Exhibit 10.1

EXECUTION VERSION

LOAN AGREEMENT

Dated as December 19, 2014

between

SWAY 2014-1 BORROWER, LLC

as Borrower

and

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,

as Lender

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TABLE OF CONTENTS

 

          Page  

Article I - DEFINITIONS; PRINCIPLES OF CONSTRUCTION

     1   

Section 1.1

   Definitions      1   

Section 1.2

   Principles of Construction      42   

Article II - GENERAL TERMS

     42   

Section 2.1

   Loan Commitment; Disbursement to Borrower      42   

2.1.1

  

Agreement to Lend and Borrow

     42   

2.1.2

  

Components of the Loan

     42   

2.1.3

  

Single Disbursement to Borrower

     42   

2.1.4

  

The Note, Mortgages and Loan Documents

     43   

2.1.5

  

Use of Proceeds

     43   

Section 2.2

   Interest Rate      43   

2.2.1

  

Interest Rate

     43   

2.2.2

  

Interest Calculation

     43   

2.2.3

  

Determination of Interest Rate

     43   

2.2.4

  

Additional Costs

     45   

2.2.5

  

Default Rate

     45   

2.2.6

  

Usury Savings

     46   

2.2.7

  

Interest Rate Cap Agreement

     46   

Section 2.3

   Loan Payment      48   

2.3.1

  

Monthly Debt Service Payments

     48   

2.3.2

  

Payments Generally

     48   

2.3.3

  

Payment on Maturity Date

     49   

2.3.4

  

Late Payment Charge

     49   

2.3.5

  

Method and Place of Payment

     49   

Section 2.4

   Prepayments      49   

2.4.1

  

Voluntary Prepayments

     49   

2.4.2

  

Mandatory Prepayments

     49   

2.4.3

  

Prepayments After Default

     53   

2.4.4

  

Prepayment/Repayment Conditions

     54   

Section 2.5

   Release of Property      56   

Section 2.6

   Rent Deposit Account/Cash Management      58   

 

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2.6.1

  

Rent Deposit Account

     58   

2.6.2

  

Cash Management Account

     59   

2.6.3

  

Order of Priority of Funds in Cash Management Account

     60   

2.6.4

  

Application During Event of Default

     61   

2.6.5

  

Payments Received in the Cash Management Account

     61   

Section 2.7

   Withholding Taxes      62   

Section 2.8

   Extension of the Initial Maturity Date      65   

Article III - REPRESENTATIONS AND WARRANTIES

     66   

Section 3.1

   General Representations      66   

3.1.1

  

Organization

     66   

3.1.2

  

Proceedings

     66   

3.1.3

  

No Conflicts

     67   

3.1.4

  

Litigation

     67   

3.1.5

  

Agreements

     67   

3.1.6

  

Consents

     67   

3.1.7

  

Solvency

     67   

3.1.8

  

Other Debt

     68   

3.1.9

  

Employee Benefit Matters

     68   

3.1.10

  

Compliance with Legal Requirements

     69   

3.1.11

  

Financial Information

     69   

3.1.12

  

Insurance

     69   

3.1.13

  

Tax Filings

     70   

3.1.14

  

Certificate of Compliance; Licenses

     70   

3.1.15

  

Special Purpose Entity/Separateness

     70   

3.1.16

  

Management

     71   

3.1.17

  

Illegal Activity

     71   

3.1.18

  

No Change in Facts or Circumstances; Disclosure

     71   

3.1.19

  

Investment Company Act

     71   

3.1.20

  

Federal Reserve Regulations

     71   

3.1.21

  

Bank Holding Company

     71   

3.1.22

  

FIRPTA

     71   

3.1.23

  

Contracts

     72   

3.1.24

  

Embargoed Person

     72   

3.1.25

  

Perfection Representations

     72   

 

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Section 3.2

   Property Representations      73   

3.2.1

  

Property/Title

     73   

3.2.2

  

Adverse Claims

     74   

3.2.3

  

Title Insurance Owner’s Policy

     74   

3.2.4

  

Deed

     74   

3.2.5

  

Mortgage File Required Documents

     74   

3.2.6

  

Property Taxes and Other Charges

     75   

3.2.7

  

Compliance with Renovation Standards

     75   

3.2.8

  

Condemnation; Physical Condition

     75   

3.2.9

  

Brokers

     75   

3.2.10

  

Leasing

     75   

3.2.11

  

Insurance

     76   

3.2.12

  

Lawsuits, Etc

     76   

3.2.13

  

Orders, Injunctions, Etc

     76   

3.2.14

  

Agreements Relating to the Properties

     76   

3.2.15

  

Accuracy of Information Regarding Property

     76   

3.2.16

  

Compliance with Legal Requirements

     76   

3.2.17

  

Utilities and Public Access

     77   

3.2.18

  

Eminent Domain

     77   

3.2.19

  

Flood Zone

     77   

3.2.20

  

Specified Liens

     77   

Section 3.3

   Survival of Representations      77   

Article IV - BORROWER COVENANTS

     77   

Section 4.1

   Affirmative Covenants      77   

4.1.1

  

Preservation of Existence

     77   

4.1.2

  

Compliance with Legal Requirements

     78   

4.1.3

  

Special Purpose Bankruptcy Remote Entity/Separateness

     78   

4.1.4

  

Non-Property Taxes

     78   

4.1.5

  

Access to the Properties

     79   

4.1.6

  

Cooperate in Legal Proceedings

     79   

4.1.7

  

Perform Loan Documents

     79   

4.1.8

  

Award and Insurance Benefits

     80   

4.1.9

  

Further Assurances

     80   

4.1.10

  

Keeping of Books and Records

     80   

 

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4.1.11

  

Business and Operations

     80   

4.1.12

  

[Reserved]

     81   

4.1.13

  

Loan Proceeds

     81   

4.1.14

  

Performance by Borrower

     81   

4.1.15

  

Leasing Matters

     81   

4.1.16

  

Borrower’s Operating Account

     81   

4.1.17

  

Security Deposits

     81   

4.1.18

  

Investment of Funds in Cash Management Account, Subaccounts; Rent Deposit
Accounts and Security Deposit Accounts

     82   

4.1.19

  

Operation of Property

     82   

4.1.20

  

Anti-Money Laundering

     83   

4.1.21

  

Embargoed Persons

     83   

4.1.22

  

ERISA Matters

     84   

4.1.23

  

Formation of a Borrower TRS

     84   

Section 4.2

   Negative Covenants      85   

4.2.1

  

Operation of Property

     85   

4.2.2

  

Indebtedness

     85   

4.2.3

  

Liens

     85   

4.2.4

  

Limitation on Investments

     85   

4.2.5

  

Limitation on Issuance of Equity Interests

     86   

4.2.6

  

Restricted Junior Payments

     86   

4.2.7

  

Principal Place of Business, State of Organization

     86   

4.2.8

  

Dissolution

     86   

4.2.9

  

Change in Business

     86   

4.2.10

  

Debt Cancellation

     87   

4.2.11

  

Changes to Accounts

     87   

4.2.12

  

Zoning

     87   

4.2.13

  

No Joint Assessment

     87   

4.2.14

  

Limitation on Transactions with Affiliates

     87   

4.2.15

  

ERISA

     88   

4.2.16

  

No Embargoed Persons

     88   

4.2.17

  

Transfers

     88   

Section 4.3

   Reporting Covenants      91   

4.3.1

  

Financial Reporting

     91   

 

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4.3.2

  

Annual Budget

     93   

4.3.3

  

Reporting on Adverse Effects

     93   

4.3.4

  

Litigation

     94   

4.3.5

  

Event of Default

     94   

4.3.6

  

Other Defaults

     94   

4.3.7

  

Properties Schedule

     94   

4.3.8

  

Disqualified Properties

     94   

4.3.9

  

Security Deposits

     95   

4.3.10

  

Advance Rents Received

     95   

4.3.11

  

[Reserved]

     95   

4.3.12

  

ERISA Matters

     95   

4.3.13

  

Leases

     96   

4.3.14

  

Periodic Rating Agency Information

     96   

4.3.15

  

Other Reports

     97   

4.3.16

  

HOA Reporting

     97   

Section 4.4

   Property Covenants      98   

4.4.1

  

Ownership of the Property

     98   

4.4.2

  

Liens Against the Property

     98   

4.4.3

  

Condition of the Property

     98   

4.4.4

  

Compliance with Legal Requirements

     99   

4.4.5

  

Property Taxes and Other Charges

     99   

4.4.6

  

Compliance with Agreements Relating to the Properties

     100   

4.4.7

  

Leasing

     100   

4.4.8

  

Verification of HOA Payments

     100   

Article V - INSURANCE; CASUALTY; CONDEMNATION

     101   

Section 5.1

  

Insurance

     101   

5.1.1

  

Insurance Policies

     101   

Section 5.2

  

Casualty

     105   

Section 5.3

  

Condemnation

     105   

Section 5.4

  

Restoration

     107   

Article VI - RESERVE FUNDS

     112   

Section 6.1

  

Tax Funds; HOA Funds

     112   

6.1.1

  

Deposits of Tax Funds

     112   

6.1.2

  

Release of Tax Funds

     112   

 

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6.1.3

  

Deposits of HOA Funds

   112

6.1.4

  

Release of HOA Funds

   113

Section 6.2

  

Insurance Funds

   113

6.2.1

  

Deposits of Insurance Funds

   113

6.2.2

  

Release of Insurance Funds

   113

6.2.3

  

Acceptable Blanket Policy

   113

Section 6.3

  

Capital Expenditure Funds

   114

6.3.1

  

Deposits of Capital Expenditure Funds

   114

6.3.2

  

Release of Capital Expenditure Funds

   114

Section 6.4

  

Casualty and Condemnation Subaccount

   114

Section 6.5

  

Eligibility Reserve Subaccount

   115

6.5.1

  

Deposit of Eligibility Funds

   115

6.5.2

  

Release of Eligibility Funds

   115

Section 6.6

  

Cash Collateral

   115

6.6.1

  

Cash Collateral Subaccount

   115

6.6.2

  

Withdrawal of Cash Collateral Funds

   115

6.6.3

  

Release of Cash Collateral Funds

   116

6.6.4

  

Extraordinary Expense

   116

Section 6.7

  

Advance Rent Funds

   116

6.7.1

  

Deposits of Advance Rent Funds

   116

6.7.2

  

Release of Advance Rent Funds

   117

Section 6.8

  

Reserve Funds, Generally

   117

Article VII - DEFAULTS

   118

Section 7.1

  

Event of Default

   118

Section 7.2

  

Remedies

   121

Section 7.3

  

Remedies Cumulative; Waivers

   122

Section 7.4

  

Lender’s Right to Perform

   123

Article VIII - SPECIAL PROVISIONS

   123

Section 8.1

  

Securitization

   123

8.1.1

  

Sale of Notes and Securitization

   123

8.1.2

  

Securitization Costs

   124

Section 8.2

  

Securitization Cooperation

   124

Section 8.3

  

Servicer

   124

Article IX - MISCELLANEOUS

   125

 

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Section 9.1

   Survival      125   

Section 9.2

   Lender’s Discretion; Rating Agency Review Waiver      125   

Section 9.3

   Governing Law      125   

Section 9.4

   Modification, Waiver in Writing      126   

Section 9.5

   Delay Not a Waiver      126   

Section 9.6

   Notices      127   

Section 9.7

   Trial by Jury      128   

Section 9.8

   Headings      128   

Section 9.9

   Severability      128   

Section 9.10

   Preferences      128   

Section 9.11

   Waiver of Notice      128   

Section 9.12

   Remedies of Borrower      129   

Section 9.13

   Expenses; Indemnity      129   

Section 9.14

   Schedules and Exhibits Incorporated      130   

Section 9.15

   Offsets, Counterclaims and Defenses      130   

Section 9.16

   No Joint Venture or Partnership; No Third Party; Beneficiaries      131   

Section 9.17

   Publicity      131   

Section 9.18

   Cross Default; Cross Collateralization; Waiver of Marshalling of Assets     
132   

Section 9.19

   Conflict; Construction of Documents; Reliance      132   

Section 9.20

   Brokers and Financial Advisors      133   

Section 9.21

   Prior Agreements      133   

Section 9.22

   Counterparts      133   

Section 9.23

   Document Delivery      133   

Section 9.24

   Exculpation of Lender      133   

Section 9.25

   Patriot Act Records      133   

Section 9.26

   No Fiduciary Duty      134   

Section 9.27

   State Specific Provisions      135   

9.27.1

  

Arizona

     135   

9.27.2

  

California

     135   

9.27.3

  

Florida

     136   

9.27.4

  

Georgia

     136   

 

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SCHEDULES

Schedules and Exhibits

 

Schedules:       

Schedule I

  -      Allocated Loan Amounts

Schedule II.A

  -      Closing Date Properties Schedule

Schedule II. B

  -      Form of Monthly Properties Schedule

Schedule II.C

  -      Form of Quarterly Investor Rollup Report

Schedule III

  -      Exceptions to Representations and Warranties

Schedule IV

  -      Chief Executive Office, Prior Names and Employer Identification Number

Schedule V

  -      Periodic Rating Agency Information

Schedule VI

  -      Midland Loan Services – SWAY 2014-1 Servicing Fees

Schedule VII

  -      Specified Liens

Schedule VIII

  -      Vacant Properties Exhibits:       

Exhibit A

  -      Form of Blocked Account Control Agreement

Exhibit B

  -      Form of Compliance Certificate

Exhibit C

  -      Form of Deposit Account Control Agreement

Exhibit D

  -      Form of Request for Release

Exhibit E

  -      Form of Closing Date HOA Opinions

 

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LOAN AGREEMENT

THIS LOAN AGREEMENT, dated as of December 19, 2014 (as amended, restated,
replaced, supplemented or otherwise modified from time to time, this
“Agreement”), between SWAY 2014-1 BORROWER, LLC, a Delaware limited liability
company, having its principal place of business at 1999 Harrison Street,
Oakland, California 94612, (“Borrower”) and JPMORGAN CHASE BANK, NATIONAL
ASSOCIATION, a banking association chartered under the laws of the United States
of America, having an address at 383 Madison Avenue, New York, New York 10179
(“Lender”).

W I T N E S S E T H:

WHEREAS, Borrower desires to obtain the Loan (as hereinafter defined) from
Lender; and

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

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

ARTICLE I - DEFINITIONS; PRINCIPLES OF CONSTRUCTION

Section 1.1 Definitions. For all purposes of this Agreement, except as otherwise
expressly required or unless the context clearly indicates a contrary intent:

“Acceptable Blanket Policy” has the meaning set forth in Section 5.1.1(e).

“Acceptable Counterparty” means a counterparty to the Interest Rate Cap
Agreement (or the guarantor of such counterparty’s obligations) that (a) has and
shall maintain, until the expiration of the applicable Interest Rate Cap
Agreement, (i) a long-term unsecured debt rating of not less than “A” by S&P and
(ii) a long-term unsecured debt rating of not less than “A2” from Moody’s or
(b) is otherwise acceptable to the Approved Rating Agencies, as evidenced by a
Rating Agency Confirmation to the effect that such counterparty shall not cause
a downgrade, withdrawal or qualification of the ratings assigned, or to be
assigned, to the Securities or any class thereof in any Securitization.

“Acknowledgment” means the Acknowledgment, dated on or about the Closing Date
made by Counterparty, or as applicable, Acceptable Counterparty with respect to
the Interest Rate Cap Agreement.

“Actual Rent Collections” means, for any period of determination, the actual
cash collections of Rents in respect of the Properties by Borrower; provided,
that collections of Advance Rent shall be allocated to applicable calendar month
set forth in the Advance Rent Disbursement Schedule.

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“Additional Insolvency Opinion” means a non-consolidation opinion letter
delivered in connection with the Loan subsequent to the Closing Date, in form
and substance and from counsel reasonably satisfactory to Lender and, following
a Securitization, as to which a Rating Agency Confirmation has been obtained.

“Advance Rent” means, for any given month, any Rent that has been prepaid more
than thirty (30) days in advance, as measured from the date of determination.

“Advance Rent Disbursement Schedule” means a schedule showing the Payment Dates
to which Advance Rents received by Borrower are applicable and should be
disbursed from the Advance Rent Subaccount to the Cash Management Account.

“Advance Rent Funds” has the meaning set forth in Section 6.7.1.

“Advance Rent Subaccount” has the meaning set forth in Section 6.7.1.

“Affected Property” has the meaning set forth in Section 2.4.2(a).

“Affiliate” means, as to any Person, any other Person that (i) owns directly or
indirectly forty-nine percent (49%) or more of all equity interests in such
Person, and/or (ii) is in Control of, is Controlled by or is under common
ownership or Control with such Person, and/or (iii) is a director or officer of
such Person or of an Affiliate of such Person.

“Agreement” has the meaning set forth in the introductory paragraph hereto.

“Allocated Loan Amount” means for a Property the amount set forth on Schedule I,
as the same may be reduced pursuant to Section 2.4.4(f); provided that (i) if a
single Substitute Property is substituted for an Affected Property or portfolio
of Affected Properties pursuant to Section 2.4.2(a), then the initial Allocated
Loan Amount of such Substitute Property shall be the Allocated Loan Amount of
such Affected Property (or the aggregate Allocated Loan Amounts of such Affected
Properties) immediately prior to its (or their) substitution, and (ii) if two
(2) or more Substitute Properties are substituted for an Affected Property or
portfolio of Affected Properties pursuant to Section 2.4.2(a), then the initial
Allocated Loan Amount of each such Substitute Property shall be a pro rata
portion of the Allocated Loan Amount of such Affected Property (or the aggregate
Allocated Loan Amounts of such Affected Properties) immediately prior to its (or
their) substitution, with such pro rata portion determined based on the BPO
Values of the Substitute Properties. For the avoidance of doubt, in connection
with calculating any prepayments contemplated by this Agreement, Lender will fix
the Allocated Loan Amount for any individual Property as of the date Lender
received notice of the prepayment from Borrower.

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

“Annual Budget” means the operating budget, including all planned Capital
Expenditures (other than Discretionary Capital Expenditures), for the Properties
prepared by Borrower in accordance with Section 4.3.2 for the applicable
calendar year, prepared on a month-by-month basis.

“Anti-Money Laundering Laws” has the meaning set forth in Section 4.1.20.

 

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“Applicable HOA Properties” means with respect to any Applicable HOA State,
(a) all HOA Properties located in such Applicable HOA State except for any
Properties (i) as to which any Liens for HOA Fees are expressly subordinated to
the Lien of the Mortgages and the applicable Title Insurance Policy insures
against any loss sustained by Lender if such Liens for HOA Fees, including
after-arising HOA Liens, have priority over the Lien of the Mortgages or
(ii) with respect to which (x) Borrower has delivered to Lender an opinion,
satisfactory to Lender, from a nationally recognized law firm (or one with
prominent standing in the applicable state) that affirmatively concludes that
any Liens for HOA Fees (including future-arising Liens for HOA Fees) would not
have Priority and (y) Borrower has delivered to Lender, within twenty
(20) Business Days after the end of the most recently ended calendar quarter, an
updated legal opinion with the same conclusion (which may be in the form of a
bring-down or date-down opinion with respect to an earlier delivered opinion) or
(b) all HOA Properties located in such Applicable HOA State designated as an
Applicable HOA Property pursuant to Section 4.3.16(b).

“Applicable HOA State” means (a) a state in which, pursuant to applicable Legal
Requirements, (i) a Lien in favor of a homeowners association may be created
through the non-payment of amounts assessed against a Property by such
homeowners association, (ii) any such Lien would have priority over the lien of
the Mortgage and (iii) any such Lien if foreclosed upon by such homeowners
association would result in an extinguishment of the Lien of the Mortgage on
such Property or (b) a state designated as an Applicable HOA State pursuant to
Section 4.3.16(b). For the avoidance of doubt, if any reported decision of a
state appellate court would result in the foregoing clauses (a)(i) through
(iii) applying in such state, then such state shall constitute an Applicable HOA
State.

“Approved Annual Budget” has the meaning set forth in Section 4.3.2.

“Approved Capital Expenditures” means Capital Expenditures (other than
Discretionary Capital Expenditures) incurred by Borrower and either (i) if no
Cash Sweep Period is continuing, included in the Annual Budget or, if during a
Cash Sweep Period, in an Approved Annual Budget or (ii) approved by Lender,
which approval shall not be unreasonably withheld, conditioned or delayed. For
the avoidance of doubt, any budgeted Capital Expenditure amount for a calendar
month may be carried forward if unused in such calendar month; provided,
however, no such unused amount may be carried over from the last calendar month
of any Approved Annual Budget to the first calendar month of the next Approved
Annual Budget.

“Approved Extraordinary Expense” has the meaning set forth in Section 6.6.4.

“Approved Initial Budget” has the meaning set forth in Section 4.3.2.

“Approved Rating Agencies” means each of the nationally-recognized statistical
rating agencies which has been approved by Lender and designated by Lender to
assign a rating to the Securities.

“Assignment of Management Agreement” means (i) with respect to Manager, an
Assignment of Management Agreement and Subordination of Management Fees among
Lender, Borrower and Manager, substantially in the form delivered on the Closing
Date by Borrower, Existing Manager and Lender and (ii) with respect to any
Person providing property

 

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management services to Manager with respect to the Properties pursuant to a
sub-management agreement, an Assignment of Management Agreement and
Subordination of Management Fees among Lender, Manager and such Person,
substantially in the form delivered on the Closing Date by Existing Manager,
Lender and the Persons providing property management services to Manager with
respect to the Properties as of the Closing Date.

“Assumed Note Rate” means, (i) with respect to each Floating Rate Component of
the Loan, an interest rate equal to the sum of 0.50%, plus the applicable
Floating Rate Component Spread plus LIBOR as determined on the preceding
Determination Date and (ii) with respect to Component G, the Component G
Interest Rate.

“Available Cash” has the meaning set forth in Section 2.6.3(j).

“Award” means any compensation paid by any Governmental Authority in connection
with a Condemnation.

“Bankruptcy Action” means, with respect to any Person:

(a) such Person shall fail generally to pay its debts as they come due, or shall
make a general assignment for the benefit of creditors; or any case or other
proceeding shall be instituted by such Person seeking to adjudicate it as
bankrupt or insolvent, or seeking liquidation, reorganization, debt arrangement,
dissolution, winding up, or composition or readjustment of debts of it or its
debts under the Bankruptcy Code; or such Person shall take any corporate,
limited partnership or limited liability company action to authorize any of such
actions; or

(b) a case or other proceeding shall be commenced, without the application or
consent of such Person in any court seeking the liquidation, reorganization,
debt arrangement, dissolution, winding up, or composition or readjustment of
debts of such Person, the appointment of a trustee, receiver, custodian,
liquidator, assignee, sequestrator or the like for such Person or all or
substantially all of its assets, or any similar action with respect to such
Person under the Bankruptcy Code, and (A) such case or proceeding shall continue
undismissed, or unstayed and in effect, for a period of sixty (60) consecutive
days or (B) an order for relief in respect of such Person shall be entered in
such case or proceeding or a decree or order granting such other requested
relief shall be entered.

“Bankruptcy Code” means Title 11 of the United States Code, 11 U.S.C. §101, et
seq., as the same may be amended from time to time, and any successor statute or
statutes and all rules and regulations from time to time promulgated thereunder,
and any comparable foreign laws relating to bankruptcy, insolvency or creditors’
rights or any other Federal, state, local or foreign bankruptcy or insolvency
law.

“Blocked Account Control Agreement” means the Cash Management Agreement among
Borrower, Cash Management Account Bank and Lender providing for the exclusive
control of the Cash Management Account and all other Subaccounts by Lender,
substantially in the form of Exhibit A or such other form as may be reasonably
acceptable to Lender.

“Borrower” has the meaning set forth in the introductory paragraph hereto,
together with its successors and permitted assigns.

 

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“Borrower Security Agreement” means that certain Security Agreement, dated as of
the Closing Date, executed by Borrower in favor of Lender.

“Borrower TRS” means a wholly-owned Delaware limited liability company
subsidiary of Borrower that is treated for US income tax purposes as a “taxable
REIT subsidiary”.

“Borrower’s Operating Account” has the meaning set forth in Section 4.1.16.

“BPO Value” means, with respect to any Property, the “as is” value for such
Property set forth in a Broker Price Opinion obtained by Lender with respect to
a Property.

“Breakage Costs” has the meaning set forth in Section 2.2.3(e).

“Broker Price Opinion” means a broker price opinion obtained by Lender.

“Business Day” means any day other than a Saturday, Sunday or any other day on
which national banks in New York, New York, or the place of business of the
trustee under a Securitization (or, if no Securitization has occurred, Lender),
or any Servicer or the financial institution that maintains any collection
account for or on behalf of any Servicer or any Reserve Funds or the Federal
Reserve Bank of New York is not open for business.

“Calculation Date” means the last day of each calendar quarter during the Term,
commencing with the calendar quarter ended March 31, 2015.

“Cap Receipts” means all amounts received by Borrower pursuant to an Interest
Rate Cap Agreement.

“Capital Expenditure Funds” has the meaning set forth in Section 6.3.1.

“Capital Expenditure Subaccount” has the meaning set forth in Section 6.3.1.

“Capital Expenditures” means, for any period, the amount expended for items
capitalized under GAAP (including expenditures for building improvements and
major repairs).

“Cash Collateral Floor” has the meaning set forth in Section 6.6.2.

“Cash Collateral Funds” has the meaning set forth in Section 6.6.1.

“Cash Collateral Subaccount” has the meaning set forth in Section 6.6.1.

“Cash Management Account” has the meaning set forth in Section 2.6.2(a).

“Cash Management Account Bank” means the Eligible Institution selected by Lender
to maintain the Cash Management Account.

“Cash Sweep Period” shall commence upon the occurrence of (i) an Event of
Default or (ii) the commencement of a Low Debt Yield Period; and shall end if,
(A) with respect to a Cash Sweep Period continuing pursuant to clause (i), the
Event of Default commencing the Cash Sweep Period has been cured and such cure
has been accepted by Lender (and no other Event of Default is then continuing)
or (B) with respect to a Cash Sweep Period continuing due to clause (ii), the
Low Debt Yield Period has ended pursuant to the terms hereof.

 

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“Casualty” has the meaning set forth in Section 5.2.

“Casualty and Condemnation Funds” has the meaning set forth in Section 6.4.

“Casualty and Condemnation Subaccount” has the meaning set forth in Section 6.4.

“Casualty Consultant” has the meaning set forth in Section 5.4(d)(iii).

“Casualty Retainage” has the meaning set forth in Section 5.4(d)(iv).

“Casualty Threshold Amount” means, with respect to all Casualties arising from
any single Casualty event, an amount equal to two percent (2%) of the
Outstanding Principal Balance as of the date of such Casualty Event.

“Closing Date” means the date of the funding of the Loan.

“Closing Date Debt Yield” means 7.43%.

“Closing Date HOA Opinion” means the opinion of Sheppard Mullin Richter &
Hampton LLP in the form of Exhibit E delivered and dated as of the Closing Date.

“Code” means the Internal Revenue Code of 1986, as amended.

“Collateral” means, collectively, all of the real, personal and mixed property
in which Liens are purported to be granted pursuant to the Collateral Documents
as security for the Obligations.

“Collateral Assignment of Interest Rate Cap Agreement” has the meaning set forth
in Section 2.2.7(a).

“Collateral Assignment of Leases and Rents” means a Collateral Assignment of
Leases and Rents for each Property or for multiple Properties located within the
same county or parish, dated as of the Closing Date (or, in connection with a
Property which is a Substitute Property, dated as of the date of the
substitution), executed and delivered by Borrower, constituting an assignment of
the Lease or the Leases, as applicable, and the proceeds thereof as Collateral
for the Loan, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time. The Collateral Assignment of Leases and
Rents may be included as part of the Mortgage for such Property or Properties.

“Collateral Documents” means the Borrower Security Agreement, the Equity Owner
Security Agreement, the Blocked Account Control Agreement, each Deposit Account
Control Agreement, each Collateral Assignment of Interest Rate Cap Agreement,
each Assignment of Management Agreement, each Mortgage Document and all other
instruments, documents and agreements delivered by any Loan Party pursuant to
this Agreement or any of the other Loan Documents in order to grant to Lender a
Lien on any real, personal or mixed property of that

 

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Loan Party as security for the Obligations, as the same may be (and each of the
foregoing defined terms shall refer to such documents as they may be) amended,
restated, replaced, supplemented or otherwise modified from time to time.

“Collections” means, without duplication, with respect to any Property, all
Rents, Insurance Proceeds (whether or not Lender elects to treat any such
Insurance Proceeds as business or rental interruption Insurance Proceeds
pursuant to Section 5.4(d)), Condemnation Proceeds, Net Transfer Proceeds, Cap
Receipts, interest on amounts on deposit in the Cash Management Account and the
Reserve Funds, amounts paid by Borrower to the Cash Management Account pursuant
to this Agreement, and all other payments received with respect to such Property
and all “proceeds” (as defined in Section 9-102 of the UCC) of such Property.
For the avoidance of doubt, Collections shall not include security deposits that
have not been forfeited by the applicable Tenant.

“Compliance Certificate” means the certificate in the form attached hereto as
Exhibit B.

“Component” means individually or collectively, as the context may require, any
one of Component A, Component B, Component C, Component D, Component E,
Component F and Component G, each as more particularly set forth in Section
2.1.2.

“Component G Interest Rate” means a rate of five ten thousandths of one percent
(0.0005%) per annum.

“Component Outstanding Principal Balance” means, as of any given date, with
respect to each Component, the outstanding principal balance of such Component.

“Concessions” means, for any period of determination, the concessions provided
with respect to the Properties by Borrower, as determined in accordance with
GAAP.

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

“Condemnation Proceeds” has the meaning set forth in the definition of “Net
Proceeds”.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or
measured by net income (however denominated) or that are franchise Taxes or
branch profits Taxes.

“Contest Security” means any security delivered to Lender by Borrower under
Section 4.1.3 or Section 4.4.5.

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of management, policies or activities of a Person,
whether through ownership of voting securities, by contract or otherwise.
“Controlled” and “Controlling” shall have correlative meanings.

 

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“Counterparty” means, with respect to the Interest Rate Cap Agreement,
                    , and with respect to any Replacement Interest Rate Cap
Agreement, any Acceptable Counterparty thereunder.

“Counterparty Opinion” has the meaning set forth in Section 2.2.7(e).

“Covered Disclosure Information” has the meaning set forth in Section 8.1.1(b).

“Covered Rating Agency Information” has the meaning set forth in Section
9.13(d).

“Cure Period” means, (i) with respect to the failure of any Property to qualify
as an Eligible Property (other than with respect to the failure of a Property to
comply with the representation in Section 3.2.20) if such failure is reasonably
susceptible of cure, a period of thirty (30) days after the earlier of actual
knowledge of such condition by a Responsible Officer of Borrower or Manager or
notice thereof by Lender to Borrower; provided that, if Borrower is diligently
pursuing such cure during such thirty (30) day period and such failure is
susceptible of cure but cannot reasonably be cured within such thirty (30) day
period, then such cure period shall be extended for another ninety (90) days so
long as Borrower continues to diligently pursue such cure and, provided,
further, that if the Obligations have been accelerated pursuant to
Section 7.1(b), then the cure period hereunder shall be reduced to zero (0) days
and (ii) with respect to the failure of a Property to comply with the
representation in Section 3.2.20, zero (0) days. If any failure of any Property
to qualify as an Eligible Property is not reasonably susceptible of cure, then
no cure period shall be available. If any failure of any Property to qualify as
an Eligible Property is due to a Voluntary Action, then no cure period shall be
available.

“Debt” means the outstanding principal amount set forth in, and evidenced by,
this Agreement and the Note together with all interest accrued and unpaid
thereon and all other sums (including, but not limited to, any Spread
Maintenance Payment, Interest Shortfall and/or Breakage Costs, if applicable)
due to Lender in respect of the Loan under the Note, this Agreement, the
Mortgage Documents, the Environmental Indemnity or any other Loan Document.

“Debt Service” means, with respect to any period of determination, the interest
payments due under the Note for such period.

“Debt Service Coverage Ratio” means, as of any date of determination, a ratio in
which:

(a) the numerator is the Underwritten Net Cash Flow calculated for the twelve
(12) month period ending on the Initial Maturity Date or the Extended Maturity
Date, as applicable; and

(b) the denominator is the aggregate debt service for the twelve (12) month
period following such date of determination, calculated as the sum of (i) with
respect to Component A, the product of (A) the Component Outstanding Principal
Balance for Component A as of such

 

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date and (B) an interest rate equal to the sum of (x) the Floating Rate
Component Spread for Component A and (y) the Strike Price described in clause
(b) of the definition of Strike Price, (ii) with respect to Component B, the
product of (A) the Component Outstanding Principal Balance for Component B as of
such date and (B) an interest rate equal to the sum of (x) the Floating Rate
Component Spread for Component B and (y) the Strike Price described in clause
(b) of the definition of Strike Price, (iii) with respect to Component C, the
product of (A) the Component Outstanding Principal Balance for Component C as of
such date and (B) an interest rate equal to the sum of (x) the Floating Rate
Component Spread for Component C and (y) the Strike Price described in clause
(b) of the definition of Strike Price, (iv) with respect to Component D, the
product of (A) the Component Outstanding Principal Balance for Component D as of
such date and (B) an interest rate equal to the sum of (x) the Floating Rate
Component Spread for Component D and (y) the Strike Price described in clause
(b) of the definition of Strike Price, (v) with respect to Component E, the
product of (A) the Component Outstanding Principal Balance for Component E as of
such date and (B) an interest rate equal to the sum of (x) the Floating Rate
Component Spread for Component E and (y) the Strike Price described in clause
(b) of the definition of Strike Price, (vi) with respect to Component F, the
product of (A) the Component Outstanding Principal Balance for Component F as of
such date and (B) an interest rate equal to the sum of (x) the Floating Rate
Component Spread for Component F and (y) the Strike Price described in clause
(b) of the definition of Strike Price, (vii) with respect to Component G, the
product of (A) the Component Outstanding Principal Balance for Component G as of
such date and (B) the Component G Interest Rate, and (viii) the aggregate amount
of the regular monthly fee of the certificate administrator (deemed to be $5,583
per month) and the trustee (deemed to be $417 per month) under the Servicing
Agreement for such twelve (12) month period.

“Debt Yield” means, as of any date of determination, a fraction expressed as a
percentage in which:

(a) the numerator is the Underwritten Net Cash Flow; and

(b) the denominator is the aggregate Component Outstanding Principal Balances of
the Floating Rate Components.

“Debt Yield Cure Prepayment” has the meaning set forth in the definition of Low
Debt Yield Period.

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

“Default Rate” means (i) with respect to each Floating Rate Component of the
Loan (including any principal, interest, Spread Maintenance Premium, Interest
Shortfall or Breakage Costs due and payable thereon to the extent provided in
Section 2.2.5), a rate per annum equal to the lesser of (a) the Maximum Legal
Rate and (b) three percent (3%) above the Interest Rate applicable to such
Component and (ii) with respect to any other amount, the lesser of (a) the
Maximum Legal Rate and (b) the weighted average of the “Default Rates”
applicable to the Floating Rate Components of the Loan then outstanding
determined in accordance with the foregoing clause (i).

