Default has occurred and is continuing; (ii) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any instrument to which Borrower is subject and shall not
constitute a default thereunder and such proceeding shall be conducted in
accordance with all applicable Legal Requirements; (iii) neither the applicable
Individual Property nor any part thereof or interest therein will be in imminent
danger of being sold, forfeited, terminated, cancelled or lost; (iv) Borrower
shall promptly upon final determination thereof pay (or cause to be paid) any
such contested Work Charge determined to be valid, applicable or unpaid;
(v) such proceeding shall suspend the collection of such contested Work Charge
from the applicable Individual Property or Borrower shall have paid the same (or
shall have caused the same to be paid) under protest; and (vi) Borrower shall
furnish (or cause to be furnished) such security as may be required in the
proceeding, or as may be reasonably requested by Lender, to insure payment of
such Work Charge, together with all interest and penalties payable in connection
therewith. Lender may apply any such security or part thereof, as necessary to
pay for such Work Charge at any time when, in the reasonable judgment of Lender,
the validity, applicability or non-payment of such Work Charge is finally
established or the applicable

 

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Individual Property (or any part thereof or interest therein) shall be in
present danger of being sold, forfeited, terminated, cancelled or lost.

Section 4.17     Performance of Other Agreements. Borrower shall observe and
perform each and every term required to be observed or performed by Borrower
pursuant to the terms of any agreement or recorded instrument affecting or
pertaining to each Individual Property, or given by Borrower to Lender for the
purpose of further securing the Debt and any amendments, modifications or
changes thereto.

Section 4.18     Debt Cancellation. Borrower shall not cancel or otherwise
forgive or release any claim or debt (other than termination of Leases in
accordance herewith) owed to Borrower by any Person, except for adequate
consideration and in the ordinary course of Borrower’s business.

Section 4.19     ERISA.

(a) Borrower shall not engage in any transaction which would cause any
obligation, or action taken or to be taken, hereunder (or the exercise by Lender
of any of its rights hereunder or under the other Loan Documents) to be a non
exempt (under a statutory or administrative class exemption) prohibited
transaction under ERISA.

(b) Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of the
Security Instruments, as requested by Lender in its reasonable discretion, that
(i) Borrower is not an “employee benefit plan” as defined in Section 3(3) of
ERISA, or other retirement arrangement, which is subject to Title I of ERISA or
Section 4975 of the IRS Code, or a “governmental plan” within the meaning of
Section 3(32) of ERISA; (ii) Borrower is not subject to state statutes
regulating investments and fiduciary obligations with respect to governmental
plans; and (iii) one or more of the following circumstances is true:

 

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

 

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

 

  (C) Borrower qualifies as an “operating company” or a “real estate operating
company” within the meaning of 29 C.F.R § 2510.3 101(c) or (e) or an investment
company registered under The Investment Company Act of 1940.

Section 4.20     No Joint Assessment. Borrower shall not suffer, permit or
initiate the joint assessment of any Individual Property with (a) any other real
property constituting a tax lot separate from such Individual Property, or
(b) any portion of such Individual Property which may be deemed to constitute
personal property, or any other procedure whereby the lien of any taxes which
may be levied against such personal property shall be assessed or levied or
charged to such Individual Property.

Section 4.21     Alterations. Lender’s prior approval shall be required in
connection with any alterations to any Improvements (a) that may have a Material
Adverse Effect, (b) the cost of which (including any related alteration,
improvement or replacement) is reasonably anticipated to exceed the Alteration
Threshold or (c) that are structural in nature, which approval may be granted or
withheld in Lender’s sole discretion. If the total unpaid amounts incurred and
to be incurred with respect to any alterations to the Improvements at all the
Individual Properties in the aggregate shall at any time exceed the Alteration
Threshold, Borrower shall promptly deliver to Lender as security for the payment
of such amounts and as additional security for Borrower’s obligations under the
Loan Documents any of the following: (i) cash, (ii) U.S. Obligations,
(iii) other securities acceptable to Lender, (provided that Lender shall have
received a Rating Agency Confirmation as to the form and issuer of same), or
(iv) a completion bond (provided that Lender shall have received a Rating Agency
Confirmation as to the form and issuer of same). Such security shall be in an
amount equal to the excess of the total unpaid amounts incurred and to be
incurred with respect to such alterations to the Improvements over the
Alteration Threshold. To the extent that

 

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Lender’s prior written approval is required pursuant to this Section 4.21, such
request for approval shall be deemed approved if the Deemed Approval
Requirements are fully satisfied.

Section 4.22     Property Document Covenants. Borrower shall (i) promptly
perform and/or observe, in all material respects, all of the covenants and
agreements required to be performed and observed by it under the Property
Documents and do all things necessary to preserve and to keep unimpaired its
material rights thereunder; (ii) promptly notify Lender of any material default
under the Property Documents of which it has knowledge; (iii) promptly deliver
to Lender a copy of each financial statement, business plan, capital
expenditures plan, notice, report and estimate received by it under the Property
Documents, (iv) enforce the performance and observance of all of the covenants
and agreements required to be performed and/or observed under the Property
Documents for the benefit of Borrower, in a commercially reasonable manner;
(v) cause any Individual Property to be operated, in all material respects, in
accordance with the Property Documents; and (vi) not, without the prior written
consent of Lender, (A) enter into any new Property Document or execute
modifications to any existing Property Documents, (B) surrender, terminate or
cancel the Property Documents, (C) reduce or consent to the reduction of the
term of the Property Documents, (D) increase or consent to the increase of the
amount of any charges under the Property Documents, (E) otherwise modify,
change, supplement, alter or amend, or waive or release any of its rights and
remedies under, the Property Documents in any material respect or (F) following
the occurrence and during the continuance of an Event of Default, exercise any
rights, make any decisions, grant any approvals or otherwise take any action
under the Property Documents.

Section 4.23     Embargoed Person/Patriot Act. (a) At all times throughout the
term of the Loan, including after giving effect to any transfers of interests
permitted pursuant to the Loan Documents, the representations contained in
Sections 3.29 and 3.30 shall remain true and correct. Borrower covenants and
agrees that in the event Borrower receives any notice that any Borrower Party
(or any of their respective beneficial owners, Affiliates or participants)
become listed on the Annex or any other list promulgated under the Patriot Act
or is indicted, arraigned, or custodially detained on charges involving money
laundering or predicate crimes to money laundering, Borrower shall immediately
notify Lender. It shall be an Event of Default hereunder if any Borrower Party
becomes listed on any list promulgated under the Patriot Act or is indicted,
arraigned or custodially detained on charges involving money laundering or
predicate crimes to money laundering. All capitalized words and phrases and all
defined terms used in the USA Patriot Act of 2001, 107 Public Law 56 (October
26, 2001) and in other statutes and all orders, rules and regulations of the
United States government and its various executive departments, agencies and
offices related to the subject matter of the Patriot Act, including Executive
Order 13224 effective September 24, 2001 (collectively referred to in this
Section and in Section 3.30 only as the “Patriot Act”) are incorporated into
this Section.

(b) Guarantor shall at all times retain a nationally-recognized third party
transfer agent, which transfer agent shall keep track of the ownership of stock
in the Guarantor, in an effort to ensure that all owners of such stock comply
with all applicable laws described in Sections 3.29, 3.30 and 4.23(a) and in an
effort to prevent Embargoed Persons and/or Prohibited Persons from acquiring any
direct or indirect ownership interests in Guarantor (the “Transfer Agent
Compliance Functions”); provided, however, that Guarantor may perform the
Transfer Agent Compliance Functions itself or by retaining an Affiliate of
Guarantor to do so provided Guarantor or its Affiliate (as applicable) uses
substantially the same procedures in performing the Transfer Agent Compliance
Functions that a nationally-recognized third party transfer agent would use in
performing the Transfer Agent Compliance Functions. DST Systems, Inc. is deemed
an acceptable nationally-recognized third party transfer agent for purposes of
this Section 4.23.

ARTICLE 5

ENTITY COVENANTS

Section 5.1     Single Purpose Entity/Separateness.

(a) Borrower has not and will not:

 

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(i) engage in any business or activity other than the ownership, operation and
maintenance of the Properties, and activities incidental thereto;

(ii) acquire or own any assets other than (A) the Properties, and (B) such
incidental Personal Property as may be necessary for the ownership, leasing,
maintenance and operation of the Properties;

(iii) merge into or consolidate with any Person, or dissolve, terminate,
liquidate in whole or in part, transfer or otherwise dispose of all or
substantially all of its assets or change its legal structure;

(iv) fail to observe all organizational formalities, or fail to preserve its
existence as an entity duly organized, validly existing and in good standing (if
applicable) under the applicable Legal Requirements of the jurisdiction of its
organization or formation, or amend, modify, terminate or fail to comply with
the provisions of its organizational documents;

(v) own any subsidiary, or make any investment in, any Person (other than, with
respect to any SPE Component Entity, in Borrower);

(vi) commingle its funds or assets with the funds or assets of any other Person
(other than any other Borrower); provided, however, the representation as to
Borrower conduct prior to the Closing Date contained in this clause (vi) is
qualified as described on Schedule 5.1 attached hereto. Nothing in the foregoing
proviso, however, shall be deemed to limit, affect or otherwise qualify
Borrower’s obligation to not commingle its funds or assets with the funds or
assets of any other Person (other than any other Borrower) from and after the
Closing Date;

(vii) except with respect to the Existing Loan which is being fully repaid on
the date hereof, incur any Indebtedness, secured or unsecured, direct or
contingent (including guaranteeing any obligation), other than (A) the Debt,
(B) trade and operational indebtedness incurred in the ordinary course of
business with trade creditors, provided such indebtedness is (1) unsecured,
(2) not evidenced by a note, (3) on commercially reasonable terms and
conditions, and (4) due not more than sixty (60) days past the date incurred and
paid on or prior to such date, and/or (C) Permitted Equipment Leases; provided
however, the aggregate amount of the indebtedness described in (B) and (C) shall
not exceed at any time four percent (4%) of the then-outstanding principal
balance of the Loan. For the avoidance of doubt, such four percent
(4%) limitation on indebtedness shall apply to all Borrowers in the aggregate
(and not to each Borrower individually). No Indebtedness other than the Debt may
be secured (subordinate or pari passu) by any Individual Property;

(viii) fail to maintain all of its books, records, financial statements and bank
accounts separate from those of any other Person (including, without limitation,
any Affiliates), except with respect to bank accounts shared with any other
Borrower. Borrower’s assets have not and will not be listed as assets on the
financial statement of any other Person; provided, however, that Borrower’s
assets may be included in a consolidated financial statement of its Affiliates
provided that (i) appropriate notation shall be made on such consolidated
financial statements to indicate the separateness of Borrower and such
Affiliates and to indicate that Borrower’s assets and credit are not available
to satisfy the debts and other obligations of such Affiliates or any other
Person and (ii) such assets shall be listed on Borrower’s own separate balance
sheet; provided, further however, that the representation as to Borrower conduct
prior to the Closing Date contained in this clause (viii) is qualified as
described on Schedule 5.1 attached hereto. Nothing in the foregoing proviso,
however, shall be deemed to limit, affect or otherwise qualify Borrower’s
obligation to not have Borrower’s assets listed as assets on the financial
statement of any other Person from and after the Closing Date except as
permitted in this clause (viii). Borrower has maintained and will maintain its
books, records, resolutions and agreements as official records;

(ix) enter into any contract or agreement with any general partner, member,
shareholder, principal or Affiliate, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available on
an arm’s-length basis with unaffiliated third parties;

 

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(x) maintain its assets in such a manner that it will be costly or difficult to
segregate, ascertain or identify its individual assets from those of any other
Person;

(xi) assume or guaranty the debts of any other Person, hold itself out to be
responsible for the debts of any other Person, or otherwise pledge its assets
for the benefit of any other Person or hold out its credit as being available to
satisfy the obligations of any other Person, other than with respect to the
Debt;

(xii) make any loans or advances to any Person; provided, however, the
representation as to Borrower conduct prior to the Closing Date contained in
this clause (xii) is qualified as described on Schedule 5.1 attached hereto.
Nothing in the foregoing proviso, however, shall be deemed to limit, affect or
otherwise qualify Borrower’s obligation to not make any loans or advances to any
Person from and after the Closing Date;

(xiii) fail to file its own tax returns (unless prohibited by applicable Legal
Requirements from doing so);

(xiv) fail either to hold itself out to the public as a legal entity separate
and distinct from any other Person or to conduct its business solely in its own
name or fail to correct any known misunderstanding regarding its separate
identity;

(xv) fail to maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its
contemplated business operations (to the extent there exists sufficient net cash
flow from the Properties to do so);

(xvi) without the unanimous written consent of all of its partners or members,
as applicable, and the consent of the Independent Director (regardless of
whether such Independent Director is engaged at the Borrower or SPE Component
Entity level), (a) file or consent to the filing of any petition, either
voluntary or involuntary, to take advantage of any Creditors Rights Laws,
(b) seek or consent to the appointment of a receiver, liquidator or any similar
official, (c) take any action that might cause such entity to become insolvent,
or (d) make an assignment for the benefit of creditors;

(xvii) fail to allocate shared expenses (including, without limitation, shared
office space) or fail to use separate stationary, invoices and checks (other
than checks relating to a checking account shared with any other Borrower);
provided, however, the representation as to Borrower conduct as to using
separate stationary, invoices and checks prior to the Closing Date contained in
this clause (xvii) is qualified as described on Schedule 5.1 attached hereto.
Nothing in the foregoing proviso, however, shall be deemed to limit, affect or
otherwise qualify Borrower’s obligation to use separate stationary, invoices and
checks from and after the Closing Date (other than checks relating to a checking
account shared with any other Borrower);

(xviii) with respect to Borrower, fail to maintain a sufficient number of
employees in light of its contemplated business operations taking into account
the services to be provided by Manager pursuant to the Management Agreement;

(xix) acquire obligations or securities of its partners, members, shareholders
or other Affiliates, as applicable; or

(xx) violate or cause to be violated the assumptions made with respect to
Borrower and its principals in the Non-Consolidation Opinion or in any New
Non-Consolidation Opinion.

(b) If Borrower is a partnership or limited liability company (other than an
Acceptable LLC), each general partner (in the case of a partnership) and at
least one member (in the case of a limited liability company) of Borrower, as
applicable, shall be a corporation or an Acceptable LLC (each an “SPE Component
Entity”) whose sole asset is its interest in Borrower. Each SPE Component Entity
(i) will at all times comply with each of the covenants, terms and provisions
contained in Section 5.1(a)(iii) - (vi) (inclusive) and (viii) - (xx)
(inclusive) and, if

 

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such SPE Component Entity is an Acceptable LLC, Section 5.1(c) and (d) hereof,
as if such representation, warranty or covenant was made directly by such SPE
Component Entity; (ii) will not engage in any business or activity other than
owning an interest in Borrower; (iii) will not acquire or own any assets other
than its partnership, membership, or other equity interest in Borrower;
(iv) will at all times continue to own no less than a 0.5% direct equity
ownership interest in Borrower; (v) will not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation); and
(vi) will cause Borrower to comply with the provisions of this Section 5.1.

(c) In the event Borrower or the SPE Component Entity is an Acceptable LLC, the
limited liability company agreement of Borrower or the SPE Component Entity (as
applicable) (the “LLC Agreement”) shall provide that (i) upon the occurrence of
any event that causes the last remaining member of Borrower or the SPE Component
Entity (as applicable) (“Member”) to cease to be the member of Borrower or the
SPE Component Entity (as applicable) (other than (A) upon an assignment by
Member of all of its limited liability company interest in Borrower or the SPE
Component Entity (as applicable) and the admission of the transferee in
accordance with the Loan Documents and the LLC Agreement, or (B) the resignation
of Member and the admission of an additional member of Borrower or the SPE
Component Entity (as applicable) in accordance with the terms of the Loan
Documents and the LLC Agreement), the special member of Borrower or the SPE
Component Entity (“Special Member”) shall, without any action of any other
Person and simultaneously with the Member ceasing to be the member of Borrower
or the SPE Component Entity (as applicable) automatically be admitted to
Borrower or the SPE Component Entity (as applicable) as a member with a 0%
economic interest therein and shall continue Borrower or the SPE Component
Entity (as applicable) without dissolution and (ii) Special Member may not
resign from Borrower or the SPE Component Entity (as applicable) or transfer its
rights as Special Member unless (A) a successor Special Member has been admitted
to Borrower or the SPE Component Entity (as applicable) as a Special Member in
accordance with requirements of Delaware or Maryland law (as applicable) and
(B) after giving effect to such resignation or transfer, there remains at least
one (1) Independent Director of the SPE Component Entity or Borrower (as
applicable) in accordance with Section 5.2 below. The LLC Agreement shall
further provide that (i) Special Member shall automatically cease to be a member
of Borrower or the SPE Component Entity (as applicable) upon the admission to
Borrower or the SPE Component Entity (as applicable) of the first substitute
member, (ii) Special Member shall be a member of Borrower or the SPE Component
Entity (as applicable) that has no interest in the profits, losses and capital
of Borrower or the SPE Component Entity (as applicable) and has no right to
receive any distributions of the assets of Borrower or the SPE Component Entity
(as applicable), (iii) pursuant to the applicable provisions of the limited
liability company act of the State of Delaware or Maryland (as applicable, the
“Act”), Special Member shall not be required to make any capital contributions
to Borrower or the SPE Component Entity (as applicable) and shall not receive a
limited liability company interest in Borrower or the SPE Component Entity (as
applicable), (iv) Special Member, in its capacity as Special Member, may not
bind Borrower or the SPE Component Entity (as applicable) and (v) except as
required by any mandatory provision of the Act, Special Member, in its capacity
as Special Member, shall have no right to vote on, approve or otherwise consent
to any action by, or matter relating to, Borrower or the SPE Component Entity
(as applicable) including, without limitation, the merger, consolidation or
conversion of Borrower or the SPE Component Entity (as applicable). In order to
implement the admission to Borrower or the SPE Component Entity (as applicable)
of Special Member, Special Member shall execute a counterpart to the LLC
Agreement. Prior to its admission to Borrower or the SPE Component Entity (as
applicable) as Special Member, Special Member shall not be a member of Borrower
or the SPE Component Entity (as applicable), but Special Member may serve as an
Independent Director of Borrower or the SPE Component Entity (as applicable).

(d) The LLC Agreement shall further provide that (i) upon the occurrence of any
event that causes the Member to cease to be a member of Borrower or the SPE
Component Entity (as applicable) to the fullest extent permitted by law, the
personal representative of Member shall, within ninety (90) days after the
occurrence of the event that terminated the continued membership of Member in
Borrower or the SPE Component Entity (as applicable) agree in writing (A) to
continue Borrower or the SPE Component Entity (as applicable) and (B) to the
admission of the personal representative or its nominee or designee, as the case
may be, as a substitute member of Borrower or the SPE Component Entity (as
applicable) effective as of the occurrence of the event that terminated the
continued membership of Member in Borrower or the SPE Component Entity (as
applicable), (ii) any action initiated by or brought against Member or Special
Member under any Creditors Rights Laws shall not cause Member or Special Member
to cease to be a member of Borrower or the SPE Component Entity (as applicable)
and upon the occurrence of such an event, the business of Borrower or the SPE
Component Entity (as applicable) shall continue without dissolution and
(iii) each of Member and Special Member waives any right it might have to agree

 

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in writing to dissolve Borrower or the SPE Component Entity (as applicable) upon
the occurrence of any action initiated by or brought against Member or Special
Member under any Creditors Rights Laws, or the occurrence of an event that
causes Member or Special Member to cease to be a member of Borrower or the SPE
Component Entity (as applicable).

Section 5.2     Independent Director.

(a) The organizational documents of Borrower (to the extent Borrower is a
corporation or an Acceptable LLC) or the SPE Component Entity, as applicable,
shall provide that at all times there shall be at least one duly appointed
independent director or manager of such entity (each, an “Independent Director”)
who shall (I) not have been at the time of each such individual’s initial
appointment, and shall not have been at any time during the preceding five
years, and shall not be at any time while serving as Independent Director,
either (i) a shareholder (or other equity owner) of, or an officer, director
(other than in its capacity as Independent Director), partner, member or
employee of, Borrower or any of its respective shareholders, partners, members,
subsidiaries or Affiliates, (ii) a customer of, or supplier to, or other Person
who derives any of its purchases or revenues from its activities with, Borrower
or any of its respective shareholders, partners, members, subsidiaries or
Affiliates, (iii) a Person who Controls or is under common Control with any such
shareholder, officer, director, partner, member, employee supplier, customer or
other Person, or (iv) a member of the immediate family of any such shareholder,
officer, director, partner, member, employee, supplier, customer or other Person
(II) shall have, at the time of their appointment, had at least three (3) years
experience in serving as an independent director and (III) be employed by, in
good standing with and engaged by Borrower in connection with, in each case, an
Approved ID Provider.