 

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“Deposit Account Control Agreement” means a Deposit Account Control Agreement
dated the Closing Date among Borrower, Lender and a Rent Deposit Bank, providing
for springing control by Lender, substantially in the form set forth
as Exhibit C attached hereto or such other form as may be reasonably acceptable
to Lender.

“Designated HOA Properties” means, with respect to any state, HOA Properties
located in such state that (i) were not Applicable HOA Properties on the Closing
Date, (ii) become Applicable HOA Properties after the Closing Date and (iii) all
such Applicable HOA Properties are designated by Borrower to Lender in writing
as Designated HOA Properties.

“Determination Date” means, with respect to each Interest Period, the date that
is two (2) London Business Days prior to the commencement date of such Interest
Period.

“Disclosure Documents” means, collectively, any written materials used or
provided to any prospective investors and/or the Approved Rating Agencies in
connection with any public offering or private placement in connection with a
Securitization (including, without limitation, a prospectus, prospectus
supplement, private placement memorandum, offering memorandum, offering
circular, term sheet, road show presentation materials or other offering
documents, marketing materials or information provided to prospective
investors), in each case in preliminary or final form and including any
amendments, supplements, exhibits, annexes and other attachments thereto.

“Discretionary Capital Expenditures” means, with respect to any Property,
non-recurring Capital Expenditures not required to be incurred to lease such
Property or to cause such Property to comply with the Renovation Standards.

“Disqualified Property” means any Property that fails to constitute an Eligible
Property (after the lapse of any applicable Cure Period).

“Eligibility Funds” has the meaning set forth in Section 6.5.1.

“Eligibility Reserve Subaccount” has the meaning set forth in Section 6.5.1.

“Eligible Account” means a separate and identifiable account from all other
funds held by the holding institution that is an account or accounts (or
subaccounts thereof) maintained with a federal or state-chartered depository
institution or trust company which complies with the definition of Eligible
Institution. An Eligible Account will not be evidenced by a certificate of
deposit, passbook or other instrument.

“Eligible Institution” means:

(a) Citibank, N.A., JPMorgan Chase Bank, N.A., Wells Fargo Bank, National
Association, Bank of America, N.A. or PNC Bank, National Association so long as,
in each case, such institution’s long term unsecured debt rating shall be at
least “A2” from Moody’s and the equivalent by KBRA (if then rated by KBRA) (if
the deposits are to be held in the applicable account for more than 30 days) or
such institution’s short term deposit or short term unsecured debt rating shall
be at least “P-1” from Moody’s and the equivalent by KBRA (if then rated by
KBRA) (if the deposits are to be held in the applicable account for 30 days or
less); or

 

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(b) any other depository institution or trust company insured by the Federal
Deposit Insurance Corporation the short term unsecured debt obligations or
commercial paper of which are rated at least A-1 by S&P, P-1 by Moody’s, and
F-1+ by Fitch in the case of accounts in which funds are held for thirty
(30) days or less or, in the case of Letters of Credit or accounts in which
funds are held for more than thirty (30) days, the long term unsecured debt
obligations of which are rated at least (i) “AA” by S&P, (ii) “AA” and/or “F1+”
(for securities) and/or “AAAmmf” (for money market funds), by Fitch and
(iii) “Aa2” by Moody’s.

“Eligible Lease” means, as of any date of determination, a Lease for a Property
that satisfies all of the following:

(a) the form of Lease reflects customary market standard terms;

(b) the Lease is entered into on an arms-length basis without payment support by
any Borrower or its Affiliates (provided, that any incentives offered to Tenants
shall not be deemed to constitute such payment support);

(c) the Lease is consistent with Borrower’s internal leasing guidelines; and

(d) the Lease is in compliance with all applicable Legal Requirements in all
material respects.

“Eligible Property” means, as of any date of determination, a Property that is
in compliance with each of the Property Representations and each of the Property
Covenants.

“Eligible Tenant” means, as of any date of determination, a bona fide third
party lessee of a Property who satisfies each of the following criteria:

(a) the Tenant is not subject to an ongoing Bankruptcy Action as of the date
such Tenant is initially screened by Borrower prior to its execution of a Lease;

(b) at the time of initial screening, the Tenant is not listed on any Government
List; and

(c) at the time of the time of initial screening, the Tenant otherwise conforms
to Borrower’s internal tenant leasing criteria as in effect at such time.

“Embargoed Person” has the meaning set forth in Section 4.2.16.

“Environmental Indemnity” means that certain Environmental Indemnity Agreement,
dated as of the Closing Date, executed by Borrower 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.

 

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“Equity Interests” means, with respect to any Person, shares of capital stock,
partnership interests, membership interests, beneficial interests or other
equity ownership interests in such Person, and any warrants, options or other
rights entitling the holder thereof to purchase or acquire any such equity
interest from such Person.

“Equity Owner” means SWAY 2014-1 Equity Owner, LLC, a Delaware limited liability
company.

“Equity Owner Guaranty” means that certain Equity Owner Guaranty, dated as of
the Closing Date, executed by Equity Owner in favor of Lender.

“Equity Owner Security Agreement” means that certain Equity Owner Security
Agreement, dated as of the Closing Date, executed by Equity Owner in favor of
Lender.

“Equity Owner’s Permitted Indebtedness” has the meaning set forth in Section
4.2.2.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, or any successor statute.

“ERISA Affiliate” means any corporation or trade or business that is a member of
any group of organizations (i) described in Section 414(b) or (c) of the Code of
which another entity is a member or (ii) described in Section 414(m) or (o) of
the Code of which another entity is a member, except that this clause (ii) shall
apply solely for purposes of potential liability under Section 302(b) of ERISA
and Section 412(b) of the Code and the lien created under Section 303(k) of
ERISA and Section 430(k) of the Code.

“ERISA Event” means (i) the failure to pay a minimum required contribution or
installment to a Plan on or before the due date provided under Section 430 of
the Code or Section 303 of ERISA, (ii) the filing of an application with respect
to a Plan for a waiver of the minimum funding standard under Section 412(c) of
the Code or Section 302(c) of ERISA, (iii) the failure of a Loan Party or any of
its ERISA Affiliates to pay a required contribution or installment to a
Multiemployer Plan on or before the applicable due date, (iv) any officer of any
Loan Party or any of its ERISA Affiliates knows or has reason to know that a
Plan is in “at risk” status within the meaning of Section 430(i) of the Code or
Section 303(i) of ERISA or (v) the occurrence of a Plan Termination Event.

“ERISA Plan” has the meaning set forth in Section 3.1.9(a).

“Event of Default” has the meaning set forth in Section 7.1(a).

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Taxes” means any of the following Taxes imposed on or with respect to
Lender or required to be withheld or deducted from a payment to Lender,
(a) Taxes imposed on or measured by net income (however denominated), franchise
Taxes, and branch profits Taxes, in each case, (i) imposed as a result of Lender
being organized under the laws of, or having its principal office or, its
applicable lending office located in, the jurisdiction imposing such Tax (or any
political subdivision thereof) or (ii) that are Other Connection Taxes, (b) U.S.
federal

 

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withholding Taxes imposed on amounts payable to or for the account of such
Lender with respect to an applicable interest in a Loan pursuant to a law in
effect on the date on which (i) such Lender acquires such interest in the Loan
or (ii) such Lender changes its lending office, except in each case to the
extent that, pursuant to Section 2.7, amounts with respect to such Taxes were
payable either to such Lender’s assignor immediately before such Lender became a
party hereto or to such Lender immediately before it changed its lending office,
(c) Taxes attributable to such Lender’s failure to comply with Section 2.7(e)
and (d) any U.S. federal withholding Taxes imposed under FATCA.

“Existing Management Agreement” means that certain Management Agreement, dated
as of the Closing Date, between Borrower and Existing Manager, pursuant to which
Existing Manager provides management and other services with respect to certain
Properties described therein.

“Existing Manager” means SWAY Management, LLC, a Delaware limited liability
company.

“Extended Maturity Date” has the meaning set forth in Section 2.8.

“Extension Option” has the meaning set forth in Section 2.8.

“Extension Term” has the meaning set forth in Section 2.8.

“Extraordinary Expense” has the meaning set forth in Section 6.6.4.

“FATCA” means Sections 1471 through 1474 of the Code, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with), any current or future
regulations or official interpretations thereof and any agreements entered into
pursuant to Section 1471(b)(1) of the Code.

“Fitch” means Fitch, Inc.

“Fixture Filing” means, with respect to any jurisdiction in which any Property
or Properties are located in which a separate, stand alone fixture filing is
required or generally recorded or filed pursuant to the local law or custom (as
reasonably determined by Lender), a Uniform Commercial Code financing statement
(or other form of financing statement required in the jurisdiction in which the
applicable Property or Properties are located) recorded or filed in the real
estate records in which the applicable Property or Properties are located.

“Floating Rate Component Prime Rate Spread” means, in connection with any
conversion of the Floating Rate Components from a LIBOR Loan to a Prime Rate
Loan, with respect to each Floating Rate Component of the Loan, the difference
(expressed as the number of basis points) between (a) the sum of (i) LIBOR,
determined as of the Determination Date for which LIBOR was last available, plus
(ii) the Floating Rate Component Spread applicable to such Floating Rate
Component, minus (b) the Prime Rate as of the date of such conversion provided,
however, that if such difference is a negative number for such Floating Rate
Component, then the Floating Rate Component Prime Rate Spread for such Component
shall be zero.

 

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“Floating Rate Component Spread” means, (a) with respect to Component A,
1.4075% per annum, (b) with respect to Component B, 2.0575% per annum, (c) with
respect to Component C, 2.7575% per annum, (d) with respect to Component D,
3.3075% per annum, (e) with respect to Component E, 4.4075% per annum and
(f) with respect to Component F, 4.6575% per annum.

“Floating Rate Components” means Component A, Component, B, Component C,
Component D, Component E and Component F.

“Foreign Lender” means a Lender that is not a U.S. Person.

“Foreign Plan” means any “employee benefit plan” as defined in Section 3(3) of
ERISA that (a) neither is subject to ERISA nor is a governmental plan within the
meaning of Section 3(32) of ERISA and that is maintained, or contributed to, by
a Loan Party or any of its ERISA Affiliates and (b) is mandated by a government
other than the United States (other than a state within the United States or an
instrumentality thereof) for employees of a Loan Party or any of its ERISA
Affiliates.

“Fully Condemned Property” has the meaning set forth in Section 5.3(b).

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

“Government List” means (i) the Annex to EO13224, (ii) OFAC’s most current list
of “Specifically Designated National and Blocked Persons” (which list may be
published from time to time in various mediums including, but not limited to,
the OFAC website, http://www.treasury.gov/ofac/downloads/t11sdn.pdf or any
successor website or webpage) and (iii) any other list of terrorists, terrorist
organizations or narcotics traffickers maintained by a Governmental Authority
that Lender notifies Borrower in writing is now included in “Government List”.

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

“GPR” means, as of any date of determination, the sum of (i) the annualized in
place Rents under bona fide Eligible Leases for the Properties as of such date
less any related underwritten Concessions and (ii) annualized market rents for
Properties that are vacant as of such date. For purposes of clause (ii) market
rents shall be determined by Borrower or, if reasonably required or elected by
Lender, by RentRange or any other nationally recognized rental rate reporting
service selected by Lender in its reasonable discretion at Borrower’s sole cost
and expense; provided that Borrower may object to any such determination by
RentRange or other nationally recognized rental rate reporting service by
delivering written notice to Lender within five (5) Business Days of any such
determination and, in such event, the market rents so objected to shall be as
determined by an independent broker opinion of market rent obtained by Lender at
Borrower’s sole cost and expense.

 

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“HOA” means a home owners or condominium association.

“HOA Fees” means homeowners’ or condominium owners’ association dues, fees and
assessments.

“HOA Funds” has the meaning set forth in Section 6.1.3.

“HOA Property” means a Property which is subject to an HOA.

“HOA Subaccount” has the meaning set forth in Section 6.1.3.

“Improvements” means the buildings, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements
now or hereafter erected or located on a Property.

“Indebtedness” means, 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, (v) all obligations under leases that constitute
capital leases for which such Person is liable, (vi) all obligations of such
Person under interest rate swaps, caps, floors, collars and other interest hedge
agreements, in each case for which such Person is liable or its assets are
liable, whether such Person (or its assets) is liable contingently or otherwise,
as obligor, guarantor or otherwise, or in respect of which obligations such
Person otherwise assures a creditor against loss and (vii) any other contractual
obligation for the payment of money which is not settled within thirty (30) days
of the incurrence of such obligation.

“Indemnified Liabilities” has the meaning set forth in Section 9.13(b).

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or
with respect to any payment made by or on account of any obligation of the
Borrower under any Loan Document and (b) to the extent not otherwise described
in (a), Other Taxes.

“Independent” means, when used with respect to any Person, a Person who:
(i) does not have any direct financial interest or any material indirect
financial interest in Borrower or in any Affiliate of Borrower, (ii) is not
connected with Borrower or any Affiliate of Borrower as an officer, employee,
promoter, underwriter, trustee, partner, member, manager, creditor, director,
supplier, customer or person performing similar functions and (iii) is not a
member of the immediate family of a Person defined in (i) or (ii) above.

“Independent Accountant” means (i) a firm of nationally recognized, certified
public accountants which is Independent and which is selected by Borrower and
reasonably acceptable to Lender or (ii) such other certified public
accountant(s) selected by Borrower, which is Independent and reasonably
acceptable to Lender.

 

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“Independent Director” means an individual who has prior experience as an
independent director, independent manager or independent member with at least
three years of employment experience and who is provided by CT Corporation,
Corporation Service Company, National Registered Agents, Inc., Wilmington Trust
Company, Stewart Management Company, Lord Securities Corporation or, if none of
those companies is then providing professional Independent Directors, another
nationally-recognized company reasonably approved by Lender, in each case that
is not an Affiliate of Borrower and that provides professional Independent
Directors and other corporate services in the ordinary course of its business,
and which individual is duly appointed as an Independent Director and is not,
and has never been, and will not while serving as Independent Director be, any
of the following:

(a) a member, partner, equityholder, manager, director, officer or employee of
Borrower or any of its equityholders or Affiliates (other than as an Independent
Director of Borrower or an Affiliate of Borrower that is not in the direct chain
of ownership of Borrower and that is required by a creditor to be a single
purpose bankruptcy remote entity, provided that such Independent Director is
employed by a company that routinely provides professional Independent Directors
or managers in the ordinary course of its business);

(b) a creditor, supplier or service provider (including provider of professional
services) to Borrower or any of its equityholders or Affiliates (other than a
nationally-recognized company that routinely provides professional Independent
Directors and other corporate services to Borrower or any of its Affiliates in
the ordinary course of its business);

(c) a family member of any such member, partner, equityholder, manager,
director, officer, employee, creditor, supplier or service provider; or

(d) a Person that controls (whether directly, indirectly or otherwise) any of
(a), (b) or (c) above.

A natural person who otherwise satisfies the foregoing definition and satisfies
subparagraph (a) by reason of being the Independent Director of a “special
purpose entity” affiliated with Borrower shall be qualified to serve as an
Independent Director of the Borrower, provided that the fees that such
individual earns from serving as an Independent Director of Affiliates of
Borrower in any given year constitute in the aggregate less than five percent
(5%) of such individual’s annual income for that year. For purposes of this
paragraph, a “special purpose entity” is an entity, whose organizational
documents contain restrictions on its activities and impose requirements
intended to preserve such entity’s separateness that are substantially similar
to those contained in the definition of Special Purpose Entity of this
Agreement.

“Individual Material Adverse Effect” means, in respect of a Property, any event
or condition that has a material adverse effect on (i) the profitability, value,
use, operation, leasing or marketability of such Property or results in any
material liability to, claim against or obligation of Lender or any Loan Party
or (ii) the enforceability, validity, perfection or priority of the lien of the
Collateral Documents with respect to such Property.

 

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“Initial Maturity Date” means the Payment Date occurring in January, 2017, or
such earlier date on which the final payment of principal of the Note becomes
due and payable as therein or herein provided, whether at such stated maturity
date, by declaration of acceleration, or otherwise.

“Initial Term” means the period from the Closing Date through the Initial
Maturity Date.

“Insolvency Opinion” means that certain non-consolidation opinion letter dated
the Closing Date delivered by Richards, Layton & Finger, P.A. in connection with
the Loan.

“Insurance Funds” has the meaning set forth in Section 6.2.1.

“Insurance Premiums” has the meaning set forth in Section 5.1.1(d).

“Insurance Proceeds” has the meaning set forth in the definition of “Net
Proceeds”.

“Insurance Subaccount” has the meaning set forth in Section 6.2.1.

“Intercreditor Agreement” means that certain Intercreditor Agreement dated as of
the Closing Date, executed by Borrower, Lender, Starwood Waypoint Borrower, LLC,
as “Warehouse Borrower”, each “Warehouse Agent” party thereto and the other
Persons from time to time party thereto, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.

“Interest Period” means, in connection with the calculation of interest accrued
with respect to any specified Payment Date, including the Maturity Date, the
period commencing on and including the fifteenth (15th) day of the prior
calendar month and ending on and including the fourteenth (14th) day of the
calendar month in which such Payment Date occurs; provided, however, the initial
Interest Period shall be the period commencing on the Closing Date, and ending
on and including January 14, 2015 and shall consist of 27 days.

“Interest Rate” means, with respect to each Interest Period, (i) with respect to
each Floating Rate Component, an interest rate per annum equal to (a) for a
LIBOR Loan, the sum of (1) LIBOR, determined as of the Determination Date
immediately preceding the commencement of such Interest Period, plus (2) the
Floating Rate Component Spread applicable to such Floating Rate Component (or,
when applicable pursuant to this Agreement or any other Loan Document, the
Default Rate); and (b) for a Prime Rate Loan, the sum of (1) the Prime Rate,
plus (2) the Floating Rate Component Prime Rate Spread applicable to such
Floating Rate Component (or, when applicable pursuant to this Agreement or any
other Loan Document, the applicable Default Rate) and (ii) with respect to
Component G, the Component G Interest Rate.

“Interest Rate Cap Agreement” means, collectively, one or more interest rate
protection agreements (together with the confirmation and schedules relating
thereto) in form and substance reasonably acceptable to Lender, between an
Acceptable Counterparty and Borrower, obtained by Borrower as and when required
pursuant to Section 2.2.7. After delivery of a Replacement Interest Rate Cap
Agreement to Lender, the term “Interest Rate Cap Agreement” shall be deemed to
mean such Replacement Interest Rate Cap Agreement and such Replacement Interest
Rate Cap Agreement shall be subject to all requirements applicable to the
Interest Rate Cap Agreement.

 

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“Interest Shortfall” has the meaning set forth in Section 2.4.4(a)(ii).

“IRS” means the United States Internal Revenue Service.

“KBRA” means Kroll Bond Rating Agency, Inc.

“Lease” means a bona fide written lease, sublease, letting, license, concession
or other agreement pursuant to which any Person is granted a possessory interest
in, or right to use or occupy all or any portion of any space in any Property by
or on behalf of Borrower (or, with respect to any Vacant Properties on the
Closing Date, prior to the Closing Date, by or on behalf of any Affiliate of
Borrower) and (a) every modification, amendment or other agreement relating to
such lease, sublease or other agreement entered into in connection with such
lease, sublease or other agreement, and (b) every guarantee of the performance
and observance of the covenants, conditions and agreements to be performed and
observed by the Tenant.

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

“Lender” has the meaning set forth in the introductory paragraph hereto,
together with its successors and assigns.

“Lending Parties” has the meaning set forth in Section 9.26.

“LIBOR” means, with respect to each Interest Period, the rate (expressed as a
percentage per annum and rounded up to the next nearest 1/1000 of 1%) for
deposits in U.S. dollars, for a one-month period, that appears on Reuters Screen
LIBOR01 Page (or the successor thereto) as of 11:00 a.m., London time, on the
related Determination Date. If such rate does not appear on Reuters Screen
LIBOR01 Page as of 11:00 a.m., London time, on such Determination Date, LIBOR
shall be the arithmetic mean of the offered rates (expressed as a percentage per
annum) for deposits in U.S. dollars for a one-month period that appear on the
Reuters Screen Libor Page as of 11:00 a.m., London time, on such Determination
Date, if at least two such offered rates so appear. If fewer than two such
offered rates appear on the Reuters Screen Libor Page as of 11:00 a.m., London
time, on such Determination Date, Lender (or Servicer, on Lender’s behalf) shall
request the principal London office of any four major reference banks in the
London interbank market selected by Lender to provide such bank’s offered
quotation (expressed as a percentage per annum) to prime banks in the London
interbank market for deposits in U.S. dollars for a one-month period as of 11:00
a.m., London time, on such Determination Date for the amounts of not

 

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less than U.S. $1,000,000. If at least two such offered quotations are so
provided, LIBOR shall be the arithmetic mean of such quotations. If fewer than
two such quotations are so provided, Lender (or Servicer, on Lender’s behalf)
shall request any three major banks in New York City selected by Lender to
provide such bank’s rate (expressed as a percentage per annum) for loans in U.S.
dollars to leading European banks for a one-month period as of approximately
11:00 a.m., New York City time on the applicable Determination Date for amounts
of not less than U.S. $1,000,000. If at least two such rates are so provided,
LIBOR shall be the arithmetic mean of such rates.

“LIBOR Loan” means the Floating Rate Components of the Loan at such time as
interest thereon accrues at a rate of interest based upon LIBOR.

“Lien” means any mortgage, deed of trust, lien (statutory or otherwise), pledge,
hypothecation, easement, restrictive covenant, preference, assignment, security
interest, or any other encumbrance, charge or transfer of, or any agreement to
enter into or create any of the foregoing, on or affecting all or any portion of
any Collateral or any interest therein, or any direct interest in any Loan
Party, including any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement, and mechanic’s, materialmen’s
and other similar liens and encumbrances.

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

“Loan Documents” means, collectively, this Agreement, the Note, each Management
Agreement, the Sponsor Guaranty, the Equity Owner Guaranty, the Environmental
Indemnity, the Intercreditor Agreement, each Interest Rate Cap Agreement, each
Collateral Document, and all other agreements, instruments and documents
delivered pursuant thereto or in connection therewith, as the same may be (and
each of the foregoing defined terms shall refer to such documents as they may
be) amended, restated, replaced, supplemented or otherwise modified from time to
time.

“Loan Party” means Borrower, Equity Owner and each Borrower TRS (if any).

“London Business Day” means any day other than a Saturday, Sunday or any other
day on which commercial banks in London, England are not open for business.

“Low Debt Yield Period” shall commence if, as of any Calculation Date, the Debt
Yield is less than eighty-five percent (85%) of the Closing Date Debt Yield, and
shall end if (i) the Properties have achieved, as of any two succeeding
consecutive Calculation Dates, a Debt Yield of at least eighty-five percent
(85%) of the Closing Date Debt Yield or (ii) immediately (without waiting for
two succeeding consecutive Calculation Dates) upon the Borrower prepaying the
principal amount of the Loan in an amount sufficient to cause the Debt Yield to
be equal to or in excess of eighty-five (85%) of the Closing Date Debt Yield (a
“Debt Yield Cure Prepayment”).

“Major Contract” means (i) any management agreement relating to the Properties
or the Loan Parties to which a Loan Party is a party, (ii) any agreement between
any Loan Party and any Affiliate of any Relevant Party and (iii) any brokerage,
leasing, cleaning, maintenance,

 

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service or other contract or agreement of any kind (other than Leases) relating
to the Properties, in each case involving payment or expense of more than One
Million Dollars ($1,000,000) during any twelve (12) month period, unless
cancelable on thirty (30) days or less notice without requiring payment of
termination fees or payments of any kind (other than amounts that accrued prior
to the termination date).

“Management Agreement” means the Existing Management Agreement or a Replacement
Management Agreement pursuant to which a Qualified Manager is managing one or
more of the Properties in accordance with the terms and provisions of this
Agreement.

“Management Fee Cap” means, with respect to each calendar month, six and
one-half percent (6.5%) of gross Rents collected with respect to the Properties
for such calendar month; provided, that for purposes of determining gross Rents
collected, collections of Advance Rent shall be allocated to applicable calendar
month set forth in the applicable Advance Rent Disbursement Schedule.

“Manager” means Existing Manager or, if the context requires, a Qualified
Manager who is managing one or more of the Properties in accordance with the
terms and provisions of this Agreement or pursuant to a Replacement Management
Agreement.

“Margin Stock” has the meaning set forth in Section 3.1.20.

“Material Adverse Effect” means a material adverse effect on (a) the property,
business, operations or financial condition of the Loan Parties taken as a
whole, (b) the use, operation or value of the Properties, taken as a whole,
(c) the ability of Borrower to repay the principal and interest of the Loan when
due or to satisfy any of Borrower’s other obligations under the Loan Documents,
or (d) the enforceability or validity of any Loan Document, the perfection or
priority of any Lien created under any Loan Document or the rights, interests
and remedies of Lender under any Loan Document.

“Maturity Date” means the Initial Maturity Date; provided that in the event of
the exercise by Borrower of an Extension Option pursuant to Section 2.8, the
Maturity Date shall be the applicable Extended Maturity Date; or such earlier
date on which the final payment of principal of the Note becomes due and payable
as herein or therein provided, whether at the Initial Maturity Date, by
declaration of acceleration, or otherwise.

“Maximum Legal Rate” means the maximum nonusurious interest rate, if any, that
at any time or from time to time may be contracted for, taken, reserved, charged
or received on the indebtedness evidenced by the Note and as provided for herein
or the other Loan 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.

“Minimum Disbursement Amount” means $50,000.

“Monthly Budgeted Amount” has the meaning set forth in Section 4.3.2.

 

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“Monthly Debt Service Payment Amount” means, for each Payment Date, an amount
equal to the amount of interest which is then due on all the Components of the
Loan in the aggregate for the Interest Period during which such Payment Date
occurs.

“Moody’s” means Moody’s Investors Service, Inc.

“Mortgage” means a Mortgage or Deed of Trust or Deed to Secure Debt, as
applicable, for each Property or for multiple Properties located within the same
county or parish, dated as of the Closing Date (or, in connection with a
Property which is a Substitute Property, dated as of the date of the
substitution), executed and delivered by Borrower, constituting a Lien on the
Improvements and the Property or Properties, as applicable, as Collateral for
the Loan, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.

“Mortgage Documents” means the Mortgages, the Collateral Assignments of Leases
and Rents and, if any, the Fixture Filings.

“Multiemployer Plan” means a plan within the meaning of Section 414(f) of the
Code or Section 3(37) of ERISA to which contributions are required to be made by
any Loan Party or any of its ERISA Affiliates or to which any such entity has
any liability.

“Net Assets” means, with respect to any Person, the difference between (i) such
Person’s assets determined in accordance with GAAP, but excluding accumulated
depreciation, and (ii) such Person’s liabilities determined in accordance with
GAAP.

“Net Proceeds” means (i) the net amount of all insurance proceeds received by
Lender pursuant to Section 5.1.1 (a)(i) and (iii) as a result of damage to or
destruction of a Property, after deduction of its reasonable costs and expenses
(including, but not limited to, reasonable counsel fees), if any, in collecting
same (“Insurance Proceeds”), or (ii) the net amount of an Award, after deduction
of Lender’s reasonable costs and expenses (including, but not limited to,
reasonable counsel fees), if any, in collecting same (“Condemnation Proceeds”),
whichever the case may be.

“Net Proceeds Deficiency” has the meaning set forth in Section 5.4(d)(vi).

“Net Transfer Proceeds” means, with respect to the Transfer of any Property, the
gross sales price for such Property (including any earnest money, down payment
or similar deposit included in the total sales price paid by the purchaser),
less Transfer Expenses.

“Non-Property Taxes” means all Taxes other than Property Taxes and Other
Charges.

“Note” means that certain Promissory Note, dated the Closing Date, in the
principal amount of Five Hundred Thirty-One Million Forty-Nine Thousand Dollars
($531,049,000), made by Borrower in favor of Lender, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

“Obligations” means, collectively, Borrower’s obligations for the payment of the
Debt and the performance by the Relevant Parties of the Other Obligations.

 

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“OFAC” means the Office of Foreign Assets Control of the U.S. Department of
Treasury.

“Officer’s Certificate” means a certificate delivered to Lender by Borrower
which is signed by an authorized officer of Borrower.

“Operating Expenses” means, for any period, without duplication, all expenses
actually paid or payable by Borrower during such period in connection with the
administration, operation, management, maintenance, repair and use of the
Properties, determined on an accrual basis, and, except to the extent otherwise
provided in this definition, in accordance with GAAP. Operating Expenses
specifically shall include, without duplication, (i) all operating expenses
incurred in such period based on quarterly financial statements delivered to
Lender in accordance with Section 4.3.1(a), (ii) cost of utilities, inventories,
and fixed asset supplies consumed in the operation of the Properties,
(iii) management fees in an amount equal to the Management Fee Cap, (iv) costs
and fees of independent professionals (including, without limitation, legal,
accounting, consultants and other professional expenses), technical consultants,
operational experts (including quality assurance inspectors) or other third
parties retained to perform services required or permitted hereunder,
(v) operational equipment and other lease payments to the extent constituting
operating expenses under GAAP, (vi) Property Taxes and Other Charges,
(vii) insurance premiums, (viii) Property maintenance expenses and (ix) leasing
commissions. Notwithstanding the foregoing, Operating Expenses shall not include
(A) depreciation or amortization, (B) income taxes or other charges in the
nature of income taxes, (C) any expenses (including legal, accounting and other
professional fees, expenses and disbursements) incurred in connection with the
making of the Loan or the sale, exchange, transfer, financing or refinancing of
all or any portion of any Property or in connection with the recovery of
Insurance Proceeds or Awards, (D) any loss that is covered by the Policies,
including any portion of a loss that is subject to a deductible under the
Policies, (E) Capital Expenditures, (F) Debt Service, (G) expenses incurred in
connection with the acquisition, initial renovation and initial leasing of
Properties and other activities undertaken prior to such initial lease that do
not constitute recurring operating expenses to be paid by Borrower, including
eviction of existing tenants, incentive payments to tenants and other similar
expenses, (H) any item of expense which would otherwise be considered within
Operating Expenses pursuant to the provisions above but is paid directly by any
Tenant under a Lease (it being understood that any such item of expense required
to be paid directly by a Tenant but not so paid shall constitute an Operating
Expense), (I) any service that is required to be provided by Manager pursuant to
the Management Agreement without compensation or reimbursement (other than the
management fee set forth in the Management Agreement), (J) any expenses that
relate to a Property from and after the release of such Property in accordance
with Section 2.5, (K) bad debt expense with respect to Rents, (L) the value of
any free rent or other Concessions provided with respect to the Properties,
(M) corporate overhead expenses incurred by Borrower’s Affiliates or (N) any
amount of sales tax expense to the extent excluded from Rent and Other Receipts.

“Other Charges” means all (i) HOA Fees, (ii) impositions other than Property
Taxes, and (iii) any other charges levied or assessed or imposed against a
Property or any part thereof other than Property Taxes.

 

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“Other Connection Taxes” means Taxes imposed as a result of a present or former
connection between Lender and the jurisdiction imposing such Tax (other than
connections arising from such Lender having executed, delivered, become a party
to, performed its obligations under, received payments under, received or
perfected a security interest under, engaged in any other transaction pursuant
to or enforced any Loan Document, or sold or assigned an interest in any Loan or
Loan Document).

“Other Obligations” means (a) the performance of all obligations of Borrower
contained herein; (b) the performance of each obligation of the Relevant Parties
contained in any other Loan Document; and (c) the performance of each obligation
of the Relevant Parties contained in any renewal, extension, amendment,
restatement, modification, consolidation, change of, or substitution or
replacement for, all or any part of this Agreement, the Note or any other Loan
Document.

“Other Receipts” for any period of determination, any actual receipts received
by Borrower from sources other than Rents with respect to the Properties, to the
extent they are properly included as operating income for such period in
accordance with GAAP (including maintenance recovery fees but, for the avoidance
of doubt, excluding income from the Transfer of any Property).

“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Loan Document, except any such Taxes that are Other
Connection Taxes imposed with respect to an assignment.

“Outstanding Principal Balance” means, as of any date, the aggregate Component
Outstanding Principal Balances of the Components of the Loan.

“Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act (USA PATRIOT
ACT) of 2001, as the same may be amended from time to time, and corresponding
provisions of future laws.

“Patriot Act Offense” has the meaning set forth in Section 3.1.24(a).

“Payment Date” means the ninth (9th) day of each calendar month during the Term
or, if such ninth day is not a Business Day, the immediately preceding Business
Day; provided, that the first Payment Date shall be February 9, 2015.

“PBGC” means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.

“Periodic Rating Agency Information” has the meaning set forth in
Section 4.3.14.

“Permitted Indebtedness” has the meaning set forth in Section 4.2.2.

 

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“Permitted Investments” means:

(a) 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 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 (i) have a predetermined fixed dollar
of principal due at maturity that cannot vary or change, (ii) if rated by S&P,
must not have an “r” highlighter affixed to their rating, (iii) 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 (iv) such investments must not be subject
to liquidation prior to their maturity;

(b) federal funds, unsecured certificates of deposit, time deposits, bankers’
acceptances and repurchase agreements with maturities of not more than 365 days
of any bank, (A) in the case of such investments with maturities of 30 days or
less, the short term obligations of which are rated in the highest short term
rating category by each Rating Agency (or, if not rated by all Approved Rating
Agencies, rated by Moody’s in the highest short term rating category) and the
long term obligations of which are rated at least “A2” by Moody’s (or such lower
rating for which Rating Agency Confirmation is received with respect to
Moody’s), (B) in the case of such investments with maturities of three months or
less, but more than 30 days, the short term obligations of which are rated in
the highest short term rating category by each Rating Agency (or, if not rated
by all Approved Rating Agencies, rated by Moody’s in the highest short term
rating category) and the long term obligations of which are rated at least “A1”
by Moody’s (or such lower rating for which Rating Agency Confirmation is
received with respect to Moody’s), (C) in the case of such investments with
maturities of six months or less, but more than three months, the short term
obligations of which are rated in the highest short term rating category by each
Rating Agency (or, if not rated by all Approved Rating Agencies, rated by
Moody’s in the highest short term rating category) and the long term obligations
of which are rated at least “Aa3” by Moody’s (or such lower rating for which
Rating Agency Confirmation is received with respect to Moody’s), and (D) in the
case of such investments with maturities of more than six months, the short term
obligations of which are rated in the highest short term rating category by each
Rating Agency (or, if not rated by all Approved Rating Agencies, rated by
Moody’s in the highest short term rating category) and the long term obligations
of which are rated “Aaa” by Moody’s (or such lower rating for which Rating
Agency Confirmation is received with respect to Moody’s); provided, however,
that the investments described in this clause must (i) have a predetermined
fixed dollar of principal due at maturity that cannot vary or change, (ii) if
rated by S&P, must not have an “r” highlighter affixed to their rating, (iii) 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 (iv) such investments must not be subject
to liquidation prior to their maturity;

 

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(c) 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, (A) in the case
of such investments with maturities of 30 days or less, the short term
obligations of which are rated in the highest short term rating category by each
Rating Agency (or, if not rated by all Approved Rating Agencies, rated by
Moody’s in the highest short term rating category) and the long term obligations
of which are rated at least “A2” by Moody’s (or such lower rating for which
Rating Agency Confirmation is received with respect to Moody’s), (B) in the case
of such investments with maturities of three months or less, but more than 30
days, the short term obligations of which are rated in the highest short term
rating category by each Rating Agency (or, if not rated by all Approved Rating
Agencies, rated by Moody’s in the highest short term rating category) and the
long term obligations of which are rated at least “A1” by Moody’s (or such lower
rating for which Rating Agency Confirmation is received with respect to
Moody’s), (C) in the case of such investments with maturities of six months or
less, but more than three months, the short term obligations of which are rated
in the highest short term rating category by each Rating Agency (or, if not
rated by all Approved Rating Agencies, rated by Moody’s in the highest short
term rating category) and the long term obligations of which are rated at least
“Aa3” by Moody’s (or such lower rating for which Rating Agency Confirmation is
received with respect to Moody’s), and (D) in the case of such investments with
maturities of more than six months, the short term obligations of which are
rated in the highest short term rating category by each Rating Agency (or, if
not rated by all Approved Rating Agencies, rated by Moody’s in the highest short
term rating category) and the long term obligations of which are rated “Aaa” by
Moody’s (or such lower rating for which Rating Agency Confirmation is received
with respect to Moody’s); provided, however, that the investments described in
this clause must (i) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (ii) if rated by S&P, must not have an “r”
highlighter affixed to their rating, (iii) 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 (iv) such investments must not be subject to liquidation prior to
their maturity;

(d) 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 Approved Rating Agencies,
rated by Moody’s in its highest long-term unsecured rating category); provided,
however, that the investments described in this clause must (i) have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (ii) if rated by S&P, must not have an “r” highlighter affixed to their
rating, (iii) 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 (iv) such
investments must not be subject to liquidation prior to their maturity;

(e) 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(A) in the case of such investments with maturities of 30 days
or less, the short term obligations of which are rated in the highest short term
rating category by each

 

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Rating Agency (or, if not rated by all Approved Rating Agencies, rated by
Moody’s in the highest short term rating category) and the long term obligations
of which are rated at least “A2” by Moody’s (or such lower rating for which
Rating Agency Confirmation is received with respect to Moody’s), (B) in the case
of such investments with maturities of three months or less, but more than 30
days, the short term obligations of which are rated in the highest short term
rating category by each Rating Agency (or, if not rated by all Approved Rating
Agencies, rated Moody’s in the highest short term rating category) and the long
term obligations of which are rated at least “A1” by Moody’s (or such lower
rating for which Rating Agency Confirmation is received with respect to
Moody’s), (C) in the case of such investments with maturities of six months or
less, but more than three months, the short term obligations of which are rated
in the highest short term rating category by each Rating Agency (or, if not
rated by all Approved Rating Agencies, rated by Moody’s in the highest short
term rating category ) and the long term obligations of which are rated at least
“Aa3” by Moody’s (or such lower rating for which Rating Agency Confirmation is
received with respect to Moody’s), and (D) in the case of such investments with
maturities of more than six months, the short term obligations of which are
rated in the highest short term rating category by each Rating Agency (or, if
not rated by all Approved Rating Agencies, rated by Moody’s in the highest short
term rating category) and the long term obligations of which are rated “Aaa” by
Moody’s (or such lower rating for which Rating Agency Confirmation is received
with respect to Moody’s); provided, however, that the investments described in
this clause must (i) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (ii) if rated by S&P, must not have an “r”
highlighter affixed to their rating, (iii) 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 (iv) such investments must not be subject to liquidation prior to
their maturity;

(f) units of taxable money market funds, which funds are regulated investment
companies invested 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 Approved Rating Agencies, rated by at
least one Approved Rating Agency and otherwise acceptable to each other Approved
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

(g) any other security, obligation or investment which has been specifically
approved as a Permitted Investment in writing (i) by Lender and (ii) each Rating
Agency, as confirmed by satisfaction of the Rating Agency Condition with respect
to each Approved 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 and provided, further, that each investment
described hereunder must have (x) a predetermined fixed amount of principal due
at maturity (that cannot vary or change) and (y) an original maturity of not
more than 365 days and a remaining maturity of not more than thirty (30) days.

 

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“Permitted Liens” means, collectively, (i) the Liens and security interests
created by the Loan Documents, (ii) all encumbrances and other matters disclosed
in the Title Insurance Policies for the Properties and, with respect to any
Substitute Property, as Lender has approved in writing in Lender’s reasonable
discretion, (iii) Liens, if any, for Non-Property Taxes or Property Taxes
imposed by any Governmental Authority not yet due or delinquent, (iv) Liens
arising after the Closing Date for Non-Property Taxes, Property Taxes or Other
Charges being contested in accordance with Section 4.1.3 or Section 4.4.5,
(v) any workers’, mechanics’ or other similar Liens on a Property that are
bonded or discharged within sixty (60) days after Borrower first receives
written notice of such Lien, (vi) all easements, rights-of-way, restrictions and
other similar non-monetary encumbrances recorded against and affecting any
Property and that would not reasonably be expected to and do not have an
Individual Material Adverse Effect on the Property, (vii) such other title and
survey exceptions as Lender has approved or may approve in writing in Lender’s
reasonable discretion, (viii) Specified Liens and (ix) rights of Tenants as
Tenants only under Leases permitted hereunder.

“Permitted Transfers” has the meaning set forth in Section 4.2.17(d).

“Person” means any individual, corporation, partnership, limited liability
company, joint venture, estate, trust, unincorporated association, any other
entity, any Governmental Authority and any fiduciary acting in such capacity on
behalf of any of the foregoing.

“Plan” means an “employee benefit plan” as defined in Section 3(3) of ERISA that
is established, maintained or contributed to by any Loan Party or any of its
ERISA Affiliates (or as to which such entity has any liability) and that is
covered by Title IV of ERISA, other than a Multiemployer Plan.

“Plan Termination Event” means (i) any event described in Section 4043 of ERISA
with respect to any Plan; (ii) the withdrawal of any Loan Party or any of its
ERISA Affiliates from a Plan during a plan year in which such Loan Party or such
ERISA Affiliate was a “substantial employer” as defined in Section 4001(a)(2) of
ERISA; (iii) the imposition of an obligation on any Loan Party or any of its
ERISA Affiliates under Section 4041 of ERISA to provide affected parties written
notice of intent to terminate a Plan in a distress termination described in
Section 4041(c) of ERISA; (iv) the institution of proceedings by the PBGC to
terminate a Plan or by any similar foreign governmental authority to terminate a
Foreign Plan; (v) any event or condition which could reasonably constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan; (vi) the institution of proceedings by a
foreign governmental authority to appoint a trustee to administer any Foreign
Plan; or (vii) the partial or complete withdrawal of any Loan Party or any of
its ERISA Affiliates from a Multiemployer Plan or Foreign Plan or a
determination that a Multiemployer Plan is, or is expected to be, insolvent or
in reorganization, within the meaning of Title IV of ERISA.

“Policy” and “Policies” shall have the respective meanings set forth in Section
5.1.1(b).

 

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“Prepayment Notice” means a prior written notice to Lender specifying the
proposed Business Day on which a prepayment of the Debt is to be made pursuant
to Section 2.4.1, which date shall be no earlier than ten (10) days after the
date of such Prepayment Notice and no later than ninety (90) days after the date
of such Prepayment Notice. A Prepayment Notice may be revoked in writing by
Borrower, or may be modified in writing by Borrower to a new specified Business
Day, in each case, on or prior to the proposed prepayment date set forth in such
Prepayment Notice; provided that such new Business Day shall be no earlier than
such proposed prepayment date. If revoked (as opposed to modified), any new
Prepayment Notice shall comply with the timeframes set forth above. Borrower
shall pay to Lender all out-of-pocket costs and expenses (if any) incurred by
Lender in connection with Borrower’s permitted revocation or modification of any
Prepayment Notice.

“Prime Rate” means the annual rate of interest publicly announced by JPMorgan
Chase Bank, National Association, in New York, New York, as its base rate, as
such rate shall change from time to time. If JPMorgan Chase Bank, National
Association, ceases to announce a base rate, Prime Rate shall mean the rate of
interest published in The Wall Street Journal from time to time as the “Prime
Rate.” If The Wall Street Journal ceases to publish the “Prime Rate,” the Lender
shall select an equivalent publication that publishes such “Prime Rate,” and if
such “Prime Rates” are no longer generally published or are limited, regulated
or administered by a governmental or quasi-governmental body, then Lender shall
select a comparable interest rate index.

“Prime Rate Loan” means the Floating Rate Components of the Loan at such time as
interest thereon accrues at a rate of interest based upon the Prime Rate.

“Priority” means, with respect to any HOA Property, that the valid and proper
foreclosure of a Lien for HOA Fees would extinguish the Lien of a Mortgage with
respect to such HOA Property.

“Properties Schedule” means the data tape of Properties attached hereto as
Schedule II.A as of the Closing Date, as updated on a monthly basis in the form
attached hereto as Schedule II.B pursuant to Section 4.3.7.

“Property” means, individually, and “Properties” means, collectively, (i) the
residential real properties described on the Properties Schedule as of the
Closing Date and encumbered by the Mortgages and (ii) any residential real
properties that are Substitute Properties; provided that if the Allocated Loan
Amount for any Property has been reduced to zero and all interest and other
Obligations related thereto that are required to be paid on or prior to the date
when the Allocated Loan Amount for such Property is required to be repaid have
been repaid in full, then such residential real property shall no longer be a
Property hereunder. The Properties include the Improvements now or hereafter
erected or installed thereon and other personal property owned by Borrower
located thereon, together with all rights pertaining to such real property,
Improvements and personal property.

“Property Covenants” means those covenants set forth in Section 4.4 and the
covenants contained in Section 2 of the Environmental Indemnity.

 

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“Property Cut-Off Date” means October 14, 2014.

“Property Representations” means those representations and warranties set forth
in Section 3.2 and Section 1 of the Environmental Indemnity.

“Property Taxes” means any real estate and personal property taxes, assessments,
water charges, sewer rents, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto now or hereafter levied
or assessed or imposed by a Governmental Authority against any Property, any
Collateral, any part of either of the foregoing or Borrower.

“Provided Information” means any and all financial and other information
provided at any time prepared by, or on behalf of, Borrower, Equity Owner and/or
Manager.

“Public Vehicle” shall mean a Person whose securities are listed and traded on a
national securities exchange and shall include a majority owned subsidiary of
any such Person or any operating partnership through which such Person conducts
all or substantially all of its business.

“Qualified Manager” means (a) Existing Manager, (b) any Person that is under
common Control with Existing Manager or Sponsor and/or (c) a reputable Person
that has at least two (2) years’ experience in the management of at least two
hundred and fifty (250) residential rental properties in each metropolitan
statistical area in which the applicable Properties to be managed by such Person
are located and is not the subject of a bankruptcy or similar proceeding;
provided, that in the case of the foregoing subclause (c), Borrower shall have
obtained a Rating Agency Confirmation in respect of the management of the
Properties by such Person; and provided, further, that in the case of the
foregoing subclause (b) and subclause (c), if such Person is an Affiliate of
Borrower, Borrower shall have obtained an Additional Insolvency Opinion if such
an opinion is requested by Lender.

“Qualified Release Property Default” has the meaning set forth in Section
2.5(b).

“Qualified Transferee” means (a) Sponsor or (b) any Person that (i) has Net
Assets of not less than $300,000,000 (exclusive of such Person’s direct or
indirect interest in the Properties and Borrower), (ii) has not been the subject
of a voluntary or involuntary (to the extent the same has not been discharged)
bankruptcy proceeding or any governmental or regulatory investigation which
resulted in a final, nonappealable conviction for criminal activity involving
moral turpitude, (iii) is (or is under common Control with a Person that is)
regularly engaged in the management, ownership or operation of residential
rental properties and (iv) with respect to the applicable Transfer to such
Person, Borrower shall have obtained a Rating Agency Confirmation.

“Quarterly HOA Report” has the meaning set forth in Section 4.3.16.

“Quarterly Investor Rollup Report” has the meaning set forth in Section 4.3.7.

“Rating Agency Confirmation” means a written affirmation from each of the
Approved Rating Agencies that the credit rating of the Securities by such
Approved Rating Agency immediately prior to the occurrence of the event with
respect to which such Approved 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

 

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Agency’s sole and absolute discretion. In the event that, at any given time, no
Securities are then outstanding, then the term Rating Agency Confirmation shall
be deemed instead to require the written approval of Lender based on its
reasonable, good faith determination of whether the Approved Rating Agencies
would issue a Rating Agency Confirmation if any such Securities were
outstanding.

“Register” has the meaning set forth in Section 8.1.

“Release Amount” means, for a Property, the following applicable amount together
with any other amounts specified in Section 2.4.4:

(a) in connection with the Transfer of a Property (other than a Designated HOA
Property) pursuant to Section 2.5 or any failure of a Property to qualify as an
Eligible Property due to the occurrence of a Voluntary Action (such Properties,
“Release Premium Properties”), (i) 105% of the Allocated Loan Amount for such
Property if the sum of the initial Allocated Loan Amounts of all Release Premium
Properties, including such Property, is less than $53,104,900, (ii) 110% of the
Allocated Loan Amount for such Property if the sum of the initial Allocated Loan
Amounts of all Release Premium Properties, including such Property, is equal to
or greater than $53,104,900 but less than $79,657,350, (iii) 115% of the
Allocated Loan Amount for such Property if the sum of the initial Allocated Loan
Amounts of all Release Premium Properties, including such Property, is equal to
or greater than $79,657,350 but less than $106,209,800, and (iv) 120% of the
Allocated Loan Amount for such Property if the sum of the initial Allocated Loan
Amounts of all Release Premium Properties, including such Property, is equal to
or greater than $106,209,800;

(b) in connection with any failure of a Property to qualify as an Eligible
Property, other than due to the occurrence of a Voluntary Action, that is not
cured within the applicable Cure Period, an amount equal to 100% of the
Allocated Loan Amount for such Property;

(c) in connection with any Condemnation or Casualty of any Property for which
prepayment of the Release Amount is required pursuant to Section 5.3 or
Section 5.4, 100% of the Allocated Loan Amount for such Property; and

(d) in connection with any release of Designated HOA Properties, a percentage of
the Allocated Loan Amounts for such Properties that is (A) at least equal to
100% and (B) with respect to such percentage of Allocated Loan Amount, Borrower
has obtained a Rating Agency Confirmation.

“Release Premium Properties” has the meanings set forth in the definition of
“Release Amount”.

“Release Property” has the meaning set forth in Section 2.5.

“Relevant Party” means each Loan Party and Sponsor (and, collectively “Relevant
Parties”).

 

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“REMIC Trust” means a “real estate mortgage investment conduit” within the
meaning of Section 860D of the Code that holds the Note or a portion thereof.

“Renovation Standards” means the maintenance, repairs, improvements and
installations that are necessary for a Property to conform to applicable
material Legal Requirements and not deviate materially from local rental market
standards for the area in which such Property is located.

“Rent Deposit Account” has the meaning set forth in Section 2.6.1(a).

“Rent Deposit Bank” has the meaning set forth in Section 2.6.1(a).

“Rent Refund” means, with respect to any Tenant in default under any applicable
Lease, any payment of Rent (in whole or in part) delivered by such Tenant to
Borrower or Manager, to the extent Borrower or Manager reasonably determines the
return of the same is necessary in order to preserve Borrower’s enforcement
remedies under the applicable Lease.

“Rents” means, with respect to each Property, all rents and rent equivalents
(including for forfeited security deposits allocated to rent) and any fees,
payments or other compensation from any Tenant.

“Repayment Date” means the date of a prepayment of the Loan pursuant to the
provisions of Section 2.4.

“Replacement Interest Rate Cap Agreement” means, collectively, one or more
interest rate protection agreements, acceptable to Lender, from an Acceptable
Counterparty with terms identical to the Interest Rate Cap Agreement except that
the same shall be effective as of the date required in Section 2.2.7(c), except
that in connection with Borrower’s exercise of an Extension Option, the same
shall be effective as of the date required in Section 2.8; provided, that to the
extent any such interest rate protection agreements do not meet the foregoing
requirements, a “Replacement Interest Rate Cap Agreement” shall be such interest
rate protection agreements approved in writing by the Approved Rating Agencies
with respect thereto.

“Replacement Management Agreement” means, collectively, (a) either (i) a
management agreement with a Qualified Manager, substantially in the same form
and substance as the Existing Management Agreement, (ii) a management agreement
with a Qualified Manager, which management agreement shall be reasonably
acceptable to Lender in form and substance, provided, that with respect to this
clause (ii), (x) if such management agreement provides for the payment of
management fees at a rate that is in excess of the rate provided for under the
Existing Management Agreement, then Borrower shall have obtained a Rating Agency
Confirmation with respect to such increase in management fees and (y) otherwise
Lender, at its option, may require that Borrower obtain a Rating Agency
Confirmation with respect to such management agreement or (iii) a management
agreement with a Manager approved by Lender in accordance with
Section 4.1.19(b)(y) and satisfying the conditions set forth in clauses (x) and
(y) above, and (b) an assignment of management agreement and subordination of
management fees substantially in the form of the Assignment of Management
Agreement dated as of the Closing Date (or such other form and substance
reasonably acceptable to Lender and the Qualified Manager).

 

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“Reportable Event” has the meaning set forth in Section 4043 of ERISA.

“Request for Release” means a request for release of a Property in connection
with any Transfer of a Property, substantially in the form attached hereto as
Exhibit D.

“Reserve Funds” means, collectively, all funds deposited by Borrower with Lender
or Cash Management Account Bank pursuant to Article 6, including, but not
limited to, the Capital Expenditure Funds, the Insurance Funds, the HOA Funds,
the Tax Funds, the Casualty and Condemnation Funds, the Cash Collateral Funds,
the Eligibility Funds and the Advance Rent Funds.

“Reserve Release Date” means any Business Day as requested by Borrower pursuant
to a Reserve Release Request; provided, that there shall be no more than one
Reserve Release Date in any calendar month.

“Reserve Release Request” means any written request by Borrower for a release of
Reserves Funds made in accordance with Article 6.

“Responsible Officer” means, as to any Person, the chief executive officer or
president or, with respect to financial matters, the chief financial officer or
treasurer of such Person; provided, that in the event any such officer is
unavailable at any time he or she is required to take any action hereunder,
Responsible Officer means any officer authorized to act on such officer’s behalf
as demonstrated by a certified resolution.

“Restoration” means the repair and restoration of any Property after a Casualty
as nearly as possible to the condition such Property was in immediately prior to
such Casualty, with such material alterations as may be approved by Lender, such
approval not to be unreasonably withheld, delayed or conditioned.

“Restricted Junior Payment” means, with respect to any Person, (i) any dividend
or other distribution of any nature (cash, securities, assets, Indebtedness or
otherwise) and any payment, by virtue of redemption, retirement or otherwise, on
any class of Equity Interests or subordinate Indebtedness issued by such Person,
whether such Equity Interests are now or may hereafter be authorized or
outstanding and any distribution in respect of any of the foregoing, whether
directly or indirectly, (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any
Equity Interests or subordinate Indebtedness of such Person now or hereafter
outstanding, or (iii) any payment of management or similar fees by such Person
(other than payment of management fees under any Management Agreement to the
extent expressly permitted by this Agreement).

“Restricted Party” means, collectively, each Borrower TRS, Borrower, Equity
Owner, and any other direct or indirect equity holder in a Borrower TRS,
Borrower or Equity Owner up to, but not including, the first direct or indirect
equity holder that has substantial assets other than the Properties and the
other Collateral.

“Review Waiver” has the meaning set forth in Section 9.2(b).

“S&P” means Standard & Poor’s Ratings Services.

 

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“Securities” has the meaning set forth in Section 8.1.1(a).

“Securities Act” means the Securities Act of 1933, as amended.

“Securitization” has the meaning set forth in Section 8.1.1(a).

“Security Deposit Account” has the meaning set forth in Section 4.1.17(a).

“Servicer” has the meaning set forth in Section 8.3.

“Servicing Agreement” has the meaning set forth in Section 8.3.

“Severed Loan Documents” has the meaning set forth in Section 7.2(c).

“Solvent” means, with respect to any Person or any consolidated group, on any
date of determination, that on such date (i) the fair saleable value of such
Person’s or consolidated group’s assets exceeds its total liabilities,
including, without limitation, subordinated, unliquidated, disputed and
contingent liabilities, (ii) the fair saleable value of such Person’s or
consolidated group’s assets exceeds its probable liabilities, as applicable,
including the maximum amount of its contingent liabilities on its debts as such
debts become absolute and matured, (iii) such Person’s or consolidated group’s
assets do not constitute unreasonably small capital to carry out its business as
conducted or as proposed to be conducted and (iv) such Person or consolidated
group does not intend to, and does not believe that it will, incur debt and
liabilities (including contingent liabilities and other commitments) beyond its
ability to pay such debt and liabilities as they mature (taking into account the
timing and amounts of cash to be received by it and the amounts to be payable on
or in respect of its obligations).

“Special Purpose Entity” means a limited liability company that, since the date
of its formation and at all times on and after the date thereof, has complied
with and shall at all times comply with the following requirements unless it has
received either prior consent to do otherwise from Lender, or, while the Loan is
securitized, a Rating Agency Confirmation from each of the Approved Rating
Agencies, and an Additional Insolvency Opinion, in each case:

(i) is and shall be organized solely for the purpose of (A) in the case of
Borrower, acquiring, maintaining, renovating, rehabilitating, owning, holding,
marketing, selling, leasing, transferring, managing and operating the
Properties, entering into and performing its obligations under the Loan
Documents to which it is a party, refinancing the Properties in connection with
a permitted repayment of the Loan, acting as the sole member of any Borrower TRS
and transacting lawful business that is incident, necessary and appropriate to
accomplish the foregoing, (B) in the case of Equity Owner, acting as the sole
member of Borrower and transacting lawful business that is incident, necessary
and appropriate to accomplish the foregoing or (C) in the case of a Borrower
TRS, marketing and selling Properties and transacting lawful business that is
incident, necessary and appropriate to accomplish the foregoing;

(ii) has not engaged and shall not engage in any business unrelated to (A) in
the case of Borrower, the acquisition, renovation, maintenance, ownership,
holding, marketing, sale, leasing, transfer, management, operation or financing
of the Properties, (B) in the case of Equity Owner, acting as the sole member of
Borrower or (C) in the case of a Borrower TRS, marketing and selling Properties;

 

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(iii) has not owned and shall not own any real property other than the
Properties;

(iv) does not have, shall not have and at no time had any assets other than
(A) in the case of Borrower, the Properties and personal property necessary or
incidental to its ownership and operation of the Properties and its membership
interest in each Borrower TRS and personal property necessary or incidental to
its ownership of such interest, (B) in the case of Equity Owner, its membership
interest in Borrower and personal property necessary or incidental to its
ownership of such interest or (C) in the case of a Borrower TRS, Properties and
personal property necessary or incidental to its marketing and sale of
Properties;

(v) shall not cause, consent to or permit any amendment of its certificate of
formation or its limited liability company agreement with respect to the matters
set forth in this definition;

(vi) with respect to each of Borrower, Equity Owner and each Borrower TRS,
(A) is and shall be a Delaware limited liability company, (B) has and shall have
at least two (2) Independent Directors serving as managers of such company,
(C) shall not take any of the following actions and shall not cause or permit
the members or managers of such entity to take any of the following actions,
either with respect to itself or, with respect to any subsidiary of it that is a
Loan Party, in each case unless two (2) Independent Directors then serving as
managers of the company shall have participated consented in writing to such
action (each, a “Material Action”): (1) filing or consenting to the filing of
any petition, either voluntary or involuntary, to take advantage of any
applicable insolvency, bankruptcy, liquidation or reorganization statute,
(2) seeking or consenting to the appointment of a receiver, liquidator or any
similar official of any Loan Party or a substantial part of its business,
(3) making an assignment for the benefit of creditors by any Loan Party,
(4) admitting in writing its inability to pay debts generally as they become
due, (5) declaring or effectuating a moratorium on the payment of any
obligations of any Loan Party, or (6) taking any action in furtherance of the
foregoing, provided, for purposes of clauses (4) and (6), the following shall
not constitute a Material Action: (x) admissions or statements which are
compelled and required by law and which are true and correct, or (y) admissions
or statements in writing to Lender or any servicer of the Loan, or in connection
with any audit opinion or “going concern” qualification in its audited financial
statements, that (I) Borrower cannot pay its Operating Expenses, (II) Borrower
cannot pay debt service on the Loan, or (III) Borrower cannot repay or refinance
the Loan on the Maturity Date and (D) under the terms of its limited liability
company agreement, immediately prior to the withdrawal or dissolution of the
last remaining member of the company, each of the persons acting as Independent
Director of such entity shall, without any action of any Person, automatically
be admitted as members of the limited liability company (“Special Members”) and
shall pursue and continue the existence of the limited liability company without
dissolution and such Special Members may not resign as such until (i) a
successor Special Member has been admitted to the limited liability company as a
Special Member and (ii) such successor Special Member has also accepted its
appointment as an Independent Director;

 

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(vii) has and shall have a limited liability agreement that provides that, to
the fullest extent permitted by applicable law, including Section 18-1101(e) of
the Delaware Limited Liability Company Act, the Independent Directors of a Loan
Party shall not be liable to such Loan Party, its equity holders or any other
Person bound by its limited liability agreement for breach of contract or breach
of duties (including fiduciary duties), unless the Independent Director acted in
bad faith or engaged in willful misconduct;

(viii) has and shall have a limited liability agreement that provides that such
entity shall not (A) dissolve, merge, liquidate, consolidate; (B) sell all or
substantially all of its assets; or (C) amend its organizational documents with
respect to the matters set forth in this definition without the consent of
Lender;

(ix) has at all times been and shall intend at all times to remain solvent and
has paid and shall pay its debts and liabilities (including, a fairly-allocated
portion of any personnel and overhead expenses that it shares with any
Affiliate) from its assets as the same shall become due, and has maintained and
shall intend to maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its
contemplated business operations; provided, that the foregoing shall not require
any direct or indirect member of any Loan Party to make any additional capital
contributions to such Loan Party;

(x) has not failed and shall not fail to correct any known misunderstanding
regarding the separate identity of such entity and has not identified and shall
not identify itself as a division of any other Person;

(xi) has maintained and shall maintain its bank accounts, books of account,
books and records separate from those of any other Person and, to the extent
that it is required to file tax returns under applicable law, has filed and
shall file its own tax returns, except to the extent that it is required by law
to file consolidated tax returns;

(xii) has maintained and shall maintain its own records, books, resolutions and
agreements;

(xiii) has not commingled and, except as contemplated by this Agreement, shall
not commingle its funds or assets with those of any other Person and has not
participated and shall not participate in any cash management system with any
other Person; provided; that a Borrower TRS may commingle its assets with those
of Borrower and may participate in Borrower’s cash management system;

(xiv) has held and shall hold its assets in its own name; provided; that a
Borrower TRS may hold assets in Borrower’s name;

(xv) has conducted and shall conduct its business in its name or in a name
franchised or licensed to it by an entity other than an Affiliate of itself or
of Borrower, except for business conducted on behalf of itself by another Person
under a business

 

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management services agreement that is on commercially-reasonable terms, so long
as the manager, or equivalent thereof, under such business management services
agreement holds itself out as an agent of Borrower;

(xvi) (A) has maintained and shall maintain its financial statements, accounting
records and other entity documents separate from those of any other Person;
(B) has shown and shall show, in its financial statements, its asset and
liabilities separate and apart from those of any other Person; and (C) has not
permitted and shall not permit its assets to be listed as assets on the
financial statement of any of its Affiliates except as required by GAAP;
provided, however, that any such consolidated financial statement contains a
note indicating that the Special Purpose Entity’s separate assets and credit are
not available to pay the debts of such Affiliate and that the Special Purpose
Entity’s liabilities do not constitute obligations of the consolidated entity;

(xvii) has paid and shall pay its own liabilities and expenses, including the
salaries of its own employees, out of its own funds and assets, and has
maintained and shall maintain a sufficient number of employees or contract for
sufficient services in light of its contemplated business operations;

(xviii) has observed and shall observe all limited liability company
formalities;

(xix) has not incurred and shall not incur any Indebtedness other than, (i) with
respect to Borrower or a Borrower TRS, Permitted Indebtedness, and (ii) with
respect to Equity Owner, Equity Owner Permitted Indebtedness;

(xx) has not assumed, guaranteed or become obligated and shall not assume or
guarantee or become obligated for the debts of any other Person, has not held
out and shall not hold out its credit as being available to satisfy the
obligations of any other Person or has not pledged and shall not pledge its
assets to secure the obligations of any other Person, in each case except as
permitted or contemplated by the Loan Documents;

(xxi) has not acquired and shall not acquire obligations or securities of its
members or any Affiliate; provided, that Equity Owner shall be the sole member
of Borrower and Borrower may organize a Borrower TRS as contemplated hereby;

(xxii) has allocated and shall allocate fairly and reasonably any overhead
expenses that are shared with any of its Affiliates, constituents, or owners, or
any guarantors of any of their respective obligations, or any Affiliate of any
of the foregoing, including, but not limited to, paying for shared office space
and for services performed by any employee of an Affiliate;

(xxiii) has maintained and used and shall maintain and use separate stationery,
invoices and checks bearing its name and not bearing the name of any other
entity unless such entity is clearly designated as being the Special Purpose
Entity’s agent;

(xxiv) has not pledged and shall not pledge its assets to secure the obligations
of any other Person, except to Lender to secure the Loan;

 

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(xxv) has held itself out and identified itself and shall hold itself out and
identify itself as a separate and distinct entity under its own name or in a
name franchised or licensed to it by an entity other than an Affiliate of
Borrower and not as a division or part of any other Person;

(xxvi) has maintained and shall maintain its assets in such a manner that it
shall not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any other Person;

(xxvii) has not made and shall not make loans to any Person and has not held and
shall not hold evidence of indebtedness issued by any other Person or entity
(other than cash and Permitted Investments);

(xxviii) has not identified and shall not identify its members or any Affiliate
of any of them, as a division or part of it, and has not identified itself and
shall not identify itself as a division of any other Person;

(xxix) other than capital contributions and distributions permitted under the
terms of its organizational documents, has not entered into or been a party to,
and shall not enter into or be a party to, any transaction with any of its
members except in the ordinary course of its business and on terms which are
commercially reasonable terms comparable to those of an arm’s-length transaction
with an unrelated third party;

(xxx) has not had and shall not have any obligation to, and has not indemnified
and shall not indemnify its partners, officers, directors or members, as the
case may be, in each case unless such an obligation or indemnification is fully
subordinated to the Debt and shall not constitute a claim against it in the
event that its cash flow is insufficient to pay the Debt;

(xxxi) has not had and shall not have any of its obligations guaranteed by any
Affiliate, except as provided by the Loan Documents;

(xxxii) has not formed, acquired or held and shall not form, acquire or hold any
subsidiary, except as contemplated by the Loan Documents;

(xxxiii) has complied and shall comply with all of the terms and provisions
contained in its organizational documents;

(xxxiv) has conducted and shall conduct its business so that each of the
assumptions made about it and each of the facts stated about it in the
Insolvency Opinion, or if applicable, any Additional Insolvency Opinion, are
true and correct in all material respects; and

(xxxv) has not permitted and shall not permit any Affiliate or constituent party
independent access to its bank accounts, except Manager pursuant to a Management
Agreement entered into in accordance with this Agreement.

 

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“Specified Liens” means Liens on properties owned by Affiliates of the Borrower
described on Schedule VII affecting one or more of the Properties as of the
Closing Date, provided that all such Liens on the affected Properties are
affirmatively covered by Title Insurance Policies.

“Sponsor” means Starwood Waypoint Residential Trust, a Maryland real estate
investment trust.

“Sponsor Financial Covenant” means the requirement that Sponsor or any Qualified
Transferee that executes and delivers a replacement guaranty pursuant to
Section 4.2.17(e) maintain Net Assets of not less than $150,000,000 (exclusive
of Sponsor’s or such Qualified Transferee’s indirect interest in Borrower).

“Sponsor Guaranty” means that certain Sponsor Guaranty, dated as of the Closing
Date, executed by Sponsor in favor of Lender.

“Spread Maintenance Date” means the Payment Date occurring in January 2017.

“Spread Maintenance Premium” means, with respect to any prepayment of principal
of the Floating Rate Components prior to the Spread Maintenance Date (other than
payments made pursuant to Section 2.4.2(a) (except where such prepayment arises
as a result of a Voluntary Action) or Section 2.4.2(c)), and with respect to
each Floating Rate Component, an amount equal to the product of the following:
(i) the amount of such prepayment (or the amount of principal so accelerated)
allocable to such Component, multiplied by (ii) the Floating Rate Component
Spread applicable to such Component, multiplied by (iii) a fraction (expressed
as a percentage) having a numerator equal to the number of months difference
between the Spread Maintenance Date and the date such prepayment occurs (or the
next succeeding Payment Date through which interest has been paid by
Borrower) and a denominator equal to twelve (12). The total Spread Maintenance
Premium shall be the sum of the Spread Maintenance Premium for each of the
Floating Rate Components. All Spread Maintenance Premium payments hereunder
shall be deemed to be earned by Lender upon the funding of the Loan.

“State” means, with respect to a Property, the State or Commonwealth in which
such Property or any part thereof is located.

“Strike Price” means (a) as to any Interest Rate Cap Agreement during the
Initial Term, 3.615% per annum, and (b) as to any Replacement Interest Rate Cap
Agreement obtained in connection with the exercise of any Extension Option, a
rate per annum equal to the interest rate at which the Debt Service Coverage
Ratio as of the Calculation Date immediately preceding the commencement of the
applicable Extension Term is not less than 1.20:1.00.

“Subaccounts” has the meaning set forth in Section 2.6.2(e).

“Substitute Mortgage Documents” has the meaning set forth in Section
2.4.2(a)(x).

“Substitute Property” and “Substitute Properties” shall have the respective
meanings set forth in Section 2.4.2(a).

 

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“Succeeding Interest Period” has the meaning set forth in Section 2.4.4(a)(ii).

“Tax Funds” has the meaning set forth in Section 6.1.1.

“Tax Subaccount” has the meaning set forth in Section 6.1.1.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions,
withholdings (including backup withholding), assessments, fees or other charges
imposed by any Governmental Authority, including any interest, additions to tax
or penalties applicable thereto.

“Tenant” means any Person obligated by contract or otherwise to pay monies
(including a percentage of gross income, revenue or profits) under any Lease now
or hereafter affecting all or any part of a Property.

“Term” means the entire term of this Agreement, which shall expire upon
repayment in full of the Debt.

“Title Insurance Owner’s Policy” means, with respect to each Property, an ALTA
owner title insurance policy issued by a title insurance company reasonably
acceptable to Lender in a form reasonably acceptable to Lender (or, if a
Property is in a state which does not permit the issuance of such ALTA policy,
such form as shall be permitted in such state and determined that is reasonably
acceptable to Lender) issued with respect to such Property and insuring the
legal title to such Property.

“Title Insurance Policy” means, with respect to each Property or multiple
Properties encumbered by the same Mortgage, an ALTA mortgagee title insurance
policy issued by a title insurance company reasonably acceptable to Lender
containing such endorsements as Lender may reasonably require (to the extent
available in the state where the Property or the Properties, as applicable, are
located) in a form reasonably acceptable to Lender (or, if such Property or the
Properties, as applicable, are located in a state which does not permit the
issuance of such ALTA policy, such form as shall be permitted in such state and
determined that is reasonably acceptable to Lender) issued with respect to such
Property or Properties, as applicable, and insuring the Lien of the Mortgage
Documents encumbering such Property or Properties, as applicable (subject to
Permitted Liens).