(b) The organizational documents of Borrower and the SPE Component Entity shall
further provide that (I) the board of directors or managers of Borrower and the
SPE Component Entity and the constituent members of such entities (the
“Constituent Members”) shall not take any action which, under the terms of any
organizational documents of Borrower or the SPE Component Entity, requires a
unanimous vote of the board of directors or managers of Borrower or the SPE
Component Entity or the Constituent Members unless at the time of such action
there shall be at least one Independent Director engaged as provided by the
terms hereof; (II) any resignation, removal or replacement of any Independent
Director shall not be effective without one (1) prior written notice to Lender
and the Rating Agencies (which such prior written notice must be given on the
earlier of five (5) days or three (3) Business Days prior to the applicable
resignation, removal or replacement) and (2) evidence that the replacement
Independent Director satisfies the applicable terms and conditions hereof and of
the applicable organizational documents (which such evidence must accompany the
aforementioned notice); (III) to the fullest extent permitted by applicable law,
including Section 18-1101(c) of the Act and notwithstanding any duty otherwise
existing at law or in equity, the Independent Director shall consider only the
interests of the Constituent Members and Borrower and any SPE Component Entity
(including Borrower’s and any SPE Component Entity’s respective creditors) in
acting or otherwise voting on the matters provided for herein and in Borrower’s
and SPE Component Entity’s organizational documents (which such fiduciary duties
to the Constituent Members and Borrower and any SPE Component Entity (including
Borrower’s and any SPE Component Entity’s respective creditors), in each case,
shall be deemed to apply solely to the extent of their respective economic
interests in Borrower or SPE Component Entity (as applicable) exclusive of
(x) all other interests (including, without limitation, all other interests of
the Constituent Members), (y) the interests of other Affiliates of the
Constituent Members, Borrower and SPE Component Entity and (z) the interests of
any group of Affiliates of which the Constituent Members, Borrower or SPE
Component Entity is a part)); (IV) other than as provided in subsection (III)
above, the Independent Director shall not have any fiduciary duties to any
Constituent Members, any directors of Borrower or SPE Component Entity or any
other Person; (V) the foregoing shall not eliminate the implied contractual
covenant of good faith and fair dealing under applicable law; and (VI) to the
fullest extent permitted by applicable law, including Section 18-1101(e) of the
Act, an Independent Director shall not be liable to Borrower, SPE Component
Entity, any Constituent Member or any other Person for breach of contract or
breach of duties (including fiduciary duties), unless the Independent Director
acted in bad faith or engaged in willful misconduct.

Section 5.3     Change of Name, Identity or Structure. Borrower shall not change
(or permit to be changed) Borrower’s or the SPE Component Entity’s (a) name,
(b) identity (including its trade name or names), (c) principal place of
business set forth on the first page of this Agreement or, (d) if not an
individual, Borrower’s or the SPE Component Entity’s corporate, partnership or
other structure, without notifying Lender of such change in

 

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writing at least thirty (30) days prior to the effective date of such change
and, in the case of a change in Borrower’s or the SPE Component Entity’s
structure, without first obtaining the prior written consent of Lender. Borrower
shall execute and deliver to Lender, prior to or contemporaneously with the
effective date of any such change, any financing statement or financing
statement change required by Lender to establish or maintain the validity,
perfection and priority of the security interest granted herein. At the request
of Lender, Borrower shall execute a certificate in form satisfactory to Lender
listing the trade names under which Borrower or the SPE Component Entity intends
to operate each Individual Property, and representing and warranting that
Borrower or the SPE Component Entity does business under no other trade name
with respect to such Individual Property.

Section 5.4     Business and Operations. Borrower will continue to engage in the
businesses now conducted by it as and to the extent the same are necessary for
the ownership, maintenance, management and operation of the Properties. Borrower
will qualify to do business and will remain in good standing under the laws of
the jurisdiction as and to the extent the same are required for the ownership,
maintenance, management and operation of the Properties.

ARTICLE 6

NO SALE OR ENCUMBRANCE

Section 6.1     Transfer Definitions. For purposes of this Article 6,
“Restricted Party” shall mean Borrower, Guarantor, any SPE Component Entity, any
Affiliated Manager, or any shareholder, partner, member or non-member manager,
or any direct or indirect legal or beneficial owner of Borrower, Guarantor, any
SPE Component Entity; provided, however, that (a) any direct or indirect owner
in Guarantor shall not be deemed to be a Restricted Party and (b) the following
entities shall not be deemed a Restricted Party: (i) Strategic Capital Holdings,
LLC (assuming such entity does not own more than a 0.08% direct or indirect
ownership interest in Borrower); (ii) Strategic Storage Holdings, LLC (assuming
such entity does not own more than a 0.08% direct or indirect ownership interest
in Borrower); and (iii) Strategic Storage Advisor, LLC (assuming such entity
does not own more than a 0.08% direct or indirect ownership interest in
Borrower); and a “Sale or Pledge” shall mean a voluntary or involuntary sale,
conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, grant of
any options with respect to, or any other transfer or disposition of (directly
or indirectly, voluntarily or involuntarily, by operation of law or otherwise,
and whether or not for consideration or of record) of a legal or beneficial
interest.

Section 6.2     No Sale/Encumbrance.

(a) It shall be an Event of Default hereof if, without the prior written consent
of Lender, a Sale or Pledge of any Individual Property or any part thereof or
any legal or beneficial interest therein occurs and/or a Sale or Pledge of an
interest in any Restricted Party occurs (collectively, a “Prohibited Transfer”),
other than pursuant to Leases of space in the Improvements to Tenants in
accordance with the provisions of Section 4.14 or a release of an Individual
Property in accordance with the provisions of Section 2.9 hereof.

(b) A Prohibited Transfer shall include, but not be limited to, (i) an
installment sales agreement wherein Borrower agrees to sell any Individual
Property or any part thereof for a price to be paid in installments; (ii) an
agreement by Borrower leasing all or a substantial part of any Individual
Property for other than actual occupancy by a Tenant thereunder or a sale,
assignment or other transfer of, or the grant of a security interest in,
Borrower’s right, title and interest in and to any (A) Leases or any Rents or
(B) Property Documents; (iii) if a Restricted Party is a corporation, any
merger, consolidation or Sale or Pledge of such corporation’s stock or the
creation or issuance of new stock in one or a series of transactions; (iv) if a
Restricted Party is a limited or general partnership or joint venture, any
merger or consolidation or the change, removal, resignation or addition of a
general partner or the Sale or Pledge of the partnership interest of any general
or limited partner or any profits or proceeds relating to such partnership
interests or the creation or issuance of new limited partnership interests;
(v) if a Restricted Party is a limited liability company, any merger or
consolidation or the change, removal, resignation or addition of a managing
member or non-member manager (or if no managing member, any member) or the Sale
or Pledge of the membership interest of any member or any profits or proceeds
relating to such membership interest; (vi) if a Restricted Party is a trust or
nominee trust, any merger, consolidation or the Sale or Pledge of the legal or
beneficial interest in a Restricted Party or the creation or issuance of new
legal or beneficial interests; (vii) the

 

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removal or the resignation of Manager (including, without limitation, an
Affiliated Manager) other than in accordance with Section 4.15; or (viii) any
action for partition of any Individual Property (or any portion thereof or
interest therein) or any similar action instituted or prosecuted by Borrower or
by any other Person, pursuant to any contractual agreement or other instrument
or under applicable law (including, without limitation, common law) and/or any
other action instituted by (or at the behest of) Borrower or its Affiliates or
consented to or acquiesced in by Borrower or its affiliates which results in a
Property Document Event.

Section 6.3     Permitted Equity Transfers. Notwithstanding the restrictions
contained in this Article 6, the following equity transfers shall be permitted
without Lender’s consent and, unless specifically otherwise provided below,
without payment of any fee or prior notice to Lender: (a) a transfer (but not a
pledge) by devise or descent or by operation of law upon the death of a
Restricted Party or any member, partner or shareholder of a Restricted Party,
(b) the transfer (but not the pledge), in one or a series of transactions, of
the stock, partnership interests or membership interests (as the case may be) in
Borrower, (c) any issuance, sale, transfer or other disposition of shares of
common stock in Guarantor so long as such issuance, sale, transfer or other
disposition does not result in (i) Guarantor no longer being the sole general
partner of the Operating Partnership, (ii) the Operating Partnership no longer
being the sole owner of each Borrower, and (iii) one Person or group of
Affiliated Persons acquiring more than 49% of the voting shares of Guarantor in
one or a series of related transactions (provided, that, the foregoing
provisions of this clause (c) shall not be deemed to waive, qualify or otherwise
limit Borrower’s obligation to comply (or to cause the compliance with) the
other covenants set forth herein and in the other Loan Documents (including,
without limitation, the covenants contained herein relating to ERISA matters)),
(d) any issuance, sale, transfer or other disposition of any limited partnership
interests in the Operating Partnership so long as such issuance, sale, transfer
or other disposition does not result in (i) Guarantor no longer being the sole
general partner of the Operating Partnership and (ii) the Operating Partnership
no longer being the sole owner of each Borrower (provided, that, the foregoing
provisions of this clause (c) shall not be deemed to waive, qualify or otherwise
limit Borrower’s obligation to comply (or to cause the compliance with) the
other covenants set forth herein and in the other Loan Documents (including,
without limitation, the covenants contained herein relating to ERISA matters))
and provided further that any pledge of the direct or indirect interests in the
Operating Partnership shall only be permitted if (x) such pledge is given to an
Institutional Lender to secure a loan to Guarantor by such Institutional Lender
that is either fully recourse to the Guarantor or is secured by a substantial
portion of the assets of Guarantor or (y) such pledge is given by an owner in
the Operating Partnership that is not an Affiliate of Borrower or Guarantor
provided not more than twenty-five percent (25%) of the limited partnership
interests in the Operating Partnership are pledged in the aggregate pursuant to
this clause (y) and (e) any issuance, sale, transfer or other disposition of
direct or indirect membership interests in Affiliated Manager (provided, that,
the foregoing provisions of this clause (e) shall not be deemed to waive,
qualify or otherwise limit Borrower’s obligation to comply (or to cause the
compliance with) the other covenants set forth herein and in the other Loan
Documents (including, without limitation, the covenants contained herein
relating to ERISA matters)); provided, further, that, with respect to the
issuances, sales, transfers or other dispositions listed in clauses (a), (b),
(c), (d) and/or (e) above the following conditions shall also apply (except as
noted below): (A) with respect to the transfers described in clause (b) only,
Lender shall receive not less than thirty (30) days prior written notice of such
transfers; (B) no such issuance, sale, transfer or other disposition shall
result in a change in Control of Guarantor or Affiliated Manager; (C) after
giving effect to such issuance, sale, transfer or other disposition, Guarantor
shall remain publicly registered under The United States Securities Exchange Act
of 1934, as amended and shall (I) own at least a 51% direct or indirect equity
ownership interest in each of Borrower and any SPE Component Entity; (II)
Control Borrower and any SPE Component Entity and (III) control the day-to-day
operation of each Individual Property; (D) after giving effect to such issuance,
sale, transfer or other disposition, each Individual Property shall continue to
be managed by Affiliated Manager or a New Manager approved in accordance with
the applicable terms and conditions hereof; (E) in the case of the transfer of
any direct equity ownership interests in Borrower or in any SPE Component
Entity, such transfers shall be conditioned upon continued compliance with the
relevant provisions of Article 5 hereof; (F) in the case of (1) the transfer of
the management of any Individual Property to a new Affiliated Manager in
accordance with the applicable terms and conditions hereof, or (2) the transfer
of any equity ownership interests (I) directly in Borrower or in any SPE
Component Entity, (II) in any Restricted Party whose sole asset is a direct or
indirect equity ownership interest in Borrower or in any SPE Component Entity or
(III) in the event any issuance, sale, transfer or other disposition (whether or
not such issuance, sale, transfer or other disposition is permitted hereunder)
results in any Person owning, directly or indirectly, in excess of forty-nine
percent (49%) of the ownership interest in Borrower, such issuance, sale,
transfer or other disposition shall be conditioned upon delivery to Lender of a
New Non-Consolidation Opinion addressing such issuance, sale, transfer or other
disposition; and (G)

 

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such issuance, sale, transfer or other disposition shall be conditioned upon
Borrower’s ability to, after giving effect to the equity transfer in question
(I) remake the representations contained herein relating to ERISA matters (and,
upon Lender’s request, Borrower shall deliver to Lender an Officer’s Certificate
containing such updated representations effective as of the date of the
consummation of the applicable equity transfer as Lender may request regarding
such transfers) and (II) continue to comply with the covenants contained herein
relating to ERISA matters. Upon request from Lender, Borrower shall promptly
provide Lender a revised version of the organizational chart delivered to Lender
in connection with the Loan reflecting any equity issuance, sale, transfer or
other disposition consummated in accordance with this Section 6.3.

Section 6.4     Permitted Property Transfer (Assumption). Notwithstanding the
foregoing provisions of this Article 6, at any time other than the sixty
(60) days prior to and following any Secondary Market Transaction, Lender shall
not unreasonably withhold consent to a one-time transfer of all the Properties
in its entirety to, and the related assumptions of the Loan by, any Person (a
“Transferee”) provided that each of the following terms and conditions are
satisfied:

(a) no Default or Event of Default has occurred;

(b) Borrower shall have (i) delivered written notice to Lender of the terms of
such prospective transfer not less than sixty (60) days before the date on which
such transfer is scheduled to close and, concurrently therewith, all such
information concerning the proposed Transferee as Lender shall reasonably
require and (ii) paid to Lender a non-refundable processing fee in the amount of
$25,000. Lender shall have the right to approve or disapprove the proposed
transfer based on its then current underwriting and credit requirements for
similar loans secured by similar properties which loans are sold in the
secondary market, such approval not to be unreasonably withheld. In determining
whether to give or withhold its approval of the proposed transfer, Lender shall
consider the experience and track record of Transferee and its principals in
owning and operating facilities similar to the Properties, the financial
strength of Transferee and its principals, the general business standing of
Transferee and its principals and Transferee’s and its principals’ relationships
and experience with contractors, vendors, tenants, lenders and other business
entities; provided, however, that, notwithstanding Lender’s agreement to
consider the foregoing factors in determining whether to give or withhold such
approval, such approval shall be given or withheld based on what Lender
determines to be commercially reasonable and, if given, may be given subject to
such conditions as Lender may deem reasonably appropriate;

(c) Borrower shall have paid to Lender, concurrently with the closing of such
prospective transfer, (i) a non-refundable assumption fee in an amount equal to
one percent (1%) of the then outstanding principal balance of the Loan, (ii) all
out-of-pocket costs and expenses, including reasonable attorneys’ fees, incurred
by Lender in connection therewith and (iii) all fees, costs and expenses of all
third parties and the Rating Agencies incurred in connection therewith;

(d) Transferee assumes and agrees to pay the Debt as and when due subject to the
provisions of Article 13 hereof and, prior to or concurrently with the closing
of such transfer, Transferee and its constituent partners, members,
shareholders, Affiliates or sponsors as Lender may require, shall execute,
without any cost or expense to Lender, such documents and agreements as Lender
shall reasonably require to evidence and effectuate said assumption and an
Affiliate of Transferee reasonably acceptable to Lender shall (but in all events
able to satisfy the net worth and other similar covenants in the Guaranty
(unless otherwise agreed to by Lender)) execute a recourse guaranty and an
environmental indemnity in form and substance identical to the Guaranty and
Environmental Indemnity, respectively, with such changes to each of the
foregoing as may be reasonably required by Lender;

(e) Borrower and Transferee, without any cost to Lender, shall furnish any
information requested by Lender for the preparation of, and shall authorize
Lender to file, new financing statements and financing statement amendments and
other documents to the fullest extent permitted by applicable Legal
Requirements, and shall execute any additional documents reasonably requested by
Lender;

(f) Borrower shall have delivered to Lender, without any cost or expense to
Lender, such endorsements to Lender’s Title Insurance Policy insuring that fee
simple or leasehold title to the Properties, as

 

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applicable, is vested in Transferee (subject to Permitted Encumbrances), hazard
insurance endorsements or certificates and other similar materials as Lender may
deem necessary at the time of the transfer, all in form and substance
satisfactory to Lender;

(g) Transferee shall have furnished to Lender all appropriate papers evidencing
Transferee’s organization and good standing, and the qualification of the
signers to execute the assumption of the Debt, which papers shall include
certified copies of all documents relating to the organization and formation of
Transferee and of the entities, if any, which are partners or members of
Transferee. Transferee and such constituent partners, members or shareholders of
Transferee (as the case may be), as Lender shall require, shall comply with the
covenants set forth in Article 5 hereof;

(h) Transferee shall assume the obligations of Borrower under any Management
Agreement or provide a new management agreement with a new manager which meets
with the requirements of the Assignment of Management Agreement and Section 4.15
hereof and assign to Lender as additional security such new management
agreement;

(i) Transferee shall furnish to Lender a New Non-Consolidation Opinion and an
additional opinion of counsel satisfactory to Lender and its counsel (A) that
Transferee’s formation documents provide for the matters described in
subparagraph (g) above, (B) that the assumption of the Debt has been duly
authorized, executed and delivered, and that the assumption agreement and the
other Loan Documents are valid, binding and enforceable against Transferee in
accordance with their terms, (C) that Transferee and any entity which is a
controlling stockholder, member or general partner of Transferee, have been duly
organized, and are in existence and good standing, (E) that the transfer will
not constitute a “significant modification” of the Loan under Section 1001 of
the IRS Code or otherwise cause a tax to be imposed on a “prohibited
transaction” by any REMIC Trust and (F) with respect to such other matters as
Lender may reasonably request;

(j) if required by Lender, Lender shall have received (A) a Rating Agency
Confirmation with respect to such transfer and (B) evidence reasonably
satisfactory to Lender that the proposed transfer will not result in a Property
Document Event; and

(k) Borrower’s obligations under the contract of sale pursuant to which the
transfer is proposed to occur shall expressly be subject to the satisfaction of
the terms and conditions of this Section 6.4.

Section 6.5     Lender’s Rights. Lender reserves the right to condition the
consent to a Prohibited Transfer requested hereunder upon (a) a modification of
the terms hereof and on assumption of this Agreement and the other Loan
Documents as so modified by the proposed Prohibited Transfer, (b) payment of a
transfer fee of 1% of outstanding principal balance of the Loan and all of
Lender’s expenses incurred in connection with such Prohibited Transfer,
(c) receipt of a Rating Agency Confirmation with respect to the Prohibited
Transfer, (d) the proposed transferee’s continued compliance with the covenants
set forth in this Agreement, including, without limitation, the covenants in
Article 5, (e) receipt of a New Non-Consolidation Opinion with respect to the
Prohibited Transfer and/or (f) such other conditions and/or legal opinions as
Lender shall determine in its sole discretion to be in the interest of Lender.
All expenses incurred by Lender shall be payable by Borrower whether or not
Lender consents to the Prohibited Transfer. 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 Prohibited Transfer without Lender’s consent. This provision shall apply to
every Prohibited Transfer, whether or not Lender has consented to any previous
Prohibited Transfer.

Section 6.6     OFAC, Patriot Act and Transfers. Borrower shall (and shall cause
its direct and indirect constituent owners and Affiliates to) (a) at all times
comply with the representations and covenants contained in Sections 3.29 and
3.30 such that the same remain true, correct and not violated or breached and
(b) not permit a Prohibited Transfer to occur and shall cause the ownership,
control and public registration requirements specified in this Article 6
(including, without limitation, those stipulated in Section 6.3 hereof) to be
complied with at all times.

 

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ARTICLE 7

INSURANCE; CASUALTY; CONDEMNATION; RESTORATION

Section 7.1     Insurance.