“Transaction” means the transaction contemplated by this Agreement and the other
Loan Documents.

“Transfer” has the meaning set forth in Section 4.2.17(b).

“Transfer Date” means the date upon which a Transfer of a Property is
consummated.

“Transfer Expenses” means, with respect to the Transfer of any Property, the
reasonable expenses of Borrower incurred in connection therewith not to exceed
6.0% of all gross amounts realized with respect thereto, for any of the
following: (i) third party real estate commissions, (ii) the closing costs of
the purchaser of such Property actually paid by Borrower and (iii) Borrower’s
miscellaneous closings costs, including, but not limited to title, escrow and
appraisal costs and expenses.

 

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“Trust Fund Expenses” means (a) any interest payable to the Servicer, or any
special servicer, trustee, operating advisor, custodian, or certificate
administrator in connection with the Loan or the Properties pursuant to the
Servicing Agreement in respect of advances made by any of the foregoing;
provided, however, that Borrower shall only be obligated to pay any amounts
described in this clause (a) if and to the extent such interest exceeds the sum
of the Default Rate interest and late payment charges payable pursuant to
Section 2.3.4 in respect of the event giving rise to the related advances;
(b) all special servicing fees, work-out, liquidation fees and other fees
payable to any special servicer under the Servicing Agreement (i) after the Loan
is transferred to the special servicer as a result of (A) the occurrence of an
Event of Default or (B) an acknowledgement by Borrower in writing that the Loan
is likely to go into default, or (ii) in connection with any Borrower requested
or consensual work-out or modification of the Loan; (c) the regular monthly fee
of the certificate administrator (capped at $5,583 per month) and the trustee
(capped at $417 per month) under the Servicing Agreement; (d) the fees and
expenses of Midland Loan Services as Servicer as set forth in Schedule VI;
(e) the costs incurred by Servicer in connection with (i) the determination of
market rents for purposes of and in accordance with clause (ii) of the
definition of GPR and (ii) the verification of information set forth in
Quarterly HOA Reports and quarterly reports delivered pursuant to clause (h) of
Schedule V, as well as the verification and/or preparation of any reports
related to HOA compliance required to be performed by the Servicer or special
servicer under the Servicing Agreement; and (f) except for the regular monthly
fees payable to the master servicer and any operating advisor, any other cost,
fee or expense of the Servicer, any special servicer, the trustee, the operating
advisor and any certificate administrator under the Servicing Agreement
(i) after the Loan is transferred to the special servicer as a result of (A) the
occurrence of an Event of Default or (B) an acknowledgement by Borrower in
writing that the Loan is likely to go into default, (ii) the occurrence of an
Event of Default under clauses (i), (ii) or (iii) of Section 7.1 or (iii) in
connection with any Borrower requested or consensual work out or modification of
the Loan or any other special waiver or approval requests made by Borrower or
Equity Owner during the term of the Loan (in each case including, but not
limited to, (1) any costs and expenses in connection with Broker Price Opinions
and, where Broker Price Opinions are not sufficient in accordance customary
mortgage servicing standards, appraisals of the Properties or the Equity
Interests in Borrower (or any updates to Broker Price Opinions or such
appraisals) conducted by or on behalf of the Servicer and/or special servicer,
(2) property inspections conducted by or on behalf of the Servicer and/or
special servicer, (3) lien searches conducted by or on behalf of the Servicer
and/or special servicer, (4) any reimbursements to the trustee, the Servicer,
the special servicer, the operating advisor, any certificate administrator
thereunder and related Persons of each of the foregoing, or the trust fund,
pursuant to the Servicing Agreement, (5) any indemnification to Persons entitled
thereto under the Servicing Agreement, (6) any litigation expenses arising from
an Event of Default and (7) the cost of Rating Agency Confirmations and/or
opinions of counsel, if any, required to be obtained pursuant to the Servicing
Agreement in connection with servicing or administering the Loan or the
Properties and administration of the trust fund).

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in
effect in the State (with respect to fixtures), the State of New York or the
state in which the Cash Management Account is located, as the case may be.

 

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“Underwritten Capital Expenditures” means, as of any date of determination, for
the twelve (12) month period ending on such date, the product of (i) the number
of Properties multiplied by (ii) $1,003.

“Underwritten Net Cash Flow” means, as of any date of determination, the excess
of: (a) for the twelve (12) month period ending on such date, the sum of (i) the
lesser of (x) GPR multiplied by 92.6%, and (y) Actual Rent Collections, and
(ii) Other Receipts; over (b) for the twelve (12) month period ending on such
date, the sum of (i) Operating Expenses, adjusted to reflect exclusion of
amounts representing non-recurring expenses and (ii) Underwritten Capital
Expenditures. For purposes of the foregoing calculations, for each of the first
three Calculation Dates after the Closing Date, Operating Expenses, Actual Rent
Collections and Other Receipts with respect to the Properties for the period
from the Closing Date to and including each such Calculation Date shall be
annualized to determine the twelve (12) month Operating Expenses, Actual Rent
Collections and Other Receipts with respect to the Properties.

Notwithstanding the foregoing, Underwritten Net Cash Flow shall not include
(a) any Insurance Proceeds (other than business interruption and/or rental loss
insurance proceeds and only to the extent allocable to the applicable reporting
period) or Operating Expenses covered by such Insurance Proceeds, (b) any
proceeds resulting from the Transfer of all or any portion of any Property,
including any Award, (c) any item of income otherwise included in Underwritten
Net Cash Flow but paid directly by any Tenant to a Person other than Borrower as
an offset or deduction against Rent payable by such Tenant, provided such item
of income is for payment of an item of expense (such as payments for utilities
paid directly to a utility company) and such expense is otherwise excluded from
the definition of Operating Expenses pursuant to clause “(H)” of the definition
thereof, (d) security deposits received from Tenants until forfeited or applied
and (e) any lease buy-out or surrender payment from any Tenant.

Notwithstanding anything herein to the contrary, the Underwritten Net Cash Flow
of any Property that is a Disqualified Property shall be zero for all purposes
of this Agreement unless Borrower makes a deposit of Eligibility Funds into the
Eligibility Reserves Subaccount in an amount equal to 100% of the Allocated Loan
Amount for such Property.

“United States” means the United States of America.

“Unrestricted Cash” means any cash or Permitted Investments not held in the Cash
Management Account, any Subaccount, any Rent Deposit Account or any Security
Deposit Account or required to be deposited therein pursuant to this Agreement;
provided, that funds held in Borrower’s Operating Account that were distributed
to Borrower for Operating Expenses set forth in a Monthly Budgeted Amount or for
Approved Extraordinary Expenses pursuant to Section 2.6.3(j)(ii) and which have
not been expended therefor are not Unrestricted Cash.

“U.S. Person” means any Person that is a “United States person” as defined in
Section 7701(a)(30) of the Code.

“U.S. Tax Compliance Certificate” has the meaning set forth in Section
2.7(e)(i)(B)(3).

 

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“Vacant Property” means, individually, and “Vacant Properties” means,
collectively, the Properties listed on Schedule VIII attached hereto which are
not leased to or occupied by any Tenant as of the Property Cut-Off Date.

“Voluntary Action” means, in respect of any Property, a voluntary action or
omission by any Loan Party or an action or omission by any third party
authorized by a Loan Party that, in each case, such Loan Party intends to result
in (i) an imposition of a Lien (other than a Permitted Lien) on such Property or
(ii) a Transfer of such Property in violation of this Agreement.

Section 1.2 Principles of Construction. All references to sections and schedules
are to sections and schedules in or to this Agreement unless otherwise
specified. All uses of the word “including” shall mean “including, without
limitation” unless the context shall indicate otherwise. Unless otherwise
specified, the words “hereof,” “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. Unless otherwise specified,
all meanings attributed to defined terms herein shall be equally applicable to
both the singular and plural forms of the terms so defined.

ARTICLE II - GENERAL TERMS

Section 2.1 Loan Commitment; Disbursement to Borrower.

2.1.1 Agreement to Lend and Borrow. Subject to and upon the terms and conditions
set forth herein, Lender hereby agrees to make and Borrower hereby agrees to
accept the Loan on the Closing Date.

2.1.2 Components of the Loan. For purposes of the computation of the interest
accrued on the Loan from time to time and certain other computations set forth
herein, the Loan shall be divided into multiple components designated as
“Component A”, “Component B”, “Component C”, “Component D”, “Component E”,
“Component F” and “Component G”. The following table sets forth the initial
principal amount of each such Component.

 

Component

   Initial Principal
Amount  

Component A

   $ 234,231,000   

Component B

   $ 61,260,000   

Component C

   $ 55,855,000   

Component D

   $ 39,639,000   

Component E

   $ 80,359,000   

Component F

   $ 33,152,000   

Component G

   $ 26,553,000   

2.1.3 Single Disbursement to Borrower. Borrower may request and receive only one
(1) borrowing hereunder in respect of the Loan and any amount borrowed and
repaid hereunder in respect of the Loan may not be reborrowed. Borrower
acknowledges and agrees that the Loan has been fully funded as of the Closing
Date.

 

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2.1.4 The Note, Mortgages and Loan Documents. The Loan shall be evidenced by the
Note and secured by the Mortgages and the other Loan Documents.

2.1.5 Use of Proceeds. Borrower shall use proceeds of the Loan to (i) make
initial deposits of the Reserve Funds, (ii) make distributions to Equity Owner,
(iii) pay costs and expenses incurred in connection with the closing of the Loan
and the related Securitization, and (iv) to the extent any proceeds remain after
satisfying clauses (i) through (iii) above, for such lawful purpose as Borrower
shall designate.

Section 2.2 Interest Rate.

2.2.1 Interest Rate. Each Component of the Loan shall accrue interest throughout
the Term at the Interest Rate applicable to such Component during each Interest
Period. The total interest accrued under the Loan shall be the sum of the
interest accrued on the outstanding balance of each of the Components. Borrower
shall pay to Lender on each Payment Date the interest accrued or to be accrued
on the Loan for the related Interest Period.

2.2.2 Interest Calculation. Interest on the Loan and other Obligations 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 expressed as an annual
rate divided by 360) or, in the case of any Loan or other Obligations bearing
interest by reference to the Prime Rate, a daily rate based on a three hundred
sixty-five (365) or three hundred sixty-six (366) day year (that is, the
Interest Rate expressed as an annual rate divided by 365 or 366), as the case
may be, by (C) the Outstanding Principal Balance or the amount of such other
Obligations, as applicable. The accrual period for calculating interest due on
each Payment Date shall be the Interest Period in which such Payment Date
occurs.

2.2.3 Determination of Interest Rate.

(a) Subject to the terms and conditions of this Section 2.2.3, each Floating
Rate Component of the Loan shall be a LIBOR Loan. In the event that Lender shall
have reasonably determined that by reason of circumstances affecting the
interbank Eurodollar market LIBOR cannot be determined as provided in the
definition of LIBOR as set forth herein, then Lender shall forthwith give notice
thereof by telephone of such fact, confirmed in writing, to Borrower at least
one (1) Business Day prior to the Determination Date. If such notice is given,
the Floating Rate Components Loan shall be converted, from and after the first
day of the next succeeding Interest Period, to a Prime Rate Loan bearing
interest based on the Prime Rate in effect on the related Determination Date.
Component G shall not be part of a LIBOR Loan or Prime Rate Loan and shall
accrue interest at the Component G Interest Rate.

(b) If, pursuant to the terms of Section 2.2.3(a), the Floating Rate Components
have been converted to a Prime Rate Loan but thereafter LIBOR can again be
determined as provided in the definition of LIBOR as set forth herein, Lender
may give notice thereof to Borrower and convert the Prime Rate Loan back to a
LIBOR Loan by delivering to Borrower notice of such conversion no later than
11:00 a.m. (New York City Time), one (1) Business Day prior to the next
succeeding Determination Date. If such notice is given, the Floating Rate
Components shall

 

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be converted, from and after the first day of the next succeeding Interest
Period, to a LIBOR Loan bearing interest based on LIBOR in effect on the related
Determination Date. Notwithstanding any provision of this Agreement to the
contrary, in no event shall Borrower have the right to elect to convert (i) a
LIBOR Loan to a Prime Rate Loan or (ii) a Prime Rate Loan to a LIBOR Loan.

(c) If any requirement of law or any change therein or in the interpretation or
application thereof, shall hereafter make it unlawful for Lender to make or
maintain a LIBOR Loan as contemplated hereunder, (i) the obligation of Lender
hereunder to make a LIBOR Loan or to convert a Prime Rate Loan to a LIBOR Loan
shall be canceled forthwith and (ii) any outstanding LIBOR Loan shall be
converted automatically to a Prime Rate Loan on the first day of the next
succeeding Interest Period or within such earlier period as required by law.
Borrower hereby agrees promptly to pay Lender, upon demand, any additional
amounts necessary to compensate Lender for any costs reasonably incurred by
Lender in making any conversion in accordance with this Agreement, including,
without limitation, any interest or fees payable by Lender to lenders of funds
obtained by it in order to make or maintain the LIBOR Loan hereunder. Lender’s
notice of such costs, as certified to Borrower, shall be conclusive absent
manifest error.

(d) In the event that any change in any requirement of law or in the
interpretation or application thereof, or compliance by Lender with any request
or directive (whether or not having the force of law) hereafter issued from any
central bank or other Governmental Authority:

(i) shall hereafter impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, or
deposits or other liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by, any office of
Lender which is not otherwise included in the determination of LIBOR hereunder;

(ii) shall hereafter have the effect of reducing the rate of return on Lender’s
capital as a consequence of its obligations hereunder to a level below that
which Lender could have achieved but for such adoption, change or compliance
(taking into consideration Lender’s policies with respect to capital adequacy)
by any amount deemed by Lender to be material;

(iii) shall hereafter subject Lender to any Taxes (other than (A) Indemnified
Taxes, (B) Taxes described in clauses (b) through (d) of the definition of
Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal,
letters of credit, commitments, or other obligations, or its deposits, reserves,
other liabilities or capital attributable thereto; or

(iv) shall hereafter impose on Lender any other condition and the result of any
of the foregoing is to increase the cost to Lender of making, renewing or
maintaining loans or extensions of credit or to reduce any amount receivable
hereunder;

then, in any such case, Borrower shall promptly pay Lender, upon demand, any
additional amounts necessary to compensate Lender for such additional cost or
reduced amount receivable

 

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which Lender deems to be material as determined by Lender in its reasonable
discretion. If Lender becomes entitled to claim any additional amounts pursuant
to this Section 2.2.3(d), Lender shall provide Borrower with not less than
thirty (30) days written notice specifying in reasonable detail the event by
reason of which it has become so entitled and the additional amount required to
fully compensate Lender for such additional cost or reduced amount. A
certificate as to any additional costs or amounts payable pursuant to the
foregoing sentence submitted by Lender to Borrower shall be conclusive in the
absence of manifest error. Subject to Section 2.7, this Section 2.2.3(d) shall
survive payment of the Debt and the satisfaction of all other Obligations.

(e) Borrower agrees to indemnify Lender and to hold Lender harmless from any
loss or expense which Lender sustains or incurs as a consequence of (i) any
default by Borrower in payment of the principal of or interest on a LIBOR Loan,
including, without limitation, any such loss or expense arising from interest or
fees payable by Lender to lenders of funds obtained by it in order to maintain a
LIBOR Loan hereunder, (ii) any prepayment (whether voluntary or mandatory) of
the LIBOR Loan on a day that (A) is not a Payment Date or (B) is a Payment Date
if Borrower did not give the prior written notice of such prepayment required
pursuant to the terms of this Agreement, including, without limitation, such
loss or expense arising from interest or fees payable by Lender to lenders of
funds obtained by it in order to maintain the LIBOR Loan hereunder and (iii) the
conversion pursuant to the terms hereof of the LIBOR Loan to the Prime Rate Loan
on a date other than the Payment Date, including, without limitation, such loss
or expenses arising from interest or fees payable by Lender to lenders of funds
obtained by it in order to maintain a LIBOR Loan hereunder (the amounts referred
to in clauses (i), (ii) and (iii) are herein referred to collectively as the
“Breakage Costs”); provided, however, Borrower shall not indemnify Lender from
any loss or expense arising from Lender’s willful misconduct or gross
negligence. This provision shall survive payment of the Note in full and the
satisfaction of all other obligations of Borrower under this Agreement and the
other Loan Documents.

2.2.4 Additional Costs. Lender will use reasonable efforts (consistent with
legal and regulatory restrictions) to maintain the availability of the LIBOR
Loan and to avoid or reduce any increased or additional costs payable by
Borrower under Section 2.2.3, including, if requested by Borrower, a transfer or
assignment of the Loan to a branch, office or Affiliate of Lender in another
jurisdiction, or a redesignation of its lending office with respect to the Loan,
in order to maintain the availability of the LIBOR Loan or to avoid or reduce
such increased or additional costs, provided that the transfer or assignment or
redesignation (a) would not result in any additional costs, expenses or risk to
Lender that are not reimbursed by Borrower and (b) would not be disadvantageous
in any other respect to Lender (including the effect on any Securitization) as
determined by Lender in its reasonable discretion.

2.2.5 Default Rate. In the event that, and for so long as, any Event of Default
shall have occurred and be continuing, the Component Outstanding Principal
Balances of the Floating Rate Components and, to the extent not prohibited by
law, all other portions of the Debt (other than any principal or interest on
Component G) shall accrue interest at the Default Rate, calculated from the date
such payment was due or, if later, such Event of Default occurred. Interest at
the Default Rate shall be paid immediately upon demand, which demand may be made
as frequently as Lender shall elect, to the extent not prohibited by applicable
law.

 

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

2.2.7 Interest Rate Cap Agreement.

(a) Prior to or contemporaneously with the Closing Date, Borrower shall enter
into an Interest Rate Cap Agreement with a LIBOR strike price equal to the
Strike Price. The Interest Rate Cap Agreement shall be governed by the laws of
the State of New York and shall contain each of the following provisions:

(i) the notional amount of the Interest Rate Cap Agreement shall be equal to the
aggregate Component Outstanding Principal Balances of the Floating Rate
Components;

(ii) the remaining term of the Interest Rate Cap Agreement shall at all times
extend through the end of the Interest Period in which the Maturity Date occurs,
as extended from time to time pursuant to this Agreement and the Loan Documents;

(iii) the Counterparty under the Interest Rate Cap Agreement shall be obligated
to make a stream of payments, directly to the Cash Management Account (whether
or not an Event of Default has occurred) from time to time equal to the product
of (i) the notional amount of such Interest Rate Cap Agreement multiplied by
(ii) the excess, if any, of LIBOR (including any upward rounding under the
definition of LIBOR) over the Strike Price and shall provide that such payment
shall be made on a monthly basis in each case not later than (after giving
effect to and assuming the passage of any cure period afforded to such
Counterparty under the Interest Rate Cap Agreement, which cure period shall not
in any event be more than three Business Days) each Payment Date; and

(iv) the Interest Rate Cap Agreement shall impose no material obligation on the
beneficiary thereof (after payment of the acquisition cost) and shall be in all
material respects satisfactory in form and substance to Lender and shall satisfy
applicable Rating Agency standards and requirements, including, without
limitation, provisions satisfying Approved Rating Agencies standards,
requirements and criteria (i) that incorporate customary tax “gross up”
provisions, (ii) whereby the Counterparty agrees not to file or

 

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join in the filing of any petition against Borrower under the Bankruptcy Code or
any other Federal or state bankruptcy or insolvency law, and (iii) that
incorporate, if the Interest Rate Cap Agreement contemplates collateral posting
by the Counterparty, a credit support annex setting forth the mechanics for
collateral to be calculated and posted that are consistent with Rating Agency
standards, requirements and criteria.

(b) Borrower shall collaterally assign to Lender, pursuant to the Collateral
Assignment of Interest Rate Cap Agreement (the “Collateral Assignment of
Interest Rate Cap Agreement”), all of its right, title and interest to receive
any and all payments under the Interest Rate Cap Agreement, and shall deliver to
Lender an executed counterpart of such Interest Rate Cap Agreement (which shall,
by its terms, authorize the assignment to Lender and require that the
Counterparty deposit any payments directly into the Cash Management Account).
Borrower shall notify the Counterparty of such assignment and shall cause the
Counterparty under the Interest Rate Cap Agreement to execute and deliver the
Acknowledgment.

(c) Borrower shall comply with all of its obligations under the terms and
provisions of the Interest Rate Cap Agreement. Borrower shall take all actions
reasonably requested by Lender to enforce Lender’s rights under the Interest
Rate Cap Agreement in the event of a default by the Counterparty and shall not
waive, amend or otherwise modify any of its rights thereunder.

(d) In the event that the Borrower receives written notice from Lender, or the
Borrower otherwise obtains knowledge, in each case, of any downgrade, withdrawal
or qualification of the rating of the Counterparty by any Approved Rating Agency
such that it ceases to qualify as an Acceptable Counterparty, unless the
Counterparty shall have posted collateral on terms acceptable to each Approved
Rating Agency, Borrower shall replace the Interest Rate Cap Agreement with a
Replacement Interest Rate Cap Agreement not later than ten (10) Business Days
following receipt of notice from Lender of such downgrade, withdrawal or
qualification. In the event that the Counterparty is downgraded (i) below BBB+
by S&P or (ii) below “Baa1” by Moody’s, a Replacement Interest Rate Cap
Agreement shall be required regardless of the posting of collateral. Other than
as provided in this Section 2.2.7(d), the Counterparty must be an Acceptable
Counterparty at all times.

(e) In the event that Borrower fails to purchase and deliver to Lender the
Interest Rate Cap Agreement or fails to maintain the Interest Rate Cap Agreement
in accordance with the terms and provisions of this Agreement, Lender may
purchase the Interest Rate Cap Agreement and the cost incurred by Lender in
purchasing such Interest Rate Cap Agreement shall be paid by Borrower to Lender
with interest thereon at the Default Rate from the date such cost was incurred
by Lender until such cost is reimbursed by Borrower to Lender.

(f) In connection with the Interest Rate Cap Agreement, Borrower shall obtain
and deliver to Lender an opinion from counsel (which counsel may be in-house
counsel for the Counterparty) for the Counterparty (upon which Lender and its
successors and assigns may rely) which shall provide, in relevant part, that (a
“Counterparty Opinion”):

(i) the Counterparty is duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation or formation and has the
organizational power and authority to execute and deliver, and to perform its
obligations under, the Interest Rate Cap Agreement;

 

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(ii) the execution and delivery of the Interest Rate Cap Agreement by the
Counterparty, and any other agreement which the Counterparty has executed and
delivered pursuant thereto, and the performance of its obligations thereunder
have been and remain duly authorized by all necessary action and do not
contravene any provision of its certificate of incorporation or by-laws (or
equivalent organizational documents) or any law, regulation or contractual
restriction binding on or affecting it or its property;

(iii) all consents, authorizations and approvals required for the execution and
delivery by the Counterparty of the Interest Rate Cap Agreement, and any other
agreement which the Counterparty has executed and delivered pursuant thereto,
and the performance of its obligations thereunder have been obtained and remain
in full force and effect, all conditions thereof have been duly complied with,
and no other action by, and no notice to or filing with any Governmental
Authority is required for such execution, delivery or performance; and

(iv) the Interest Rate Cap Agreement, and any other agreement which the
Counterparty has executed and delivered pursuant thereto, has been duly executed
and delivered by the Counterparty and constitutes the legal, valid and binding
obligation of the Counterparty, enforceable against the Counterparty in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors’ rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).

Section 2.3 Loan Payment.

2.3.1 Monthly Debt Service Payments. Borrower shall pay to Lender (a) on the
Closing Date, an amount equal to interest only on the Outstanding Principal
Balance of the Components from the Closing Date up to and including January 14,
2015, which interest shall be calculated in accordance with the provisions of
Section 2.2 and (b) on the Payment Date occurring in February 2015, and on each
Payment Date thereafter up to and including the Maturity Date, Borrower shall
make a payment to Lender equal to the Monthly Debt Service Payment Amount.
Borrower shall also pay to Lender on the Closing Date all amounts required in
respect of Reserve Funds as set forth in Article 6 and an amount equal to the
sum of the initial monthly certificate administrator fee and the initial monthly
trustee fee.

2.3.2 Payments Generally. The first Interest Period hereunder shall commence on
and include the Closing Date and shall end on and include January 14, 2015.
Thereafter during the term of the Loan, each Interest Period shall commence on
the fifteenth (15th) day of the calendar month preceding the calendar month in
which the related Payment Date occurs and shall end on and include the
fourteenth (14th) day of the calendar month in which the related Payment Date
occurs. For purposes of making payments hereunder, but not for purposes of
calculating Interest Periods, if the day on which such payment is due is not a
Business Day, then amounts due on such date shall be due on the immediately
preceding Business Day and with respect to payments of principal due on the
Maturity Date, interest shall be payable at the Interest Rate or the Default

 

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Rate, as the case may be, through and including the last day of the related
Interest Period. All amounts due under this Agreement and the other Loan
Documents shall be payable without setoff, counterclaim, defense or any other
deduction whatsoever.

2.3.3 Payment on Maturity Date. Borrower shall pay to Lender on the Maturity
Date the Outstanding Principal Balance, all accrued and unpaid interest and all
other amounts due hereunder and under the Note, the Mortgage Documents and the
other Loan Documents.

2.3.4 Late Payment Charge. If any sums due under the Loan Documents (other than
those as to which interest is accruing thereon at the Default Rate pursuant to
Section 2.2.5) are not paid by Borrower on or prior to the date on which it is
due, Borrower shall pay to Lender upon demand an amount equal to the lesser of
four percent (4%) of such unpaid sum or the Maximum Legal Rate in order to
defray the expense incurred by Lender in handling and processing such delinquent
payment and to compensate Lender for the loss of the use of such delinquent
payment. Any such amount shall be secured by the Mortgages and the other Loan
Documents to the extent permitted by applicable law.

2.3.5 Method and Place of Payment. Except as otherwise specifically provided
herein, all payments and prepayments under this Agreement and the Note shall be
made to Lender not later than 2:00 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 or as otherwise directed by
Lender, and any funds received by Lender after such time shall, for all purposes
hereof, be deemed to have been paid on the next succeeding Business Day.

Section 2.4 Prepayments.

2.4.1 Voluntary Prepayments. Provided that Borrower shall timely deliver to
Lender a Prepayment Notice, Borrower may prepay all or any portion of the
Outstanding Principal Balance and any other amounts outstanding under the Note,
this Agreement, the Mortgage Documents and any of the other Loan Documents, on
any Business Day, provided that Borrower shall comply with the provisions of and
pay to Lender the amounts set forth in Section 2.4.4. Each such prepayment shall
be in a minimum principal amount equal to $1,000,000 and in integral multiples
of $100,000 in excess thereof and shall be made and applied in the manner set
forth in Section 2.4.4.

2.4.2 Mandatory Prepayments.

(a) Disqualified Properties. If at any time any Property shall become a
Disqualified Property, Borrower shall, no later than the close of business on
the fifth (5th) Business Day following the last day of the applicable Cure
Period, give notice thereof to Lender and prepay the Debt in the applicable
Release Amount with respect to such Property. After the prepayment of the Debt
by the Release Amount with respect to a Disqualified Property as provided above,
Lender shall release the Disqualified Property from the applicable Mortgage
Documents and related Lien, provided, that (x) Borrower has delivered to Lender
a draft release (and, in the event the Mortgage and the Collateral Assignment of
Leases and Rents applicable to the Disqualified Property encumbers other
Property(ies) in addition to the Disqualified Property, such release shall be a
partial release that relates only to the Disqualified Property and does not

 

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affect the Liens and security interests encumbering or on the other
Property(ies)) in form and substance appropriate for the jurisdiction in which
such Disqualified Property is located and shall contain standard provisions
protecting the rights of Lender and (y) Borrower shall pay all costs, taxes and
expenses associated with such release (including, without limitation, cost to
file and record the release and Lender’s reasonable attorneys’ fees).
Notwithstanding the foregoing, in lieu of such prepayment, Borrower may either
(1) deposit an amount equal to 100% of the Allocated Loan Amount for such
Disqualified Property in the Eligibility Reserve Subaccount in accordance with
and subject to Section 6.5 or (2) substitute a Disqualified Property or a
portfolio of Disqualified Properties (each, an “Affected Property” and
collectively, the “Affected Properties”) with a substitute Eligible Property or
a portfolio of Eligible Properties (each, a “Substitute Property” and
collectively, the “Substitute Properties”) provided that, in the case of a
proposed substitution, the following conditions are satisfied:

(i) each substitute Eligible Property shall be a single family residential real
property, but excluding housing cooperatives, manufactured housing,
condominiums, duplexes and townhomes;

(ii) no Event of Default shall have occurred and be continuing except as related
to, and cured by the removal of, any Affected Property;

(iii) Lender shall have obtained, at Borrower’s sole cost and expense, a Broker
Price Opinion for the Substitute Property (or Broker Price Opinions for the
Substitute Properties, if a portfolio of Affected Properties is being
substituted), and based on such Broker Price Opinion(s), the Substitute Property
(or Substitute Properties, in the aggregate, if a portfolio of Affected
Properties is being substituted) shall have the same or greater BPO Value as the
greater of (x) the BPO Value of the Affected Property (or portfolio of Affected
Properties being substituted) as of the Closing Date and (y) the BPO Value of
the Affected Property (or portfolio of Affected Properties being substituted) at
the time of substitution; provided that, if a Broker Price Opinion with respect
to any Affected Property (including any Affected Property included in a
portfolio of Affected Properties being substituted) has been obtained within the
six (6) month period prior to the date of substitution therefor, the BPO Value
of such Affected Property at the time of substitution shall be deemed to be the
BPO Value set forth in such Broker Price Opinion;

(iv) Borrower shall deliver to Lender an Officer’s Certificate stating that each
Substitute Property satisfies each of the Property Representations and is in
compliance with each of the Property Covenants on the date of the substitution
after giving effect to the substitution;

(v) the in place Rents under the Lease for the Substitute Property (or under the
Leases for the Substitute Properties, in the aggregate, if a portfolio of
Affected Properties is being substituted) shall be equal to or greater than the
greater of (A) the in place Rents under the Lease(s) for the Affected Property
(or portfolio of Affected Properties being substituted) measured at the time of
substitution and (B) the in place Rents under the Lease(s) for the Affected
Property (or portfolio of Affected Properties being substituted) measured as of
the Closing Date;

 

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(vi) simultaneously with the substitution, Borrower shall convey all of
Borrower’s right, title and interest in, to and under the Affected Property (or
portfolio of Affected Properties being substituted) to a Person other than a
Loan Party and Borrower shall deliver to Lender a copy of the deed conveying all
or Borrower’s right, title and interest in the Affected Property (or portfolio
of Affected Properties being substituted);

(vii) Borrower shall deliver on or prior to the date of substitution evidence
satisfactory to Lender that each Substitute Property is insured pursuant to
Policies meeting the requirements of Article 5;

(viii) Borrower shall deliver to Lender the deed, Title Insurance Owner’s Policy
and the Lease with respect to each Substitute Property;

(ix) Borrower shall have executed and delivered to Lender, the Mortgage
Documents with respect to each Substitute Property, which shall be in
substantially the same form as the Mortgage, Collateral Assignment of Leases and
Rents and Fixture Filing, if applicable, executed and/or delivered on the
Closing Date with such changes as may be necessitated or appropriate (as
reasonably determined by Lender) for the jurisdiction in which the Substitute
Property is located, and which may, in Lender’s reasonable discretion, be
Mortgage Documents with respect to only such Substitute Property (and in the
event the Substitute Property is located in the same county or parish in which
one or more other Properties (other than the Affected Property) is located, such
Mortgage and Collateral Assignment of Leases and Rents may be in the form of an
amendment and spreader agreement to the existing Mortgage and Collateral
Assignment of Leases and Rents covering such Property or Properties located in
the same county or parish as the Substitute Property, in each case, in form and
substance reasonably acceptable to Lender) (the “Substitute Mortgage
Documents”);

(x) Borrower shall deliver to Lender the following opinions of counsel: (A) an
opinion of counsel admitted to practice under the laws of the state in which the
Substitute Property (or Substitute Properties, if a portfolio of Affected
Properties are being substituted) is located in form and substance reasonably
satisfactory to Lender opining as to the enforceability of the Substitute
Mortgage Documents with respect to the Substitute Property and (B) an opinion
stating that the Substitute Mortgage Documents were duly authorized, executed
and delivered by Borrower and that the execution and delivery of such Substitute
Mortgage Documents and the performance by Borrower of its obligations thereunder
will not cause a breach or a default under, any agreement, document or
instrument to which Borrower is a party or to which it or the Properties are
bound and otherwise in form and substance reasonably satisfactory to Lender;

(xi) Lender shall have received a Title Insurance Policy for the Substitute
Property (or, in the event a Substitute Property is located in the same county
or parish in which one or more other Properties (other than an Affected
Property) is located, an endorsement to the existing Title Insurance Policy with
respect to such Property or Properties located in the same county or parish as
such Substitute Property in form and substance reasonably satisfactory to
Lender) insuring the Lien of the Mortgage encumbering such Substitute Property
as a valid first lien on such Substitute Property, free and clear of all
exceptions other than the Permitted Liens;

 

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(xii) each Substitute Property shall be located in a metropolitan statistical
area that contains at least one property described on the Properties Schedule as
of the Closing Date,

(xiii) no acquisition of a Substitute Property will result in Borrower or any
Loan Party incurring any Indebtedness (except as permitted by this Agreement);

(xiv) the BPO Value of the Affected Properties at the time of substitution,
together with the BPO Value at the time of substitution of all other Affected
Properties since the Closing Date, shall be no more than ten percent (10%) of
the aggregate BPO Values of all Properties as of the Closing Date;

(xv) if any Lien, litigation or governmental proceeding is existing or pending
or, to the actual knowledge of a Responsible Officer of Manager or a Loan Party,
threatened in writing against any Affected Property or Substitute Property which
may result in liability for Borrower, Borrower shall have deposited with Lender
reserves reasonably satisfactory to Lender as security for the satisfaction of
such liability;

(xvi) simultaneously with the substitution, Lender shall release the Affected
Property or Affected Properties from the applicable Mortgage Documents and
related Lien, provided, that Borrower has delivered to Lender a draft release
(and, in the event the Mortgage and the Collateral Assignment of Leases and
Rents applicable to the Affected Property or Affected Properties encumbers other
Property(ies) in addition to the Affected Property or Affected Properties, such
release shall be a partial release that relates only to the Affected Property or
Affected Properties and does not affect the Liens and security interests
encumbering or on the other Property(ies)) in form and substance appropriate for
the jurisdiction in which such Affected Property or Affected Properties are
located which contains standard provisions protecting the rights of Lender; and

(xvii) Borrower shall pay to Lender all reasonable out-of-pocket costs and
expenses incurred by Lender in connection with the substitution (including,
without limitation, costs and expenses incurred by Lender in connection with the
release of the Affected Property from applicable Mortgage Documents) and, in
addition, the current reasonable and customary fee being assessed by Lender
and/or its Servicer to effect releases or assignments.

Any such deposit in the Eligibility Reserve Subaccount or any such substitution
shall be completed no later than the due date for the prepayment required under
this Section 2.4.2(a). Notwithstanding anything to the contrary contained herein
or in any other Loan Document, if the Loan is included in a REMIC Trust, no
substitution will be permitted unless (1) either (aa) immediately after such
substitution the ratio of the unpaid principal balance of the Loan to the value
of the remaining Properties (as determined by Lender in its sole discretion
using any commercially reasonable method permitted to a REMIC Trust; and which
shall exclude the value of personal property (other than fixtures) or going
concern value, if any) is equal to or less than

 

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125% or (bb) the ratio of the unpaid principal balance of the Loan to the value
of the Properties (including the Substitute Property or Substitute Properties)
will not increase as a result of the substitution of the Substitute Property or
Substitute Properties for the Affected Property or Affected Properties, or
(2) Lender receives an opinion of counsel that the Securitization will not fail
to maintain its status as a REMIC Trust as a result of the substitution of the
Substitute Property or Substitute Properties for the Affected Property or
Affected Properties.

(b) Transfer. If at any time any Property is sold or otherwise disposed of to a
third party (other than for the avoidance of doubt, a Borrower TRS), then
Borrower shall, no later than the close of business on the day on which such
Transfer occurs, give notice thereof to Lender and prepay the Debt in the
applicable Release Amount with respect to such Property in accordance with
Section 2.5.

(c) Condemnation or Casualty. If Borrower is required to make any prepayment
under Section 5.3 or Section 5.4 as a result of a Condemnation or Casualty, on
the next occurring Payment Date following the date on which Lender actually
receives the applicable Net Proceeds, such Net Proceeds, up to the amount
required to be prepaid as provided in Section 5.3 or Section 5.4, as applicable,
shall be applied to the prepayment of the Debt in accordance with
Section 2.4.4(d). Notwithstanding anything herein to the contrary, no Spread
Maintenance Premium shall be due in connection with any prepayment made pursuant
to this Section 2.4.2(c).

(d) Application of Mandatory Prepayments. Each such prepayment shall be made and
applied in the manner set forth in Section 2.4.4.

(e) Payment from Cash Management Account. Lender may collect any prepayment
required under this Section 2.4.2 from the Cash Management Account on the date
such prepayment is payable hereunder.

2.4.3 Prepayments After Default.

(a) If, during the continuance of an Event of Default, payment of all or any
part of the Debt is tendered by Borrower and accepted by Lender or is otherwise
recovered by Lender (including through application of any Reserve Funds), such
tender or recovery shall be deemed to be a voluntary prepayment by Borrower and
Borrower shall pay, as part of the Debt, all of: (i) all accrued interest
calculated at the Interest Rate on the amount of principal being prepaid through
and including the date of such prepayment together with an amount equal to the
interest that would have accrued at the Interest Rate on the amount of principal
being prepaid through the end of the Interest Period in which such prepayment
occurs, notwithstanding that such Interest Period extends beyond the date of
prepayment, (ii) the Interest Shortfall, if applicable, with respect to the
amount prepaid, (iii) Breakage Costs, if any, without duplication of any sums
paid pursuant to the preceding clauses (i) and (ii), and (iv) an amount equal to
the Spread Maintenance Premium (if made before the Spread Maintenance Date).

(b) Notwithstanding anything contained herein to the contrary, upon the
occurrence and during the continuance of any Event of Default, any payment of
principal, interest and other amounts payable under the Loan Documents from
whatever source may be applied by Lender among the Components and other
Obligations as Lender shall determine in its sole and absolute discretion.

 

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2.4.4 Prepayment/Repayment Conditions.

(a) On the date on which a prepayment, voluntary or mandatory, is made under the
Note or as required under this Agreement, which date must be a Business Day,
Borrower shall pay to Lender:

(i) all accrued and unpaid interest calculated at the Interest Rate on the
amount of principal being prepaid on the applicable Component or Components
through and including the Repayment Date together with an amount equal to the
interest that would have accrued at the Interest Rate on the amount of principal
being prepaid through the end of the Interest Period in which such prepayment
occurs, notwithstanding that such Interest Period extends beyond the date of
prepayment;

(ii) if such prepayment is made during the period from and including the first
day after a Payment Date through and including the last day of the Interest
Period in which such prepayment occurs, all interest on the principal amount
being prepaid on the applicable Component or Components which would have accrued
from the first day of the Interest Period immediately following the Interest
Period in which the prepayment occurs (the “Succeeding Interest Period”) through
and including the end of the Succeeding Interest Period, calculated at (A) the
Interest Rate if such prepayment occurs on or after the Determination Date for
the Succeeding Interest Period or (B) the Assumed Note Rate if such prepayment
occurs before the Determination Date for the Succeeding Interest Period (the
“Interest Shortfall”);

(iii) Breakage Costs, if any, without duplication of any sums paid pursuant to
the preceding clauses (i) and (ii);

(iv) if such prepayment occurs prior to the Spread Maintenance Date, the Spread
Maintenance Premium applicable thereto; provided, that no Spread Maintenance
Premium shall be due in connection with a prepayment under Section 2.4.2(a)
(except where such prepayment arises as a result of a Voluntary Action) or
Section 2.4.2(c) and no Spread Maintenance Premium shall be owing on account of
a prepayment of Component G; and

(v) all other sums, then due under the Note, this Agreement and the other Loan
Documents.

(b) If the Interest Shortfall was calculated based upon the Assumed Note Rate,
upon determination of LIBOR on the Determination Date for the Succeeding
Interest Period then (i) if the Interest Rate applicable to any Floating Rate
Component for such Succeeding Interest Period is less than the Assumed Note Rate
applicable to such Component, Lender shall promptly refund to Borrower the
amount of the Interest Shortfall paid with respect to such Component, calculated
at a rate equal to the difference between the Assumed Note Rate applicable to
such Component and the Interest Rate applicable to such Component for such
Interest Period, or (ii) if the Interest Rate applicable to any Floating Rate
Component is greater than the Assumed Note Rate

 

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applicable to such Component, Borrower shall promptly (and in no event later
than the ninth (9th) day of the following month) pay Lender the amount of such
additional Interest Shortfall applicable to such Component calculated at a rate
equal to the amount by which the Interest Rate applicable to such Component
exceeds the Assumed Note Rate applicable to such Component.

(c) Borrower shall pay all reasonable costs and expenses of Lender incurred in
connection with the repayment or prepayment (including without limitation
reasonable attorneys’ fees and expenses and costs and expenses related to the
Transfer or substitution of any Property); provided, for the avoidance of doubt,
this provision shall not apply with respect to Taxes.

(d) Except during an Event of Default, prepayments shall be applied by Lender in
the following order of priority: (i) first, to any amounts (other than
principal, interest, Interest Shortfall, Breakage Costs and Spread Maintenance
Premium) then due and payable under the Loan Documents, including any costs and
expenses of Lender in connection with such prepayment; (ii) second, interest
payable pursuant to Section 2.4.4(a)(i) on the applicable Component or
Components being prepaid pursuant to this clause (d) at the Interest Rate;
(iii) third, Interest Shortfall on the applicable Component or Components being
prepaid pursuant to this clause (d); (iv) fourth, Breakage Costs on the
applicable Component or Components being prepaid pursuant to this clause (d);
(v) fifth, Spread Maintenance Premium, to the extent applicable, on the
applicable Floating Rate Component or Floating Rate Components being prepaid
pursuant to this clause (d) and (vi) sixth, to principal, applied as set forth
in clause (e) below.

(e) Except during an Event of Default, prepayments of principal of the Loan made
pursuant to this Section 2.4.4 shall be applied to the Loan (i) first, to
Component A until the Component Outstanding Principal Balance of Component A is
reduced to zero, (ii) second, to Component B until the Component Outstanding
Principal Balance of Component B is reduced to zero, (iii) third, to Component C
until the Component Outstanding Principal Balance of Component C is reduced to
zero, (iv) fourth, to Component D until the Component Outstanding Principal
Balance of Component D is reduced to zero, (v) fifth, to Component E until the
Component Outstanding Principal Balance of Component E is reduced to zero
(vi) sixth, to Component F until the Component Outstanding Principal Balance of
Component F is reduced to zero (vii) seventh, to Component G until the Component
Outstanding Principal Balance of Component G is reduced to zero; provided, that
so long as no Event of Default is continuing, any voluntary prepayments of
principal on the Loan made from Unrestricted Cash, other than Debt Yield Cure
Prepayments, shall be applied to the Components of the Loan on a pro rata basis,
based on the Component Outstanding Principal Balance of each Component.

(f) Prepayments under Section 2.4.1 shall reduce the Allocated Loan Amounts for
each Property on a pro rata basis. Prepayments under Section 2.4.2 shall reduce
the Allocated Loan Amount with respect to the applicable Property, until the
Allocated Loan Amount and any interest, fees or other Obligations related
thereto is zero and any excess of such prepayment shall be applied to reduce the
Allocated Loan Amounts for the remaining Properties on a pro rata basis.

(g) Lender shall, upon the written request and at the expense of Borrower, upon
payment in full of the Debt in accordance with the terms and provisions of the
Loan Documents,

 

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release the Liens of the Mortgage Documents and cause the trustees under any of
the Mortgages to reconvey the applicable Properties to Borrower. In connection
with the releases of the Liens, Borrower shall submit to Lender, forms of
releases of Liens (and related Loan Documents) for execution by Lender. Such
releases shall be the forms appropriate in the jurisdictions in which the
Properties are located and contain standard provisions protecting the rights of
Lender. In addition, Borrower shall provide all other documentation Lender
reasonably requires to be delivered by Borrower in connection with such
releases, 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 out-of-pocket costs, taxes and expenses associated with the
release of the Liens of the Mortgage Documents, including Lender’s reasonable
attorneys’ fees.

Section 2.5 Release of Property. Borrower may Transfer any Property (each, a
“Release Property”) and Lender shall release the Release Property from the
applicable Mortgage Documents and release the security interest and Lien on any
Collateral located at such Property, provided that the following conditions
precedent to such Transfer are satisfied (the “Release Conditions”); provided,
that, for the avoidance of doubt, the Release Conditions do not need to be
satisfied in order for Lender to release its security interest and Lien on any
Disqualified Property in connection with any substitution in accordance with
Section 2.4.2(a):

(a) Borrower shall submit to Lender, not less than ten (10) Business Days’ prior
to the Transfer Date, a Request for Release, together with all attachments
thereto and evidence reasonably satisfactory to Lender that the conditions
precedent set forth in this Section 2.5 will be satisfied upon the consummation
of such Transfer (for the avoidance of doubt, no Request for Release need be
provided in connection with a contribution of a Release Property to a Borrower
TRS prior to the Transfer thereof to such third party);

(b) No Event of Default has occurred and is continuing (other than a
non-monetary Event of Default that is specific to such Release Property to which
Section 2.4.2(a) is applicable and would be cured as a result of the release of
the Release Property, so long as a mandatory prepayment is made with respect
thereto in accordance with Section 2.4.2(a) (a “Qualified Release Property
Default”));

(c) the Debt Yield as of the most recent Calculation Date, after giving pro
forma effect for the elimination of the Underwritten Net Cash Flow for the
Release Property and the repayment of the Loan in the applicable Release Amount,
is at least the greater of (x) the Closing Date Debt Yield and (y) the lesser of
(A) the actual Debt Yield as of such date (without giving effect to the
elimination of the Underwritten Net Cash Flow for the Release Property and the
repayment of the Loan in the applicable Release Amount) and (B) 9.43%; provided,
that the condition in this clause (c) shall not be applicable to a Transfer of a
Property if the Loan is prepaid in the amount that is the greater of the
applicable Release Amount and 100% of the Net Transfer Proceeds for the Release
Property;

(d) Unless the release of the Release Property is effected in order to cure a
Qualified Release Property Default, the Release Property shall be Transferred to
a Person other than a Loan Party; provided, that Borrower may contribute the
Release Property to a Borrower TRS prior to and in anticipation of the Transfer
thereof to a third party;

 

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(e) Except for any release or contribution to a Borrower TRS in order to cure a
Qualified Release Property Default described in the foregoing clause (d) or any
release of a Designated HOA Property, the Release Property shall be Transferred
pursuant to a bona fide all-cash sale of the Release Property on arms-length
terms and conditions;

(f) On or prior to the Transfer Date, Borrower shall prepay the Outstanding
Principal Balance by an amount equal to the applicable Release Amount for the
Release Property, and Borrower shall comply with the provisions and pay to
Lender the amounts set forth in Section 2.4.4;

(g) if a Cash Sweep Period is continuing on the Transfer Date, the excess, if
any, of (i) the Net Transfer Proceeds for the Release Property over (ii) the
applicable Release Amount for the Release Property and any other amounts payable
to Lender in connection with such release, shall be deposited into the Cash
Collateral Subaccount;

(h) Borrower shall submit to Lender, not less than five (5) Business Days’ prior
to the Transfer Date, a draft release for the applicable Mortgage Documents
(and, in the event the Mortgage and the Collateral Assignment of Leases and
Rents applicable to the Release Property encumber other Property(ies) in
addition to the Release Property, such release shall be a partial release that
relates only to the Release Property and does not affect the Liens and security
interests encumbering or on the other Property(ies)) in form and substance
appropriate for the jurisdiction in which the Release Property is located and
shall contain standard provisions protecting the rights of Lender. In addition,
Borrower shall provide all other documentation of a ministerial or
administrative nature that Lender reasonably requires to be delivered by
Borrower in connection with such release or assignment;

(i) Borrower shall have paid all taxes and all reasonable out-of-pocket costs
and expenses incurred by Lender and/or its Servicer in connection with any such
release and, in addition, the current reasonable and customary fee being
assessed by Lender and/or its Servicer to effect such release or assignment; and

(j) Notwithstanding anything to the contrary contained herein or in any other
Loan Document, if the Loan is included in a REMIC Trust and the ratio of the
unpaid principal balance of the Loan to the value of the remaining Properties
(as determined by Lender in its sole discretion using any commercially
reasonable method permitted to a REMIC Trust; and which shall exclude the value
of any personal property (other than fixtures) or going concern value, if any)
exceeds or would exceed 125% immediately after giving effect to the release of
the Release Property, no release will be permitted unless the principal balance
of the Loan is prepaid by an amount not less than the greater of (i) the Release
Amount or (ii) the least amount that is a “qualified amount” as that term is
defined in IRS Revenue Procedure 2010-30, as the same may be amended, replaced,
supplemented or modified from time to time, unless Lender receives an opinion of
counsel that, if this Section 2.5(j) is applicable but not followed or is no
longer applicable at the time of such release, the Securitization will not fail
to maintain its status as a REMIC Trust as a result of the release of the
Release Property.

 

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Section 2.6 Rent Deposit Account/Cash Management.

2.6.1 Rent Deposit Account.

(a) During the Term, Borrower shall establish and maintain one or more accounts
for the purpose of collecting Rents (each, a “Rent Deposit Account”) at an
Eligible Institution selected by Borrower and reasonably approved by Lender (a
“Rent Deposit Bank”). Borrower shall cause any Rents which are paid to Borrower
or Manager by wire transfer or other electronic means to be deposited directly
into a Rent Deposit Account. Each Rent Deposit Account shall be subject to a
Deposit Account Control Agreement and Borrower and Manager shall have access to
and may make withdrawals from and withhold the deposit of Rent payments from the
Rent Deposit Accounts for the sole purpose of making Rent Refunds; provided,
that, in no event shall the amount of Rent Refunds so withdrawn from or withheld
from the Rent Deposit Accounts during any calendar month exceed 2.5% of the
total Rents actually deposited into the Rent Deposit Accounts during the prior
calendar month; provided, further, that during the continuance of an Event of
Default, Lender may exercise sole control and dominion over the Rent Deposit
Accounts and neither Borrower nor Manager shall have the right of access to,
withdraw from or to withhold deposits from the Rent Deposit Accounts. Subject to
the foregoing, Borrower shall cause all Rents that are received by Borrower or
Manager to be deposited into a Rent Deposit Account within three (3) Business
Days after receipt thereof by Borrower or Manager. Borrower shall (or instruct
Manager to) cause all funds on deposit in the Rent Deposit Accounts to be
deposited into the Cash Management Account every second (2nd) Business Day (or
more frequently in Borrower’s discretion), provided, that Borrower may cause
each Rent Deposit Bank to retain a reasonable amount of funds in the Rent
Deposit Accounts with respect to anticipated overdrafts, charge backs and bank
fees and any minimum balance required by the Deposit Account Control Agreement
or account terms for the Rent Deposit Accounts, not in excess of $100,000 in the
aggregate for all such Rent Deposit Banks and Rent Deposit Accounts. Borrower
hereby grants to Lender a first-priority security interest in the Rent Deposit
Accounts 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 Rent Deposit Accounts. All monies now or
hereafter deposited into the Rent Deposit Accounts shall be deemed additional
security for the Debt.

(b) During the continuance of an Event of Default, Lender may, in addition to
any and all other rights and remedies available to Lender, apply any sums then
present in the Rent Deposit Accounts to the payment of the Debt in any order in
its sole discretion.

(c) The Rent Deposit Accounts shall not be commingled with other monies held by
Borrower, Manager or the Rent Deposit Banks, including, without limitation, by
linkage of any such Rent Deposit Account to any other deposit account at the
Rent Deposit Bank maintaining such Rent Deposit Account by a controlled balance
arrangement without prior written approval from Lender and entering into an
amendment to the applicable Deposit Account Control Agreement if necessary or
reasonably requested by Lender.

(d) Borrower shall not further pledge, assign or grant any security interest in
the Rent Deposit Accounts or the monies deposited therein or permit any lien or
encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1
financing statements, except those naming Lender as the secured party, to be
filed with respect thereto.

 

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(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 Rent
Deposit Accounts and/or the related Deposit Account Control Agreement (unless
arising from the gross negligence or willful misconduct of Lender) or the
performance of the obligations for which the Rent Deposit Accounts were
established.

(f) All costs and expenses for establishing and maintaining the Rent Deposit
Accounts shall be paid by Borrower.

2.6.2 Cash Management Account.

(a) During the Term, Borrower shall establish and maintain a segregated Eligible
Account (the “Cash Management Account”) to be held by Cash Management Account
Bank in trust and for the benefit of Lender, which Cash Management Account shall
be under the sole dominion and control of Lender or the Servicer on behalf of
Lender. Borrower hereby grants to Lender a first priority security interest in
the Cash Management Account and all deposits at any time contained therein and
the proceeds thereof and will take all actions necessary to maintain in favor of
Lender a perfected first priority security interest in the Cash Management
Account, including, without limitation, filing UCC-1 financing statements and
continuations thereof. Borrower will not in any way alter or modify the Cash
Management Account. Lender and Servicer on behalf of Lender shall have the sole
right to make withdrawals from the Cash Management Account and all costs and
expenses for establishing and maintaining the Cash Management Account shall be
paid by Borrower.

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

(c) All funds on deposit in the Cash Management Account following the occurrence
of an Event of Default may be applied by Lender in such order and priority as
Lender shall determine.

(d) In the event of any Transfer of any Property, Borrower shall (or shall cause
Manager or the closing title company or escrow agent, as applicable, to) deposit
directly into the Cash Management Account the Net Transfer Proceeds for
allocation in accordance with the terms of this Agreement. Borrower shall cause
all Cap Receipts to be paid directly to the Cash Management Account. Except as
expressly provided herein, Borrower shall, and shall cause Manager to, deposit
any other Collections received by or on behalf of Borrower directly into the
Cash Management Account or a Rent Deposit Account within three (3) Business Days
following receipt thereof.

(e) Lender may also establish subaccounts of the Cash Management Account which
shall at all times be Eligible Accounts (and may be ledger or book entry
accounts and not actual accounts) (such subaccounts are referred to herein as
“Subaccounts”). The Reserve Funds will be maintained in Subaccounts.

 

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(f) The Cash Management Account and all other Subaccounts shall be subject to
the Blocked Account Control Agreement and shall be under the sole control and
dominion of Lender or Servicer on behalf of Lender. Neither Borrower nor Manager
shall have the right of withdrawal with respect to the Cash Management Account
or any Subaccounts except with the prior written consent of Lender, and neither
Borrower, Manager, nor any Person claiming on or behalf of or through Borrower
or Manager shall have any right or authority to give instructions with respect
to the Cash Management Account or the Subaccounts.

(g) Borrower acknowledges and agrees that Cash Management Account Bank shall
comply with (i) the instructions originated by Lender with respect to the
disposition of funds in the Cash Management Account and the Subaccounts without
the further consent of Borrower or Manager or any other Person and (ii) all
“entitlement orders” (as defined in Section 8-102(a)(8) of the UCC) and
instructions originated by Lender directing the transfer or redemption of any
financial asset relating to the Cash Management Account or any Subaccount
without further consent by Borrower or any other Person. The Cash Management
Account and each Subaccount is and shall be treated either as a “securities
account”, as such term is defined in Section 8-501(a) of the UCC, or a “deposit
account”, as defined in Section 9-102(a)(29) of the UCC.

(h) During the Term, Borrower shall not and shall cause Manager not to deposit
Rents or other Collections into any account other than a Rent Deposit Account or
the Cash Management Account.

2.6.3 Order of Priority of Funds in Cash Management Account. Unless otherwise
directed by Lender during the continuance of an Event of Default pursuant to
Section 2.6.4, on each Payment Date during the Term, Collections on deposit in
the Cash Management Account (less any fees and expenses of the Cash Management
Account Bank then due and payable) on such day shall be applied on such Payment
Date in the following order of priority:

(a) first, to the applicable Security Deposit Account, the amount of any
security deposits that have been deposited into the Cash Management Account by
Borrower during the calendar month ending immediately prior to such Payment
Date, as set forth in a written notice from Borrower to Lender delivered
pursuant to Section 4.3.9;

(b) second, to Lender the amount of any mandatory prepayment of the Outstanding
Principal Balance pursuant to Sections 2.4.2 then due and payable and all other
amounts payable in connection therewith, such amounts to be applied in the
manner set forth in Section 2.4.4(d);

(c) third, to the Tax Subaccount, to make the required payments of Tax Funds as
required under Section 6.1;

(d) fourth, to the Insurance Subaccount, to make any required payments of
Insurance Funds as required under Section 6.2;

(e) fifth, to Lender, funds sufficient to pay the Monthly Debt Service Payment
Amount, applied (i) first, to the payment of interest then due and payable on
Component A, (ii) second, to the payment of interest then due and payable on
Component B, (iii) third, to the payment of interest then due and payable on
Component C, (iv) fourth, to the payment of interest then due and payable on
Component D, (v) fifth, to the payment of interest then due and payable on
Component E, (vi) sixth, to the payment of interest then due and payable on
Component F, and (vii) seventh, to the payment of interest then due and payable
on Component G;

 

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(f) sixth, to Manager, (i) management fees payable for the calendar month ending
immediately prior to such Payment Date, but not in excess of the Management Fee
Cap for such calendar month and (ii) leasing commissions payable for the
calendar month ending immediately prior to such Payment Date to Manager,
including in respect of leasing commissions payable by Manager to third-party
property managers pursuant to sub-management agreements;

(g) seventh, to the Capital Expenditure Subaccount, to make the required
payments of Capital Expenditure Funds as required under Section 6.3;

(h) eighth, to Lender, any other fees, costs, expenses (including Trust Fund
Expenses) or indemnities then due or payable under this Agreement or any other
Loan Document;

(i) ninth, all amounts remaining after payment of the amounts set forth in
clauses (a) through (h) above (the “Available Cash”) either:

(i) if as of a Payment Date no Cash Sweep Period is continuing, any remaining
amounts to Borrower’s Operating Account; and

(ii) if as of a Payment Date a Cash Sweep Period is continuing:

(A) first, to Borrower’s Operating Account, funds in an amount equal to the
Monthly Budgeted Amount;

(B) second, to Borrower’s Operating Account, payments for Approved Extraordinary
Expenses, if any; and

(C) third, to the Cash Collateral Subaccount to be held or disbursed in
accordance with Section 6.6.

2.6.4 Application During Event of Default. Notwithstanding anything to the
contrary contained herein (including Section 2.6.3), upon the occurrence and
during the continuance of an Event of Default, Lender, at its option, may apply
any Collections then in the possession of Lender, Servicer or the Cash
Management Account Bank (including any Reserve Funds on deposit in the
Subaccounts) or the Rent Deposit Banks to the payment of the Debt in such order,
proportion and priority as Lender may determine in its sole and absolute
discretion. Lender’s right to withdraw and apply any of the foregoing funds
shall be in addition to all other rights and remedies provided to Lender under
the Loan Documents.

2.6.5 Payments Received in the Cash Management Account. Notwithstanding anything
to the contrary contained in this Agreement or the other Loan Documents, and
provided no Event of Default has occurred and is continuing, Borrower’s
obligations with respect to the payment of the Monthly Debt Service Payment
Amount and amounts required to be deposited into the Reserve Funds, if any,
shall be deemed satisfied to the extent sufficient amounts are deposited in the
Cash Management Account to satisfy such obligations pursuant to this Agreement
on the dates each such payment is required, regardless of whether any of such
amounts are so applied by Lender.

 

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Section 2.7 Withholding Taxes.

(a) Payments Free of Taxes. Any and all payments by or on account of any
obligation of the Borrower under any Loan Document shall be made without
deduction or withholding for any Taxes, except as required by applicable law. If
any applicable law (as determined in the good faith discretion of the Borrower)
requires the deduction or withholding of any Tax from any such payment by the
Borrower, then the Borrower shall be entitled to make such deduction or
withholding and shall timely pay the full amount deducted or withheld to the
relevant Governmental Authority in accordance with applicable law and, if such
Tax is an Indemnified Tax, then the sum payable by the Borrower shall be
increased as necessary so that after such deduction or withholding has been made
(including such deductions and withholdings applicable to additional sums
payable under this Section 2.7(a)) the Lender receives an amount equal to the
sum it would have received had no such deduction or withholding been made.

(b) Payment of Other Taxes by the Borrower. The Borrower shall timely pay to the
relevant Governmental Authority in accordance with applicable law any Other
Taxes.

(c) Indemnification by the Borrower. The Borrower shall indemnify Lender, within
10 days after demand therefor, for the full amount of any Indemnified Taxes
(including Indemnified Taxes imposed or asserted on or attributable to amounts
payable under this Section) payable or paid by such Lender or required to be
withheld or deducted from a payment to such Lender and any reasonable
out-of-pocket expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount of such payment
or liability delivered to the Borrower by a Lender shall be conclusive absent
manifest error.

(d) Evidence of Payments. As soon as practicable after any payment of Taxes by
the Borrower to a Governmental Authority pursuant to this Section 2.7, the
Borrower shall deliver to the Lender the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such payment reasonably
satisfactory to the Lender.

(e) Status of Lenders. (i) Any Lender that is entitled to an exemption from or
reduction of withholding Tax with respect to payments made under any Loan
Document shall deliver to the Borrower, at the time or times reasonably
requested by the Borrower, such properly completed and executed documentation
reasonably requested by the Borrower as will permit such payments to be made
without withholding or at a reduced rate of withholding. In addition, any
Lender, if reasonably requested by the Borrower, shall deliver such other
documentation prescribed by applicable law or reasonably requested by the
Borrower as will enable the Borrower to determine whether or not such Lender is
subject to backup withholding or information reporting requirements.
Notwithstanding anything to the contrary in the preceding two sentences, the
completion, execution and submission of such documentation (other than such
documentation set forth in Section 2.7(e)(ii)(A), (ii)(B) and (ii)(D)) shall not
be required if in the Lender’s reasonable judgment such completion, execution or
submission would subject such Lender to any material unreimbursed cost or
expense or would materially prejudice the legal or commercial position of such
Lender.

 

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(ii) Without limiting the generality of the foregoing,

(A) any Lender that is a U.S. Person shall deliver to the Borrower on or prior
to the date on which such Lender becomes a Lender under this Agreement (and from
time to time thereafter upon the reasonable request of the Borrower), executed
originals of IRS Form W-9 certifying that such Lender is exempt from U.S.
federal backup withholding tax;

(B) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to the Borrower (in such number of copies as shall be requested by the
recipient) on or prior to the date on which such Foreign Lender becomes a Lender
under this Agreement (and from time to time thereafter upon the reasonable
request of the Borrower), whichever of the following is applicable:

(1) in the case of a Foreign Lender that is an entity and is claiming the
benefits of an income tax treaty to which the United States is a party (x) with
respect to payments of interest under any Loan Document, executed originals of
IRS Form W-8BEN-E establishing an exemption from, or reduction of, U.S. federal
withholding Tax pursuant to the “interest” article of such tax treaty and
(y) with respect to any other applicable payments under any Loan Document, IRS
Form W-8BEN-E establishing an exemption from, or reduction of, U.S. federal
withholding Tax pursuant to the “business profits” or “other income” article of
such tax treaty and in the case of a Foreign Lender that is an individual and is
claiming the benefits of an income tax treaty to which the United States is a
party (x) with respect to payments of interest under any Loan Document, executed
originals of IRS Form W-8BEN establishing an exemption from, or reduction of,
U.S. federal withholding Tax pursuant to the “interest” article of such tax
treaty and (y) with respect to any other applicable payments under any Loan
Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S.
federal withholding Tax pursuant to the “business profits” or “other income”
article of such tax treaty;

(2) executed originals of IRS Form W-8ECI;

(3) in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the Code, (x) a certificate to the
effect that such Foreign Lender is not a “bank” within the meaning of
Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower
within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign
corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax
Compliance Certificate”) and (y) executed originals of IRS Form W-8BEN-E (in the
case of an entity) or IRS Form W-8BEN (in the case of an individual); or

 

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(4) to the extent a Foreign Lender is a partnership or is not the beneficial
owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI,
IRS Form W-8BEN, IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate,
reasonably satisfactory to Borrower, IRS Form W-9, and/or other certification
documents from each beneficial owner, as applicable; provided, that if the
Foreign Lender is a partnership and one or more direct or indirect partners of
such Foreign Lender are claiming the portfolio interest exemption, such Foreign
Lender may provide a U.S. Tax Compliance Certificate, reasonably satisfactory to
Borrower, on behalf of each such direct and indirect partner;

(C) any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to the Borrower (in such number of copies as shall be requested by the
recipient) on or prior to the date on which such Foreign Lender becomes a Lender
under this Agreement (and from time to time thereafter upon the reasonable
request of the Borrower), executed originals of any other form prescribed by
applicable law as a basis for claiming exemption from or a reduction in U.S.
federal withholding Tax, duly completed, together with such supplementary
documentation as may be prescribed by applicable law to permit the Borrower to
determine the withholding or deduction required to be made; and

(D) if a payment made to a Lender under any Loan Document would be subject to
U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender
shall deliver to the Borrower at the time or times prescribed by law and at such
time or times reasonably requested by the Borrower such documentation prescribed
by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the
Code) and such additional documentation reasonably requested by the Borrower as
may be necessary for the Borrower to comply with their obligations under FATCA
and to determine that such Lender has complied with such Lender’s obligations
under FATCA or to determine the amount to deduct and withhold from such payment.
Solely for purposes of this clause (D), “FATCA” shall include any amendments
made to FATCA after the date of this Agreement.

Each Lender agrees that the Borrower shall be entitled to rely on any
documentation or certification delivered pursuant to this Section 2.7(e) as
being accurate and complete. Without limiting the foregoing, each Lender agrees
that if any form or certification it previously delivered expires or becomes
obsolete or inaccurate in any respect, it shall update such form or
certification or promptly notify the Borrower in writing of its legal inability
to do so.

(f) Treatment of Certain Refunds. If any party determines, in its sole
discretion exercised in good faith, that it has received a refund of any Taxes
as to which it has been indemnified pursuant to this Section 2.7 (including by
the payment of additional amounts pursuant to this Section 2.7), it shall pay to
the indemnifying party an amount equal to such refund (but only to the extent of
indemnity payments made under this Section with respect to the

 

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Taxes giving rise to such refund), net of all out-of-pocket expenses (including
Taxes) of such indemnified party and without interest (other than any interest
paid by the relevant Governmental Authority with respect to such refund). Such
indemnifying party, upon the request of such indemnified party, shall repay to
such indemnified party the amount paid over pursuant to this Section 2.7(f)
(plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) in the event that such indemnified party is required to
repay such refund to such Governmental Authority. Notwithstanding anything to
the contrary in this Section 2.7(f), in no event will the indemnified party be
required to pay any amount to an indemnifying party pursuant to this
Section 2.7(f) the payment of which would place the indemnified party in a less
favorable net after-tax position than the indemnified party would have been in
if the indemnification payments or additional amounts giving rise to such refund
had never been paid. This Section 2.7(f) shall not be construed to require any
indemnified party to make available its tax returns (or any other information
relating to its Taxes that it deems confidential) to the indemnifying party or
any other Person.

(g) Survival. Each party’s obligations under this Section 2.7 shall survive any
assignment of rights by, or the replacement of, a Lender and the repayment,
satisfaction or discharge of all obligations under any Loan Document.

Section 2.8 Extension of the Initial Maturity Date. Borrower shall have the
option to extend the term of the Loan beyond the Initial Maturity Date of the
Loan for three (3) successive terms (each such option, an “Extension Option” and
each such successive term, an “Extension Term”) of one (1) year each (the
Maturity Date following the exercise of each such option is hereinafter the
“Extended Maturity Date”) upon satisfaction of the following terms and
conditions:

(a) no Event of Default shall have occurred and be continuing on the Initial
Maturity Date or the then-current Extended Maturity Date (as applicable);

(b) Borrower shall provide Lender with written notice of its election to extend
the Maturity Date as aforesaid not later than twenty (20) days and not earlier
than one hundred twenty (120) days prior to the date the Loan is then scheduled
to mature. Borrower shall have the right to revoke any notice of its election to
extend the Maturity Date by giving written notice to Lender not less than five
(5) Business Days prior to the Initial Maturity Date or the then-current
Extended Maturity Date, as applicable (provided that Borrower shall pay all
actual out-of-pocket costs and expenses of Lender incurred in reliance upon the
expected extension of the term of the Loan, including any Breakage Costs);

(c) Borrower shall obtain and deliver to Lender on the first day of the
applicable Extension Term, one or more Replacement Interest Rate Cap Agreements
in form substantially identical to the Interest Rate Cap Agreements delivered to
Lender in connection with the closing of the Loan or otherwise in a form which
is reasonably acceptable to the Lender, from an Acceptable Counterparty in a
notional amount equal to the aggregate Component Outstanding Balances of the
Floating Rate Components, which Interest Rate Cap Agreement shall be effective
commencing on the first date of such Extension Term and shall have a scheduled
term that expires not earlier than the last day of the Interest Period in which
the applicable Extended Maturity Date is scheduled to occur after giving effect
to the option then being exercised;

 

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(d) Borrower shall deliver a Counterparty Opinion with respect to the
Replacement Interest Rate Cap Agreement and the related Acknowledgment and shall
deliver to Lender an executed Collateral Assignment of Interest Rate Cap
Agreement;

(e) All amounts due and payable by Borrower and any other Person pursuant to
this Agreement or the other Loan Documents as of the Initial Maturity Date or
the then-current Extended Maturity Date (as applicable), and all reasonable,
out-of-pocket costs and expenses of Lender, including fees and expenses of
Lender’s counsel, in connection with the Loan and/or the applicable extension of
the Term shall have been paid in full; and

(f) Borrower shall have delivered to Lender together with its notice pursuant to
Section 2.8(b) and at Lender’s reasonable request, on the commencement date of
the applicable Extension Option, an Officer’s Certificate in form reasonably
acceptable to the Lender certifying that each of the representations and
warranties of Borrower contained in the Loan Documents is true, complete and
correct in all material respects as of the giving of the notice to the extent
such representations and warranties are not matters which by their nature can no
longer be true and correct as a result of the passage of time.