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

(i) insurance with respect to the Improvements and the Personal Property
insuring against any peril now or hereafter included within the classification
“All Risk” or “Special Perils” (including, without limitation, fire, lightning,
windstorm, hail, terrorism and similar acts of sabotage, explosion, riot, riot
attending a strike, civil commotion, vandalism, aircraft, vehicles and smoke),
in each case (A) in an amount equal to 100% of the “Full Replacement Cost,”
which for purposes of this Agreement shall mean actual replacement value
exclusive of costs of excavations, foundations, underground utilities and
footings, with a waiver of depreciation; (B) in an amount sufficient so that no
co-insurance penalties shall apply; (C) providing for no deductible in excess of
$10,000; (D) at all times insuring against at least those hazards that are
commonly insured against under a “special causes of loss” form of policy, as the
same shall exist on the date hereof, and together with any increase in the scope
of coverage provided under such form after the date hereof; and (E) providing
coverage for contingent liability from Operation of Building Laws, Demolition
Costs and Increased Cost of Construction Endorsements together with an
“Ordinance or Law Coverage” endorsement. The Full Replacement Cost shall be
re-determined from time to time (but not more frequently than once in any twelve
(12) calendar months) at the request of Lender by an appraiser or contractor
designated and paid by Borrower and approved by Lender, or by an engineer or
appraiser in the regular employ of the insurer. After the first appraisal,
additional appraisals may be based on construction cost indices customarily
employed in the trade. No omission on the part of Lender to request any such
ascertainment shall relieve Borrower of any of its obligations under this
Subsection;

(ii) commercial general liability insurance against all claims for personal
injury, bodily injury, death or property damage occurring upon, in or about each
Individual Property, including “Dram Shop” or other liquor liability coverage if
alcoholic beverages are sold, manufactured or distributed from any Individual
Property, such insurance (A) to be on the so-called “occurrence” form with a
general aggregate limit of not less than $2,000,000 and a per occurrence limit
of not less than $1,000,000, with no deductible or self insured retention;
(B) to continue at not less than the aforesaid limit until required to be
changed by Lender in writing by reason of changed economic conditions making
such protection inadequate; and (C) to cover at least the following hazards:
(1) premises and operations; (2) products and completed operations on an “if
any” basis; (3) independent contractors; (4) blanket contractual liability to
the extent covered by the “insured contract” provision under a standard general
liability policy; (5) contractual liability covering the indemnities contained
in Article 12 hereof for bodily injury and property damage resulting from
Borrower’s negligence to the extent the same is available; and (6) acts of
terrorism and similar acts of sabotage;

(iii) loss of rents and/or business interruption insurance (A) with loss payable
to Lender; (B) covering all risks required to be covered by the insurance
provided for in Subsection 7.1(a)(i), (iv) and (vi) through (viii); (C) in an
amount determined by the insurer based on actual loss sustained by Borrower
resulting directly from such interruption of business, but not exceeding the
reduction in gross earnings during a period of recovery of not less than twelve
(12) months following the casualty, less charges and expenses which do not
necessarily continue during the interruption of business and (D) containing an
extended period of indemnity endorsement which provides that after the physical
loss to the Improvements and the Personal Property has been repaired, the
continued loss of income will be insured until such income either returns to the
same level it was at prior to the loss, or the expiration of six (6) months from
the date that the applicable Individual Property is repaired or replaced and
operations are resumed, whichever first occurs, and notwithstanding that the
policy may expire prior to the end of such period. To the extent that insurance
proceeds are payable to Lender pursuant to this Subsection (the “Rent Loss
Proceeds”) and Borrower is entitled to disbursement of such Rent Loss Proceeds
in accordance with the terms hereof (1) a

 

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Trigger Period shall be deemed to exist and (2) such Rent Loss Proceeds shall be
deposited by Lender in the Cash Management Account and disbursed as provided in
Article 9 hereof; provided, however, that (I) nothing herein contained shall be
deemed to relieve Borrower of its obligations to pay the obligations secured
hereunder on the respective dates of payment provided for in the Note except to
the extent such amounts are actually paid out of the Rent Loss Proceeds and (II)
in the event the Rent Loss Proceeds are paid in a lump sum in advance and
Borrower is entitled to disbursement of such Rent Loss Proceeds in accordance
with the terms hereof, Lender or Servicer shall hold such Rent Loss Proceeds in
a segregated interest-bearing Eligible Account (which shall deemed to be
included within the definition of the “Accounts” hereunder) and Lender or
Servicer shall estimate the number of months required for Borrower to restore
the damage caused by the applicable Casualty, shall divide the applicable
aggregate Rent Loss Proceeds by such number of months and shall disburse such
monthly installment of Rent Loss Proceeds from such Eligible Account into the
Cash Management Account each month during the performance of such Restoration;

(iv) at all times during which structural construction, repairs or alterations
are being made with respect to the Improvements (A) owner’s contingent or
protective liability insurance covering claims not covered by or under the terms
or provisions of the above mentioned commercial general liability insurance
policy; and (B) the insurance provided for in Subsection 7.1(a)(i) written in a
so-called builder’s risk completed value form (1) on a non-reporting basis,
(2) against all risks insured against pursuant to Subsection 7.1(a)(i),
(3) including permission to occupy each Individual Property, and (4) with an
agreed amount endorsement waiving co-insurance provisions;

(v) workers’ compensation, subject to the statutory limits of the state in which
each Individual Property is located, and employer’s liability insurance with a
limit of at least $1,000,000 per accident and per disease per employee, and
$1,000,000 for disease aggregate in respect of any work or operations on or
about each Individual Property, or in connection with the such Individual
Property or its operation (if applicable);

(vi) comprehensive boiler and machinery insurance covering all mechanical and
electrical equipment and pressure vessels and boilers in an amount not less than
their replacement cost or in such other amount as shall be reasonably required
by Lender;

(vii) if any portion of the Improvements is at any time located in an area
identified by the Secretary of Housing and Urban Development or any successor
thereto as an area having special flood hazards pursuant to the National Flood
Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National
Flood Insurance Reform Act of 1994, as each may be amended, or any successor law
(the “Flood Insurance Acts”), flood hazard insurance in an amount equal to the
maximum limit of coverage available for the Property under the Flood Insurance
Acts (or such higher amount as Lender may require in its sole discretion);

(viii) earthquake, sinkhole and mine subsidence insurance, if required, in
amounts equal to two times (2x) the probable maximum loss of each Individual
Property as determined by Lender in its reasonable discretion and in form and
substance satisfactory to Lender, provided that the insurance pursuant to this
Subsection (viii) shall be on terms consistent with the all risk insurance
policy required under Section 7.1(a)(i);

(ix) umbrella liability insurance in an amount not less than $3,000,000 per
occurrence on terms consistent with the commercial general liability insurance
policy required under subsection (ii) above;

(x) Intentionally Omitted;

(xi) motor vehicle liability coverage for all owned and non-owned vehicles,
including rented and leased vehicles containing minimum limits per occurrence,
including umbrella coverage, of One Million and No/100 Dollars ($1,000,000); and

 

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(xii) such other insurance and in such amounts as (A) may be required pursuant
to the terms of the Property Documents and (B) Lender from time to time may
reasonably request against such other insurable hazards which at the time are
commonly insured against for property similar to each Individual Property
located in or around the region in which each Individual Property is located.

(b) All insurance provided for in Subsection 7.1(a) hereof shall be obtained
under valid and enforceable policies (the “Policies” or in the singular, the
“Policy”), in such forms and, from time to time after the date hereof, in such
amounts as may be satisfactory to Lender, issued by financially sound and
responsible insurance companies authorized and admitted to do business in the
state in which each Individual Property is located and approved by Lender. The
insurance companies must have a general policy rating of A or better and a
financial class of X or better by A.M. Best Company, Inc., and a claims paying
ability/financial strength rating of “A-” (or its equivalent) or better by at
least two (2) of the Rating Agencies (one of which will be S&P if they are
rating the Securities and one of which shall be Moody’s if they are rating the
Securities), or if only one Rating Agency is rating the Securities, then only by
such Rating Agency (each such insurer shall be referred to below as a “Qualified
Insurer”). Not less than fifteen (15) days prior to the expiration dates of the
Policies for which certificates were furnished to Lender pursuant to Subsection
7.1(a), Borrower shall deliver certificates of insurance relating to the
Policies marked “premium paid” or accompanied by evidence satisfactory to Lender
of payment of the premiums due thereunder (the “Insurance Premiums”), provided,
however, Borrower shall, when available, deliver to Lender certified copies of
the Policies promptly upon Lender’s request therefor.

(c) Borrower shall not obtain (or permit to be obtained) (i) any umbrella or
blanket liability or casualty Policy unless, in each case, such Policy is
approved in advance in writing by Lender, Lender’s interest is included therein
as provided in this Agreement, such Policy is issued by a Qualified Insurer and
such Policy includes such changes to the coverages and requirements set forth
herein as may be required by Lender (including, without limitation, increases to
the amount of coverages required herein) or (ii) separate insurance concurrent
in form or contributing in the event of loss with that required in Subsection
7.1(a) to be furnished by, or which may be reasonably required to be furnished
by, Borrower. In the event Borrower obtains (or causes to be obtained) separate
insurance or an umbrella or a blanket Policy, Borrower shall notify Lender of
the same and shall cause certified copies of each Policy to be delivered as
required in Subsection 7.1(a).

(d) All Policies of insurance provided for or contemplated by Subsection 7.1(a),
except for the Policy referenced in Subsection 7.1(a)(v), shall name Lender and
Borrower as the insured or additional insured, as their respective interests may
appear, and in the case of property damage, rent loss, business interruption,
boiler and machinery, earthquake and flood insurance, shall contain a standard
noncontributing mortgagee clause (or its equivalent) in favor of Lender
providing that the loss thereunder shall be payable to Lender.

(e) All Policies of insurance provided for in Subsection 7.1(a) shall contain
clauses or endorsements to the effect that:

(i) the following shall in no way affect the validity or enforceability of the
Policy insofar as Lender is concerned: (A) any act or negligence of Borrower, of
anyone acting for Borrower, of any Tenant under any Lease or other occupant, of
Lender or of any other Person named as an insured, additional insured and/or
loss payee and (B) the failure to comply with the provisions of the Policy which
might otherwise result in a forfeiture of the insurance or any part thereof;

(ii) the Policy shall not be terminated or cancelled without at least 30 days’
written notice to Lender and any other party named therein as an insured;

(iii) the issuer(s) of the Policy shall give written notice to Lender if the
Policy has not been renewed thirty (30) days prior to its expiration;

(iv) As long as the Borrower is paying, Lender shall not be liable for any
Insurance Premiums thereon or subject to any assessments or commissions
thereunder and that the related issuer(s) waive any related claims to the
contrary;

 

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(v) Lender shall, at its option and with no obligation to do so, have the right
to directly pay Insurance Premiums in order to avoid cancellation, expiration
and/or termination of the Policy due to non-payment of Insurance Premiums; and

(vi) the Policy shall not exclude coverage for acts of terror or similar acts of
sabotage.

(f) Borrower shall furnish to Lender, on or before thirty (30) days after the
close of each of Borrower’s fiscal years, a statement certified by Borrower or a
Responsible Officer of Borrower of the amounts of insurance maintained in
compliance herewith, of the risks covered by such insurance and of the insurance
company or companies which carry such insurance and, if requested by Lender,
verification of the adequacy of such insurance by an independent insurance
broker or appraiser acceptable to Lender.

(g) If at any time Lender is not in receipt of written evidence that all
insurance required hereunder is in full force and effect, Lender shall have the
right, without notice to Borrower to take such action as Lender deems necessary
to protect its interest in the Properties, including, without limitation, the
obtaining of such insurance coverage as Lender in its sole discretion deems
appropriate, and all expenses reasonably incurred by Lender in connection with
such action or in obtaining such insurance and keeping it in effect shall be
paid by Borrower to Lender upon demand and until paid shall be secured by the
Security Instruments and shall bear interest at the Default Rate.

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

(i) As an alternative to the Policies required to be maintained pursuant to the
preceding provisions of this Section 7.1, Borrower will not be in default under
this Section 7.1 if Borrower maintains (or causes to be maintained) Policies
which (i) have coverages, deductibles and/or other related provisions other than
those specified above and/or (ii) are provided by insurance companies not
meeting the credit ratings requirements set forth above (any such Policy, a
“Non-Conforming Policy”), provided, that, prior to obtaining such Non-Conforming
Policies (or permitting such Non-Conforming Policies to be obtained), Borrower
shall have (1) received Lender’s prior written consent thereto and (2) if
required by Lender, confirmed that Lender has received a Rating Agency
Confirmation with respect to any such Non-Conforming Policy. Notwithstanding the
foregoing, Lender hereby reserves the right to deny its consent to any
Non-Conforming Policy regardless of whether or not Lender has consented to the
same on any prior occasion.

(j) Borrower shall cooperate with Lender in obtaining for Borrower and Lender
the benefits of any Awards or insurance proceeds lawfully or equitably payable
in connection with the Property, and Lender shall be reimbursed for any expenses
reasonably incurred by Lender in connection therewith (including reasonable,
actual attorneys’ fees and disbursements, and the payment by Borrower of the
expense of an appraisal on behalf of Lender in case of a Casualty or
Condemnation affecting the Property or any part thereto) out of such Awards or
insurance proceeds.

Section 7.2     Casualty. If an Individual Property shall be damaged or
destroyed, in whole or in part, by fire or other casualty (a “Casualty”),
Borrower shall give prompt notice of such damage to Lender and shall promptly
commence and diligently prosecute the Restoration of such Individual Property
and otherwise in accordance with Section 7.4. Borrower shall pay all costs of
such Restoration whether or not such costs are covered by insurance. Lender may,
but shall not be obligated to, make proof of loss if not made promptly by
Borrower.

Section 7.3     Condemnation. Borrower shall promptly give Lender notice of the
actual or threatened commencement of any proceeding for the Condemnation of any
Individual Property of which Borrower has knowledge and shall deliver to Lender
copies of any and all papers served in connection with such proceedings. Lender
may participate in any such proceedings, and Borrower shall from time to time
deliver to Lender all instruments requested by it to permit such participation.
Borrower shall, at its expense, diligently prosecute any

 

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such proceedings, and shall consult with Lender, its attorneys and experts, and
cooperate with them in the carrying on or defense of any such proceedings.
Notwithstanding any taking by any public or quasi-public authority through
Condemnation or otherwise (including but not limited to any transfer made in
lieu of or in anticipation of the exercise of such taking), Borrower shall
continue to pay the Debt at the time and in the manner provided for its payment
in the Note and in this Agreement and the Debt shall not be reduced until any
Award shall have been actually received and applied by Lender, after the
deduction of expenses of collection, to the reduction or discharge of the Debt.
Lender shall not be limited to the interest paid on the Award by the condemning
authority but shall be entitled to receive out of the Award interest at the rate
or rates provided herein or in the Note. If any Individual Property or any
portion thereof is taken by a condemning authority, provided Lender makes Net
Proceeds available for Restoration, Borrower shall promptly commence and
diligently prosecute the Restoration of such Individual Property and otherwise
comply with the provisions of Section 7.4. If any Individual Property is sold,
through foreclosure or otherwise, prior to the receipt by Lender of the Award,
Lender shall have the right, whether or not a deficiency judgment on the Note
shall have been sought, recovered or denied, to receive the Award, or a portion
thereof sufficient to pay the Debt, with any excess to be paid to Borrower.
Notwithstanding the foregoing or anything to the contrary contained herein, in
the event that, in accordance with the applicable terms and conditions hereof,
the Condemnation Net Proceeds are required to be applied to the Debt and the
amount of the Condemnation Net Proceeds applied to the Debt in connection
therewith are insufficient under REMIC Requirements, Borrower shall, within five
(5) days of demand by Lender, prepay the principal amount of the Debt in an
amount equal to such insufficiency plus the amount of any then applicable
Interest Shortfall (such payment, the “Condemnation Payment”).

Section 7.4     Restoration. The following provisions shall apply in connection
with the Restoration of any Individual Property:

(a) If the Net Proceeds shall be less than the Restoration Threshold and the
costs of completing the Restoration shall be less than the Restoration
Threshold, the Net Proceeds will be disbursed by Lender to Borrower upon
receipt, provided that all of the conditions set forth in Section 7.4(b)(i) are
met and Borrower delivers to Lender a written undertaking to expeditiously
commence and to satisfactorily complete with due diligence the Restoration in
accordance with the terms of this Agreement.

(b) If the Net Proceeds are equal to or greater than the Restoration Threshold
or the costs of completing the Restoration are equal to or greater than the
Restoration Threshold, Lender shall make the Net Proceeds available for the
Restoration in accordance with the provisions of this Section 7.4.

(i) The Net Proceeds shall be made available for Restoration provided that each
of the following conditions are met:

 

  (A) no Event of Default shall have occurred and be continuing;

 

  (B) (1) in the event the Net Proceeds are insurance proceeds, less than
thirty-five percent (35%) of each of (i) fair market value of the applicable
Individual Property as reasonably determined by Lender, and (ii) rentable area
of the applicable Individual Property has been damaged, destroyed or rendered
unusable as a result of a Casualty or (2) in the event the Net Proceeds are
condemnation proceeds, less than ten percent (10%) of each of (i) the fair
market value of the applicable Individual Property as reasonably determined by
Lender and (ii) rentable area of the applicable Individual Property is taken,
such land is located along the perimeter or periphery of the Property, (iii) no
portion of the Improvements is located on such land and (iv) such taking does
not materially impair the existing access to the applicable Individual Property
or the continued operation of the Individual Property as a self storage
facility;

 

  (C) Intentionally Omitted;

 

  (D)

Borrower shall commence (or shall cause the commencement of) the Restoration as
soon as reasonably practicable (but in no event later than thirty (30) days
after the issuance of a

 

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building permit with respect thereto) and shall diligently pursue the same to
satisfactory completion in compliance with all applicable Legal Requirements,
including, without limitation, all applicable Environmental Laws, and the
applicable requirements of the Property Documents;

 

  (E) Lender shall be satisfied that any operating deficits which will be
incurred with respect to the applicable Individual Property as a result of the
occurrence of any such fire or other casualty or taking will be covered out of
(1) the Net Proceeds, (2) the insurance coverage referred to in
Section 7.1(a)(iii) above, or (3) other funds of Borrower;

 

  (F) The debt service coverage ratio (as reasonably determined by Lender for
the twelve (12) month period following the completion of the Restoration and
stabilization of the Individual Property) shall be equal to or greater than 1.20
to 1.00;

 

  (G) Lender shall be satisfied that the Restoration will be completed on or
before the earliest to occur of (1) six (6) months prior to the Maturity Date,
(2) six (6) months after the occurrence of such fire or other casualty or
taking, (3) the earliest date required for such completion under the terms of
any Leases and the Property Documents, (4) such time as may be required under
applicable Legal Requirements or (5) the expiration of the insurance coverage
referred to in Section 7.1(a)(iii) above;

 

  (H) Intentionally Omitted;

 

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

 

  (J) the Restoration shall be done and completed in an expeditious and diligent
fashion and in compliance with all applicable Legal Requirements and the
Property Documents;

 

  (K) the Property Documents will remain in full force and effect during and
after the Restoration and a Property Document Event shall not occur as a result
of the applicable Casualty, Condemnation and/or Restoration; and

 

  (L) Lender shall be satisfied that making the Net Proceeds available for
Restoration shall be permitted pursuant to REMIC Requirements.

(ii) The Net Proceeds shall be held by Lender and, until disbursed in accordance
with the provisions of this Section 7.4(b), shall constitute additional security
for the Debt and other obligations under this Agreement, the Security
Instruments, the Note and the other Loan Documents. The Net Proceeds (other than
the Rent Loss Proceeds) shall be disbursed by Lender to, or as directed by,
Borrower from time to time during the course of the Restoration, upon receipt of
evidence satisfactory to Lender that (A) all materials installed and work and
labor performed (except to the extent that they are to be paid for out of the
requested disbursement) in connection with the related Restoration item have
been paid for in full, and (B) there exist no notices of pendency, stop orders,
mechanic’s or materialman’s liens or notices of intention to file same, or any
other liens or encumbrances of any nature whatsoever on the applicable
Individual Property which have not either been fully bonded to the satisfaction
of Lender and discharged of record or in the alternative fully insured to the
satisfaction of Lender by the title company issuing the Title Insurance Policy.

(iii) All plans and specifications required in connection with the Restoration
shall be subject to prior review and acceptance in all respects by Lender and by
an independent consulting engineer selected by Lender (the “Casualty
Consultant”). Lender shall have the use of the plans and specifications and all
permits, licenses and approvals required or obtained in connection with the
Restoration. The identity of the contractors, subcontractors and materialmen
engaged in the Restoration shall be subject to

 

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prior review and acceptance by Lender and the Casualty Consultant, not to be
unreasonably withheld. All costs and expenses incurred by Lender in connection
with making the Net Proceeds available for the Restoration including, without
limitation, reasonable counsel fees and disbursements and the Casualty
Consultant’s fees, shall be paid by Borrower. Borrower shall have the right to
settle all claims under the Policies jointly with Lender, provided that (a) no
Event of Default exists, (b) Borrower promptly and with commercially reasonable
diligence negotiates a settlement of any such claims and (c) the insurer with
respect to the Policy under which such claim is brought has not raised any act
of the insured as a defense to the payment of such claim. If an Event of Default
exists, Lender shall, at its election, have the exclusive right to settle or
adjust any claims made under the Policies in the event of a Casualty. To the
extent that Lender’s prior written approval is required for the identity of the
contractors, subcontractors and materialmen pursuant to this subsection (iii),
such request for approval shall be deemed approved if the Deemed Approval
Requirements are fully satisfied.

(iv) In no event shall Lender be obligated to make disbursements of the Net
Proceeds in excess of an amount equal to the costs actually incurred from time
to time for work in place as part of the Restoration, as certified by the
Casualty Consultant, minus the Restoration Retainage. The term “Restoration
Retainage” as used in this Subsection 7.4(b) shall mean an amount equal to 10%
of the costs actually incurred for work in place as part of the Restoration, as
certified by the Casualty Consultant, until such time as the Casualty Consultant
certifies to Lender that Net Proceeds representing 50% of the required
Restoration have been disbursed. There shall be no Restoration Retainage with
respect to costs actually incurred by Borrower for work in place in completing
the last 50% of the required Restoration. The Restoration Retainage shall in no
event, and notwithstanding anything to the contrary set forth above in this
Subsection 7.4(b), be less than the amount actually held back by Borrower from
contractors, subcontractors and materialmen engaged in the Restoration. The
Restoration Retainage shall not be released until the Casualty Consultant
certifies to Lender that the Restoration has been completed in accordance with
the provisions of this Subsection 7.4(b) and that all approvals necessary for
the re-occupancy and use of the applicable Individual Property have been
obtained from all appropriate governmental and quasi-governmental authorities,
and Lender receives evidence satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out of the
Restoration Retainage, provided, however, that Lender will release the portion
of the Restoration Retainage being held with respect to any contractor,
subcontractor or materialman engaged in the Restoration as of the date upon
which the Casualty Consultant certifies to Lender that the contractor,
subcontractor or materialman has satisfactorily completed all work and has
supplied all materials in accordance with the provisions of the contractor’s,
subcontractor’s or materialman’s contract, and the contractor, subcontractor or
materialman delivers the lien waivers and evidence of payment in full of all
sums due to the contractor, subcontractor or materialman as may be reasonably
requested by Lender or by the title company insuring the lien of the applicable
Security Instrument. If required by Lender, the release of any such portion of
the Restoration Retainage shall be approved by the surety company, if any, which
has issued a payment or performance bond with respect to the contractor,
subcontractor or materialman.

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

(vi) If at any time the Net Proceeds or the undisbursed balance thereof shall
not, in the reasonable opinion of Lender in consultation with the Casualty
Consultant, be sufficient to pay in full the balance of the costs which are
estimated by the Casualty Consultant to be incurred in connection with the
completion of the Restoration, Borrower shall deposit the deficiency (the “Net
Proceeds Deficiency”) with Lender before any further disbursement of the Net
Proceeds shall be made. The Net Proceeds Deficiency deposited with Lender shall
be held by Lender and shall be disbursed for costs actually incurred in
connection with the Restoration on the same conditions applicable to the
disbursement of the Net Proceeds, and until so disbursed pursuant to this
Section 7.4(b) shall constitute additional security for the Debt and other
obligations under this Agreement, the Security Instruments, the Note and the
other Loan Documents.

(vii) The excess, if any, of the Net Proceeds and the remaining balance, if any,
of the Net Proceeds Deficiency deposited with Lender after the Casualty
Consultant certifies to Lender that the Restoration has been completed in
accordance with the provisions of this Section 7.4(b), and the receipt by

 

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Lender of evidence satisfactory to Lender that all costs incurred in connection
with the Restoration have been paid in full, shall be remitted by Lender to
Borrower, provided no Event of Default shall have occurred and shall be
continuing under this Agreement, the Security Instruments, the Note or any of
the other Loan Documents.

(c) All Net Proceeds not required (i) to be made available for the Restoration
or (ii) to be returned to Borrower as excess Net Proceeds pursuant to Subsection
7.4(b)(vii) shall be retained and applied by Lender toward the payment of the
Debt whether or not then due and payable in such order, priority and proportions
as Lender in its discretion shall deem proper. If Lender shall receive and
retain Net Proceeds, the lien of the Security Instruments shall be reduced only
by the amount thereof received and retained by Lender and actually applied by
Lender in reduction of the Debt.

ARTICLE 8

RESERVE FUNDS

Section 8.1     Immediate Repair Funds.

(a) Borrower shall perform the repairs at each Individual Property as set forth
on Schedule I hereto (such repairs hereinafter referred to as “Immediate
Repairs”) and shall complete each of the Immediate Repairs on or before the
respective deadline for each repair as set forth on Schedule I hereto. On the
Closing Date, Borrower shall deposit into an Eligible Account held by Lender or
Servicer (the “Immediate Repair Account”) the amount set forth on such Schedule
I hereto to perform the Immediate Repairs. Amounts deposited pursuant to this
Section 8.1 are referred to herein as the “Immediate Repair Funds”.

(b) Lender shall disburse to Borrower the Immediate Repair Funds upon
satisfaction by Borrower of each of the following conditions: (i) Borrower shall
submit a request for payment to Lender at least ten (10) days prior to the date
on which Borrower requests such payment be made and specifies the Immediate
Repairs to be paid; (ii) on the date such request is received by Lender and on
the date such payment is to be made, no Event of Default shall exist and remain
uncured; (iii) Lender shall have received a certificate from Borrower
(A) stating that all Immediate Repairs to be funded by the requested
disbursement have been completed in a good and workmanlike manner and in
accordance with all applicable Legal Requirements, such certificate to be
accompanied by a copy of any license, permit or other approval by any
Governmental Authority required in connection with the Immediate Repairs,
(B) identifying each Person that supplied materials or labor in connection with
the Immediate Repairs to be funded by the requested disbursement, and
(C) stating that each such Person has been paid in full or will be paid in full
upon such disbursement, such certificate to be accompanied by lien waivers,
invoices and/or other evidence of payment reasonably satisfactory to Lender;
(iv) at Lender’s option, a title search for the applicable Individual Property
indicating that such Individual Property is free from all liens, claims and
other encumbrances other than Permitted Encumbrances; (v) at Lender’s option, if
the cost of the Immediate Repairs exceeds $50,000, Lender shall have received a
report satisfactory to Lender in its reasonable discretion from an architect or
engineer approved by Lender in respect of such architect or engineer’s
inspection of the required repairs; and (vi) Lender shall have received such
other evidence as Lender shall reasonably request that the Immediate Repairs to
be funded by the requested disbursement have been completed and are paid for or
will be paid upon such disbursement to Borrower. Lender shall not be required to
disburse Immediate Repair Funds more frequently than once each calendar month
nor in an amount less than the Minimum Disbursement Amount (or a lesser amount
if the total Immediate Repair Funds is less than the Minimum Disbursement
Amount, in which case only one disbursement of the amount remaining in the
account shall be made).

Section 8.2     Replacement Reserve Funds.

(a) Borrower shall deposit into an Eligible Account held by Lender or Servicer
(the “Replacement Reserve Account”) on each Monthly Payment sDate an amount
equal to $10,627.00 (the “Replacement Reserve Monthly Deposit”) for the
Replacements. Amounts deposited pursuant to this Section 8.2 are referred to
herein as the “Replacement Reserve Funds”. Lender may reassess its estimate of
the amount necessary for Replacements from time to time based upon a building
condition or engineer’s report prepared by an engineer or other professional

 

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reasonably acceptable to Lender. Lender may require Borrower to increase the
monthly deposits required pursuant to this Section 8.2 upon thirty (30) days
notice to Borrower if, based on the recommendation contained in the report
described in the preceding sentence, Lender determines, in its reasonable
discretion and in acting in good faith, that an increase is necessary to
maintain proper operation of any Individual Property.

(b) Lender shall disburse Replacement Reserve Funds only for Replacements.
Lender shall disburse to Borrower the Replacement Reserve Funds upon
satisfaction by Borrower of each of the following conditions: (i) Borrower shall
submit a request for payment to Lender at least ten (10) days prior to the date
on which Borrower requests such payment be made and specifies the Replacements
to be paid; (ii) on the date such request is received by Lender and on the date
such payment is to be made, no Event of Default shall exist and remain uncured,
(iii) Lender shall have received a certificate from Borrower (A) stating that
the items to be funded by the requested disbursement are Replacements,
(B) stating that all Replacements at the applicable Individual Property to be
funded by the requested disbursement have been completed in a good and
workmanlike manner and in accordance with all applicable Legal Requirements,
such certificate to be accompanied by a copy of any license, permit or other
approval required by any Governmental Authority in connection with the
Replacements, (C) identifying each Person that supplied materials or labor in
connection with the Replacements to be funded by the requested disbursement and
(D) stating that each such Person has been paid in full or will be paid in full
upon such disbursement, such certificate to be accompanied by lien waivers,
invoices and/or other evidence of payment satisfactory to Lender; (iv) at
Lender’s option, a title search for the applicable Individual Property
indicating that such Individual Property is free from all liens, claims and
other encumbrances other than Permitted Encumbrances; (v) at Lender’s option, if
the cost of any individual Replacement exceeds $50,000, Lender shall have
received a report satisfactory to Lender in its reasonable discretion from an
architect or engineer approved by Lender in respect of such architect or
engineer’s inspection of the required repairs; and (vi) Lender shall have
received such other evidence as Lender shall reasonably request that the
Replacements at the applicable Individual Property to be funded by the requested
disbursement have been completed and are paid for or will be paid upon such
disbursement to Borrower. Lender shall not be required to disburse Replacement
Reserve Funds more frequently than once each calendar month nor in an amount
less than the Minimum Disbursement Amount (or a lesser amount if the total
amount of Replacement Reserve Funds is less than the Minimum Disbursement
Amount, in which case only one disbursement of the amount remaining in the
account shall be made). Lender shall not be obligated to make disbursements from
the Replacement Reserve Account with respect to an Individual Property in excess
of the amount of Replacement Reserve Monthly Deposits allocable to such
Individual Property as set forth on Schedule 8.2 hereof.

(c) Nothing in this Section 8.2 shall (i) make Lender responsible for making or
completing the Replacements; (ii) require Lender to expend funds in addition to
the Replacement Reserve Funds to complete any Replacements; (iii) obligate
Lender to proceed with the Replacements; or (iv) obligate Lender to demand from
Borrower additional sums to complete any Replacements.

(d) Borrower shall permit Lender and Lender’s agents and representatives
(including, without limitation, Lender’s engineer, architect, or inspector) or
third parties to enter onto each Individual Property during normal business
hours (subject to the rights of Tenants under their Leases) to inspect the
progress of any Replacements and all materials being used in connection
therewith and to examine all plans and shop drawings relating to such
Replacements. Borrower shall cause all contractors and subcontractors to
cooperate with Lender or Lender’s representatives or such other Persons
described above in connection with inspections described in this Section.

Section 8.3     Intentionally Omitted.

Section 8.4     Operating Expense Funds. On the first Monthly Payment Date
occurring after each occurrence of a Trigger Period, Borrower shall make a True
Up Payment into the Operating Expense Account. On each Monthly Payment Date
occurring on and after the occurrence and continuance of a Trigger Period,
Borrower shall deposit (or shall cause there to be deposited) into an Eligible
Account held by Lender or Servicer (the “Operating Expense Account”) an amount
equal to the aggregate amount of Approved Operating Expenses and Approved
Extraordinary Expenses to be incurred by Borrower for the then current Interest
Accrual Period (such amount, the “Op Ex Monthly Deposit”). Amounts deposited
pursuant to this Section 8.4 are referred to herein as the “Operating Expense
Funds”. Provided no Event of Default has occurred and is continuing, Lender
shall disburse the

 

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Operating Expense Funds to Borrower to pay Approved Operating Expenses and/or
Approved Extraordinary Expenses upon Borrower’s request (which such request
shall be accompanied by an Officer’s Certificate detailing the applicable
expenses to which the requested disbursement relates and attesting that such
expense shall be paid with the requested disbursement).

Section 8.5     Excess Cash Flow Funds. On each Monthly Payment Date occurring
after the occurrence and continuance of a Trigger Period, Borrower shall deposit
(or cause to be deposited) into an Eligible Account with Lender or Servicer (the
“Excess Cash Flow Account”) an amount equal to the Excess Cash Flow generated by
the Properties for the immediately preceding Interest Accrual Period (each such
monthly deposit being herein referred to as the “Monthly Excess Cash Flow
Deposits” and the amounts on deposit in the Excess Cash Flow Reserve Account
being herein referred to as the “Excess Cash Flow Funds”). Provided no Event of
Default exists and all required deposits to be made to any Reserve Accounts have
been made, sums on deposit in the Excess Cash Flow Account shall be returned to
Borrower upon the termination of the applicable Trigger Period.

Section 8.6     Tax and Insurance Funds. In addition to the initial deposits
with respect to Taxes and, if applicable, Insurance Premiums made by Borrower to
Lender on the Closing Date to be held in Eligible Accounts by Lender or Servicer
and hereinafter respectively referred to as the “Tax Account” and the “Insurance
Account”, Borrower shall pay (or cause to be paid) to Lender on each Monthly
Payment Date (a) one-twelfth of an amount which would be sufficient to pay the
Taxes payable, or reasonably estimated by Lender to be payable, during the next
ensuing twelve (12) months (the “Monthly Tax Deposit”), each of which such
deposits shall be held in the Tax Account, and (b) at the option of Lender, if
the liability or casualty Policy maintained by Borrower covering the Properties
shall not constitute an approved blanket or umbrella Policy pursuant to
Subsection 7.1(c) hereof, one-twelfth of an amount which would be sufficient to
pay the Insurance Premiums due for the renewal of the coverage afforded by the
Policies upon the expiration thereof (the “Monthly Insurance Deposit”), each of
which such deposits shall be held in the Insurance Account (amounts held in the
Tax Account and the Insurance Account are collectively herein referred to as the
“Tax and Insurance Funds”). In the event Lender shall elect, after the Closing
Date, to collect payments in escrow for Insurance Premiums should Lender have
the right to do so hereunder or if Lender reasonably estimates that sums in the
Tax Account will be insufficient to pay the Taxes on or before the date said
Taxes become due, Borrower shall pay a True Up Payment with respect to the same
into the applicable Reserve Account. Borrower agrees to notify Lender
immediately of any changes to the amounts, schedules and instructions for
payment of any Taxes and Insurance Premiums of which it has or obtains knowledge
and authorizes Lender or its agent to obtain the bills for Taxes directly from
the appropriate taxing authority. Provided there are sufficient amounts in the
Tax Account and Insurance Account, respectively, and no Event of Default exists,
Lender shall be obligated to pay the Taxes and Insurance Premiums as they become
due on their respective due dates on behalf of Borrower by applying the Tax and
Insurance Funds to the payment of such Taxes and Insurance Premiums. If the
amount of the Tax and Insurance Funds shall exceed the amounts due for Taxes and
Insurance Premiums pursuant to Sections 4.5 and 7.1 hereof, Lender shall, in its
discretion, return any excess to Borrower or credit such excess against future
payments to be made to the Tax and Insurance Funds. If the Tax and Insurance
Funds are not sufficient to pay the amounts set forth above, Borrower shall
promptly pay to Lender, upon demand, an amount which Lender shall reasonably
estimate as sufficient to make up the deficiency.

Section 8.7     The Accounts Generally.

(a) Borrower grants to Lender a first-priority perfected security interest in
each of the Accounts and any and all sums now or hereafter deposited in the
Accounts as additional security for payment of the Debt. Until expended or
applied in accordance herewith, the Accounts and the funds deposited therein
shall constitute additional security for the Debt. The provisions of this
Section 8.7 (together with the other related provisions of the other Loan
Documents) are intended to give Lender and/or Servicer “control” of the Accounts
and the Account Collateral and serve as a “security agreement” and a “control
agreement” with respect to the same, in each case, within the meaning of the
UCC. Borrower acknowledges and agrees that the Accounts are subject to the sole
dominion, control and discretion of Lender, its authorized agents or designees,
subject to the terms hereof, and Borrower shall have no right of withdrawal with
respect to any Account except with the prior written consent of Lender or as
otherwise provided herein. The funds on deposit in the Accounts shall not
constitute trust funds and may be commingled with other monies held by Lender.

 

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(b) Borrower shall not, without obtaining the prior written consent of Lender,
further pledge, assign or grant any security interest in the Accounts or the
sums deposited therein or permit any lien to attach thereto, or any levy to be
made thereon, or any UCC-1 Financing Statements, except those naming Lender as
the secured party, to be filed with respect thereto. Borrower hereby authorizes
Lender to file a financing statement or statements under the UCC in connection
with any of the Accounts and the Account Collateral in the form required to
properly perfect Lender’s security interest therein. Borrower agrees that at any
time and from time to time, at the expense of Borrower, Borrower will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be reasonably necessary or desirable, or that Lender may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby (including, without limitation, any
security interest in and to any Permitted Investments) or to enable Lender to
exercise and enforce its rights and remedies hereunder with respect to any
Account or Account Collateral.

(c) Notwithstanding anything to the contrary contained herein or in any other
Loan Document, upon the occurrence and during the continuance of an Event of
Default, without notice from Lender or Servicer (i) Borrower shall have no
rights in respect of the Accounts, (ii) Lender may liquidate and transfer any
amounts then invested in Permitted Investments pursuant to the applicable terms
hereof to the Accounts or reinvest such amounts in other Permitted Investments
as Lender may reasonably determine is necessary to perfect or protect any
security interest granted or purported to be granted hereby or pursuant to the
other Loan Documents or to enable Lender to exercise and enforce Lender’s rights
and remedies hereunder or under any other Loan Document with respect to any
Account or any Account Collateral, and (iii) Lender shall have all rights and
remedies with respect to the Accounts and the amounts on deposit therein and the
Account Collateral as described in this Agreement and in the Security
Instruments, in addition to all of the rights and remedies available to a
secured party under the UCC, and, notwithstanding anything to the contrary
contained in this Agreement or in the Security Instruments, may apply the
amounts of such Accounts to amounts then due hereunder as Lender determines in
its sole discretion including, but not limited to, payment of the Debt.

(d) The insufficiency of funds on deposit in the Accounts shall not absolve
Borrower of the obligation to make any payments, as and when due pursuant to
this Agreement and the other Loan Documents, and such obligations shall be
separate and independent, and not conditioned on any event or circumstance
whatsoever.

(e) Borrower shall indemnify Lender and hold Lender harmless from and against
any and all actions, suits, claims, demands, liabilities, losses, damages,
obligations and costs and expenses (including litigation costs and reasonable
attorneys fees and expenses) arising from or in any way connected with the
Accounts, the sums deposited therein or the performance of the obligations for
which the Accounts were established, except to the extent arising from the gross
negligence or willful misconduct of Lender, its agents or employees. Borrower
shall assign to Lender all rights and claims Borrower may have against all
Persons supplying labor, materials or other services which are to be paid from
or secured by the Accounts; provided, however, that Lender may not pursue any
such right or claim unless an Event of Default has occurred and remains uncured.

(f) Borrower and Lender (or Servicer on behalf of Lender) shall maintain each
applicable Account as an Eligible Account, except as otherwise expressly agreed
to in writing by Lender. In the event that Lender or Servicer no longer
satisfies the criteria for an Eligible Institution, Borrower shall cooperate
with Lender in transferring the applicable Accounts to an institution that
satisfies such criteria. Borrower hereby grants Lender power of attorney
(irrevocable for so long as the Loan is outstanding) with respect to any such
transfers and the establishment of accounts with a successor institution.