ARTICLE III - REPRESENTATIONS AND WARRANTIES

Section 3.1 General Representations. Borrower represents and warrants to Lender
as of the Closing Date that, except to the extent (if any) disclosed on Schedule
III with reference to a specific subsection of this Section 3.1:

3.1.1 Organization. Each Loan Party has been duly organized and is validly
existing with requisite power and authority to own its properties and to
transact the businesses in which it is now engaged. Each Loan Party is duly
qualified to do business and in good standing in each jurisdiction where it is
required to be so qualified in connection with its properties, businesses and
operations, except to the extent that failure to do so would not reasonably be
expected to have a Material Adverse Effect. Each Loan Party possesses all
rights, licenses, permits and authorizations, governmental or otherwise,
necessary to entitle it to own its properties and to transact the businesses in
which it is now engaged, except to the extent that failure to do so could not in
the aggregate reasonably be expected to have a Material Adverse Effect. The sole
business of Borrower is the acquisition, ownership, maintenance, sale, transfer,
refinancing, management, leasing and operation of the Properties; and the sole
business of Equity Owner is acting as the sole member of Borrower, including,
providing the Equity Owner Guaranty and the Equity Owner Security Agreement.
Each Loan Party is a Special Purpose Entity.

3.1.2 Proceedings. Each Loan Party has taken all necessary action to authorize
the execution, delivery and performance of this Agreement and each of the other
Loan Documents to which it is a party. This Agreement and the other Loan
Documents have been duly authorized, executed and delivered by or on behalf of
each Loan Party party thereto and constitute legal, valid and binding
obligations of each Loan Party party thereto, enforceable against each such Loan
Party party thereto in accordance with their respective terms, subject only to
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the rights of creditors generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law). The Loan Documents
are not

 

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subject to any right of rescission, set-off, counterclaim or defense by any Loan
Party 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, and no Loan Party has asserted any right of
rescission, set-off, counterclaim or defense with respect thereto.

3.1.3 No Conflicts. The execution, delivery and performance of this Agreement
and the other Loan Documents by each Loan Party party thereto (i) will not
contravene such Loan Party’s organizational documents, (ii) will not result in
any violation of the provisions of any Legal Requirement of any Governmental
Authority having jurisdiction over any Loan Party or any of each Loan Party’s
properties or assets, (iii) with respect to each Loan Party, will not conflict
with or result in a breach of any of the terms or provisions of, or constitute a
default under the terms of any indenture, mortgage, deed of trust, deed to
secure debt, loan agreement, management agreement or other agreement or
instrument to which such Loan Party is a party or to, which any of such Loan
Party’s property or assets is subject, that would be reasonably expected to have
a Material Adverse Effect and (iv) with respect to each Loan Party, except for
Liens created under the Loan Documents, result in or require the creation or
imposition of any Lien upon or with respect to any of the assets of such Loan
Party.

3.1.4 Litigation. There are no actions, suits or proceedings at law or in equity
by or before any Governmental Authority or other entity now pending or, to the
actual knowledge of a Responsible Officer of Manager or any Loan Party,
threatened in writing, against or affecting any Loan Party or Manager, as
applicable, which actions, suits or proceedings (i) involve the Loan Documents
or the transactions contemplated thereby or (ii) if adversely determined, would
reasonably be expected to have a Material Adverse Effect. There are no actions,
suits or proceedings at law or in equity by or before any Governmental Authority
or other entity that resulted in a judgment against any Loan Party that has not
been paid in full that would otherwise constitute an Event of Default.

3.1.5 Agreements. No Loan Party is a party to any agreement or instrument or
subject to any restriction which would reasonably be expected to have a Material
Adverse Effect. No Loan Party is in default 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 which default would be expected
to have a Material Adverse Effect. Other than the Loan Documents, no Loan Party
has a material financial obligation (contingent or otherwise) under any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which any Loan Party is a party other than, with respect to
Borrower, the Management Agreement.

3.1.6 Consents. No consent, approval, authorization or order of any court or
Governmental Authority is required for the execution, delivery and performance
by any Loan Party of, or compliance by any Loan Party with, this Agreement or
the other Loan Documents or the consummation of the transactions contemplated
hereby and thereby, other than those which have been obtained by the applicable
Loan Party.

3.1.7 Solvency. No Loan Party has entered into the transaction contemplated by
this Agreement nor executed any Loan Document with the actual intent to hinder,
delay or defraud any creditor and each Loan Party has received reasonably
equivalent value in exchange for its obligations under the Loan Documents. After
giving effect to the Loans, each Loan Party is

 

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Solvent. No petition in bankruptcy has been filed against any Loan Party in the
last seven (7) years, and no Loan Party in the last seven (7) years has made an
assignment for the benefit of creditors or taken advantage of any insolvency act
for the benefit of debtors. No Loan Party is contemplating either the filing of
a petition by it under any state or federal bankruptcy or insolvency laws or the
liquidation of all or a major portion of such Person’s assets or property, and
to the actual knowledge of any Loan Party, no Person is contemplating the filing
of any such petition against any Loan Party.

3.1.8 Other Debt. No Loan Party has any Indebtedness other than, with respect to
Borrower, Permitted Indebtedness, and with respect to Equity Owner, Equity Owner
Permitted Indebtedness.

3.1.9 Employee Benefit Matters.

(a) Assuming no portion of the assets used by Lender to fund the Loan
constitutes the assets of an ERISA Plan, the assets of each Loan Party do not
constitute “plan assets” of (a) any “employee benefit plan” (as defined in
Section 3(3) of ERISA) that is subject to Title I of ERISA, (b) any “plan” (as
defined in Section 4975 of the Code) that is subject to Section 4975 of the Code
or (c) any employee benefit plan or plan that is not subject to Title I of ERISA
or Section 4975 of the Code but is subject to any law, rule or regulation
applicable to such Loan Party which is substantially similar to the prohibited
transaction provisions of Section 406 of ERISA or Section 4975 of the Code (each
of (a), (b) and (c), an “ERISA Plan”) with the result that the transactions
contemplated by this Agreement, including, but not limited to, the exercise by
Lender of any rights under the Loan Documents will constitute a non-exempt
prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Code. No Loan Party or any of its ERISA Affiliates sponsors,
maintains or contributes to any Plans or Foreign Plans. No Loan Party has any
employees.

(b) Each Plan (and each related trust, insurance contract or fund) is in
compliance in all material respects with its terms and with all applicable laws,
including without limitation ERISA and the Code. Each Plan that is intended to
be qualified under Section 401(a) of the Code as currently in effect has been
determined by the IRS to be so qualified, and each trust related to any such
Plan has been determined to be exempt from federal income tax under
Section 501(a) of the Code as currently in effect, and no event has taken place
which could reasonably be expected to cause the loss of such qualified status
and exempt status. With respect to each Plan of a Loan Party, each Loan Party
and all of its ERISA Affiliates have satisfied the minimum funding standard
under Section 412(a) of the Code and Section 302(a) of ERISA and paid all
required minimum contributions and all required installments on or before the
due dates under Section 430(j) of the Code and Section 303(j) of ERISA. No Loan
Party nor any of its ERISA Affiliates has filed, pursuant to Section 412(c) of
the Code or Section 302(c) of ERISA, an application for a waiver of the minimum
funding standard. No Loan Party nor any of its ERISA Affiliates has incurred any
liability to the PBGC which remains outstanding other than the payment of
premiums, and there are no premium payments which have become due which are
unpaid. No Plan is in “at risk” status within the meaning of Section 430(i) of
the Code or Section 303(j) of ERISA. There are no existing, pending or
threatened in writing claims (other than routine claims for benefits in the
normal course), sanctions, actions, lawsuits or other proceedings or
investigation involving any Plan to which any Loan Party or any of its ERISA

 

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Affiliates has incurred or otherwise has or could have an obligation or any
liability. With respect to each Multiemployer Plan to which any Loan Party or
any of its ERISA Affiliates is required to make a contribution, each Loan Party
and all of its ERISA Affiliates have satisfied all required contributions and
installments on or before the applicable due dates and have not incurred a
complete or partial withdrawal under Section 4203 or 4205 of ERISA. No Plan
Termination Event has or is reasonably expected to occur.

(c) Each Foreign Plan is in compliance in all material respects with all laws,
regulations and rules applicable thereto and the respective requirements of the
governing documents for such plan. The aggregate of the liabilities to provide
all of the accrued benefits under each Foreign Plan does not exceed the current
fair market value of the assets held in the trust or other funding vehicle for
such plan. There are no actions, suits or claims (other than routine claims for
benefits) pending or, threatened in writing against any Loan Party or any of its
ERISA Affiliates with respect to any Foreign Plan.

3.1.10 Compliance with Legal Requirements. Each Loan Party is in compliance with
all applicable Legal Requirements, except to the extent that any noncompliance
would not reasonably be expected to have a Material Adverse Effect. No Loan
Party is in default or violation of any order, writ, injunction, decree or
demand of any Governmental Authority, except for any default or violation that
would not reasonably be expected to have a Material Adverse Effect.

3.1.11 Financial Information. All financial data that have been delivered to
Lender in connection with the Loan (i) are true, complete and correct in all
material respects (or, to the extent that any such financial data was incorrect
in any material respect when delivered, the same has been corrected by financial
data subsequently delivered to Lender prior to the Closing Date),
(ii) accurately represent the financial condition of the Properties as of the
date of such reports (or, to the extent that any such financial data did not
accurately represent the financial condition of the Properties when delivered,
the same has been corrected by financial data subsequently delivered to Lender
prior to the Closing Date), and (iii) have been prepared in accordance with GAAP
throughout the periods covered, except as disclosed therein. The foregoing
representation shall not apply to any such financial data that constitutes
projections, provided that Borrower represents and warrants that such
projections were made in good faith and that Borrower has no reason to believe
that such projections were materially inaccurate. Borrower does not have any
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable commitments
that are known to Borrower and reasonably likely to have a Material Adverse
Effect, except as referred to or reflected in said financial statements.
Borrower has no liabilities or other obligations that arose or accrued prior to
the Closing Date that would reasonably be expected to have a Material Adverse
Effect. Borrower has no known contingent liabilities.

3.1.12 Insurance. Borrower has obtained and delivered to Lender certificates
evidencing the Policies required to be maintained under Section 5.1.1. All such
Policies are in full force and effect, with all premiums prepaid thereunder. No
claims have been made that are currently pending, outstanding or otherwise
remain unsatisfied under any such Policies that would reasonably be expected to
have a Material Adverse Effect. With respect to any insurance policy, neither
Borrower nor, to Borrower’s or Manager’s knowledge, any other Person, has done,
by act or omission, anything which would impair the coverage of any of the
Policies in any material respect.

 

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3.1.13 Tax Filings. Each Loan Party has filed, or caused to be filed, on a
timely basis all Tax returns (including, without limitation, all foreign,
federal, state, local and other Tax returns) required to be filed by it, if any,
is not liable for Non-Property Taxes payable by any other Person and has paid or
made adequate provisions for the payment of all Non-Property Taxes (to the
extent such Taxes, assessment and other governmental charges exceed $100,000 in
the aggregate) payable by such Loan Party except as permitted by Section 4.1.4
or 4.4.5. All material recording or other similar taxes required to be paid by
any Loan Party under applicable Legal Requirements currently in effect in
connection with the execution, delivery, recordation, filing, registration,
perfection or enforcement of any of the Loan Documents have been paid.

3.1.14 Certificate of Compliance; Licenses. All certifications, permits,
licenses and approvals, including without limitation, certificates of completion
and occupancy, required of Borrower for the legal use, occupancy and operation
of each Property have been obtained and are in full force and effect, except as
would not reasonably be expected to have a Material Adverse Effect. The use
being made of each Property is in conformity with the certificate of occupancy
issued for such Property, if any.

3.1.15 Special Purpose Entity/Separateness.

(a) Since its formation, no Loan Party has conducted any business other than
entering into and performing its obligations under the Loan Documents to which
it is a party and as described in the definition of Special Purpose Entity
herein. As of the Closing Date, no Loan Party owns or holds, directly or
indirectly (i) any capital stock or equity security of, or any equity interest
in, any Person other than a Loan Party or (ii) any debt security or other
evidence of indebtedness of any Person, except for Permitted Investments and as
otherwise contemplated by the Loan Documents. As of the Closing Date, Borrower
does not have any subsidiaries.

(b) Any and all of the stated facts and assumptions made in the Insolvency
Opinion, including, but not limited to, any exhibits attached thereto, will have
been and shall be true and correct in all respects, and each Loan Party will
have complied and will comply in all material respects, with all of the stated
facts and assumptions made with respect to it in the Insolvency Opinion. Each
entity other than a Loan Party with respect to which an assumption is made or a
fact stated in any Insolvency Opinion will have complied and will comply, in all
material respects, with all of the assumptions made and facts stated with
respect to it in the Insolvency Opinion. Borrower covenants that in connection
with any Additional Insolvency Opinion delivered in connection with this
Agreement it shall provide an updated certification regarding compliance with
the facts and assumptions made therein, which certificate shall be substantially
similar to the representations made in this Section 3.1.15(b).

(c) Borrower covenants and agrees that Borrower shall provide Lender with
thirty (30) days’ prior written notice prior to the removal of an Independent
Director of any Loan Party.

 

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3.1.16 Management. The ownership, leasing, management and collection practices
used by each Loan Party and Manager with respect to the Properties have been in
compliance with all applicable Legal Requirements, and all necessary licenses,
permits and regulatory requirements pertaining thereto have been obtained and
remain in full force and effect, except to the extent that failure to obtain
would not reasonably be expected to have a Material Adverse Effect. The
Management Agreement is in full force and effect and there is no default
thereunder by any party thereto and no event has occurred that, with the passage
of time and/or the giving of notice would constitute a default thereunder.

3.1.17 Illegal Activity. None of the Properties has been or will be purchased
with proceeds of any illegal activity.

3.1.18 No Change in Facts or Circumstances; Disclosure. All information,
reports, financial statements, exhibits and schedules furnished in writing by or
on behalf of each Loan Party to Lender in connection with the negotiation,
preparation or delivery of this Agreement and the other Loan Documents or
included herein or therein or delivered pursuant hereto or thereto (but
excluding any projections, forward looking statements, budgets, estimates and
general market data as to which each Loan Party only represents and warrants
that such information was prepared in good faith based upon assumptions believed
by it to be reasonable at the time), when taken as a whole, as of the date
furnished, do not contain any untrue statement of material fact or omit to state
any material fact necessary to make the statements herein or therein, in light
of the circumstances under which they were made, not materially misleading.
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 does or might
result in a Material Adverse Effect.

3.1.19 Investment Company Act. No Loan Party is (a) an “investment company” or a
company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended; or (b) subject to any other federal
or state law or regulation which purports to restrict or regulate its ability to
borrow money.

3.1.20 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
(“Margin Stock”) 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 in any material respects or by the
terms and conditions of this Agreement or the other Loan Documents. None of the
Collateral is comprised of Margin Stock and less than 25% of the assets of each
Loan Party are comprised of Margin Stock.

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

3.1.22 FIRPTA. No Loan Party is a “foreign person” within the meaning of
Section 1445(f)(3) of the Code.

 

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3.1.23 Contracts.

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

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

(c) Borrower has delivered copies of the Major Contracts (including all
amendments and supplements thereto) to Lender that are true, correct and
complete in all material respects.

(d) Except for Manager under the Management Agreement, no Major Contract has as
a party an Affiliate of Borrower. All fees and other compensation for services
previously performed under the Management Agreement have been paid in full.

3.1.24 Embargoed Person.

(a) No Loan Party nor any of its respective officers, directors or members is a
Person (or to Borrower’s knowledge, owned or controlled by a Person): (i) that
is listed on a Government List, (ii) is otherwise subject to the provisions of
Executive Order 13224 issued on September 24, 2001, (iii) has been previously
indicted for or convicted of any felony involving a crime of moral turpitude or
any Patriot Act Offense, or (iv) is currently under investigation by any
Governmental Authority for alleged felony involving a crime of moral turpitude.
For purposes hereof, the term “Patriot Act Offense” means any violation of the
criminal laws of the United States of America or of any of the several states,
or that would be a criminal violation if committed within the jurisdiction of
the United States of America or any of the several states, relating to terrorism
or the laundering of monetary instruments, including any offense under (A) the
criminal laws against terrorism; (B) the criminal laws against money laundering,
(C) the Bank Secrecy Act, as amended, (D) the Money Laundering Control Act of
1986, as amended, or (E) the Patriot Act. “Patriot Act Offense” also includes
the crimes of conspiracy to commit, or aiding and abetting another to commit, a
Patriot Act Offense.

(b) At the time Borrower first entered into a Lease with each Tenant, no such
Tenant was listed on either of the Government Lists described in Section 4.1.21.

3.1.25 Perfection Representations.

(a) The Borrower Security Agreement and the Equity Owner Security Agreement
create valid and continuing security interests (as defined in the applicable
UCC) in the personal property Collateral in favor of Lender, which security
interests are prior to all other Liens arising under the UCC, subject to
Permitted Liens, and are enforceable as such against creditors of each Loan
Party, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors’ rights and
remedies generally, and to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity);

 

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(b) All appropriate financing statements have been filed in the proper filing
office in the appropriate jurisdictions under applicable law in order to perfect
the security interest granted to Lender hereunder in the Collateral that may be
perfected by filing a financing statement.

(c) Other than the security interest granted to Lender pursuant to the Loan
Documents, no Loan Party has pledged, assigned, collaterally assigned, sold,
granted a security interest in, or otherwise conveyed any of the Collateral
except to the extent expressly permitted by the terms hereof. No Loan Party has
authorized the filing of and is not aware of any financing statements against
any Loan Party that include a description of the Collateral other than any
financing statement relating to the security interest granted to Lender
hereunder or that has been terminated.

(d) No instrument or document that constitutes or evidences any Collateral has
any marks or notations indicating that they have been pledged, assigned or
otherwise conveyed to any Person other than Lender.

(e) The grant of the security interest in the Collateral by each Loan Party to
Lender, pursuant to the Borrower Security Agreement and the Equity Owner
Security Agreement is in the ordinary course of business for each Loan Party and
is not subject to the bulk transfer or any similar statutory provisions in
effect in any applicable jurisdiction.

(f) The chief executive office and the location of each Loan Party’s records
regarding the Collateral are listed on Schedule IV. Except as otherwise
disclosed to Lender in writing, each Loan Party’s legal name is as set forth in
this Agreement, each Loan Party has not changed its name since its formation.
Except as otherwise listed on Schedule IV, each Loan Party does not have
tradenames, fictitious names, assumed names or “doing business as” names and
each Loan Party’s federal employer identification number and Delaware
organizational identification number is set forth on Schedule IV.

Section 3.2 Property Representations. Borrower represents and warrants to Lender
with respect to each Property as follows:

3.2.1 Property/Title.

(a) Borrower has good and marketable fee simple legal and equitable title to the
real property comprising the Property, subject to Permitted Liens. The Mortgage
Documents, when properly recorded and/or filed in the appropriate records, will
create (i) a valid, first priority, perfected Lien on Borrower’s interest in the
Property, subject only to the Permitted Liens, and (ii) perfected security
interests in and to, and perfected collateral assignments of, all personalty
(including the Leases), all in accordance with the terms thereof, in each case
subject only to the Permitted Liens. The Permitted Liens with respect to the
Property, in the aggregate, do not have a material adverse effect on the
profitability, value, use or operation of the Property or the enforceability,
validity or perfection of the lien of the applicable Mortgage.

(b) All transfer taxes, deed stamps, intangible taxes or other amounts in the
nature of transfer taxes required to be paid under applicable Legal Requirements
in connection with the transfer of the Property to Borrower have been paid or
are being paid simultaneously herewith. All mortgage, mortgage recording, stamp,
intangible or other similar tax required to be paid

 

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under applicable Legal Requirements in connection with the execution, delivery,
recordation, filing, registration, perfection or enforcement of any of the
Mortgage Documents with respect to such Property, including the Mortgages, have
been paid or are being paid simultaneously herewith. All taxes and governmental
assessments due and owing in respect of the Property have been paid, or an
escrow of funds in an amount sufficient to cover such payments has been
established hereunder or are insured against by the Title Insurance Policy and
the Title Insurance Owner’s Policy for such Property.

(c) Each Property is comprised of one (1) or more parcels which constitute
separate tax lots and do not constitute a portion of any other tax lot not a
part of such Property.

3.2.2 Adverse Claims. Borrower’s ownership of the Property is free and clear of
any Liens other than Permitted Liens.

3.2.3 Title Insurance Owner’s Policy. Borrower has delivered to Lender either
(i) a Title Insurance Owner’s Policy insuring fee simple ownership of such
Property by Borrower in an amount equal to or greater than the initial Allocated
Loan Amount of the Property, issued by a title insurance company reasonably
acceptable to Lender with no title exceptions other than Permitted Liens or
(ii) a marked or initialed binding commitment that is effective as a Title
Insurance Owner’s Policy in respect of such Property in an amount equal to or
greater than the initial Allocated Loan Amount of the Property, issued by a
title insurance company reasonably acceptable to Lender with no title exceptions
other than Permitted Liens, which commitment shall be accompanied by such other
affidavits, transfer declarations and other documents as are necessary for the
recordation of the deed for such Property and issuance of such Title Insurance
Owner’s Policy.

3.2.4 Deed. Borrower has delivered to Lender a copy of a deed for such Property
conveying the Property to Borrower, with vesting in the actual name of Borrower,
and Borrower hereby certifies that such Property’s deed has been recorded or
presented to and accepted for recording by the applicable title insurance
company issuing the related Title Insurance Owner’s Policy or binding commitment
referred to in Section 3.2.3, with all fees, premiums and deed stamps and other
transfer taxes paid.

3.2.5 Mortgage File Required Documents. Borrower has delivered to Lender
(a) either (i) certified or file stamped (in each case by the applicable land
registry) original executed Mortgage Documents or (ii) a copy of the Mortgage
Documents in recordable form that have been submitted by the title insurance
company referred to in Section 3.2.3 for recording in the jurisdiction in which
such Property is located (with Lender and Borrower acknowledging that the
Mortgage Documents delivered on the Closing Date consist solely of Mortgages
(which include Assignments of Leases and Rents and fixture filings as a part
thereof), and that no separate Assignments of Leases and Rents or Fixture
Filings are included as part of the Mortgage Documents delivered at the Closing
Date), (b) an opinion of counsel admitted to practice in the state in which such
Property is located in form and substance reasonably satisfactory to Lender in
respect of the enforceability of such Mortgage Documents and an opinion of
counsel in form and substance reasonably satisfactory to Lender stating that the
Mortgage Documents were duly authorized, executed and delivered by Borrower and
that the execution and delivery of such Mortgage Loan Documents and the
performance by Borrower of its obligations thereunder will

 

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not cause a breach of, or a default under, any agreement, document or instrument
to which Borrower is a party or to which it or such Property is bound,
(c) either (x) a Title Insurance Policy insuring the Lien of the Mortgage
encumbering such Property, or (y) a marked or initialed binding commitment that
is effective as a Title Insurance Policy in respect of such Property, in each
case, issued by the title insurance company referred to in Section 3.2.3 with no
title exceptions other than Permitted Liens, which commitment shall be
accompanied by such other affidavits, transfer declarations and other documents
specified in such commitment as necessary for the issuance of such Title
Insurance Policy, and (d) evidence that all taxes, fees and other charges
payable in connection therewith have been paid in full or delivered to escrow.

3.2.6 Property Taxes and Other Charges. There are no delinquent Property Taxes
or Other Charges outstanding with respect to the Property, other than Property
Taxes or Other Charges that may exist in accordance with Section 4.4.5. As of
the Closing Date, there are no pending or, to Borrower’s or Manager’s knowledge,
proposed, special or other assessments for homeowner’s association improvements
affecting the Property that would reasonably be expected to have an Individual
Material Adverse Effect with respect to the Property.

3.2.7 Compliance with Renovation Standards. With respect to each Property then
subject to a Lease and each Vacant Property previously subject to a Lease, at
the commencement of such Lease, such Property satisfied the Renovation Standards
and all renovations thereto have been conducted in accordance with applicable
Legal Requirements, in all material respects.

3.2.8 Condemnation; Physical Condition. The Property has not been condemned in
whole or in part. No proceeding is pending or, to the knowledge of Manager or
Borrower, threatened in writing for the condemnation of the Property. With
respect to each Property then subject to a Lease and each Vacant Property
previously subject to a Lease, at the commencement of such Lease, such Property
was (and to Borrower’s knowledge continues to be) in a good, safe and habitable
condition and repair, and free of and clear of any damage or waste that has an
Individual Material Adverse Effect on the Property.

3.2.9 Brokers. There is no commission or other compensation payable to any
broker or finder in connection with the purchase of the Property by Borrower or
its Affiliate that has not been paid.

3.2.10 Leasing. As of the Property Cut-Off Date, unless such Property is a
Vacant Property, or, in case of any Substitute Property, as of the date such
Property becomes a Substitute Property, the Property was leased by Borrower to
an Eligible Tenant pursuant to an Eligible Lease and such Lease was in full
force and effect and was not in default in any material respect. No Person
(other than the Borrower) has any possessory interest in the Property or right
to occupy the same except any Tenant under and pursuant to the provisions of the
applicable Lease and any Person claiming rights through any such Tenant. If such
Property is a Vacant Property, the Property was previously subject to an
Eligible Lease. With respect to each Property that is then subject to a Lease,
the copy of the Lease for such Property delivered to Lender is true and complete
in all material respects, there are no material oral agreements with respect
thereto. Except as set forth on Schedule III, as of the Closing Date, no Rent
(including security deposits) has been paid more than thirty (30) days in
advance of its due date and all amounts set forth on Schedule III have been
delivered to the Advance Rent Subaccount on or

 

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before the Closing Date. As of the Closing Date, any payments, free rent,
partial rent, rebate of rent or other payments, credits, allowances or
abatements required to be given by Borrower to the relevant Tenant has already
been provided to such Tenant.

3.2.11 Insurance. The Property is covered by property, casualty, liability,
business interruption, windstorm, flood, earthquake and other applicable
insurance policies as and to the extent, and in compliance with the applicable
requirements of Section 5.1.1 and neither Borrower nor Manager has taken (or
omitted to take) any action that would impair or invalidate the coverage
provided by any such policies. As of the Closing Date, no claims have been made
that are currently pending, outstanding or otherwise remain unsatisfied under
any such policies and would reasonably be expected to have an Individual
Material Adverse Effect with respect to the Property.

3.2.12 Lawsuits, Etc. As of the Closing Date, there are no actions, suits or
proceedings at law or in equity by or before any Governmental Authority or other
entity pending or to the actual knowledge of Borrower or Manager, threatened in
writing against or affecting the Property, which actions, suits or proceedings
would reasonably be expected to have an Individual Material Adverse Effect on
such Property.

3.2.13 Orders, Injunctions, Etc. There are no orders, injunctions, decrees or
judgments outstanding with respect to the Property that would reasonably be
expected to have an Individual Material Adverse Effect on such Property.

3.2.14 Agreements Relating to the Properties. Borrower is not a party to any
agreement or instrument or subject to any restriction which would reasonably be
expected to have an Individual Material Adverse Effect on such Property.
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 the Property is bound. Except
for the Management Agreement, Borrower does not have a material financial
obligation under any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument by which the Property is bound, other than obligations
under the Loan Documents. Borrower is not in default in any material respect in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any Permitted Lien with respect to any Property.
Neither the Property nor any part thereof are subject to any purchase options,
rights of first refusal, rights of first offer or other similar rights in favor
of any Tenant or other third parties.

3.2.15 Accuracy of Information Regarding Property. All information with respect
to the Property included in the Properties Schedule is true, complete and
accurate in all material respects. None of the Properties consist of housing
cooperatives, manufactured housing, condominiums, duplexes or townhomes.

3.2.16 Compliance with Legal Requirements. The Property (including the leasing
and intended use thereof) complies with all applicable Legal Requirements,
including, without limitation, building and zoning ordinances and codes and all
certifications, permits, licenses and approvals, including without limitation,
certificates of completion and occupancy permits, required for the legal
leasing, use, occupancy, habitability and operation of such Property, except

 

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as would not reasonably be expected to have an Individual Material Adverse
Effect with respect to the Property. There is no consent, approval, permit,
license, order or authorization of, and no filing with or notice to, any court
or Governmental Authority related to the operation, use or leasing of the
Property that has not been obtained, except as would not reasonably be expected
to have an Individual Material Adverse Effect with respect to the Property.
There has not been committed by Borrower or by any other Person in occupancy of
or involved with the operation, use or leasing of the Property any act or
omission affording any Governmental Authority the right of forfeiture as against
the Property or any part thereof.

3.2.17 Utilities and Public Access. The Property has rights of access to public
ways and is served by water, sewer or septic system, and storm drain facilities
adequate to service the Property for its intended uses and all public utilities
necessary or convenient to the full use and enjoyment of the Property are
located either in the public right-of-way abutting the Property (which are
connected so as to serve the Property without passing over other property) or in
recorded easements serving the Property and such easements are set forth in and
insured by the applicable Title Insurance Owner’s Policy and Title Insurance
Policy and all roads necessary for the use of the Property for its intended
purposes have been completed and dedicated to public use and accepted by all
Governmental Authorities, except as would not reasonably be expected to have an
Individual Material Adverse Effect with respect to the Property.

3.2.18 Eminent Domain. As of the Closing Date, there is no proceeding pending
or, to Borrower’s or Manager’s knowledge, threatened in writing, for the total
or partial condemnation or taking of the Property by eminent domain or for the
relocation of roadways resulting in a failure of access to the Property on
public roads.

3.2.19 Flood Zone. The Property is not located in an area identified by the
Federal Emergency Management Agency as a special flood hazard area, or, if so
located the flood insurance required pursuant to Section 5.1.1(a) is in full
force and effect with respect to the Property.

3.2.20 Specified Liens. The Property is not subject to any Specified Lien at any
time on or after the first anniversary of the Closing Date.

Section 3.3 Survival of Representations. Borrower agrees that all of the
representations and warranties of Borrower set forth in Article III and
elsewhere in this Agreement and in the other Loan Documents shall survive for so
long as any amount remains owing to Lender under this Agreement or any of the
other Loan Documents by Borrower. All representations, warranties, covenants and
agreements made in this Agreement or in the other Loan Documents by Borrower
shall be deemed to have been relied upon by Lender notwithstanding any
investigation heretofore or hereafter made by Lender or on its behalf.

ARTICLE IV - BORROWER COVENANTS

Section 4.1 Affirmative Covenants. Borrower hereby covenants and agrees with
Lender as follows:

4.1.1 Preservation of Existence. Borrower shall and shall cause each other Loan
Party to (i) observe all procedures required by its organizational documents and
preserve and maintain

 

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its limited liability company, existence, rights, franchises and privileges in
the jurisdiction of its organization, and (ii) qualify and remain qualified in
good standing (where relevant) as a foreign limited liability company in each
other jurisdiction where the nature of its business requires such qualification
and to the extent such concept exists in such jurisdiction except where, in the
case of clause (ii), the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect.

4.1.2 Compliance with Legal Requirements. Except with respect to the Properties
and the use thereof (which is subject to Section 4.4.4), Borrower shall and
shall cause each other Loan Party to do or cause to be done all things necessary
to preserve, renew and keep in full force and effect its rights, licenses and
permits and to comply with all Legal Requirements applicable to it, except to
the extent that the failure to do so would not reasonably be expected to have a
Material Adverse Effect. A Loan Party, at such Loan Party’s 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 a Loan Party or any alleged violation of any Legal
Requirement; provided, that (i) such proceeding shall be permitted under and be
conducted in accordance with the provisions of any instrument to which a Loan
Party is subject and shall not constitute a default thereunder and such
proceeding shall be conducted in accordance with all applicable Legal
Requirements; (ii) no Property nor any part thereof or interest therein will be
in danger of being sold, forfeited, terminated, cancelled or lost; and (iii) the
Loan Party 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, except to the extent that the failure to do so would not
reasonably be expected to have a Material Adverse Effect.

4.1.3 Special Purpose Bankruptcy Remote Entity/Separateness.

(a) Borrower shall and shall cause each other Loan Party to be and continue to
be a Special Purpose Entity.

(b) Borrower shall and shall cause each other Loan Party to comply in all
material respects with all of the stated facts and assumptions made with respect
to the Loan Parties in the Insolvency Opinion and each Additional Insolvency
Opinion. Each entity other than a Loan Party with respect to which an assumption
is made or a fact stated in the Insolvency Opinion or an Additional Insolvency
Opinion will comply in all material respects with all of the assumptions made
and facts stated with respect to it in such Insolvency Opinion or Additional
Insolvency Opinion.

4.1.4 Non-Property Taxes. Borrower shall and shall cause each other Loan Party
to file, cause to be filed or obtain an extension of the time to file, all Tax
returns for Non-Property Taxes and reports required by law to be filed by it and
to promptly pay or cause to be paid all material Non-Property Taxes now or
hereafter levied, assessed or imposed on it as the same become due and payable;
provided, that, after prior written notice to Lender of its intention to contest
any such Non-Property Taxes, such Loan Party may contest by appropriate legal
proceedings conducted in good faith and with due diligence, the amount or
validity of any such Non-Property Taxes and, in such event, may permit the
Non-Property Taxes so contested to remain unpaid during any period, including
appeals, when a Loan Party is in good faith

 

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contesting the same so long as (i) no Event of Default has occurred and remains
uncured, (ii) such proceeding shall be permitted under and be conducted in
accordance with all applicable Legal Requirements, (iii) no Property or other
Collateral nor any part thereof or interest therein will be in danger of being
sold, forfeited, terminated, canceled or lost, (iv) the applicable Loan Party
has set aside on its books adequate reserves in accordance with GAAP, and the
non-payment or non-discharge of such Non-Property Taxes would not reasonably be
expected to have a Material Adverse Effect, (v) enforcement of the contested
Non-Property Taxes is effectively stayed for the entire duration of such contest
and no Lien is imposed on any Property or other Collateral, (vi) any
Non-Property Taxes determined to be due, together with any interest or penalties
thereon, is promptly paid as required after final resolution of such contest,
(vii) to the extent such Non-Property Taxes (when aggregated with all other
Taxes that any Loan Party is then contesting under this Section 4.1.4 or
Section 4.4.5 and for which Borrower has not delivered to Lender any Contest
Security) exceed $1,000,000, Borrower shall deliver to Lender either (A) cash,
or other security as may be approved by Lender, in an amount sufficient to
insure the payment of any such Non-Property Taxes, together with all interest
and penalties thereon or (B) a payment and performance bond in an amount equal
to one hundred percent (100%) of the contested amount from a surety acceptable
to Lender in its reasonable discretion, (viii) failure to pay such Non-Property
Taxes will not subject Lender to any civil or criminal liability, (ix) such
contest shall not affect the ownership, use or occupancy of any Property or
other Collateral, and (x) Borrower shall, upon request by Lender, give Lender
prompt notice of the status of such proceedings and/or confirmation of the
continuing satisfaction of the conditions set forth in clauses (i) through
(ix) of this Section 4.1.4. Notwithstanding the foregoing, Borrower shall and
shall cause each other Loan Party to pay any contested Non-Property Taxes (or,
if cash or other security has been provided, Lender may pay over any such cash
or other security held by Lender to the claimant entitled thereto) if, in the
Lender’s reasonable judgment, any Property or other Collateral (or any part
thereof or interest therein) shall be in danger of being sold, forfeited,
terminated, cancelled or lost or there shall be any danger of the Lien of any
Collateral Document being primed by any related Lien.