(g) Interest accrued on any Account other than an Interest Bearing Account shall
not be required to be remitted either to Borrower or to any Account and may
instead be retained by Lender. Funds deposited in the Interest Bearing Accounts
shall be invested in Permitted Investments as provided for in Section 8.7(h)
hereof. Interest accrued, if any, on sums on deposit in the Interest Bearing
Accounts shall be remitted to and become part of the applicable Account. All
such interest that so becomes part of the applicable Account shall be disbursed
in accordance with the disbursement procedures contained herein applicable to
such Account; provided, however, that Lender may, at its election, retain any
such interest for its own account during the occurrence and continuance of an
Event of Default.

 

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(h) Sums on deposit in the Interest Bearing Accounts shall, upon Borrower’s
written request, be invested in Permitted Investments selected by Lender or
Servicer provided (i) such investments are then regularly offered by Lender (or
Servicer on behalf of Lender) for accounts of this size, category and type
(Borrower acknowledges that the Servicer or Lender may only offer as an
investment opportunity the right to place funds on deposit in the applicable
Accounts in an interest bearing account (bearing interest at the money market
rate)), (ii) such investments are permitted by applicable federal, State and
local rules, regulations and laws, (iii) the maturity date of the Permitted
Investment is not later than the date on which sums in the Interest Bearing
Accounts are required to be disbursed pursuant to the terms hereof, and (iv) no
Event of Default shall have occurred and be continuing. All income earned from
the aforementioned Permitted Investments shall be the property of Borrower and
Borrower hereby irrevocably authorizes and directs Lender (or Servicer on behalf
of Lender) to hold any income earned from the aforementioned Permitted
Investments as part of the applicable Interest Bearing Account. Borrower shall
be responsible for payment of any federal, State or local income or other tax
applicable to income earned from Permitted Investments. No other investments of
the sums on deposit in the Interest Bearing Accounts shall be permitted. Lender
shall not be liable for any loss sustained on the investment of any funds in the
Interest Bearing Accounts.

(i) Borrower acknowledges and agrees that it solely shall be, and shall at all
times remain, liable to Lender or Servicer for all fees, charges, costs and
expenses in connection with the Accounts, this Agreement and the enforcement
hereof, including, without limitation, any monthly or annual fees or charges as
may be assessed by Lender or Servicer in connection with the administration of
the Accounts and the reasonable fees and expenses of legal counsel to Lender and
Servicer as needed to enforce, protect or preserve the rights and remedies of
Lender and/or Servicer under this Agreement.

ARTICLE 9

CASH MANAGEMENT

Section 9.1     Establishment of Certain Accounts.

(a) Borrower shall, simultaneously herewith, establish an Eligible Account (the
“Restricted Account”) pursuant to the Restricted Account Agreement in the name
of Borrower for the sole and exclusive benefit of Lender into which Borrower
shall deposit, or cause to be deposited, all revenue generated by the
Properties. Pursuant to the Restricted Account Agreement, funds on deposit in
the Restricted Account shall be transferred on each Business Day to or at the
direction of Borrower unless a Trigger Period exists, in which case such funds
shall be transferred on each Business Day to the Cash Management Account. Lender
acknowledges that, notwithstanding anything herein to the contrary, for purposes
of convenience the Restricted Account will be established in the name and under
the taxpayer identification number of one Borrower, SSTI 1742 Pass Rd, LLC.

(b) Upon the first occurrence of a Trigger Period, Lender, on Borrower’s behalf,
shall establish an Eligible Account (the “Cash Management Account”) with Lender
or Servicer, as applicable, in the name of Borrower for the sole and exclusive
benefit of Lender. Upon the first occurrence of a Trigger Period, Lender, on
Borrower’s behalf, shall also establish with Lender or Servicer an Eligible
Account into which Borrower shall deposit, or cause to be deposited the amounts
required for the payment of Debt Service under the Loan (the “Debt Service
Account”).

Section 9.2     Deposits into the Restricted Account; Maintenance of Restricted
Account.

(a) Borrower represents, warrants and covenants that, so long as the Debt
remains outstanding, (i) Borrower shall, or shall cause Manager to, deposit all
revenue derived from the Properties and received by Borrower or Manager, as the
case may be, into the Restricted Account once each week; (ii) Borrower shall
instruct Manager to deposit (A) all revenue derived from the Properties
collected by Manager, if any, pursuant to the Management Agreement (or
otherwise) into the Restricted Account once each week and (B) all funds
otherwise payable to Borrower by Manager pursuant to the Management Agreement
(or otherwise in connection with the Properties) into the Restricted Account;
(iii) except as previously disclosed to Lender in writing prior to the closing
of the Loan, there shall be no other accounts maintained by Borrower or any
other Person into which revenues from the

 

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ownership and operation of the Properties are directly deposited; and
(iv) except as previously disclosed to Lender in writing prior to the closing of
the Loan, neither Borrower nor any other Person shall open any other such
account with respect to the direct deposit of income in connection with the
Properties. Notwithstanding anything herein to the contrary but subject to the
terms of Section 5.1 and Section 9.2(a)(i) and (ii), Borrower or Manager, at
Borrower’s discretion, may deposit all revenues derived from each Property into
an operating account for said Property controlled by Borrower and thereafter to
one or more holding accounts controlled by Borrower before said revenues are
wired to the Restricted Account. Until deposited into the Restricted Account,
any Rents and other revenues from the Properties held by Borrower shall be
deemed to be collateral and shall be held in trust by it for the benefit, and as
the property, of Lender pursuant to the Security Instruments and shall not be
commingled with any other funds or property of Borrower, except as previously
disclosed to Lender in writing prior to the closing of the Loan. Borrower
warrants and covenants that it shall not rescind, withdraw or change any notices
or instructions required to be sent by it pursuant to this Section 9.2 without
Lender’s prior written consent.

(b) Borrower shall maintain the Restricted Account for the term of the Loan,
which Restricted Account shall be under the sole dominion and control of Lender
(subject to the terms hereof and of the Restricted Account Agreement). The
Restricted Account shall have a title evidencing the foregoing in a manner
reasonably acceptable to Lender. Borrower hereby grants to Lender a
first-priority security interest in the Restricted Account and all deposits at
any time contained therein and the proceeds thereof and will take all actions
necessary to maintain in favor of Lender a perfected first priority security
interest in the Restricted Account, Borrower hereby authorizes Lender to file
UCC Financing Statements and continuations thereof to perfect Lender’s security
interest in the Restricted Account and all deposits at any time contained
therein and the proceeds thereof. All costs and expenses for establishing and
maintaining the Restricted Account (or any successor thereto) shall be paid by
Borrower. All monies now or hereafter deposited into the Restricted Account
shall be deemed additional security for the Debt. Borrower shall not alter or
modify either the Restricted Account or the Restricted Account Agreement, in
each case without the prior written consent of Lender. The Restricted Account
Agreement shall provide (and Borrower shall provide) Lender online access to
bank and other financial statements relating to the Restricted Account
(including, without limitation, a listing of the receipts being collected
therein). In connection with Secondary Market Transaction, Lender shall have the
right to cause the Restricted Account to be entitled with such other designation
as Lender may select to reflect an assignment or transfer of Lender’s rights
and/or interests with respect to the Restricted Account. Lender shall provide
Borrower with prompt written notice of any such renaming of the Restricted
Account. Borrower shall not further pledge, assign or grant any security
interest in the Restricted Account or the monies deposited therein or permit any
lien or encumbrance to attach thereto, or any levy to be made thereon, or any
UCC Financing Statements, except those naming Lender as the secured party, to be
filed with respect thereto. The Restricted Account (i) shall be an Eligible
Account and (ii) shall not be commingled with other monies held by Borrower or
Bank. Upon (A) Bank ceasing to be an Eligible Institution, (B) the Restricted
Account ceasing to be an Eligible Account, (C) any resignation by Bank or
termination of the Restricted Account Agreement by Bank or Lender and/or (D) the
occurrence and continuance of an Event of Default, Borrower shall, within
fifteen (15) days of Lender’s request, (1) terminate the existing Restricted
Account Agreement, (2) appoint a new Bank (which such Bank shall (I) be an
Eligible Institution, (II) other than during the continuance of an Event of
Default, be selected by Borrower and approved by Lender and (III) during the
continuance of an Event of Default, be selected by Lender), (3) cause such Bank
to open a new Restricted Account (which such account shall be an Eligible
Account) and enter into a new Restricted Account Agreement with Lender on
substantially the same terms and conditions as the previous Restricted Account
Agreement and (4) send any notices required pursuant to the terms hereof
relating to such new Restricted Account Agreement and Restricted Account.
Borrower constitutes and appoints Lender its true and lawful attorney-in-fact
with full power of substitution to complete or undertake any action required of
Borrower under this Section 9.2 in the name of Borrower in the event Borrower
fails to do the same. Such power of attorney shall be deemed to be a power
coupled with an interest and cannot be revoked.

Section 9.3     Disbursements from the Cash Management Account. On each Monthly
Payment Date, Lender or Servicer, as applicable, shall allocate all funds, if
any, on deposit in the Cash Management Account and disburse such funds in the
following amounts and order of priority:

(a) First, funds sufficient to pay the Monthly Tax Deposit due for the then
applicable Monthly Payment Date, if any, shall be deposited in the Tax Account;

 

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(b) Second, funds sufficient to pay the Monthly Insurance Deposit due for the
then applicable Monthly Payment Date, if any, shall be deposited in the
Insurance Account;

(c) Third, funds sufficient to pay any interest accruing at the Default Rate and
late payment charges, if any, shall be deposited into the Debt Service Account;

(d) Fourth, funds sufficient to pay the Debt Service due on the then applicable
Monthly Payment Date shall be deposited in the Debt Service Account;

(e) Fifth, funds sufficient to pay the Replacement Reserve Monthly Deposit for
the then applicable Monthly Payment Date, if any, shall be deposited in the
Replacement Reserve Account;

(f) Sixth, funds sufficient to pay any other amounts due and owing to Lender
and/or Servicer pursuant to the terms hereof and/or of the other Loan Documents,
if any, shall be deposited with or as directed by Lender;

(g) Seventh, to the extent that a Trigger Period has occurred and is continuing,
funds sufficient to pay the Op Ex Monthly Deposit for the then applicable
Monthly Payment Date, if any, shall be deposited in the Operating Expense
Account;

(h) Eighth, to the extent that a Trigger Period has occurred and is continuing,
all amounts remaining in the Cash Management Account after deposits for items
(a) through (g) above (“Excess Cash Flow”) shall be deposited into the Excess
Cash Flow Account;

(i) Ninth, provided no Event of Default has occurred and is continuing, all
amounts remaining in the Cash Management Account after deposits for items
(a) through (h) above, if any, shall be disbursed to Borrower.

Section 9.4     Withdrawals from the Debt Service Account. Prior to the
occurrence and continuance of an Event of Default, funds on deposit in the Debt
Service Account, if any, shall be used to pay Debt Service when due, together
with any late payment charges or interest accruing at the Default Rate.

Section 9.5     Payments Received Under this Agreement. Notwithstanding anything
to the contrary contained in this Agreement or the other Loan Documents,
provided no Event of Default has occurred and is continuing, Borrower’s
obligations with respect to the monthly payment of Debt Service and amounts due
for the Reserve Accounts shall (provided Lender is not prohibited from
withdrawing or applying any funds in the applicable Accounts by operation of law
or otherwise) be deemed satisfied to the extent sufficient amounts are deposited
in applicable Accounts to satisfy such obligations on the dates each such
payment is required, regardless of whether any of such amounts are so applied by
Lender.

ARTICLE 10

EVENTS OF DEFAULT; REMEDIES

Section 10.1     Event of Default.

The occurrence of any one or more of the following events shall constitute an
“Event of Default”:

(a) if (A) any monthly Debt Service payment or the payment due on the Maturity
Date is not paid when due, (B) any monthly reserve deposits are not paid when
due in accordance with Article 8 hereof or (C) any other portion of the Debt is
not paid when due and such non-payment continues for five (5) days following
notice to Borrower that the same is due and payable;

(b) if any of the Taxes or Other Charges is not paid when the same is due and
payable except to the extent sums sufficient to pay such Taxes and Other Charges
have been deposited with Lender in accordance with the terms of this Agreement
and Lender’s access to such sums is not restricted or constrained in any manner;

 

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(c) if the Policies are not kept in full force and effect or if evidence of the
same is not delivered to Lender as provided in Section 7.1 hereof;

(d) if any of the representations or covenants contained in Article 5, Article 6
or Section 4.22 hereof are breached or violated; provided, however, with respect
to a breach or violation of the terms of Section 4.22, such breach or violation
shall not be an Event of Default if Borrower cures such breach or violation
within ten (10) Business Days of notice from Lender;

(e) if any representation or warranty made herein, in the Guaranty or in the
Environmental Indemnity or in any other guaranty, or in any certificate, report,
financial statement or other instrument or document furnished to Lender in
connection with the Loan shall have been false or misleading in any material
adverse respect when made;

(f) if (i) Borrower, any SPE Component Entity, or Guarantor shall commence any
case, proceeding or other action (A) under any Creditor’s Rights Laws seeking to
have an order for relief entered with respect to it, or seeking to adjudicate it
a bankrupt or insolvent, or seeking reorganization, or (B) seeking appointment
of a receiver, trustee, custodian, conservator or other similar official for it
or for all or any substantial part of its assets, or Borrower or any managing
member or general partner of Borrower, any SPE Component Entity, or Guarantor
shall make a general assignment for the benefit of its creditors; (ii) there
shall be commenced against Borrower or any managing member or general partner of
Borrower, any SPE Component Entity, or Guarantor any case, proceeding or other
action of a nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or appointment or
(B) remains undismissed, undischarged or unbonded for a period of ninety
(90) days; (iii) there shall be commenced against Borrower, any SPE Component
Entity, or Guarantor any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of any order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within ninety (90) days from the entry thereof;
(iv) Borrower, any SPE Component Entity, or Guarantor shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Borrower,
any SPE Component Entity, or Guarantor shall generally not, or shall be unable
to, or shall admit in writing its inability to, pay its debts as they become
due;

(g) if Borrower shall be in default beyond applicable notice and grace periods
under any other mortgage, deed of trust, deed to secure debt or other security
agreement covering any part of any Individual Property whether it be superior or
junior in lien to any Security Instrument;

(h) if any Individual Property becomes subject to any mechanic’s, materialman’s
or other lien other than a lien for any Taxes not then due and payable and the
lien shall remain undischarged of record (by payment, bonding or otherwise) for
a period of thirty (30) days;

(i) if any federal tax lien is filed against Borrower, any SPE Component Entity,
Guarantor or any Individual Property and same is not discharged of record (by
payment, bonding or otherwise) within thirty (30) days after same is filed;

(j) if Borrower shall fail to deliver to Lender, within ten (10) days after
request by Lender, the estoppel certificates required by Section 4.13(a) hereof;

(k) if any default occurs under any guaranty or indemnity executed by Borrower
or Guarantor in connection herewith (including, without limitation, the
Environmental Indemnity and/or the Guaranty) and such default continues after
the expiration of applicable grace periods, if any, provided therein;

(l) if any of the assumptions contained in the Non-Consolidation Opinion, or in
any New Non-Consolidation Opinion are untrue or shall become untrue in any
material respect;

(m) if Borrower defaults under the Management Agreement beyond the expiration of
applicable notice and grace periods, if any, thereunder or if the Management
Agreement is canceled, terminated or surrendered or

 

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expires pursuant to its terms, unless in such case Borrower shall enter into a
new management agreement with a Qualified Manager in accordance with the
applicable terms and provisions hereof;

(n) if any representation and/or covenant herein relating to ERISA matters is
breached;

(o) if (A) Borrower shall fail (beyond any applicable notice or grace period) to
pay any rent, additional rent or other charges payable under any Property
Document as and when payable thereunder, (B) Borrower defaults under the
Property Documents beyond the expiration of applicable notice and grace periods,
if any, thereunder, (C) any of the Property Documents are amended, supplemented,
replaced, restated or otherwise modified without Lender’s prior written consent
or if Borrower consents to a transfer of any party’s interest thereunder without
Lender’s prior written consent, (D) any Property Document and/or the estate
created thereunder is canceled, rejected, terminated, surrendered or expires
pursuant to its terms, unless in such case Borrower enters into a replacement
thereof in accordance with the applicable terms and provisions hereof or (E) a
Property Document Event occurs;

(p) With respect to any default or breach of any term, covenant or condition of
this Agreement not specified in subsections (a) through (o) above or not
otherwise specifically specified as an Event of Default in this Agreement, if
the same is not cured (i) within 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
(ii) for thirty (30) days after notice from Lender (in the case of any other
default or breach); provided, that, with respect to any default or breach
specified in subsection (ii), if the same cannot reasonably be cured within such
thirty (30) day period and Borrower shall have commenced to cure the same within
such thirty (30) day period and thereafter diligently and expeditiously proceeds
to cure the same, such thirty (30) day period shall be extended for so long as
it shall require Borrower in the exercise of due diligence to cure the same, it
being agreed that no such extension shall be for a period in excess of sixty
(60) days; or

(q) if there shall be default under any of the other Loan Documents beyond any
applicable cure periods contained in such Loan Documents, whether as to Borrower
or any Individual Property, or, subject to all applicable notice and/or cure
periods set forth herein or in any of the other Loan Documents, if any other
such event shall occur or condition shall exist, if the effect of such event or
condition is to accelerate the maturity of any portion of the Debt or to permit
Lender to accelerate the maturity of all or any portion of the Debt.

Section 10.2     Remedies.

(a) Upon the occurrence and during the continuance of an Event of Default (other
than an Event of Default described in Section 10.1(f) above with respect to
Borrower or any SPE Component Entity) and at any time thereafter Lender may, in
addition to any other rights or remedies available to it pursuant to this
Agreement, the Security Instruments, the Note and the other Loan Documents or at
law or in equity, take such action, without notice or demand, that Lender deems
advisable to protect and enforce its rights against Borrower and in any
Individual Property, including, without limitation, declaring the Debt to be
immediately due and payable, and Lender may enforce or avail itself of any or
all rights or remedies provided in this Agreement, the Security Instruments, the
Note and the other Loan Documents against Borrower and any Individual Property,
including, without limitation, all rights or remedies available at law or in
equity. Upon any Event of Default described in Section 10.1(f) above with
respect to Borrower or any SPE Component Entity, the Debt and all other
obligations of Borrower under this Agreement, the Security Instruments, the Note
and the other Loan Documents shall immediately and automatically become due and
payable, without notice or demand, and Borrower hereby expressly waives any such
notice or demand, anything contained herein or in any Security Instrument, the
Note and the other Loan Documents to the contrary notwithstanding.

(b) Upon the occurrence and during the continuance of an Event of Default, all
or any one or more of the rights, powers, privileges and other remedies
available to Lender against Borrower under this Agreement, the Security
Instruments, the Note or the other Loan Documents executed and delivered by, or
applicable to, Borrower or at law or in equity may be exercised by Lender at any
time and from time to time, whether or not all or any of the Debt shall be
declared due and payable, and whether or not Lender shall have commenced any
foreclosure proceeding or other action for the enforcement of its rights and
remedies under this Agreement, any Security

 

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Instrument, the Note or the other Loan Documents with respect to any Individual
Property. Any such actions taken by Lender shall be cumulative and concurrent
and may be pursued independently, singularly, successively, together or
otherwise, at such time and in such order as Lender may determine in its sole
discretion, to the fullest extent permitted by applicable law, without impairing
or otherwise affecting the other rights and remedies of Lender permitted by
applicable law, equity or contract or as set forth herein or in any Security
Instrument, the Note or the other Loan Documents. No delay or omission to
exercise any remedy, right or power accruing upon an Event of Default shall
impair any such remedy, right or power or shall be construed as a waiver
thereof, but any such remedy, right or power may be exercised from time to time
and as often as may be deemed expedient. A waiver of one Default or Event of
Default with respect to Borrower shall not be construed to be a waiver of any
subsequent Default or Event of Default by Borrower or to impair any remedy,
right or power consequent thereon.

(c) Lender shall have the right from time to time to partially foreclose any
Security Instrument in any manner and for any amounts secured by any Security
Instrument then due and payable as determined by Lender in its sole discretion
including, without limitation, the following circumstances: (i) in the event
Borrower defaults beyond any applicable grace period in the payment of one or
more scheduled payments of principal and interest, Lender may foreclose any
Security Instrument to recover such delinquent payments, or (ii) in the event
Lender elects to accelerate less than the entire outstanding principal balance
of the Loan, Lender may foreclose any Security Instrument to recover so much of
the principal balance of the Loan as Lender may accelerate and such other sums
secured by any Security Instrument as Lender may elect. Notwithstanding one or
more partial foreclosures, the Properties shall remain subject to the Security
Instruments to secure payment of sums secured by the Security Instruments and
not previously recovered.

(d) Lender shall have the right from time to time to sever the Note and the
other Loan Documents into one or more separate notes, security instruments and
other security documents (the “Severed Loan Documents”) in such denominations as
Lender shall determine in its sole discretion for purposes of evidencing and
enforcing its rights and remedies provided hereunder. Borrower shall execute and
deliver to Lender from time to time, promptly after the request of Lender, a
severance agreement and such other documents as Lender shall request in order to
effect the severance described in the preceding sentence, all in form and
substance reasonably satisfactory to Lender. Borrower hereby absolutely and
irrevocably appoints Lender as its true and lawful attorney, coupled with an
interest, in its name and stead to make and execute all documents necessary or
desirable to effect the aforesaid severance, Borrower ratifying all that its
said attorney shall do by virtue thereof; provided, however, Lender shall not
make or execute any such documents under such power until three (3) days after
notice has been given to Borrower by Lender of Lender’s intent to exercise its
rights under such power together with a copy of the documents that Lender
intends to execute as attorney-in-fact. Borrower shall not be obligated to pay
any costs or expenses incurred in connection with the preparation, execution,
recording or filing of the Severed Loan Documents and the Severed Loan Documents
shall not contain any representations, warranties or covenants not contained in
the Loan Documents and any such representations and warranties contained in the
Severed Loan Documents will be given by Borrower effective only as of the
Closing Date. Notwithstanding the foregoing, Borrower shall not be required to
execute any Severed Loan Document if any Severed Loan Document would change the
interest rate, the stated maturity or the amortization of principal set forth in
the Note or herein, except in connection with Severed Loan Documents which may
result in varying fixed interest rates and amortization schedules, but which the
weighted average interest rate of the bifurcated notes shall equal the Interest
Rate (without giving effect to any deviation attributable to the imposition of
any rate of interest at the Default Rate or prepayments occurring pursuant to
Section 2.7(b) or 2.7(c) hereof) and the cumulative amortization required under
such bifurcated notes loan shall not exceed the cumulative amortization required
under the Loan; provided, except as expressly described in this subsection (d),
such Severed Loan Documents shall not (1) increase the obligations, or decrease
the rights, of Borrower or Guarantor under the Loan Documents other than to a de
minimis extent, or (2) impose any personal liability on Borrower, Guarantor or
any of their Affiliates in addition to the personal liability of Borrower and
Guarantor that exists prior to such severance.

(e) Notwithstanding anything to the contrary contained herein or in any other
Loan Document, any amounts recovered from the Property or any other collateral
for the Loan and/or paid to or received by Lender after an Event of Default may
be applied by Lender toward the Debt in such order, priority and proportions as
Lender in its sole discretion shall determine.

 

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(f) Lender may, but without any obligation to do so and without notice to or
demand on Borrower and without releasing Borrower from any obligation hereunder
or being deemed to have cured any Event of Default hereunder, make, do or
perform any obligation of Borrower hereunder in such manner and to such extent
as Lender may deem necessary. Lender is authorized to enter upon each Individual
Property for such purposes, or appear in, defend, or bring any action or
proceeding to protect its interest in each Individual Property for such
purposes, and the cost and expense thereof (including reasonable attorneys’ fees
to the extent permitted by applicable law), with interest as provided in this
Section, shall constitute a portion of the Debt and shall be due and payable to
Lender upon demand. All such costs and expenses incurred by Lender in remedying
such Event of Default or such failed payment or act or in appearing in,
defending, or bringing any action or proceeding shall bear interest at the
Default Rate, for the period after such cost or expense was incurred to the date
of payment to Lender. All such costs and expenses incurred by Lender together
with interest thereon calculated at the Default Rate shall be deemed to
constitute a portion of the Debt and be secured by the liens, claims and
security interests provided to Lender under the Loan Documents and shall be
immediately due and payable upon demand by Lender therefor.

ARTICLE 11

SECONDARY MARKET

Section 11.1     Securitization.

(a) Lender shall have the right (i) to sell or otherwise transfer the Loan (or
any portion thereof and/or interest therein), (ii) to sell participation
interests in the Loan (or any portion thereof and/or interest therein) or
(iii) to securitize the Loan (or any portion thereof and/or interest therein) in
a single asset securitization or a pooled asset securitization. The transaction
referred to in clauses (i), (ii) and (iii) above shall hereinafter be referred
to collectively as “Secondary Market Transactions” and the transactions referred
to in clause (iii) shall hereinafter be referred to as a “Securitization”. Any
certificates, notes or other securities issued in connection with a
Securitization are hereinafter referred to as “Securities”.

(b) If requested by Lender, Borrower shall assist Lender in satisfying the
market standards to which Lender customarily adheres or which may be reasonably
required in the marketplace or by the Rating Agencies in connection with any
Secondary Market Transactions, including, without limitation, to:

(i) provide (A) updated financial and other information with respect to the
Properties, the business operated at the Properties, Borrower, Guarantor, SPE
Component Entity and Manager, (B) updated budgets relating to the Properties and
(C) updated appraisals, market studies, environmental reviews (Phase I’s and, if
appropriate, Phase II’s), property condition reports and other due diligence
investigations of the Properties (the “Updated Information”), together, if
customary, with appropriate verification of the Updated Information through
letters of auditors or opinions of counsel acceptable to Lender and the Rating
Agencies and (D) use commercially reasonably efforts to obtain revisions to and
other agreements with respect to the Property Documents in form and substance
reasonably acceptable to Lender and the Rating Agencies;

(ii) provide new and/or updated opinions of counsel, which may be relied upon by
Lender, the Rating Agencies and their respective counsel, agents and
representatives, as to matters of enforceability of the Loan Documents under New
York law, substantive non-consolidation, fraudulent conveyance, matters of
Delaware or Maryland (as applicable) and federal bankruptcy law relating to
limited liability companies, true sale and any other opinion customary in
Secondary Market Transactions or required by the Rating Agencies with respect to
the Property, Borrower and Borrower’s Affiliates, which counsel and opinions
shall be satisfactory in form and substance to Lender and the Rating Agencies;

(iii) provide updated, as of the closing date of the Secondary Market
Transaction, representations and warranties made in the Loan Documents, modified
as necessary to be current as of such date, and such additional representations
and warranties as the Rating Agencies may reasonably require; and

 

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(iv) execute such amendments to the Loan Documents, the Property Documents
(subject to the provisions of Section 11.1(b)(i)(D) above) and Borrower’s or any
SPE Component Entity’s organizational documents as may be reasonably requested
by Lender or requested by the Rating Agencies or otherwise to effect any
Secondary Market Transaction, including, without limitation, (A) to amend and/or
supplement the Independent Director provisions provided herein and therein
(including, without limitation, to add a second Independent Director), in each
case, in accordance with the applicable requirements of the Rating Agencies,
(B) bifurcating the Loan into two or more components and/or additional separate
notes and/or creating additional senior/subordinate note structure(s) (any of
the foregoing, a “Loan Bifurcation”) and (C) to modify any payment dates and
interest period start dates and end dates under the Loan Documents, by up to ten
(10) days; provided, however, that Borrower shall not be required to so modify
or amend any Loan Document if such modification or amendment would change the
interest rate, the stated maturity (except as provided in subclause (C) above)
or the amortization of principal set forth herein, except in connection with a
Loan Bifurcation which may result in varying fixed interest rates and
amortization schedules, but which components/notes shall have the same weighted
average coupon of the original Note (without giving effect to any deviation
attributable to the imposition of any rate of interest at the Default Rate or
prepayments occurring pursuant to Section 2.7(b) or 2.7(c) hereof). Such
amendments shall not (a) alter the economic terms of the Loan except as
expressly provided in this Section 11.1(b)(iv) or (b) negatively affect in any
manner the rights and obligations of Borrower or Guarantor under the Loan
Documents other than to a de minimis extent or except as expressly provided in
this Section 11.1(b)(iv).

Notwithstanding anything to the contrary contained in this Agreement or the
other Loan Documents, other than costs and expenses relating to the delivery of
financial statements already required pursuant to Section 4.12 hereof, in
connection with Borrower’s complying with requests made under this
Section 11.1(b), Borrower shall not be responsible for any material costs and
expenses incurred by Borrower in connection with such compliance. Other than
counsel fees which are incurred by Borrower with respect to the New York
enforceability opinion referenced in Section 11.1(b)(ii) hereof, which Borrower
agrees to deliver at its cost and expense, Lender agrees to pay for Borrower’s
reasonable counsel fees in connection with Borrower’s complying with requests
made under this Section 11.1(b) provided that Lender reasonably approves the
counsel selected by Borrower to assist in connection with such compliance.

(c) Upon request, Borrower shall furnish to Lender from time to time such
financial data and financial statements as Lender reasonably determines to be
necessary, advisable or appropriate for complying with any applicable legal
requirements (including those applicable to Lender or any Servicer (including,
without limitation and to the extent applicable, Regulation AB)) within the
timeframes necessary, advisable or appropriate in order to comply with such
legal requirements.

Section 11.2     Disclosure.

(a) Borrower (on its own behalf and on behalf of each other Borrower Party)
understands that information provided to Lender by Borrower, any other Borrower
Party and/or their respective agents, counsel and representatives may be
(i) included in (A) the Disclosure Documents and (B) filings under the
Securities Act and/or the Exchange Act and (ii) made available to Investors, the
Rating Agencies and service providers, in each case, in connection with any
Secondary Market Transaction.

(b) Borrower shall indemnify Lender and its officers, directors, partners,
employees, representatives, agents and affiliates against any losses, claims,
damages or liabilities (collectively, the “Liabilities”) to which Lender and/or
its officers, directors, partners, employees, representatives, agents and/or
affiliates may become subject in connection with any Disclosure Document and/or
any Covered Rating Agency Information, in each case, insofar as such Liabilities
arise out of or are based upon any untrue statement of any material fact in the
Provided Information and/or arise out of or are based upon the omission to state
a material fact in the Provided Information required to be stated therein or
necessary in order to make the statements in the applicable Disclosure Document
and/or Covered Rating Agency Information, in light of the circumstances under
which they were made, not misleading.

 

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(c) Promptly after receipt by an indemnified party under this Section 11.2 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 11.2, notify the indemnifying party in writing of the commencement
thereof, but the omission to so notify the indemnifying party will not relieve
the indemnifying party from any liability which the indemnifying party may have
to any indemnified party hereunder except to the extent that failure to notify
causes prejudice to the indemnifying party. In the event that any action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled, jointly with
any other indemnifying party, to participate therein and, to the extent that it
(or they) may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party. After notice from the indemnifying party to such indemnified
party under this Section 11.2, such indemnified party shall pay for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, if the defendants in any such action include both the indemnified party
and the indemnifying party and the indemnified party shall have reasonably
concluded that there are any legal defenses available to it and/or other
indemnified parties that are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party at
the cost of the indemnifying party. The indemnifying party shall not be liable
for the expenses of more than one separate counsel unless an indemnified party
shall have reasonably concluded that there may be legal defenses available to it
that are different from or additional to those available to another indemnified
party.

(d) The liabilities and obligations of both Borrower and Lender under this
Section 11.2 shall survive the termination of this Agreement and the
satisfaction and discharge of the Debt. Failure by Borrower and/or any Borrower
Party to comply with the provisions of Section 11.1 and/or Section 11.2 within
the timeframes specified therein and/or as otherwise required by Lender shall,
at Lender’s option, constitute a breach of the terms thereof and/or an Event of
Default. Borrower (on its own behalf and on behalf of each Borrower Party)
hereby expressly authorizes and appoints Lender its attorney-in-fact to take any
actions required of any Borrower Party under Sections 11.1 and/or 11.2 in the
event any Borrower Party fails to do the same, which power of attorney shall be
irrevocable and shall be deemed to be coupled with an interest.

Section 11.3     Reserves/Escrows. In the event that Securities are issued in
connection with the Loan, all funds held by Lender in escrow or pursuant to
reserves in accordance with this Agreement and the other Loan Documents shall be
deposited in “eligible accounts” at “eligible institutions” and, to the extent
applicable, invested in “permitted investments” as then defined and required by
the Rating Agencies.

Section 11.4     Servicer. At the option of Lender, the Loan may be serviced by
a servicer/special servicer/trustee selected by Lender (collectively, the
“Servicer”) and Lender may delegate all or any portion of its responsibilities
under this Agreement and the other Loan Documents to such Servicer pursuant to a
servicing agreement between Lender and such Servicer.

Section 11.5     Rating Agency Costs. In connection with any Rating Agency
Confirmation or other Rating Agency consent, approval or review required
hereunder as a result of a request of, or action initiated by, Borrower (other
than the initial review of the Loan by the Rating Agencies in connection with a
Securitization), Borrower shall pay all of the costs and expenses of Lender,
Servicer and each Rating Agency in connection therewith, and, if applicable,
shall pay any fees imposed by any Rating Agency in connection therewith. For the
avoidance of doubt, Borrower shall not be responsible to pay for costs, expenses
and fees of the Rating Agencies in connection with the initial review of the
Loan by the Rating Agencies in connection with a Securitization.

Section 11.6     Mezzanine Option. Lender shall have the option (the “Mezzanine
Option”) at any time to divide the Loan into two parts, a mortgage loan and a
mezzanine loan, provided, that (i) the total loan amounts for such mortgage loan
and such mezzanine loan shall equal the then outstanding amount of the Loan
immediately prior to Lender’s exercise of the Mezzanine Option, and (ii) the
weighted average interest rate of such mortgage loan and mezzanine loan shall
equal the Interest Rate (without giving effect to any deviation attributable to
the imposition of any rate of interest at the Default Rate or prepayments
occurring pursuant to Section 2.7(b) or 2.7(c) hereof). Borrower shall cooperate
with Lender in Lender’s exercise of the Mezzanine Option in good faith and in a
timely

 

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manner, which such cooperation shall include, but not be limited to,
(i) executing such amendments to the Loan Documents and Borrower or any SPE
Component Entity’s organizational documents as may be reasonably requested by
Lender or requested by the Rating Agencies, (ii) creating one or more Single
Purpose Entities (the “Mezzanine Borrower”), which such Mezzanine Borrower shall
(A) own, directly or indirectly, 100% of the equity ownership interests in
Borrower (the “Equity Collateral”), and (B) together with such constituent
equity owners of such Mezzanine Borrower as may be designated by Lender, execute
such agreements, instruments and other documents as may be reasonably required
by Lender in connection with the mezzanine loan (including, without limitation,
a promissory note evidencing the mezzanine loan and a pledge and security
agreement pledging the Equity Collateral to Lender as security for the mezzanine
loan); and (iii) delivering such opinions, title endorsements, UCC title
insurance policies, documents and/or instruments relating to the Property
Documents and other materials as may be reasonably required by Lender or
required by the Rating Agencies. Notwithstanding anything contained herein to
the contrary, (A) Lender shall have the right to apply all payments to the Debt
during the continuance of an Event of Default in such order as Lender determines
in its sole discretion and to require that (x) no sums shall be paid to
Mezzanine Lender under the Mezzanine Loan during the existence of an Event of
Default, and (y) all Net Proceeds be applied to the Loan to the exclusion of the
Mezzanine Loan. The rights and remedies of the holder of the Mezzanine Loan
shall be separate, distinct and in addition to the rights and remedies of Lender
under the Loan. In no event shall Lender’s exercise of the Mezzanine Option, or
the consummation of the applicable transaction pursuant thereto (a) alter the
economic terms of the Loan except as expressly provided in this Section 11.6 or
(b) negatively affect in any manner the rights and obligations of Borrower or
Guarantor under the Loan Documents other than to a de minimis extent or except
as expressly provided in this Section 11.6. Notwithstanding anything to the
contrary contained herein, Borrower shall not be responsible to pay for any
costs and expenses incurred by Borrower in connection with complying with the
terms of this Section 11.6 other than its counsel’s fees in excess of $10,000.

Section 11.7     Conversion to Registered Form. At the request of Lender,
Borrower shall appoint, as its agent, a registrar and transfer agent (the
“Registrar”) reasonably acceptable to Lender which shall maintain, subject to
such reasonable regulations as it shall provide, such books and records as are
necessary for the registration and transfer of the Note in a manner that shall
cause the Note to be considered to be in registered form for purposes of
Section 163(f) of the IRS Code. The option to convert the Note into registered
form once exercised may not be revoked. Any agreement setting out the rights and
obligation of the Registrar shall be subject to the reasonable approval of
Lender. Borrower may revoke the appointment of any particular person as
Registrar, effective upon the effectiveness of the appointment of a replacement
Registrar. The Registrar shall not be entitled to any fee from Borrower or
Lender or any other lender in respect of transfers of the Note and other Loan
Documents.

ARTICLE 12

INDEMNIFICATIONS

Section 12.1     General Indemnification. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all Losses imposed upon or incurred by or
asserted against any Indemnified Parties and directly or indirectly arising out
of or in any way relating to any one or more of the following: (a) any accident,
injury to or death of persons or loss of or damage to property occurring in, on
or about any Individual Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(b) any use, nonuse or condition in, on or about any Individual Property or any
part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent
parking areas, streets or ways; (c) performance of any labor or services or the
furnishing of any materials or other property in respect of any Individual
Property or any part thereof; (d) any failure of any Individual Property to be
in compliance with any applicable Legal Requirements; (e) any and all claims and
demands whatsoever which may be asserted against Lender by reason of any alleged
obligations or undertakings on its part to perform or discharge any of the
terms, covenants, or agreements contained in any Lease or any Property Document;
(f) the payment of any commission, charge or brokerage fee to anyone (other than
a broker or other agent retained by Lender) which may be payable in connection
with the funding of the Loan evidenced by the Note and secured by the Security
Instruments; and/or (g) the holding or investing of the funds on deposit in the
Accounts or the performance of any work or the disbursement of funds in each
case in connection with the Accounts, excluding, however, any such Losses that
arise out of the gross negligence or willful misconduct of Lender, its agents,
employees, representative and/or contractors. Any

 

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amounts payable to Lender by reason of the application of this Section 12.1
shall become immediately due and payable and shall bear interest at the Default
Rate from the date loss or damage is sustained by Lender until paid.

Section 12.2     Mortgage and Intangible Tax Indemnification. Borrower shall, at
its sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties from and against any and all Losses imposed upon or
incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any tax on the making and/or
recording of any Security Instrument, the Note or any of the other Loan
Documents, but excluding any income, franchise or similar taxes.

Section 12.3     ERISA Indemnification. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all Losses (including, without limitation,
reasonable attorneys’ fees and costs incurred in the investigation, defense, and
settlement of Losses incurred in correcting any prohibited transaction or in the
sale of a prohibited loan, and in obtaining any individual prohibited
transaction exemption under ERISA that may be required, in Lender’s sole
discretion) that Lender may incur, directly or indirectly, as a result of a
default under Sections 3.7 or 4.19 of this Agreement.

Section 12.4     Duty to Defend, Legal Fees and Other Fees and Expenses. Upon
written request by any Indemnified Party, Borrower shall defend such Indemnified
Party (if requested by any Indemnified Party, in the name of the Indemnified
Party) by attorneys and other professionals reasonably approved by the
Indemnified Parties. Notwithstanding the foregoing, any Indemnified Parties may,
in their sole discretion, engage their own attorneys and other professionals to
defend or assist them, and, at the option of Indemnified Parties, their
attorneys shall control the resolution of any claim or proceeding. Upon demand,
Borrower shall pay or, in the sole discretion of the Indemnified Parties,
reimburse, the Indemnified Parties for the payment of reasonable fees and
disbursements of attorneys, engineers, environmental consultants, laboratories
and other professionals in connection therewith.

Section 12.5     Survival. The obligations and liabilities of Borrower under
this Article 12 shall fully survive indefinitely notwithstanding any
termination, satisfaction, assignment, entry of a judgment of foreclosure,
exercise of any power of sale, or delivery of a deed in lieu of foreclosure of
any Security Instrument.