4.1.5 Access to the Properties. Subject to the rights of Tenants, Borrower shall
permit agents, representatives and employees of Lender to inspect the Properties
or any part thereof at reasonable hours upon reasonable advance notice, subject
to the limitations set forth in Schedule VI.

4.1.6 Cooperate in Legal Proceedings. Borrower shall cooperate reasonably with
Lender with respect to any proceedings before any court, board or other
Governmental Authority which is reasonably likely to affect the rights of Lender
hereunder or any rights obtained by Lender under any of the other Loan Documents
and, in connection therewith, permit Lender, at its election by written notice,
to participate in any such proceedings.

4.1.7 Perform Loan Documents. Borrower shall and shall cause each other Loan
Party to, in a timely manner, observe, perform and satisfy all the terms,
provisions, covenants and conditions of the Loan Documents executed and
delivered by, or applicable to, the Loan Party, and shall pay when due all
costs, fees and expenses of Lender, to the extent required under the Loan
Documents executed and delivered by, or applicable to, the Loan Party.

 

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4.1.8 Award and Insurance Benefits. Borrower shall cooperate with Lender, in
accordance with the relevant provisions of this Agreement, to enable Lender to
receive the benefits of any Awards or Insurance Proceeds lawfully or equitably
payable in connection with any Property, and Lender shall be reimbursed for any
expenses reasonably incurred in connection therewith (including reasonable
attorneys’ fees and disbursements, and the payment by the Loan Parties of the
reasonable expense of an appraisal on behalf of Lender in case of Casualty or
Condemnation affecting any Property or any part thereof) out of such Insurance
Proceeds.

4.1.9 Further Assurances. Borrower shall and shall cause each other Loan Party
to take all necessary action to establish and maintain, in favor of Lender a
valid and perfected first priority security interest in all Collateral to the
full extent contemplated herein, free and clear of any Liens other than
Permitted Liens (including the filing of all financing statements or other
similar instruments or documents necessary under the UCC (or any comparable law)
of all appropriate jurisdictions to perfect Lender’s security interest in the
Collateral). Each such financing statement may describe the Collateral as “all
assets of the Borrower, now owned or hereafter existing”, or words to similar
effect. Borrower shall and shall cause each other Loan Party to, at the Loan
Parties’ sole cost and expense execute any and all further documents, financing
statements, agreements, affirmations, waivers and instruments, and take all such
further actions (including the filing and recording of financing statements)
that may be required under any applicable Legal Requirement, or that Lender
reasonably deems necessary or advisable, in order to grant, preserve, protect
and perfect the validity and priority of the security interests created or
intended to be created hereby or by the Collateral Documents or the
enforceability of any guaranty or other Loan Document.

4.1.10 Keeping of Books and Records. Borrower shall keep and maintain or shall
cause to be kept and maintained on a calendar year basis, in accordance with the
requirements for a Special Purpose Entity set forth herein and GAAP (or such
other accounting basis acceptable to Lender), proper and accurate books, records
and accounts reflecting all of the financial affairs of the Loan Parties and all
items of income and expense in connection with the operation on an individual
basis of each Property. Lender shall have the right from time to time at all
times during normal business hours upon reasonable notice to examine such books,
records and accounts at the office of Borrower or any other Person maintaining
such books, records and accounts and to make such copies or extracts thereof as
Lender shall desire. After the occurrence of an Event of Default, Borrower shall
pay any costs and expenses reasonably incurred by Lender to examine each Loan
Parties’ accounting records with respect to the Properties, as Lender shall
reasonably determine to be necessary or appropriate in the protection of
Lender’s interest.

4.1.11 Business and Operations. Borrower shall directly or through Manager or
subcontractors of Manager (subject to Section 4.2.1), continue to engage in the
businesses presently conducted by it as and to the extent the same are necessary
for the ownership, maintenance, sale, management, leasing and operation of the
Properties. Borrower shall qualify to do business and will remain in good
standing under the laws of each jurisdiction as and to the extent the same are
required for the ownership, maintenance, management and operation of the
Properties, except to the extent that failure to do so would not reasonably be
expected to have a Material Adverse Effect. Borrower or a Borrower TRS, as
applicable, shall at all times during the term of the Loan, continue to own or
lease all equipment, fixtures and personal property which are necessary to
operate its Properties.

 

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4.1.12 [Reserved].

4.1.13 Loan Proceeds. Borrower shall use the proceeds of the Loan received by it
on the Closing Date only for the purposes set forth in Section 2.1.5.

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

4.1.15 Leasing Matters. Borrower shall (i) observe and perform the obligations
imposed upon the lessor under the Leases for the Properties in a commercially
reasonable manner; and (ii) enforce the terms, covenants and conditions
contained in such Leases upon the part of the Tenant thereunder to be observed
or performed in a commercially reasonable manner except in each case to the
extent that the failure to do so would not reasonably be expected to have an
Individual Material Adverse Effect with respect to a Property.

4.1.16 Borrower’s Operating Account. Borrower shall establish and maintain an
account (the “Borrower’s Operating Account”) at a bank selected by Borrower and
reasonably approved by Lender which shall be an Eligible Institution. Borrower
may also establish and maintain subaccounts of Borrower’s Operating Account
(which may be ledger or book entry accounts and not actual accounts).

4.1.17 Security Deposits.

(a) All security deposits of Tenants, whether held in cash or any other form,
shall be deposited into one or more Eligible Accounts (each, a “Security Deposit
Account”) established and maintained by Borrower at a local bank which shall be
an Eligible Institution, held in compliance with all Legal Requirements and
identified by written notice to Lender, and shall not be commingled with any
other funds of Borrower. Borrower shall cause all security deposits received by
Borrower, Manager or third-party property manager of any security deposit after
the Closing Date to be deposited into a Security Deposit Account, the Cash
Management Account or a Rent Deposit Account within three (3) Business Days of
receipt; provided, that security deposits held or received by any third-party
property manager may be held in a trust account maintained by such third-party
property manager for safe keeping of such security deposits. Borrower shall, no
less frequently than one each month, transfer into a Security Deposit Account
any security deposits previously received and deposited into the Cash Management
Account or a Rent Deposit Account. The security deposits shall be disbursed by
Borrower in accordance with the terms of the applicable Leases and all Legal
Requirements. In the event the Tenant under any Lease defaults such that the
applicable security deposit may be drawn upon on account of such default, the
proceeds of such draw shall constitute Collections and Borrower shall promptly
(but in any event, within three (3) Business Days), deposit the proceeds thereof
into a Rent Deposit Account or the Cash Management Account.

 

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(b) Any bond or other instrument which Borrower is permitted to hold in lieu of
cash security deposits under applicable Legal Requirements (i) shall be
maintained in full force and effect in the full amount of such deposits unless
replaced by cash deposits as above described, (ii) shall be issued by an
institution reasonably satisfactory to Lender, (iii) shall, if permitted
pursuant to Legal Requirements, name Lender as payee or mortgagee thereunder (or
at Lender’s option, be fully assignable to Lender), and (iv) shall in all
respects comply with applicable Legal Requirements and otherwise be satisfactory
to Lender. Borrower shall, upon request, provide Lender with evidence reasonably
satisfactory to Lender of Borrower’s compliance with the foregoing.

(c) Upon Lender’s written request during an Event of Default, Borrower shall
deliver (or cause to be delivered) all security deposits to Lender for
safe-keeping, and not for application against the Debt. Upon a foreclosure of
any Property or transfer in lieu thereof, Borrower shall deliver to Lender or to
an account designed by Lender the security deposits applicable to such Property
for safe-keeping and not for application to the Debt.

4.1.18 Investment of Funds in Cash Management Account, Subaccounts; Rent Deposit
Accounts and Security Deposit Accounts. Sums on deposit in the Cash Management
Account and the Subaccounts may be invested in Permitted Investments. Borrower
shall have the right to direct Cash Management Account Bank to invest sums on
deposit in the Cash Management Account and the Subaccounts in Permitted
Investments. The Cash Management Account shall be assigned the federal tax
identification number of Borrower. Sums on deposit in the Rent Deposit Accounts
shall not be invested in Permitted Investments and shall be held solely in cash.
Subject to any requirements of applicable law, sums on deposit in a Security
Deposit Account may be invested in Permitted Investments and Borrower shall have
the right to direct the applicable Security Deposit Bank to invest sums on
deposit in such Security Deposit Account in Permitted Investments. The amount of
actual losses sustained on a liquidation of a Permitted Investment in the Cash
Management Account or a Subaccount shall be deposited into the Cash Management
Account or the applicable Subaccount by Borrower no later than one (1) Business
Day following such liquidation. Borrower shall pay any federal, state or local
income or other tax applicable to income earned from Permitted Investments.

4.1.19 Operation of Property.

(a) Borrower shall (i) cause the Manager to manage the Properties in accordance
with the Management Agreement, (ii) diligently perform and observe all of the
terms, covenants and conditions of the Management Agreement on the part of
Borrower to be performed and observed, (iii) promptly notify Lender of any
material default under the Management Agreement of which it is aware and
(iv) promptly enforce the performance and observance of all of the covenants
required to be performed and observed by the Manager under the Management
Agreement in a commercially reasonable manner. 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 Lender’s other rights or remedies under this Agreement or the
other Loan Documents, and without waiving or releasing

 

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Borrower from any of its obligations hereunder or under the Management
Agreement, Lender shall have the right, but shall be under no obligation, to pay
any sums and to perform any act as may be appropriate to cause all the material
terms, covenants and conditions of the Management Agreement on the part of
Borrower to be performed or observed. In no event shall the management fee
payable to the Manager for any calendar month exceed the Management Fee Cap for
such calendar month and in no event shall Borrower pay or become obligated to
pay to the Manager, any transition or termination costs or expenses, termination
fees, or their equivalent in connection with the Transfer of a Property or the
termination of the Management Agreement. For the avoidance of doubt, for
purposes of this Agreement, management fees shall not be deemed to include
leasing commissions and reimbursements of expenses paid to Manager in the
ordinary course of Borrower’s business.

(b) If any one or more of the following events occurs: (i) during the
continuance of an Event of Default, (ii) if the Manager shall be in material
default under the Management Agreement beyond any applicable notice and cure
period (including as a result of any gross negligence, fraud, willful misconduct
or misappropriation of funds), or (iii) if Manager shall become insolvent or a
debtor in any bankruptcy or insolvency proceeding, then Lender shall have the
right to require Borrower to replace the Manager and enter into a Replacement
Management Agreement with (x) a Qualified Manager selected by Borrower that is
not an Affiliate of Borrower or (y) another property manager chosen by Borrower
and approved by Lender; provided, that such approval shall be conditioned upon
Borrower delivering a Rating Agency Confirmation as to such property manager. If
Borrower fails to select a new Qualified Manager or a replacement Manager that
satisfies the conditions described in the foregoing clause (y) and enter into a
Replacement Management Agreement with such Person within sixty (60) days of
Lender’s demand to replace the Manager, then Lender may choose the replacement
property manager provided that such replacement property manager is a Qualified
Manager or satisfies the conditions set forth in proviso of the foregoing clause
(y).

4.1.20 Anti-Money Laundering. Borrower shall comply and shall cause each other
Loan Party to comply in all material respects with all applicable anti-money
laundering laws and regulations, including without limitation the USA Patriot
Act of 2001 (collectively, the “Anti-Money Laundering Laws”). Borrower (a) has
established an anti-money laundering compliance program as required by the
Anti-Money Laundering Laws, (b) has conducted and will conduct the requisite due
diligence in connection with the Leases and Tenants for purposes of the
Anti-Money Laundering Laws, including with respect to the legitimacy of the
applicable Tenant and the origin of the assets used by said Tenant to lease the
applicable Property and (c) maintains and will maintain sufficient information
to identify the applicable Tenant for purposes of the Anti-Money Laundering
Laws. Borrower shall provide notice to Lender, within five (5) Business Days, of
receipt of any written notice of any Anti-Money Laundering Law violation or
action involving a Loan Party.

4.1.21 Embargoed Persons. Prior to entering into a Lease with a prospective
Tenant (excluding any existing Tenant of a Property that was previously screened
in accordance with this Section 4.2.21), Borrower shall confirm that such
prospective Tenant is not a Person whose name appears on a Government List.
Borrower shall not enter into a Lease with a Person whose name appears on a
Government List unless Borrower determines that such Person is not the
terrorist, narcotics trafficker or other Person who is identified on such
Government List but

 

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merely has the same name as such Person. If notwithstanding such confirmation, a
Responsible Officer of a Loan Party or Manager obtains knowledge that a Tenant
is a Person whose name appears on a Government List, it shall promptly provide
notice of such fact to Lender within five (5) Business Days of acquiring
knowledge thereof.

4.1.22 ERISA Matters. Each Loan Party shall and shall cause each of its ERISA
Affiliates to establish, maintain and operate all Plans to comply in all
material respects with the provisions of ERISA, the Code and all applicable
laws, the regulations and interpretation thereunder and the respective
requirements of the governing documents for such Plans. Each Loan Party shall
and shall cause each of its ERISA Affiliates to establish, maintain and operate
all Foreign Plans to comply in all material respects with all laws, regulations
and rules applicable thereto and the respective requirements of the governing
documents for such plans.

4.1.23 Formation of a Borrower TRS. If Borrower organizes any Borrower TRS then
the following covenants shall be applicable:

(a) Borrower shall cause such Borrower TRS to execute and deliver to the Lender
promptly after the formation of such Borrower TRS and, in any event, prior to
contributing any Properties or other Collateral to such Borrower TRS: (i) a
guaranty substantially in the form of the Equity Owner Guaranty, guaranteeing
the Obligations; (ii) a security agreement, substantially in the form of the
Borrower Security Agreement, pursuant to which all personal property assets of
such Borrower TRS are pledged as security for the Obligations and (iii) such
other agreements, instruments, approvals, legal opinions or other documents as
are reasonably requested by Lender in order to create, perfect or establish the
first priority of (subject to Permitted Liens) any Lien purported to be covered
by any such Collateral Documents or otherwise to effect the intent that all
property and assets of such Borrower TRS shall become Collateral for the
Obligations; provided, that for the avoidance of doubt, the Lien of the Mortgage
encumbering any Property contributed to the Borrower TRS shall not be released
at such time and no new Mortgage shall be executed with respect to or recorded
against any Property contributed to such Borrower TRS by Borrower;

(b) Borrower shall deliver promptly after the formation of such Borrower TRS
and, in any event, prior to contributing any Properties or other Collateral to
such Borrower TRS: (i) an updated Exhibit D to the Borrower Security Agreement
reflecting the pledge of Borrower’s capital stock in such Borrower TRS as
Collateral for the Obligations, (ii) a certificate evidencing all of the capital
stock of such Borrower TRS; (iii) undated stock powers or other appropriate
instruments of assignment executed in blank with signature guaranteed and
(iv) such other agreements, instruments, approvals, legal opinions or other
documents as are reasonably requested by Lender in order to create, perfect or
establish the first priority of (subject to Permitted Liens) Lender’s Lien in
such capital stock or otherwise to effect the intent that such capital stock
shall become Collateral for the Obligations; and

(c) Prior to contributing a Property to such Borrower TRS, Borrower shall cause
such Borrower TRS to execute and deliver to Lender an assumption of the Mortgage
related to such Property, in form and substance reasonably acceptable to Lender
and Borrower.

 

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Section 4.2 Negative Covenants. Borrower covenants and agrees with Lender as
follows:

4.2.1 Operation of Property. Borrower shall not (i) surrender, terminate,
cancel, modify, renew or extend the Management Agreement, provided, that
Borrower may, without Lender’s consent, (x) replace Manager so long as the
replacement manager is a Qualified Manager pursuant to a Replacement Management
Agreement and (y) renew and extend the Management Agreement pursuant to the
terms thereof, (ii) enter into any other agreement relating to the management or
operation of a Property with Manager or any other Person, provided, that
Borrower may permit Manager to enter into sub-management agreements with
third-party property managers to perform all or any portion of the services by
Manager so long as (A) the fees and charges payable under any such
sub-management agreements shall be the sole responsibility of Manager,
(B) Borrower shall have no liabilities or obligations under any such
sub-management agreements and (C) any such sub-management agreements will be
terminable without penalty upon the termination of the Management Agreement,
(iii) consent to the assignment by Manager of its interest under the Management
Agreement, or (iv) waive or release any of its rights and remedies under the
Management Agreement, in each case without the express consent of Lender, which
consent shall not be unreasonably withheld. If at any time Lender consents to
the appointment of a new property manager or a Qualified Manager is appointed,
such new property manager (including a Qualified Manager) shall execute a
Replacement Management Agreement. For the avoidance of doubt, for purposes of
subclause (C) above, payments for services provided during the termination
notice period of a sub-management agreement shall not constitute a termination
penalty.

4.2.2 Indebtedness. Borrower shall not, and shall cause each Borrower TRS not
to, create, incur, assume or suffer to exist any Indebtedness other than (i) the
Debt and (ii) unsecured trade payables incurred in the ordinary course of
business relating to the ownership and operation of the Properties, which in the
case of such unsecured trade payables (A) are not evidenced by a note, (B) do
not exceed, at any time, a maximum aggregate amount of three percent (3%) of the
original principal amount of the Loan and (C) are paid within sixty (60) days of
the date incurred (collectively, “Permitted Indebtedness”). Borrower shall cause
Equity Owner not to create, incur, assume or suffer to exist any Indebtedness
other than Indebtedness incurred under the Equity Owner Guaranty and the other
Loan Documents to which Equity Owner is a party and unsecured trade payables
incurred in the ordinary course of business related to the ownership of
membership interest in Borrower and that (A) are not evidenced by a note, (B) do
not exceed, at any time, $10,000 and (C) are paid within sixty (60) days of the
date incurred (collectively, the “Equity Owner’s Permitted Indebtedness”). For
the purposes of this Section 4.2.2, Property Taxes and Other Charges are not
Indebtedness.

4.2.3 Liens. Borrower shall not and shall cause each other Loan Party not to
create or suffer to exist any Liens upon or with respect to, any Collateral
(other than any Property) except for Permitted Liens.

4.2.4 Limitation on Investments. Borrower shall not and shall cause each other
Loan Party not to make or suffer to exist any loans or advances to, or extend
any credit to, purchase any property or asset or make any investment (by way of
transfer of property, contributions to capital, purchase of stock or securities
or evidences of indebtedness, acquisition of the business

 

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or assets, or otherwise) in, any Affiliate or any other Person except for
acquisition of the Properties and related Collateral and Permitted Investments
and for creation of a Borrower TRS and contributions of Properties to a Borrower
TRS as permitted by Section 4.1.23.

4.2.5 Limitation on Issuance of Equity Interests. Borrower shall not and shall
cause each other Loan Party not to issue or sell or enter into any agreement or
arrangement for the issuance and sale of any Equity Interests.

4.2.6 Restricted Junior Payments. Borrower shall not make any Restricted Junior
Payment; provided, that Borrower may make Restricted Junior Payments so long as
(i) no Event of Default shall then exist or would result therefrom, (ii) such
Restricted Junior Payments have been approved by all necessary action on the
part of Borrower and in compliance with all applicable laws and (iii) such
Restricted Junior Payments are paid from Unrestricted Cash.

4.2.7 Principal Place of Business, State of Organization. Borrower shall not and
shall cause each other Loan Party not to change its name, identity (including
its trade name or names), place of organization or formation (as set forth in
Section 3.1.25) or Borrower’s or Equity Owner’s limited liability company
structure unless Borrower shall have first notified Lender in writing of such
change at least thirty (30) days prior to the effective date of such change, and
shall have first taken all action required by Lender for the purpose of
perfecting or protecting the lien and security interests of Lender pursuant to
this Agreement, and the other Loan Documents and, in the case of a change in
Borrower’s or Equity Owner’s structure, without first obtaining the prior
written consent of Lender, which consent may be given or denied in Lender’s sole
discretion. Upon Lender’s request, Borrower shall and shall cause each other
Loan Party to, at Borrower’s sole cost and expense, execute and deliver
additional security agreements and other instruments which may be necessary to
effectively evidence or perfect Lender’s security interest in the Collateral as
a result of such change of principal place of business or place of organization.
Each Loan Party’s principal place of business and chief executive office, and
the place where each Loan Party keeps its books and records, including recorded
data of any kind or nature, regardless of the medium or recording, including
software, writings, plans, specifications and schematics, has been for the
preceding four months (or, if less, the entire period of the existence of
Borrower) and will continue to be the address of Borrower set forth in the
introductory paragraph of this Agreement (unless Borrower notifies Lender in
writing at least thirty (30) days prior to the date of such change). Borrower
shall promptly notify Lender of any change in any Loan Party’s organizational
identification number.

4.2.8 Dissolution. Borrower shall not and shall cause each other Loan Party not
to (i) engage in any dissolution, liquidation or consolidation or merger with or
into any other business entity, (ii) transfer, lease or sell, in one transaction
or any combination of transactions, the assets or all or substantially all of
the properties or assets of any Loan Party except to the extent permitted by the
Loan Documents or (iii) terminate its organizational documents or its
qualification and good standing in any jurisdiction, except to the extent
permitted by Section 4.2.7.

4.2.9 Change in Business. Borrower shall not and shall cause each Borrower TRS
not to enter into any line of business other than the acquisition, renovation,
ownership, holding, marketing, sale, leasing, transfer, management, operation or
financing of the Properties (and any

 

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businesses ancillary or related thereto), or make any material change in the
scope or nature of its business objectives, purposes or operations, or undertake
or participate in activities other than the continuance of its present business.
Borrower shall cause Equity Owner to not engage in any activity other than
acting as the sole member of Borrower.

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

4.2.11 Changes to Accounts. Borrower shall not and shall cause each Borrower TRS
not to (i) open or permit to remain open any cash, securities or other account
with any bank, custodian or institution into which Rents or other Collections or
any security deposits are deposited other than the Cash Management Account, the
Subaccounts, the Rent Deposit Accounts and the Security Deposit Accounts,
(ii) change or permit to change any account number of the Cash Management
Account, the Subaccounts or the Rent Deposit Accounts without providing notice
thereof to Lender and, to the extent required for the continued perfection of
Lender’s security interest in such account, entering into an amendment to the
related Deposit Account Control Agreement or the Blocked Account Control
Agreement to reflect such change, (iii) open or permit to remain open any
sub-account of the Cash Management Account (except any Subaccount) or the Rent
Deposit Accounts, (iv) permit any funds of Persons other than Borrower or a
Borrower TRS to be deposited or held in any of the Cash Management Account, the
Subaccounts or the Rent Deposit Accounts, or (v) permit any Collections or other
proceeds of any Properties to be deposited or held in Borrower’s Operating
Account other than cash that is distributed to Borrower pursuant to Section
2.6.3(j).

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

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

4.2.14 Limitation on Transactions with Affiliates. Borrower shall not and shall
cause each other Loan Party not to enter into, or be a party to any transaction
with any Affiliate of the Loan Parties, except for: (i) the Loan Documents;
(ii) capital contributions by (x) Sponsor or any other direct or indirect parent
thereof to Equity Owner, (y) Equity Owner to Borrower or (z) Borrower to a
Borrower TRS; (iii) Restricted Junior Payments which are in compliance with
Section 4.2.6 and distributions from a Borrower TRS to Borrower; (iv) the
Management

 

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Agreement; and (v) to the extent not otherwise prohibited under this Agreement,
other transactions upon fair and reasonable terms materially no less favorable
to the Loan Parties than would be obtained in a comparable arm’s-length
transaction with a Person not an Affiliate.

4.2.15 ERISA. None of the Loan Parties or their ERISA Affiliates shall establish
or be a party to any employee benefit plan within the meaning of Section 3(2) of
ERISA that is a defined benefit pension plan that is subject to Part III of
Subchapter D, Chapter 1, Subtitle A of the Code.

4.2.16 No Embargoed Persons. At all times throughout the term of the Loan,
including after giving effect to any Transfers permitted pursuant to the Loan
Documents, Borrower shall ensure that (a) none of the funds or other assets of
any Loan Party shall constitute property of, or shall be beneficially owned,
directly or indirectly, by any Person subject to trade restrictions under United
States 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 Loan Party (whether directly or
indirectly), would be prohibited by law (each, an “Embargoed Person”) or the
Loan made by Lender would be in violation of law, (b) no Embargoed Person shall
have any interest of any nature whatsoever in any Loan Party with the result
that the investment in any Loan Party (whether directly or indirectly), would be
prohibited by law or the Loan would be in violation of law, and (c) none of the
funds of any Loan Party shall be derived from any unlawful activity with the
result that the investment in such Loan Party (whether directly or indirectly),
would be prohibited by law or the Loan would be in violation of law.

4.2.17 Transfers.

(a) Borrower acknowledges that Lender has examined and relied on the experience
of Borrower and Sponsor in owning and operating properties such as the
Properties in agreeing to make the Loan, and will continue to rely on Borrower’s
ownership of the Properties as a means of maintaining the value of the
Properties as security for repayment of the Debt and the performance of the
Other Obligations. Borrower acknowledges that Lender has a valid interest in
maintaining the value of the Properties so as to ensure that, should Borrower
default in the repayment of the Debt or the performance of the Other
Obligations, Lender can recover the Debt by a sale of the Properties.

(b) Without the prior written consent of Lender, and except to the extent
otherwise set forth in this Section 4.2.17, Borrower shall not, and shall not
permit any other Person having a direct or indirect ownership or beneficial
interest in Borrower to sell, convey, mortgage, grant, bargain, encumber,
pledge, assign, grant options with respect to or otherwise transfer or dispose
of (directly or indirectly, voluntarily or involuntarily, by operation of law or
otherwise, and whether or not for consideration or of record) (i) any Property
or any part thereof or any legal or beneficial interest therein, or (ii) any
interest, direct or indirect, in any Loan Party or any legal or beneficial
interest therein (a “Transfer”).

(c) A Transfer shall include, but not be limited to, (i) an installment sales
agreement wherein Borrower agrees to sell one or more Properties 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 Property for

 

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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 Leases or any Rents; (iii) if a Restricted
Party is a corporation, any merger, consolidation or Transfer of such
corporation’s stock or the creation or issuance of new stock; (iv) if a
Restricted Party is a limited or general partnership or joint venture, any
merger or consolidation or the change, removal, resignation or addition of a
general partner or the Transfer of the partnership interest of any general
partner or any profits or proceeds relating to such partnership interest, or the
Transfer of limited partnership interests or any profits or proceeds relating to
such limited partnership interest or the creation or issuance of new limited
partnership interests; (v) if 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 Transfer of the membership interest of a managing member (or if no managing
member, any member) or any profits or proceeds relating to such membership
interest, or the Transfer of non-managing membership interests or the creation
or issuance of new non-managing membership interests; or (vi) if a Restricted
Party is a trust or nominee trust, any merger, consolidation or the Transfer of
the legal or beneficial interest in a Restricted Party or the creation or
issuance of new legal or beneficial interests.

(d) Notwithstanding the foregoing, the following Transfers (herein, the
“Permitted Transfers”) shall be permitted hereunder without Lender’s consent:

(i) an Eligible Lease entered into in accordance with the Loan Documents;

(ii) a Permitted Lien or any other Lien expressly permitted under the terms of
the Loan Documents;

(iii) a Transfer of a Property in accordance with Section 2.5;

(iv) a substitution of a Property for a Substitute Property in accordance with
Section 2.4.2 or Section 5.3(b), as applicable;

(v) the Transfer of any direct or indirect legal or beneficial interests in any
Public Vehicle, including the Sponsor or any other Public Vehicle that exists on
the Closing Date, a Public Vehicle which acquires a direct or indirect legal or
beneficial interest in Borrower and Equity Owner after the Closing Date in
accordance with the terms of this Section 4.2.17 or a Person which holds a
direct or indirect legal or beneficial interest in Borrower and subsequently
becomes a Public Vehicle;

(vi) a Transfer of any direct or indirect interest in Borrower or Equity Owner
not described in the foregoing clause (v) provided, that:

(A) after giving effect to such Transfer, a Qualified Transferee (x) shall own
not less than fifty-one percent (51%) of the direct or indirect legal and
beneficial interests in each Loan Party and (y) shall Control (directly or
indirectly) each Loan Party;

(B) if a Transfer is made pursuant to this clause (vi) and such Transfer shall
cause more than ten percent (10%) of the direct or indirect legal or beneficial

 

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interests in each Loan Party to be owned by any Person and its Affiliates that
owned less than ten percent (10%) of the direct or indirect legal or beneficial
interests in such Loan Party prior to such Transfer, then Lender shall receive
notice of such Transfer not less than (x) if the Qualified Transferee referenced
in clause (A) above is not the Sponsor or a 100% owned subsidiary of the
Sponsor, ten (10) Business Days prior to the consummation thereof or (y) if the
Qualified Transferee referenced in clause (A) above is the Sponsor or a 100%
owned subsidiary of the Sponsor, thirty (30) days following the consummation
thereof, but the failure to deliver the notice referred to in this clause
(y) shall not constitute an Event of Default unless such failure continues for
ten (10) Business Days following notice of such failure from Lender;

(C) each Loan Party shall each continue to be a Special Purpose Entity;

(D) after giving effect to such Transfer, Equity Owner shall remain the sole
member of Borrower and Borrower shall remain the sole member of any Borrower
TRS;

(E) the Properties shall continue to be managed by Existing Manager or by a
Qualified Manager pursuant to a Replacement Management Agreement;

(F) if such Transfer shall cause more than forty-nine percent (49%) of the
direct or indirect interests in each Loan Party to be owned by any Person and
its Affiliates that owned less than forty-nine percent (49%) of the direct or
indirect interest in each Loan Party prior to such Transfer, Borrower shall
deliver (or cause to be delivered) to Lender an Additional Insolvency Opinion;

(G) so long as the Loan is outstanding, (A) no pledge or other encumbrance of
any direct interests in any Restricted Party (other than pledges securing the
Obligations pursuant to the Collateral Documents) shall occur, and (B) no
Restricted Party shall issue preferred equity that has the characteristics of
mezzanine debt (such as a fixed maturity date, regular payments of interest, a
fixed rate of return and rights of the equity holder to demand repayment of its
investment);

(H) Borrower shall provide Lender with copies of all organizational documents
and all transaction documents relating to any Transfer under this clause
(vi) involving a direct legal or beneficial interest in any Restricted Party;
and

(I) In connection with any Transfer under this clause (vi), to the extent a
transferee shall own ten percent (10%) or more of the direct or indirect
ownership interests in a Loan Party immediately following such transfer
(provided such transferee owned less than ten percent (10%) of the direct or
indirect ownership interests in a Loan Party as of the Closing Date), Borrower
shall deliver (and Borrower shall be responsible for any reasonable out of
pocket costs and expenses in connection therewith), customary searches
reasonably

 

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requested by Lender in writing (including credit, judgment, lien, litigation,
bankruptcy, criminal and watch list) reasonably acceptable to Lender with
respect to such transferee.

(e) Following a Permitted Transfer, if Sponsor no longer owns a majority of the
direct or indirect interest in Borrower or the Properties, Sponsor shall be
released from the Sponsor Guaranty for all liability accruing after the date of
such Transfer, provided that the Qualified Transferee shall execute and deliver
to Lender a replacement guaranty in substantially the same form and substance as
the Sponsor Guaranty covering all liability accruing from and after the date of
such Transfer (but not any which may have accrued prior thereto).

(f) Borrower shall pay all costs and expenses of Lender in connection with any
Transfer, whether or not such Transfer is deemed to be a Permitted Transfer,
including, without limitation, all fees and expenses of Lender’s counsel,
whether internal or outside, and the cost of any required counsel opinions
related to REMIC or other securitization or tax issues and any Rating Agency
fees.

Section 4.3 Reporting Covenants. Borrower shall, unless Lender shall otherwise
consent in writing, furnish or cause to be furnished to Lender the following
reports, notices and other documents:

4.3.1 Financial Reporting. Borrower shall furnish the following financial
reports to Lender:

(a) As soon as available and in any event within forty-five (45) days after the
end of each calendar quarters (or, in the case of the fourth calendar quarter,
within ninety (90) days after the end of such calendar quarter), commencing with
the calendar quarter ending March 31, 2015, a balance sheet, statement of
operations, statement of equity, and statement of cash flows of Borrower, in
each case, as at the end of such quarter and for the period commencing at the
end of the immediately preceding calendar year and ending with the end of such
quarter, setting forth in each case in comparative form the figures for the
corresponding date or period of the immediately preceding calendar year (if
any), all in reasonable detail and prepared in accordance with GAAP and, with
respect to Capital Expenditures included thereon, separately identifying Capital
Expenditures (other than Discretionary Capital Expenditures) and Discretionary
Capital Expenditures.

(b) As soon as available, and in any event within ninety (90) days after the end
of each calendar year commencing with the calendar year ending December 31,
2015, unaudited copies, and within 120 days following the end of each calendar
year commencing with the calendar year ending December 31, 2015, audited copies,
of a balance sheet, statement of operations, statement of equity, and statement
of cash flows of Borrower, in each case, as at the end of such calendar year,
setting forth in each case in comparative form the figures for the immediately
preceding calendar year (if any), all in reasonable detail and prepared in
accordance with GAAP and the inclusion of footnotes to the extent required by
GAAP and, with respect to Capital Expenditures included thereon, separately
identifying Capital Expenditures (other than Discretionary Capital Expenditures)
and Discretionary Capital Expenditures, such audited financial statements to be
accompanied by a report and an unqualified opinion, prepared in

 

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accordance with generally accepted auditing standards, of an Independent
Accountant selected by Borrower that is reasonably acceptable to Lender (which
opinion on such consolidated information shall be without (1) any qualification
as to the scope of such audit or (2) a “going concern” or like qualification
(other than a going concern qualification that relates solely to the near term
maturity of the Loans hereunder)), together with a written statement of such
accountants (A) to the effect that, in making the examination necessary for
their certification of such financial statements, they have not obtained any
knowledge of the existence of an Event of Default or a Default and (B) if such
accountants shall have obtained any knowledge of the existence of an Event of
Default or such Default, describing the nature thereof.