Section 12.6     Environmental Indemnity. Simultaneously herewith, Borrower and
Guarantor have executed and delivered the Environmental Indemnity to Lender,
which Environmental Indemnity is not secured by the Security Instrument.

ARTICLE 13

EXCULPATION

Section 13.1     Exculpation.

(a) Notwithstanding anything to the contrary contained in this Agreement or any
of the other Loan Documents, but subject to the qualifications expressly set
forth below, Lender shall not enforce the liability and obligation of Borrower
to perform and observe the obligations contained in the Note, this Agreement,
the Security Instruments or the other Loan Documents by any action or proceeding
wherein a money judgment or any deficiency judgment or other judgment
establishing personal liability shall be sought against Borrower or any
principal, director, officer, employee, beneficiary, shareholder, partner,
member, manager, trustee, agent, or Affiliate of Borrower or any legal
representatives, successors or assigns of any of the foregoing (collectively,
the “Exculpated Parties”), except that Lender may bring a foreclosure action, an
action for specific performance or any other appropriate action or proceeding to
enable Lender to enforce and realize upon its interest under the Note, this
Agreement, the Security Instruments and the other Loan Documents, or in the
Properties, the Rents, or any other collateral given to Lender pursuant to the
Loan Documents; provided, however, that, except as specifically provided herein,
any judgment in any such action or proceeding shall be enforceable against
Borrower only to the extent of Borrower’s interest in the Properties, in the
Rents and in any other collateral given to Lender, and Lender, by accepting the
Note, this Agreement, the Security Instruments and the other Loan Documents,
shall not sue for, seek or demand any deficiency judgment against Borrower or
any of the Exculpated Parties in any such action or

 

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proceeding under or by reason of or under or in connection with the Note, this
Agreement, the Security Instruments or the other Loan Documents. The provisions
of this Section 13.1(a) shall not, however, (1) constitute a waiver, release or
impairment of any obligation evidenced or secured by any of the Loan Documents,
subject in all respects to the foregoing limitation of remedies and personal
liability; (2) impair the right of Lender to name Borrower as a party defendant
in any action or suit for foreclosure and sale under any Security Instrument, to
the extent necessary under applicable law, and for the limited purposes of,
effecting such foreclosure;; (3) affect the validity or enforceability of any
indemnity or guaranty (including, without limitation, indemnities set forth in
Article 12 hereof, Section 11.2 hereof, in the Guaranty and the Environmental
Indemnity) executed by Borrower or Guarantor in connection with the Loan or any
of the rights and remedies of Lender thereunder (including, without limitation,
Lender’s right to enforce said rights and remedies against Borrower and/or
Guarantor (as applicable) personally and without the effect of the exculpatory
provisions of this Article 13); (4) impair the rights of Lender to (A) obtain
the appointment of a receiver; and/or (B) enforce its rights and remedies
provided in Articles 8 and 9 hereof; (5) impair the enforcement of the
Assignment of Leases; (6) impair the right of Lender to enforce Section 4.12(e)
of this Agreement; (7) constitute a prohibition against Lender to seek a
deficiency judgment against Borrower for the sole and limited purpose, and only
to the extent required under applicable law, of realizing upon the security
granted by any Security Instrument or to commence any other appropriate action
or proceeding in order for Lender to exercise its remedies against any
Individual Property; or (8) constitute a waiver of the right of Lender to
enforce the liability and obligation of Borrower, by money judgment or
otherwise, to the extent of any Loss incurred by Lender (including attorneys’
fees and costs reasonably incurred) arising out of or in connection with the
following:

(i) fraud or intentional misrepresentation by any Borrower Party in connection
with the Loan;

(ii) the gross negligence or willful misconduct of any Borrower Party;

(iii) any litigation or other legal proceeding related to the Debt filed by any
Borrower Party that delays, opposes, impedes, obstructs, hinders, enjoins or
otherwise interferes with or frustrates the efforts of Lender, following an
Event of Default, to accelerate the Loan, foreclose upon the Property, seek a
receiver or enforce the Guaranty and Environmental Indemnity;

(iv) waste to any Individual Property caused by the intentional acts or
intentional omissions of any Borrower Party and/or the removal or disposal of
any portion of any Individual Property after an Event of Default;

(v) the misapplication, misappropriation or conversion by any Borrower Party of
(A) any insurance proceeds paid by reason of any loss, damage or destruction to
the any Individual Property, (B) any Awards or other amounts received in
connection with the Condemnation of all or a portion of any Individual Property,
(C) any Rents following an Event of Default or (D) any Tenant security deposits
or Rents collected in advance;

(vi) failure to pay Taxes, charges for labor or materials or other charges that
can create liens on any portion of any Individual Property in accordance with
the terms and provisions hereof;

(vii) failure to pay Insurance Premiums, to maintain the Policies in full force
and effect and/or to provide Lender evidence of the same, in each case, as
expressly provided herein;

(viii) any security deposits, advance deposits or any other deposits collected
with respect to any Individual Property which are not delivered to Lender upon a
foreclosure of such Individual Property or action in lieu thereof, except to the
extent any such security deposits were applied in accordance with the terms and
conditions of any of the Leases prior to the occurrence of the Event of Default
that gave rise to such foreclosure or action in lieu thereof;

(ix) any tax on the making and/or recording of any Security Instrument, the Note
or any of the other Loan Documents or any transfer or similar taxes (whether due
upon the making of the same or upon

 

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Lender’s exercise of its remedies under the Loan Documents), but excluding any
income, franchise or other similar taxes;

(x) the seizure or forfeiture of any Individual Property, or any portion
thereof, or Borrower’s interest therein, resulting from criminal wrongdoing by
any Borrower Party;

(xi) the failure to make any True Up Payment (but only to the extent that the
Property generated net operating income for the immediately preceding twelve
(12) month period sufficient to pay the same);

(xii) Intentionally omitted;

(xiii) Borrower fails to comply with its obligations to deposit revenues derived
from the Properties into the Restricted Account in accordance with
Section 9.2(a) hereof; and for purposes of this subsection (xiii), Losses shall
be deemed to mean any funds not so deposited by Borrower into the Restricted
Account);

(xiv) any default or breach by Borrower or any SPE Component Entity (if any) of
any of the provisions set forth in Article 5 hereof (other than a default or
breach of the terms of Section 5.1(a)(i), (ii), (iii), (iv), (vi), (vii) and
(xi) hereof)); or

(xv) Section 11.1 or Section 11.6 hereof is violated or breached.

(b) Notwithstanding anything to the contrary in this Agreement, the Note or any
of the Loan Documents, (A) Lender shall not be deemed to have waived any right
which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
Debt or to require that all collateral shall continue to secure all of the Debt
owing to Lender in accordance with the Loan Documents, and (B) the Debt shall be
fully recourse to Borrower in the event that: (i) the first full monthly payment
of principal and interest under the Note is not paid when due; (ii) any default
or breach by Borrower or any SPE Component Entity (if any) of the provisions of
Section 5.1(a)(i), (ii), (iii), (iv), (vi), (vii) or (xi), (iii) any
representation, warranty or covenant contained in Article 6 hereof is violated
or breached; (iii) a Bankruptcy Event occurs.

ARTICLE 14

NOTICES

Section 14.1     Notices. All notices or other written communications hereunder
shall be deemed to have been properly given (a) upon delivery, if delivered in
person or by facsimile transmission with receipt acknowledged by the recipient
thereof and confirmed by telephone by sender, (b) one (1) Business Day after
having been deposited for overnight delivery with any reputable overnight
courier service, or (c) three (3) Business Days after having been deposited in
any post office or mail depository regularly maintained by the U.S. Postal
Service and sent by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:

 

If to Borrower:   

Each of the Parties Set Forth on Exhibit A attached hereto

c/o Strategic Capital Holdings, LLC

111 Corporate Drive, Suite 120

Ladera Ranch, California 92694

Attention: H. Michael Schwartz

Facsimile No.: (949) 429-6606

With a copy to:   

Mastrogiovanni Schorsch & Mersky, P.C.

2001 Bryan Street, Suite 1250

Dallas, Texas 75201

Attention: Charles Mersky

Facsimile No.: (214) 922-8801

 

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If to Lender:   

Citigroup Global Markets Realty Corp.

388 Greenwich Street

19th Floor

New York, New York 10013

Attention : Ana Rosu

Facsimile No.: (646) 328-2938

With a copy to:   

SNR Denton US LLP

Two World Financial Center

New York, New York 10281

Attention: Peter J. Mignone, Esq.

Facsimile No.: (212) 768-6800

or addressed as such party may from time to time designate by written notice to
the other parties.

Either party by notice to the other may designate additional or different
addresses for subsequent notices or communications.

ARTICLE 15

FURTHER ASSURANCES

Section 15.1     Replacement Documents. Upon receipt of an affidavit of an
officer of Lender as to the loss, theft, destruction or mutilation of the Note,
this Agreement or any of the other Loan Documents which is not of public record,
and, in the case of any such mutilation, upon surrender and cancellation of the
Note, this Agreement or such other Loan Document, Borrower will issue, in lieu
thereof, a replacement thereof, dated the date of the Note, this Agreement or
such other Loan Document, as applicable, in the same principal amount thereof
and otherwise of like tenor, and reflecting that it has been issued in
replacement thereof.

Section 15.2     Recording of Security Instrument, etc. Borrower forthwith upon
the execution and delivery of the Security Instruments and thereafter, from time
to time, will cause each Security Instrument and any of the other Loan Documents
creating a lien or security interest or evidencing the lien hereof upon each
Individual 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 to protect and
perfect the lien or security interest hereof upon, and the interest of Lender
in, each Individual Property. Borrower will pay all taxes, filing, registration
or recording fees, and all expenses incident to the preparation, execution,
acknowledgment and/or recording of the Note, the Security Instruments, this
Agreement, the other Loan Documents, any note, deed of trust or mortgage
supplemental hereto, any security instrument with respect to the Properties and
any instrument of further assurance, and any modification or amendment of the
foregoing documents, 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 the Security Instruments, any deed of trust or
mortgage supplemental hereto, any security instrument with respect to the
Properties or any instrument of further assurance, and any modification or
amendment of the foregoing documents, except where prohibited by applicable law
so to do, excluding income, franchise or similar taxes.

Section 15.3     Further Acts, etc. Borrower will, at the cost of Borrower, and
without expense to Lender, do, execute, acknowledge and deliver all and every
further acts, deeds, conveyances, deeds of trust, mortgages, assignments,
notices of assignments, transfers and assurances as Lender shall, from time to
time, reasonably require, for the better assuring, conveying, assigning,
transferring, and confirming unto Lender the property and rights hereby
mortgaged, deeded, granted, bargained, sold, conveyed, confirmed, pledged,
assigned, warranted and transferred or intended now or hereafter so to be, or
which Borrower may be or may hereafter become bound to convey or assign to
Lender, or for carrying out the intention or facilitating the performance of the
terms of this Agreement or for filing, registering or recording the Security
Instruments, or for complying with all Legal

 

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Requirements. Borrower, on demand, will execute and deliver, and in the event it
shall fail to so execute and deliver, 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 to evidence more effectively
the security interest of Lender in the Properties. Borrower grants to Lender an
irrevocable power of attorney coupled with an interest for the purpose of
exercising and perfecting any and all rights and remedies available to Lender
pursuant to this Section 15.3.

Section 15.4     Changes in Tax, Debt, Credit and Documentary Stamp Laws.

(a) If any law is enacted or adopted or amended after the date of this Agreement
which deducts the Debt from the value of any Individual Property for the purpose
of taxation and which imposes a tax, either directly or indirectly, on the Debt
or Lender’s interest in any Individual Property, Borrower will pay the tax, with
interest and penalties thereon, if any. If Lender is advised by counsel chosen
by it that the payment of tax by Borrower would be unlawful or taxable to Lender
or unenforceable or provide the basis for a defense of usury then Lender shall
have the option by written notice of not less than ninety (90) days to declare
the Debt immediately due and payable.

(b) Borrower will not claim or demand or be entitled to any credit or credits on
account of the Debt for any part of the Taxes or Other Charges assessed against
any Individual Property, or any part thereof, and no deduction shall otherwise
be made or claimed from the assessed value of any Individual Property, or any
part thereof, for real estate tax purposes by reason of any Security Instrument
or the Debt. If such claim, credit or deduction shall be required by applicable
law, Lender shall have the option, by written notice of not less than ninety
(90) days, to declare the Debt immediately due and payable.

(c) If at any time the United States of America, any State thereof or any
subdivision of any such State shall require revenue or other stamps to be
affixed to the Note, any Security Instrument, or any of the other Loan Documents
or impose any other tax or charge on the same, Borrower will pay for the same,
with interest and penalties thereon, if any.

ARTICLE 16

WAIVERS

Section 16.1     Remedies Cumulative; Waivers.

The rights, powers and remedies of Lender under this Agreement shall be
cumulative and not exclusive of any other right, power or remedy which Lender
may have against Borrower pursuant to this Agreement, any Security Instrument,
the Note or the other Loan Documents, or existing at law or in equity or
otherwise. Lender’s rights, powers and remedies may be pursued singularly,
concurrently or otherwise, at such time and in such order as Lender may
determine in Lender’s sole discretion. No delay or omission to exercise any
remedy, right or power accruing upon an Event of Default shall impair any such
remedy, right or power or shall be construed as a waiver thereof, but any such
remedy, right or power may be exercised from time to time and as often as may be
deemed expedient. A waiver of one Default or Event of Default with respect to
Borrower shall not be construed to be a waiver of any subsequent Default or
Event of Default by Borrower or to impair any remedy, right or power consequent
thereon.

Section 16.2     Modification, Waiver in Writing.

No modification, amendment, extension, discharge, termination or waiver of any
provision of this Agreement, any Security Instrument, the Note and the other
Loan Documents, nor consent to any departure by Borrower therefrom, shall in any
event be effective unless the same shall be in a writing signed by the party
against whom enforcement is sought, and then such waiver or consent shall be
effective only in the specific instance, and for the purpose, for which given.
Except as otherwise expressly provided herein, no notice to, or demand on
Borrower, shall entitle Borrower to any other or future notice or demand in the
same, similar or other circumstances.

 

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Section 16.3     Delay Not a Waiver.

Neither any failure nor any delay on the part of Lender in insisting upon strict
performance of any term, condition, covenant or agreement, or exercising any
right, power, remedy or privilege under this Agreement, any Security Instrument,
the Note or the other Loan Documents, or any other instrument given as security
therefor, shall operate as or constitute a waiver thereof, nor shall a single or
partial exercise thereof preclude any other future exercise, or the exercise of
any other right, power, remedy or privilege. In particular, and not by way of
limitation, by accepting payment after the due date of any amount payable under
this Agreement, any Security Instrument, the Note or the other Loan Documents,
Lender shall not be deemed to have waived any right either to require prompt
payment when due of all other amounts due under this Agreement, the Security
Instruments, the Note and the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.

Section 16.4     Waiver of Trial by Jury.

BORROWER AND LENDER, BY ACCEPTANCE OF THIS AGREEMENT, HEREBY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT. TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE APPLICATION FOR THE LOAN, THIS
AGREEMENT, THE NOTE, THE SECURITY INSTRUMENTS OR THE OTHER LOAN DOCUMENTS OR ANY
ACTS OR OMISSIONS OF LENDER OR BORROWER.

Section 16.5     Waiver of Notice.

Borrower shall not be entitled to any notices of any nature whatsoever from
Lender except (a) with respect to matters for which this Agreement specifically
and expressly provides for the giving of notice by Lender to Borrower and
(b) with respect to matters for which Lender is required by applicable law to
give notice, and Borrower hereby expressly waives the right to receive any other
such notice from Lender.

Section 16.6     Remedies of Borrower.

In the event that a claim or adjudication is made that Lender or its agents have
acted unreasonably or unreasonably delayed acting in any case where by
applicable law or under this Agreement, the Security Instruments, the Note and
the other Loan Documents, Lender or such agent, as the case may be, has an
obligation to act reasonably or promptly, Borrower agrees that neither Lender
nor its agents shall be liable for any monetary damages, and Borrower’s sole
remedies shall be limited to commencing an action seeking injunctive relief or
declaratory judgment. The parties hereto agree that any action or proceeding to
determine whether Lender has acted reasonably shall be determined by an action
seeking declaratory judgment. Lender agrees that, in such event, it shall
cooperate in expediting any action seeking injunctive relief or declaratory
judgment.

Section 16.7     Cross-Default; Cross-Collateralization; Marshalling and Other
Matters.

(a) Borrower acknowledges that Lender has made the Loan to Borrower upon the
security of its collective interest in the Properties and in reliance upon the
aggregate of the Properties taken together being of greater value as collateral
security than the sum of each Individual Property taken separately. Borrower
agrees that the Security Instruments are and will be cross collateralized and
cross defaulted with each other so that (i) an Event of Default under any of the
Security Instruments shall constitute an Event of Default under each of the
other Security Instruments which secure the Note; (ii) an Event of Default under
the Note or this Agreement shall constitute an Event of Default under each
Security Instrument; (iii) each Security Instrument shall constitute security
for the Note as if a single blanket lien were placed on all of the Properties as
security for the Note; and (iv) such cross collateralization shall in no event
be deemed to constitute a fraudulent conveyance.

(b) Borrower hereby waives, to the extent permitted by applicable Leal
Requirements, the benefit of all appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all rights of
marshalling in the event of any sale under any Security Instrument of any
Individual Property or any part thereof or any interest therein. Further,
Borrower hereby expressly waives any and all rights of redemption from

 

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sale under any order or decree of foreclosure of any Security Instrument on
behalf of Borrower, and on behalf of each and every person acquiring any
interest in or title to any Individual Property subsequent to the date of any
Security Instrument and on behalf of all persons to the extent permitted by
applicable Legal Requirements. In addition, Borrower, for itself and its
successors and assigns, waives in the event of foreclosure of any or all of the
Security Instruments, any equitable right otherwise available to Borrower which
would require the separate sale of the Properties or require Lender to exhaust
its remedies against any Individual Property or any combination of the
Properties before proceeding against any other Individual Property or
combination of Properties; and further in the event of such foreclosure Borrower
does hereby expressly consent to and authorizes, at the option of Lender, the
foreclosure and sale either separately or together of any combination of the
Properties.

Section 16.8     Waiver of Statute of Limitations.

To the extent permitted by applicable law, Borrower hereby expressly waives and
releases to the fullest extent permitted by applicable law, the pleading of any
statute of limitations as a defense to payment of the Debt or performance of its
obligations hereunder, under the Note, Security Instruments or other Loan
Documents.

Section 16.9     Waiver of Counterclaim. Borrower hereby waives the right to
assert a counterclaim, other than a compulsory counterclaim, in any action or
proceeding brought against it by Lender or its agents.

Section 16.10     Sole Discretion of Lender. Wherever pursuant to this Agreement
(a) Lender exercises any right given to it to approve or disapprove, (b) any
arrangement or term is to be satisfactory to Lender, or (c) any other decision
or determination is to be made by Lender, the decision to approve or disapprove
all decisions that arrangements or terms are satisfactory or not satisfactory,
and all other decisions and determinations made by Lender, shall be in the sole
discretion of Lender, except as may be otherwise expressly and specifically
provided herein.

ARTICLE 17

MISCELLANEOUS

Section 17.1     Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery to Lender of the Note, and shall continue in full force and effect
so long as all or any of the Debt is outstanding and unpaid unless a longer
period is expressly set forth in this Agreement, the Security Instruments, the
Note or the other Loan Documents. Whenever in this Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the legal
representatives, successors and assigns of such party. All covenants, promises
and agreements in this Agreement, by or on behalf of Borrower, shall inure to
the benefit of the legal representatives, successors and assigns of Lender.

Section 17.2     Governing Law. This Agreement shall be deemed to be a contract
entered into pursuant to the laws of the state of New York and shall in all
respects be governed, construed, applied and enforced in accordance with the
laws of the state of New York (without regard to principles of conflicts of
laws), provided however, that with respect to the creation, perfection, priority
and enforcement of the liens and security interests created by this Agreement,
the Security Instrument and the other Loan Documents, and the determination of
deficiency judgments, if applicable, the laws of the state where each Individual
Property is located shall apply.

THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE BY
LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF
THE LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK,
WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND
TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING,
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS
AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE

 

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LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH
STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS) AND ANY APPLICABLE LAW
OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS
CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL, WITH
RESPECT TO EACH INDIVIDUAL PROPERTY, BE GOVERNED BY AND CONSTRUED ACCORDING TO
THE LAW OF THE STATE WHERE SUCH INDIVIDUAL PROPERTY IS LOCATED, IT BEING
UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE
LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND
ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING
HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY
UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY
OTHER JURISDICTION GOVERNS THIS AGREEMENT, THE NOTE AND THE OTHER LOAN
DOCUMENTS, AND THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS MAY AT LENDER’S OPTION
BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF
NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND
BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE
AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT,
ACTION OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND APPOINT:

CT Corporation System

111 Eighth Avenue

New York NY 10011

Tel: 212-894-8940

AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY
AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND NOTICE OF SAID SERVICE MAILED OR
DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE TO
LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY
TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN
OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE
DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

Section 17.3     Headings. The Article and/or Section headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.

Section 17.4     Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable Legal Requirements, but if any provision of this Agreement shall be
prohibited by or invalid under applicable Legal Requirements, such provision
shall be

 

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ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.

Section 17.5     Preferences. Lender shall have the continuing and exclusive
right to apply or reverse and reapply any and all payments by Borrower to any
portion of the obligations of Borrower hereunder. To the extent Borrower makes a
payment or payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
Creditors Rights Laws, state or federal law, common law or equitable cause,
then, to the extent of such payment or proceeds received, the obligations
hereunder or part thereof intended to be satisfied shall be revived and continue
in full force and effect, as if such payment or proceeds had not been received
by Lender.

Section 17.6     Expenses. Borrower covenants and agrees to pay its own costs
and expenses and pay, or, if Borrower fails to pay, to reimburse, Lender, upon
receipt of written notice from Lender, for Lender’s reasonable costs and
expenses (including reasonable, actual attorneys’ fees and disbursements) in
each case, incurred by Lender in accordance with this Agreement in connection
with (i) the preparation, negotiation, execution and delivery of this Agreement,
the Security Instruments, the Note and the other Loan Documents and the
consummation of the transactions contemplated hereby and thereby and all the
costs of furnishing all opinions by counsel for Borrower (including without
limitation any opinions requested by Lender as to any legal matters arising
under this Agreement, the Security Instruments, the Note and the other Loan
Documents with respect to the Properties); (ii) Borrower’s ongoing performance
of and compliance with Borrower’s respective agreements and covenants contained
in this Agreement, the Security Instruments, the Note and the other Loan
Documents on its part to be performed or complied with after the Closing Date,
including, without limitation, confirming compliance with environmental and
insurance requirements; (iii) [reserved]; (iv) the negotiation, preparation,
execution, delivery and administration of any consents, amendments, waivers or
other modifications to this Agreement, the Security Instruments, the Note and
the other Loan Documents and any other documents or matters requested by
Borrower; (v) securing Borrower’s compliance with any requests made pursuant to
the provisions of this Agreement; (vi) the filing and recording fees and
expenses, title insurance and reasonable fees and expenses of counsel for
providing to Lender all required legal opinions, and other similar expenses
incurred in creating and perfecting the lien in favor of Lender pursuant to this
Agreement, the Security Instruments, the Note and the other Loan Documents;
(vii) enforcing or preserving any rights, in response to third party claims or
the prosecuting or defending of any action or proceeding or other litigation, in
each case against, under or affecting Borrower, this Agreement, the Security
Instruments, the Note, the other Loan Documents, any Individual Property, or any
other security given for the Loan; and (viii) enforcing any obligations of or
collecting any payments due from Borrower under this Agreement, the Security
Instruments, the Note and the other Loan Documents or with respect to any
Individual Property or in connection with any refinancing or restructuring of
the credit arrangements provided under this Agreement in the nature of a
“work-out” or of any insolvency or bankruptcy proceedings (which such costs and
expenses shall be deemed to include, without limitation and in each case, any
special servicing fees, liquidation fees, modification fees, work-out fees and
other similar costs or expenses payable to any Servicer, trustee and/or special
servicer of the Loan (or any portion thereof and/or interest therein));
provided, however, that Borrower shall not be liable for the payment of any such
costs and expenses to the extent the same arise by reason of the gross
negligence, illegal acts, fraud or willful misconduct of Lender, its agents,
employees, representative and/or contractors.

Section 17.7     Cost of Enforcement. In the event (a) that any Security
Instrument is foreclosed in whole or in part, (b) of the bankruptcy, insolvency,
rehabilitation or other similar proceeding in respect of Borrower or any of its
constituent Persons or an assignment by Borrower or any of its constituent
Persons for the benefit of its creditors, or (c) Lender exercises any of its
other remedies under this Agreement, any Security Instrument, the Note and the
other Loan Documents, Borrower shall be chargeable with and agrees to pay all
costs of collection and defense, including reasonable attorneys’ fees and costs,
incurred by Lender or Borrower in connection therewith and in connection with
any appellate proceeding or post judgment action involved therein, together with
all required service or use taxes.

Section 17.8     Schedules Incorporated. The Schedules and exhibits annexed
hereto are hereby incorporated herein as a part of this Agreement with the same
effect as if set forth in the body hereof.

 

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Section 17.9     Offsets, Counterclaims and Defenses. Any assignee of Lender’s
interest in and to this Agreement, the Security Instruments, the Note and the
other Loan Documents shall take the same free and clear of all offsets,
counterclaims or defenses which are unrelated to such documents which Borrower
may otherwise have against any assignor of such documents, and no such unrelated
counterclaim or defense shall be interposed or asserted by Borrower in any
action or proceeding brought by any such assignee upon such documents and any
such right to interpose or assert any such unrelated offset, counterclaim or
defense in any such action or proceeding is hereby expressly waived by Borrower.

Section 17.10     No Joint Venture or Partnership; No Third Party Beneficiaries.

(a) Borrower and Lender intend that the relationships created under this
Agreement, the Security Instruments, the Note and the other Loan Documents be
solely that of borrower and lender. Nothing herein or therein is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy
relationship between Borrower and Lender nor to grant Lender any interest in any
Individual Property other than that of mortgagee, beneficiary or lender.

(b) This Agreement, the Security Instruments, the Note and the other Loan
Documents are solely for the benefit of Lender and Borrower and nothing
contained in this Agreement, the Security Instruments, the Note or the other
Loan Documents shall be deemed to confer upon anyone other than Lender and
Borrower any right to insist upon or to enforce the performance or observance of
any of the obligations contained herein or therein. All conditions to the
obligations of Lender to make the Loan hereunder are imposed solely and
exclusively for the benefit of Lender and no other Person shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Lender will refuse to make the Loan in the absence of
strict compliance with any or all thereof and no other Person shall under any
circumstances be deemed to be a beneficiary of such conditions, any or all of
which may be freely waived in whole or in part by Lender if, in Lender’s sole
discretion, Lender deems it advisable or desirable to do so.

(c) The general partners, members, principals and (if Borrower is a trust)
beneficial owners of Borrower are experienced in the ownership and operation of
properties similar to the Properties, and Borrower and Lender are relying solely
upon such expertise and business plan in connection with the ownership and
operation of the Properties. Borrower is not relying on Lender’s expertise,
business acumen or advice in connection with the Properties.

(d) Notwithstanding anything to the contrary contained herein, Lender is not
undertaking the performance of (i) any obligations related to any Individual
Property (including, without limitation, under the Leases); or (ii) any
obligations with respect to any agreements, contracts, certificates,
instruments, franchises, permits, trademarks, licenses and other documents to
which any Borrower Party and/or any Individual Property is subject.

(e) By accepting or approving anything required to be observed, performed or
fulfilled or to be given to Lender pursuant to this Agreement, the Security
Instruments, the Note or the other Loan Documents, including, without
limitation, any officer’s certificate, balance sheet, statement of profit and
loss or other financial statement, survey, appraisal, or insurance policy,
Lender shall not be deemed to have warranted, consented to, or affirmed the
sufficiency, the legality or effectiveness of same, and such acceptance or
approval thereof shall not constitute any warranty or affirmation with respect
thereto by Lender.

(f) Borrower recognizes and acknowledges that in accepting this Agreement, the
Note, the Security Instruments and the other Loan Documents, Lender is expressly
and primarily relying on the truth and accuracy of the representations and
warranties set forth in Article 3 of this Agreement without any obligation to
investigate the Properties and notwithstanding any investigation of the
Properties by Lender; that such reliance existed on the part of Lender prior to
the date hereof, that the warranties and representations are a material
inducement to Lender in making the Loan; and that Lender would not be willing to
make the Loan and accept this Agreement, the Note, the Security Instruments and
the other Loan Documents in the absence of the warranties and representations as
set forth in Article 3 of this Agreement.

 

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Section 17.11     Publicity. All news releases, publicity or advertising by
Borrower or its Affiliates through any media intended to reach the general
public which refers to this Agreement, the Note, the Security Instruments or the
other Loan Documents or the financing evidenced by this Agreement, the Note, the
Security Instruments or the other Loan Documents, to Lender or any of its
Affiliates shall be subject to the prior written approval of Lender, not to be
unreasonably withheld.

Section 17.12     Conflict; Construction of Documents; Reliance. In the event of
any conflict between the provisions of this Agreement and the Security
Instruments, the Note or any of the other Loan Documents, the provisions of this
Agreement shall control. The parties hereto acknowledge that they were
represented by competent counsel in connection with the negotiation, drafting
and execution of this Agreement, the Note, the Security Instruments and the
other Loan Documents and this Agreement, the Note, the Security Instruments and
the other Loan Documents shall not be subject to the principle of construing
their meaning against the party which drafted same. Borrower acknowledges that,
with respect to the Loan, Borrower shall rely solely on its own judgment and
advisors in entering into the Loan without relying in any manner on any
statements, representations or recommendations of Lender or any parent,
subsidiary or Affiliate of Lender. Lender shall not be subject to any limitation
whatsoever in the exercise of any rights or remedies available to it under this
Agreement, the Note, the Security Instruments and the other Loan Documents or
any other agreements or instruments which govern the Loan by virtue of the
ownership by it or any parent, subsidiary or Affiliate of Lender of any equity
interest any of them may acquire in Borrower, and Borrower hereby irrevocably
waives the right to raise any defense or take any action on the basis of the
foregoing with respect to Lender’s exercise of any such rights or remedies.
Borrower acknowledges that Lender engages in the business of real estate
financings and other real estate transactions and investments which may be
viewed as adverse-to or competitive with the business of Borrower or its
Affiliates.

Section 17.13     Entire Agreement. This Agreement, the Note, the Security
Instruments and the other Loan Documents contain the entire agreement of the
parties hereto and thereto in respect of the transactions contemplated hereby
and thereby, and all prior agreements among or between such parties, whether
oral or written between Borrower and Lender are superseded by the terms of this
Agreement, the Note, the Security Instruments and the other Loan Documents.

Section 17.14     Liability. If Borrower consists of more than one Person, the
obligations and liabilities of each such Person hereunder shall be joint and
several. This Agreement shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns forever.

Section 17.15     Duplicate Originals; Counterparts. This Agreement may be
executed in any number of duplicate originals and each duplicate original shall
be deemed to be an original. The failure of any party hereto to execute this
Agreement, or any counterpart hereof, shall not relieve the other signatories
from their obligations hereunder.

Section 17.16     Contributions and Waivers.

(a) As a result of the transactions contemplated by this Agreement and the other
Loan Documents, each Borrower will benefit, directly and indirectly, from each
Borrower’s obligation to pay the Debt and perform its obligations hereunder and
under the other Loan Documents (collectively, the “Obligations”) and in
consideration therefore each Borrower desires to enter into an allocation and
contribution agreement among themselves as set forth in this Section to allocate
such benefits among themselves and to provide a fair and equitable agreement to
make contributions among each of Borrowers in the event any payment is made by
any individual Borrower hereunder to Lender (such payment being referred to
herein as a “Contribution,” and for purposes of this Section, includes any
exercise of recourse by Lender against any Property of a Borrower and
application of proceeds of such Property in satisfaction of such Borrower’s
obligations, to Lender under the Loan Documents).

(b) Each Borrower shall be liable hereunder with respect to the Obligations only
for such total maximum amount (if any) that would not render its Obligations
hereunder or under any of the Loan Documents subject to avoidance under
Section 548 of the Bankruptcy Code or any comparable provisions of applicable
Legal Requirements.

 

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(c) In order to provide for a fair and equitable contribution among Borrowers in
the event that any Contribution is made by an individual Borrower (a “Funding
Borrower”), such Funding Borrower shall be entitled to certain reimbursement
from all other Borrowers for all payments, damages and expenses incurred by that
Funding Borrower in discharging any of the Obligations (a “Reimbursement
Contribution”), in the manner and to the extent set forth in this Section.

(d) For purposes hereof, the “Benefit Amount” attributed to any individual
Borrower as of any date of determination shall be the value of the benefits to
such Borrower and its Affiliates from the extension(s) of credit made by Lender
to (i) such Borrower, plus (ii) to the other Borrowers hereunder and the Loan
Documents, to the extent such other Borrowers have guaranteed or mortgaged their
property to secure the Obligations of such Borrower to Lender.

(e) Each Borrower shall be liable to a Funding Borrower in an amount equal to
the greater of (i) the ratio of the Benefit Amount of such Borrower to the total
amount of the Obligations, multiplied by the sum of Obligations paid by such
Funding Borrower, or (ii) ninety-five percent (95%) of the remainder sum of
(x) the fair market value of the property of such Borrower, minus (y) the total
liabilities of such Borrower (including the maximum amount reasonably expected
to become due in respect of contingent liabilities) determined as of the date on
which the payment made by a Funding Borrower is deemed made for purposes hereof
(giving effect to all payments made by other Funding Borrowers as of such date
in a manner to maximize the amount of such Contributions).

(f) In the event that at any time there exists more than one Funding Borrower
with respect to any Contribution (in any such case, the “Applicable
Contribution”), then Reimbursement Contributions from other Borrowers pursuant
hereto shall be allocated among such Funding Borrowers in proportion to the
total amount of the Contribution made for or on account of the other Borrowers
by each such Funding Borrower pursuant to the Applicable Contribution. In the
event that at any time any Borrower pays an amount hereunder in excess of the
amount calculated pursuant to this Section 17.16, that Borrower shall be deemed
to be a Funding Borrower to the extent of such excess and shall be entitled to a
Reimbursement Contribution from the other Borrowers in accordance with the
provisions of this Section.

(g) Each Borrower acknowledges that the right to Reimbursement Contribution
hereunder shall constitute an asset in favor of Borrower to which such
Reimbursement Contribution is owing.

(h) No Reimbursement Contribution payments payable by a Borrower pursuant to the
terms of this Section shall be paid until all amounts then due and payable by
all of Borrowers to Lender, pursuant to the terms of the Loan Documents, are
paid in full in cash. Nothing contained in this Section shall limit or affect in
any way the Obligations of any Borrower to Lender under the Loan Documents.

(i) To the extent permitted by applicable Legal Requirements, each Borrower
waives:

(i) any right to require Lender to proceed against any other Borrower or any
other Person or to proceed against or exhaust any security held by Lender at any
time or to pursue any other remedy in Lender’s power before proceeding against
Borrower;

(ii) any defense based upon any legal disability or other defense of any other
Borrower, any guarantor of any other Person or by reason of the cessation or
limitation of the liability of any other Borrower or any guarantor from any
cause other than full payment of all sums payable under the Loan Documents;

(iii) any defense based upon any lack of authority of the officers, directors,
partners or agents acting or purporting to act on behalf of any other Borrower
or any principal of any other Borrower or any defect in the formation of any
other Borrower or any principal of any other Borrower;

(iv) any defense based upon any statute or rule of law which provides that the
obligation of a surety must be neither larger in amount nor in any other
respects more burdensome than that of a principal;

 

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(v) any defense based upon any failure by Lender to obtain collateral for the
indebtedness or failure by Lender to perfect a lien on any collateral;

(vi) presentment, demand, protest and notice of any kind;

(vii) any defense based upon any failure of Lender to give notice of sale or
other disposition of any collateral to any other Borrower or to any other Person
or any defect in any notice that may be given in connection with any sale or
disposition of any collateral;

(viii) any defense based upon any failure of Lender to comply with applicable
laws in connection with the sale or other disposition of any collateral,
including any failure of Lender to conduct a commercially reasonable sale or
other disposition of any collateral;

(ix) any defense based upon any use of cash collateral under Section 363 of the
Bankruptcy Code;

(x) any defense based upon any agreement or stipulation entered into by Lender
with respect to the provision of adequate protection in any bankruptcy
proceeding;

(xi) any defense based upon any borrowing or any grant of a security interest
under Section 364 of the Bankruptcy Code;

(xii) any defense based upon the avoidance of any security interest in favor of
Lender for any reason;

(xiii) any defense based upon any bankruptcy, insolvency, reorganization,
arrangement, readjustment of debt, liquidation or dissolution proceeding,
including any discharge of, or bar or stay against collecting, all or any of the
obligations evidenced by the Note or owing under any of the Loan Documents;

(xiv) any defense or benefit based upon Borrower’s, or any other party’s,
resignation of the portion of any obligation secured by any Security Instrument
to be satisfied by any payment from any other Borrower or any such party;

(xv) all rights and defenses arising out of an election of remedies by Lender
even though the election of remedies, such as non-judicial foreclosure with
respect to security for the Loan or any other amounts owing under the Loan
Documents, has destroyed Borrower’s rights of subrogation and reimbursement
against any other Borrower; and

(xvi) all rights and defenses that Borrower may have because any of Debt is
secured by real property. This means, among other things (subject to the other
terms and conditions of the Loan Documents): (1) Lender may collect from
Borrower without first foreclosing on any real or personal property collateral
pledged by any other Borrower, and (2) if Lender forecloses on any real property
collateral pledged by any other Borrower, (I) the amount of the Debt may be
reduced only by the price for which that collateral is sold at the foreclosure
sale, even if the collateral is worth more than the sale price and (II) Lender
may collect from Borrower even if any other Borrower, by foreclosing on the real
property collateral, has destroyed any right Borrower may have to collect from
any other Borrower. This is an unconditional and irrevocable waiver of any
rights and defenses Borrower may have because any of the Debt is secured by real
property; and except as may be expressly and specifically permitted herein, any
claim or other right which Borrower might now have or hereafter acquire against
any other Borrower or any other Person that arises from the existence or
performance of any obligations under the Loan Documents, including any of the
following: (i) any right of subrogation, reimbursement, exoneration,
contribution, or indemnification; or (ii) any right to participate in any claim
or remedy of Lender against any other Borrower or any collateral security
therefor, whether or not such claim, remedy or right arises in equity or under
contract, statute or common law.

 

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(j) Each Borrower hereby restates and makes the waivers made by Guarantor in the
Guaranty for the benefit of Lender. Such waivers are hereby incorporated by
reference as if fully set forth herein (and as if applicable to each Borrower)
and shall be effective for all purposes under the Loan (including, without
limitation, in the event that any Borrower is deemed to be a surety or guarantor
of the Debt (by virtue of each Borrower being co-obligors and jointly and
severally liable hereunder, by virtue of each Borrower encumbering its interest
in the Properties for the benefit or debts of the other Borrowers in connection
herewith or otherwise)).]

Section 17.17     Knowledge. All references in this Agreement or any other Loan
Documents to the knowledge of Borrower and/or Guarantor shall be deemed to mean
the current actual knowledge of such party.

[NO FURTHER TEXT ON THIS PAGE]

 

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

 

[Entities Listed on Exhibit A] By:   /s/ H. Michael Schwartz   Name: H. Michael
Schwartz   Title: President

 

LENDER: CITIGROUP GLOBAL MARKETS REALTY CORP. By:   /s/ Ana E. Rosu   Name: Ana
E. Rosu   Title: Authorized Signatory

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EXHIBIT A

List of Borrowers

 

1) SSTI 1000 E 95th ST, LLC

2) SSTI 2244 S Western AVE, LLC

3) SSTI 5701 W Ogden AVE, LLC

4) SSTI 5525 W Roosevelt RD, LLC

5) SSTI 1120 S Las Vegas BLVD, LLC

6) SSTI 11640 Jones Bridge RD, LLC

7) SSTI 2016 Lebanon RD, LLC

8) SSTI 8080 Steilen DR, LLC

9) SSTI 69 Mallory AVE, LLC

10) SSTI 15 McClure Dr, LLC

11) SSTI 1742 Pass Rd, LLC