(c) As soon as available, and in any event within forty-five (45) days after the
end of each calendar month, commencing with the calendar month ending
December 31, 2014 (i) an operating statement in respect of such calendar month
and a calendar year-to-date (but not prior to the calendar month ending
December 31, 2014) operating statement for Borrower and, with respect to Capital
Expenditures included thereon, separately identifying Capital Expenditures
(other than Discretionary Capital Expenditures) and Discretionary Capital
Expenditures, (ii) an Officer’s Certificate certifying that such operating
statements are true, correct and complete in all material respects as of their
respective dates, and (iii) upon Lender’s request, other information maintained
by Borrower in the ordinary course of business that is reasonably necessary and
sufficient to fairly represent the financial position, ongoing maintenance and
results of operation of the Properties (on a combined basis) during such
calendar month;

(d) Simultaneously with the delivery of the financial statements of Borrower
required by clause (a) above an Officer’s Certificate certifying (i) that such
statements fairly represent the financial condition and results of operations of
Borrower as of the end of such quarter or calendar year (as applicable) and the
results of operations and cash flows of Borrower for such quarter or calendar
year (as applicable), in accordance with GAAP applied in a manner consistent
with that of the most recent audited financial statements of Borrower furnished
to Lender, subject to normal year-end adjustments and the absence of footnotes,
(ii) stating that such Responsible Officer has reviewed the provisions of this
Agreement and the other Loan Documents and has made or caused to be made under
his or her supervision a review of the condition and operations of the Relevant
Parties with a view to determining whether the Relevant Parties are in
compliance with the provisions of the Loan Documents to the extent applicable to
them, and that such review has not disclosed, and such Responsible Officer has
no knowledge of, the existence of an Event of Default or Default or, if an Event
of Default or Default exists, describing the nature and period of existence
thereof and the action which the Relevant Parties propose to take or have taken
with respect thereto and (iii) no litigation exists involving Borrower or any
Property in which the potential liability of Borrower with respect to any single
claim or series of related claims thereunder (including claims brought as a
class action) is greater than $500,000 or, if involving any single Property, is
greater than $250,000, in each case, excluding any liabilities covered by
insurance or, if any such litigation does exist, identifying and describing such
litigation and the actions being taking in relation thereto.

(e) Simultaneously with the delivery of the financial statements of Borrower
required by clause (a) above, a calculation of Underwritten Net Cash Flow for
the 12 month period ended on the last day of the calendar quarter for which such
financial statements were prepared;

 

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(f) Simultaneously with the delivery of the financial statements of Borrower
required by clause (a) above, a duly completed Compliance Certificate, with
appropriate insertions, containing the data and calculations set forth on
Exhibit B; and

(g) Simultaneously with the delivery of the financial statements of Borrower
required by clause (a) above, a certificate executed by a Responsible Officer of
Borrower certifying (i) the current Property Tax assessment amounts and Other
Charges payable in respect of each Property, (ii) the payment of all Property
Taxes and Other Charges prior to the date such Property Taxes or Other Charges
become delinquent, subject to any contest conducted in accordance with
Section 4.4.5 and (iii) if either (A) an Acceptable Blanket Policy is not in
place with respect to all Properties or (B) an Acceptable Blanket Policy is in
place with respect to all Properties but Borrower has elected to reinstate
deposits of Insurance Premiums to the Insurance Subaccount pursuant to
Section 6.2.3, the monthly cost of the Insurance Premiums with respect to the
Policies required under in Section 5.1.1 that are required to be deposited into
the Insurance Subaccount pursuant to Section 6.2;

4.3.2 Annual Budget. Prior to the Closing Date, Borrower has submitted and
Lender has approved an Annual Budget for the 2015 calendar year (the “Approved
Initial Budget”). Borrower shall submit to Lender by November 1 of each year the
Annual Budget relating to the Properties for the succeeding calendar year.
During the continuance of a Cash Sweep Period, Lender shall have the right to
approve each Annual Budget (which approval shall not be unreasonably,
conditioned or delayed withheld so long as no Event of Default is continuing).
An Annual Budget approved by Lender during a Cash Sweep Period or any Annual
Budget submitted prior to the commencement of a Cash Sweep Period, shall each
hereinafter be referred to as an “Approved Annual Budget”. In the event of a
Transfer of any Property the Approved Annual Budget shall be reduced as
reasonably determined by Lender in consultation with Borrower in order to
reflect the removal of such Property and the Operating Expenses associated
therewith; provided, further, that no such reduction shall be made in the event
such Transfer is made in connection with a substitution under Section 2.4.2(a).
If Lender has the right to approve an Annual Budget pursuant to this
Section 4.3.2, neither Borrower nor Manager shall change or modify the Annual
Budget that has been approved by Lender without the prior written consent of
Lender (which consent shall not be unreasonably withheld, conditioned or delayed
so long as no Event of Default is continuing). The “Monthly Budgeted Amount” for
each Payment Date shall mean the monthly amount set forth in the Approved Annual
Budget for Operating Expenses for the Interest Period related to such Payment
Date, but excluding management fees and Property Taxes that are required to be
deposited into the Tax Subaccount pursuant to Section 6.1 and Insurance Premiums
that are required to be deposited into the Insurance Subaccount pursuant to
Section 6.2. If during any Cash Sweep Period, Borrower has submitted an Annual
Budget and such Annual Budget has not been approved prior to the commencement of
the calendar year to which such budget relates then the previous Approved Annual
Budget shall continue to be deemed to be the Approved Annual Budget for that
calendar year.

4.3.3 Reporting on Adverse Effects. Promptly and in no event more than two (2)
Business Days after any Responsible Officer of any Loan Party obtains knowledge
of any matter or the occurrence of any event concerning any other Loan Party
which would reasonably be expected to have a Material Adverse Effect, written
notice thereof.

 

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4.3.4 Litigation. Prompt written notice to Lender of any litigation or
governmental proceedings pending or to the actual knowledge of a Responsible
Officer of any Loan Party or Manager, threatened in writing against any Loan
Party or against Manager with respect to any Property, which would reasonably be
expected to have a Material Adverse Effect or an Individual Material Adverse
Effect with respect to any Property.

4.3.5 Event of Default. Promptly after any Responsible Officer of any Loan Party
or Manager obtains knowledge of the occurrence of each Event of Default or
Default (if such Default is continuing on the date of such notice), a statement
of a Responsible Officer of Manager setting forth the details of such Event of
Default or Default and the action which such Loan Party is taking or proposes to
take with respect thereto.

4.3.6 Other Defaults. Promptly and in no event more than two (2) Business Days
after any Responsible Officer of Borrower or Manager obtains actual knowledge of
any default by any Loan Party under any agreement other than the Loan Documents
to which such Loan Party is a party which would reasonably be expected to have a
Material Adverse Effect, the statement of a Responsible Officer of Manager
setting forth the details of such default and the action which such Loan Party
is taking or proposes to take with respect thereto.

4.3.7 Properties Schedule. Borrower shall deliver to Lender no later than the
tenth (10th) Business Day of each calendar month, commencing with the calendar
month ending December 31, 2014, (i) an updated Properties Schedule containing
each of the data fields set forth on Schedule II.B (other than those under the
caption “BPO Values”); provided, that the information under the caption
“Underwritten Net Cash Flow” need only be updated in the Properties Schedule
that is delivered for the months March, June, September and December of each
year, commencing with the Properties Schedule delivered in March 2015 and (ii) a
calculation of the monthly turnover rate for the Properties for the prior
calendar month, which shall be equal to the number of Properties that became
vacant during such calendar month divided by the daily average number of
Properties during such calendar month. The foregoing information shall be
delivered together with a certificate of a Responsible Officer of Borrower
certifying that it is true, correct and complete in all material respects
(i) with respect to the information in the Properties Schedule other than
Underwritten Net Cash Flow data, as of the last day of the preceding calendar
month, (ii) with respect to the Underwritten Net Cash Flow data in the
Properties Schedule, for the calendar quarter most recently ended, and
(iii) with respect to the turnover rate of the Properties, for the prior
calendar month. In addition, the Borrower shall deliver to Lender no later than
sixty (60) days after the end of the first three calendar quarters and within
ninety (90) days of the fourth calendar quarter of each year, a report in Excel®
format containing the information set forth on Schedule II.C presented
separately for each MSA (the “Quarterly Investor Rollup Report”). The foregoing
information shall be delivered together with a certificate of a Responsible
Officer of Borrower certifying that it is true, correct and complete (i) with
respect to the information in the Properties Schedule, as of the last day of the
preceding quarter and (ii) with respect to the turnover rate of the Properties,
for the prior calendar quarter.

4.3.8 Disqualified Properties. Promptly and in no event more than ten
(10) Business Days after any Responsible Officer of Borrower or Manager obtains
actual knowledge that any Property fails to comply with the Property
Representations or the Property Covenants, written notice thereof and the action
that Borrower is taking or proposes to take with respect thereto.

 

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4.3.9 Security Deposits.

(a) Within five (5) days of the last day of each calendar month, commencing with
the calendar month ending January 31, 2015, written notice of the aggregate
amount of security deposits deposited into the Security Deposit Accounts during
such month, which notice shall include (i) the identity of each applicable
Security Deposit Account (including, the name and identification number of the
applicable Security Deposit Account, the name, address and wiring instructions
of the financial institution which maintains the Security Deposit Account, and
the name of the Person to contact at such financial institution) and (ii) amount
of each security deposit allocable to such Security Deposit Account; provided
that the notice given for the calendar month ending January 31, 2015 shall
include security deposits deposited into the Security Deposit Accounts during
the period from and including the Closing Date through and including January 31,
2015.

(b) Within ten (10) Business Days of Lender’s request therefor, a written
accounting of all security deposits held in connection with the Leases,
including the name and identification number of the accounts in which such
security deposits are held, the name and address of the financial institutions
in which such security deposits are held and the name of the Person to contact
at such financial institution, along with any authority or release necessary for
Lender to obtain information regarding such accounts directly from such
financial institutions.

4.3.10 Advance Rents Received. Within five (5) days of the last day of each
calendar month, commencing with the calendar month ending January 31, 2015,
written notice of any Advance Rents received during such calendar month and the
related Advance Rent Disbursement Schedules; provided that the notice given for
the calendar month ending January 31, 2015 shall include Advance Rents received
during the period from and including the Closing Date through and including
January 31, 2015.

4.3.11 [Reserved].

4.3.12 ERISA Matters.

(a) As soon as reasonably possible, and in any event within thirty (30) days
after the occurrence of any ERISA Event, written notice of, and any requested
information relating to such ERISA Event.

(b) As soon as reasonably possible after the occurrence of a Plan Termination
Event, written notice of any action that any Loan Party or any of its ERISA
Affiliates proposes to take with respect thereto, along with a copy of any
notices received from or filed with the PBGC, the IRS or any Multiemployer Plan
with respect to such Plan Termination Event, as applicable.

(c) As soon as reasonably possible, and in any event within thirty (30) days
after a Responsible Officer of any Loan Party has actual knowledge of, or with
respect to any Plan or Multiemployer Plan to which such Loan Party or any of its
ERISA Affiliates makes direct contributions has reason to believe, that any of
the events or conditions specified below with

 

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respect to any Plan or Multiemployer Plan has occurred or exists, a statement
signed by a Responsible Officer of Borrower setting forth details respecting
such event or condition and the action, if any, that the applicable Loan Party
or any of its ERISA Affiliates proposes to take with respect thereto (and a copy
of any report or notice required to be filed with or given to PBGC by any such
Loan Party or any of its ERISA Affiliates with respect to such event or
condition):

(i) any Reportable Event with respect to a Plan, as to which the PBGC has not by
regulation or otherwise waived the requirement of Section 4043(a) of ERISA that
it be notified within thirty (30) days of the occurrence of such event (provided
that a failure to meet the minimum funding standard of Section 412 of the Code
or Section 302 of ERISA, including the failure to make on or before its due date
a required installment under Section 412(m) of the Code or Section 302(e) of
ERISA, shall be a Reportable Event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code); and any request for a waiver under
Section 412(d) of the Code for any Plan;

(ii) the distribution under Section 404(c) of ERISA of a notice of intent to
terminate any Plan or any action taken by any Loan Party or any of its ERISA
Affiliates to terminate any Plan;

(iii) the institution by the PBGC of proceedings under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Plan, or
the receipt by Equity Owner GP, any Loan Party or any of their ERISA Affiliates
of a notice from a Multiemployer Plan that such action has been taken by PBGC
with respect to such Multiemployer Plan;

(iv) the complete or partial withdrawal from a Multiemployer Plan by any Loan
Party or any of its ERISA Affiliates, as applicable, that results in liability
under Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default) or the receipt by any
Loan Party or any of its ERISA Affiliates, as applicable, of notice from a
Multiemployer Plan that it is in reorganization or insolvency pursuant to
Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated
under Section 4041A of ERISA;

(v) the institution of a proceeding by a fiduciary of any Multiemployer Plan
against any Loan Party or any of its ERISA Affiliates, as applicable, to enforce
Section 515 of ERISA; and

(vi) failure to satisfy Section 436 of the Code.

4.3.13 Leases. Borrower shall deliver to Lender copies of any executed Leases
for the Properties within ten (10) Business Days of request therefor by Lender.

4.3.14 Periodic Rating Agency Information. Borrower shall, or shall cause
Manager to, deliver to Lender, and Lender shall deliver to the Approved Rating
Agencies, the information and reports set forth on Schedule V (the “Periodic
Rating Agency Information”) at the times set forth therein.

 

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4.3.15 Other Reports.

(a) Borrower shall deliver to Lender, within ten (10) Business Days of Lender’s
request therefor, copies of any requested Property Tax, Other Charge or
insurance bills, statements or invoices received by Borrower or any Loan Party
with respect to the Properties.

(b) Borrower shall, as soon as reasonably practicable after request by Lender
furnish or cause to be furnished to Lender in such manner and in such detail as
may be reasonably requested by Lender, such additional information, documents,
records or reports as may be reasonably requested with respect to the Property
or the conditions or operations, financial or otherwise, of the Relevant
Parties.

4.3.16 HOA Reporting.

(a) The Borrower shall deliver to Lender, within twenty-eight (28) days after
the end of each calendar quarter, commencing with the calendar quarter ending
March 31, 2015, a report (the “Quarterly HOA Report”) containing the following
information with respect to each Applicable HOA Property, a data tape of such
Applicable HOA Properties containing the following data fields: (x) the data
fields set forth on the Properties Schedule under the captions “Property ID”,
“YardiCode”, “Property Name”, “Address (Street)”, “City”, “County”, “State”,
“Closest MSA”, and “Zip Code”, (y) the number of HOAs applicable to each such
Applicable HOA Property, and (z) for each such Applicable HOA Property, the HOA
name and notice address, the frequency with which payments are due to the HOA,
the last HOA payment due date, the next HOA payment due date, the amount owed on
the last HOA payment due date, the amount paid on the last HOA payment due date,
the amount owed on the next HOA payment due date and annual payments to the HOA;
and

(b) Subject to the remainder of this subsection (b), Borrower shall deliver to
Lender, within twenty (20) Business Days after the end of each calendar quarter
of each year, commencing with the calendar quarter ending March 31, 2015, one or
more legal opinions (which may be in the form of a bring-down or date-down
opinion with respect to an earlier delivered opinion, including, without
limitation, the Closing Date HOA Opinions) from a nationally recognized law firm
(or one with prominent standing in the applicable state) specifying with respect
to each state in which a Property is located whether such state is an Applicable
HOA State (as defined under clause (a) of the definition thereof). Any opinion
required to be delivered pursuant to this Section 4.3.16(b) may be aggregated
with any other opinion required to be delivered to Lender (or Servicer on behalf
of Lender) so long as all the states in which Properties are located are
included in such opinion or opinions and such opinion or opinions specifically
reference this Agreement and otherwise meet the requirements of this
Section 4.3.16(b). If, with respect to any state in which a Property is located,
(i) Borrower fails to deliver to Lender an opinion pursuant to this
Section 4.3.16(b), the Lender may in its sole and absolute discretion designate
such state an Applicable HOA State by written notice to Borrower or (ii) any
opinion delivered to Lender pursuant to this Section 4.3.16(b) shall be
materially different from the Closing Date HOA Opinions and such differences are
not satisfactory to Lender in its sole and absolute discretion, Lender may
request in writing that Borrower obtain a second opinion from a nationally
recognized law firm (or one with prominent standing in the applicable state) and
deliver such opinion to Lender within twenty (20) Business Days of such

 

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written request and (1) if Borrower fails to deliver such a second opinion to
Lender, the Lender may in its sole and absolute discretion designate such state
an Applicable HOA State by written notice to Borrower or (2) if any such second
opinion delivered to Lender shall be materially different from the Closing Date
HOA Opinions and such differences are not satisfactory to Lender in its sole and
absolute discretion and Lender believes in good faith that such state is an
Applicable HOA State (as defined under clause (a) of the definition thereof),
Lender may designate such state an Applicable HOA State by written notice to
Borrower. In addition, if, as a result of any such differences Lender believes
in good faith that any provisions for subordination of Liens for HOA Fees to the
Lien of the Mortgages are unenforceable under the laws of an Applicable HOA
State or that such Lien for HOA Fees would be entitled to Priority, Lender may
redesignate all affected HOA Properties in such Applicable HOA State as
Applicable HOA Properties. On the Closing Date, Lender acknowledges that, based
on the Closing Date HOA Opinions and related certifications: (i) Colorado and
Texas are the sole Applicable HOA States; (ii) the determination that Georgia
and Illinois are not Applicable HOA States depends on the particular terms of
the HOA declarations for the HOA Properties as set forth in the Closing Date HOA
Opinions for those states and, (iii) based on the certifications provided by OS
National, LLC, as of the Closing Date there are no Applicable HOA Properties in
those states and the only Applicable HOA Properties in Texas are the Properties
listed on Schedule B to the Certification from OS National, LLC, a copy of which
has been provided to the Lender.

(c) If subsequent to the Closing Date there is consummated a securitization of a
single borrower single family residential rental financing similar to the
transactions contemplated by this Agreement and such financing contains HOA
reporting and/or HOA opinion delivery requirements and/or HOA Funds reserve
requirements that are less burdensome to the borrower thereunder than those
required by this Agreement (including Sections 4.3.16, 4.4.8, 6.1.4, 6.1.5 and
Schedule V), then subject to a Rating Agency Confirmation, Borrower shall have
the right to require Lender to amend this Agreement in a manner consistent with
such less burdensome requirements.

Section 4.4 Property Covenants. Borrower shall comply with the following
covenants with respect to each Property:

4.4.1 Ownership of the Property. Borrower shall warrant and defend (a) the title
to each Property and the related Collateral and (b) the validity and priority of
the Lien of the Mortgages on the Properties, in each case against the claims of
all Persons whomsoever; subject only to Permitted Liens and Transfers permitted
hereunder. Borrower shall reimburse Lender for any losses, costs, damages or
expenses (including reasonable attorneys’ fees and expenses) incurred by Lender
if an interest in any Property, other than as permitted hereunder, is claimed by
another Person.

4.4.2 Liens Against the Property. Borrower shall not create, incur, assume or
permit to exist any Lien on any direct or indirect interest in any Property,
except for the Permitted Liens.

4.4.3 Condition of the Property. Except if the Property has suffered a Casualty
and is in the process being restored in accordance with Section 5.4, Borrower
shall keep and maintain in all material respects the Property in a good, safe
and habitable condition and repair and free of

 

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and clear of any damage or waste, and from time to time make, or cause to be
made, in all material respects, all reasonably necessary repairs, renewals,
replacements, betterments and improvements thereto necessary to comply with the
Renovation Standards and applicable Legal Requirements in all material respects.

4.4.4 Compliance with Legal Requirements. The Property (including the leasing
and intended use thereof) shall comply in all material respects with all
applicable Legal Requirements, including, without limitation, building and
zoning ordinances and codes and all certifications, permits, licenses and
approvals, including without limitation, certificates of completion and
occupancy permits, required for the legal leasing, use, occupancy, habitability
and operation of the Property, all such certifications, permits, licenses and
approvals shall be maintained in full force and effect, except as would not
reasonably be expected to have an Individual Material Adverse Effect on the
Property. Borrower shall obtain and maintain in full force and effect all
consents, approvals, orders, certifications, permits, licenses and
authorizations of, and make all filings with or notices to, any court or
Governmental Authority related to the operation, use or leasing of the Property
except where the failure to obtain would not reasonably be expected to have an
Individual Material Adverse Effect with respect to the Property. Borrower shall
not and shall not permit Equity Owner, any Borrower TRS, any Manager or any
other Person in occupancy of or involved with the operation, use or leasing of
the Property to commit any act or omission affording any Governmental Authority
the right of forfeiture as against the Property or any part thereof.

4.4.5 Property Taxes and Other Charges. Borrower shall promptly pay or cause to
be paid all Property Taxes and Other Charges now or hereafter levied, assessed
or imposed on it as the same become due and payable and shall furnish to Lender
evidence of payment of Property Taxes and Other Charges prior to the date the
same shall become delinquent, and shall promptly pay for all utility services
provided to the Property as the same become due and payable (other than any such
utilities which are, pursuant to the terms of any Lease, required to be paid by
the Tenant thereunder directly to the applicable service provider); provided,
that, after prior written notice to Lender of its intention to contest any such
Property Taxes and Other Charges, such Loan Party may contest by appropriate
legal proceedings conducted in good faith and with due diligence, the amount or
validity of any such Property Taxes and Other Charges and, in such event, may
permit the Property Taxes and Other Charges so contested to remain unpaid during
any period, including appeals, when a Loan Party is in good faith contesting the
same so long as (i) no Event of Default has occurred and remains uncured,
(ii) such proceeding shall be permitted under and be conducted in accordance
with all applicable Legal Requirements, (iii) no Property or other Collateral
nor any part thereof or interest therein will be in danger of being sold,
forfeited, terminated, canceled or lost, (iv) the applicable Loan Party has set
aside on its books adequate reserves in accordance with GAAP, and the
non-payment or non-discharge of such Property Taxes and Other Charges would not
reasonably be expected to have an Individual Material Adverse Effect on the
applicable Property, (v) enforcement of the contested Property Taxes and Other
Charges is effectively stayed for the entire duration of such contest and no
Lien is imposed on any Property or other Collateral which is reasonably expected
to have an Individual Material Adverse Effect, (vi) any Property Taxes and Other
Charges determined to be due, together with any interest or penalties thereon,
is promptly paid as required after final resolution of such contest, (vii) to
the extent such Property Taxes and Other Charges (when aggregated with all other
Taxes that any Loan Party is then contesting under Section 4.1.4 or

 

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Section 4.4.5 and for which Borrower has not delivered to Lender any Contest
Security) exceed $2,500,000, Borrower shall deliver to Lender either (A) cash,
or other security as may be approved by Lender, in an amount sufficient to
insure the payment of any such Property Taxes and Other Charges, together with
all interest and penalties thereon or (B) a payment and performance bond in an
amount equal to one hundred percent (100%) of the contested amount from a surety
acceptable to Lender in its reasonable discretion, (viii) failure to pay such
Property Taxes and Other Charges will not subject Lender to any civil or
criminal liability, (ix) such contest shall not affect the ownership, use or
occupancy of any Property, and (x) Borrower shall, upon request by Lender, give
Lender prompt notice of the status of such proceedings and/or confirmation of
the continuing satisfaction of the conditions set forth in clauses (i) through
(ix) of this Section 4.4.5. Notwithstanding the foregoing, Borrower shall pay
any contested Property Taxes and Other Charges (or, if cash or other security
has been provided, Lender may pay over any such cash or other security held by
Lender to the claimant entitled thereto) if, in the Lender’s reasonable
judgment, any Property or other Collateral (or any part thereof or interest
therein) shall be in danger of being sold, forfeited, terminated, cancelled or
lost or there shall be any danger of the Lien of any Collateral Document being
primed by any related Lien.

4.4.6 Compliance with Agreements Relating to the Properties. Borrower shall not
enter into any agreement or instrument or become subject to any restriction
which would reasonably be expected to have an Individual Material Adverse Effect
on any Property. Borrower shall not 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 any Property is
bound. Borrower shall not have a material financial obligation under any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument by which any Property is bound, other than obligations under the Loan
Documents. Borrower shall not, and shall cause each Borrower TRS not to, default
in any material respect in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any Permitted Lien with
respect to any Property. No Property nor any part thereof shall be subject to
any purchase options, rights of first refusal, rights of first offer or other
similar rights in favor of any Tenant or other third parties.

4.4.7 Leasing. Borrower shall not enter into any Lease (including any renewals
or extensions of any existing Lease) for any Property unless such Lease is an
Eligible Lease with an Eligible Tenant.

4.4.8 Verification of HOA Payments. Borrower shall deliver to Lender, within
twenty-eight (28) days after the end of each calendar quarter, with respect to
each Applicable HOA Property, proof of payment of the paid HOA Fees identified
in the corresponding Quarterly HOA Report (whether in the form of cancelled
checks, receipts, ACH confirmations, confirmation of electronic payments or
other evidence of such payment reasonably satisfactory to Lender) unless such
proof of payment has previously been delivered (e.g. quarterly prepayments) as
may reflect that as of the end of such calendar quarter no other amounts (except
HOA Fees that may be contested in accordance with Section 4.4.5) remain then due
and payable by Borrower or that Borrower has prepaid or otherwise has a positive
credit balance (whether in the form of invoices, payment coupons, account
statements, assessment letters, estoppels, receipts or other evidence reasonably
satisfactory to Lender).

 

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ARTICLE V - INSURANCE; CASUALTY; CONDEMNATION

Section 5.1 Insurance.

5.1.1 Insurance Policies

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

(i) comprehensive “all risk” or special causes of loss form insurance, as is
available in the insurance market as of the Closing Date, including, but not
limited to, loss caused by any type of windstorm (including hail) on the
Properties (A) in an amount equal to one hundred percent (100%) of the “full
replacement cost”, which for purposes of this Agreement shall mean actual
replacement value of the Properties, subject to a loss limit equal to
$20,000,000 per occurrence; (B) containing an agreed amount endorsement with
respect to the Improvements and personal property at any Property waiving all
co-insurance provisions or to be written on a no co-insurance form and
(C) providing for no deductible in excess of $25,000 (it being understood that,
so long as no Default or Event of Default has occurred and is continuing
(1) Borrower may utilize a $3,000,000 aggregate deductible stop loss subject to
a $25,000 per occurrence deductible and a $25,000 maintenance deductible
following the exhaustion of the aggregate, (2) the aggregate stop loss does not
apply to any losses arising from named windstorm, earthquake or flood, (3) the
perils of windstorm in tier 1 areas or flood shall be permitted to have a per
occurrence deductible of five percent (5%) of the total insurable value of
affected Properties (with a minimum deductible of $250,000 per occurrence for
any and all affected Properties), (4) the peril of earth movement including but
not limited to earthquake shall be permitted to have a per occurrence deductible
of fifteen percent (15%) of the total insurable value of the affected Properties
(with a minimum deductible of $250,000 per occurrence for any and all affected
Properties) and (5) the peril of “other wind and hail” shall be permitted to
have a per occurrence deductible of three percent (3%) of the total insurable
value of the affected Properties (with a minimum deductible of $250,000 per
occurrence for any and all affected Properties)). In addition, Borrower shall
obtain (x) if any portion of a Property is currently or at any time in the
future located in a federally designated “special flood hazard area”, flood
hazard insurance in an amount equal to the maximum amount of such insurance
available under the National Flood Insurance Act of 1968, the Flood Disaster
Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as
each may be amended, plus excess amounts as Lender shall require, (y) named
storm insurance in an amount equal to the Probable Maximum Loss (PML) or
Scenario Expected Limit (SEL) based upon a storm risk analysis for a 500 year
event for the entire portfolio at risk (such analysis to be secured by the
applicable Borrower utilizing a third-party firm qualified to perform such storm
risk analysis using the most current RMS software, or its equivalent, to include
consideration of storm surge, if applicable, and loss amplification, at the
expense of the applicable Borrower at least one time per year or more frequently
as may reasonably be requested by Lender and shared with Lender presented by the
Properties located in areas prone to named storm activity), and (z) earthquake
insurance in an amount equal to the Probable Maximum Loss (PML) or Scenario
Expected Limit (SEL) based upon a seismic risk analysis for a

 

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500 year event for all properties located in California (such analysis to be
secured by the applicable Borrower utilizing a third-party firm qualified to
perform such seismic risk analysis using the most current RMS software, or its
equivalent, to include consideration of loss amplification, at the expense of
the applicable Borrower at least one time per year or more frequently as may
reasonably be requested by Lender and shared with Lender presented by the
Properties located in areas prone to seismic activity); provided, that the
insurance pursuant to subclauses (x), (y) and (z) hereof shall be on terms
consistent with the comprehensive all risk insurance policy required under this
Section 5.1.1(a)(i);

(ii) business income or rental loss insurance, written on an “Actual Loss
Sustained Basis” (A) with loss payable to Lender for the benefit of Lenders;
(B) covering all risks required to be covered by the insurance provided for in
Section 5.1.1(a)(i), (iii), (iv) and (viii); (C) in an amount equal to one
hundred percent (100%) of the aggregate projected net income plus continuing
expenses from the operation of the Properties for a period of at least twelve
(12) months after the date of the Casualty; and (D) containing an extended
period of indemnity endorsement which provides that after the physical loss to
the Improvements and personal property at a 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 thirty (30) days
from the date that the applicable Property is repaired or replaced and
operations are resumed, whichever first occurs, and notwithstanding that the
policy may expire prior to the end of such period. The amount of such business
income or rental loss insurance shall be determined prior to the Closing Date
and at least once each year thereafter based on Borrower’ reasonable estimate of
the net income from each Property for the succeeding twelve (12) month
period. All proceeds payable to Lender pursuant to this subsection shall be held
by Lender and shall be applied in Lender’s sole discretion to (x) the
Obligations or (y) Operating Expenses approved by Lender in its sole discretion;
provided, however, that nothing herein contained shall be deemed to relieve
Borrower of their obligation to pay the Obligations on the respective dates of
payment provided for in this Agreement and the other Loan Documents except to
the extent such amounts are actually paid out of the proceeds of such business
income insurance;

(iii) at all times during which structural construction, repairs or renovations
are being made with respect to any Property, and only if each of the property
coverage form and the liability insurance coverage form does not otherwise
apply, (A) owner’s contingent or protective liability insurance, otherwise known
as Owner Contractor’s Protective Liability (or its equivalent), 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 Section 5.1.1(a) written in a so-called builder’s risk completed value form
including coverage for all insurable hard and soft costs of construction (x) on
a non-reporting basis, (y) against all risks insured against pursuant to
Section 5.1.1(a)(i), (iii), (iv) and (viii), (z) including permission to occupy
such Property and (C) with an agreed amount endorsement waiving co-insurance
provisions;

(iv) commercial general liability insurance against claims for personal injury,
bodily injury, death or property damage occurring upon, in or about any
Property, such insurance (A) to be on the so-called “occurrence” form with a
combined limit of not less

 

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than One Million and No/100 Dollars ($1,000,000.00) per occurrence; Two Million
and No/100 Dollars ($2,000,000.00) in the aggregate “per location” and overall
$10,000,000.00 in the aggregate; (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 be at least as
broad as Insurance Services Offices (ISO) policy form CG 00 01;

(v) if applicable, automobile liability coverage for all owned and non-owned
vehicles, including rented and leased vehicles, containing minimum limits per
occurrence of One Million and No/100 Dollars ($1,000,000.00);

(vi) if applicable, worker’s compensation subject to the worker’s compensation
laws of the applicable state, and employer’s liability in amounts reasonably
acceptable to Lender;

(vii) umbrella and excess liability insurance in an amount not less than Sixty
Million and No/100 Dollars ($60,000,000.00) per occurrence and in the aggregate
on terms consistent with the commercial general liability insurance policy
required under Section 5.1.1(a)(iv), and including employer liability and
automobile liability, if applicable; and

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

(b) All Policies required pursuant to Section 5.1.1 shall: (i) be obtained under
valid and enforceable policies (collectively, the “Policies” or in the singular,
the “Policy”), and shall be subject to the approval of Lender as to insurance
companies, amounts, deductibles, loss payees and insureds and (ii) be issued by
financially sound and responsible insurance companies authorized to do business
in the states where the applicable Properties are located and having a rating of
“A3” or better by Moody’s or, if Moody’s does not provide a rating of an
applicable insurance company, a rating of “A-” or better by S&P or Fitch,
provided, that if Borrower elects to have its insurance coverage provided by a
syndicate of insurers, then, if such syndicate consists of five (5) or more
members, (A) at least sixty percent (60%) of the insurance coverage (or
seventy-five percent (75%) if such syndicate consists of four (4) or fewer
members) and one hundred (100%) of the first layer of such insurance coverage
shall be provided by insurance companies having a rating of “A3” or better by
Moody’s or, if Moody’s does not provide a rating of an applicable insurance
company, a rating of “A-” or better by S&P or Fitch and (B) the remaining forty
percent (40%) of the insurance coverage (or the remaining twenty-five percent
(25%) if such syndicate consists of four (4) or fewer members) shall be provided
by insurance companies having a rating of “Baa2” by Moody’s or, if Moody’s does
not provide a rating of an applicable insurance company, a rating of “BBB” or
better by S&P or Fitch; provided, further, that Borrower shall be permitted to
use Ironshore Specialty Insurance Company so long as such insurer maintains
minimum ratings of “A:X” by A.M. Best Company. Borrower shall provide Lender
with evidence that the Properties are specifically covered by such Policies in a
form reasonably requested by Lender.

 

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(c) All Policies of insurance provided for in Section 5.1.1(a), except for the
Policies referenced in Section 5.1.1(a)(vi), shall contain clauses or
endorsements to the effect that:

(i) no act or negligence of Borrower, or anyone acting for Borrower, or of any
Tenant or other occupant, or failure to comply with the provisions of any
Policy, which might otherwise result in a forfeiture of the insurance or any
part thereof, shall in any way affect the validity or enforceability of the
insurance insofar as Lender is concerned;

(ii) the Policy shall not be canceled without at least thirty (30) days’ written
notice to Lender and any other party named therein as an additional insured
(other than in the case of non-payment in which case only ten (10) days prior
notice, or the shortest time allowed by applicable Legal Requirement (whichever
is longer), will be required); and

(iii) Lender shall not be liable for any Insurance Premiums thereon or subject
to any assessments thereunder.

(d) Certificates of insurance evidencing the Policies shall be delivered to
Lender on the Closing Date with respect to the current Policies. Prior to the
expiration dates of the Policies theretofore furnished to Lender, Borrower shall
promptly deliver to Lender certificates of insurance evidencing the Policies
(and, upon the written request of Lender, copies of such Policies, if available
(and, if not available as of such date, as soon as available)) accompanied by
evidence satisfactory to Lender of payment of the premiums due thereunder (the
“Insurance Premiums”). Additionally, Borrower shall give prompt prior written
notice to Lender of (i) any non-renewal of a Policy prior to its expiration date
and (ii) any other material change to any Policy (other than any increase in the
coverage provided).

(e) Any blanket insurance Policy shall otherwise provide the same protection as
would a separate Policy insuring only the Properties in compliance with the
provisions of Section 5.1.1(a) (any such blanket policy, an “Acceptable Blanket
Policy”).

(f) All Policies of insurance provided for or contemplated by Section 5.1.1(a),
except for the Policy referenced in
Section 5.1.1(a)(iv), shall name Borrower as the insured and Lender and its
successors and/or assigns as mortgagee and loss payee, as its interests may
appear, and in the case of property damage, boiler and machinery, windstorm,
flood and earthquake insurance, shall contain a so-called New York standard
non-contributing mortgagee clause in favor of Lender providing that the loss
thereunder shall be payable to Lender unless below the threshold for Borrower to
handle such claim without Lender intervention as provided in Section 5.2.
Additionally, if Borrower obtains property insurance coverage in addition to or
in excess of that required by Section 5.1.1(a)(i), then such insurance policies
shall also contain a so-called New York standard non-contributing mortgagee
clause in favor of Lender providing that the loss thereunder shall be payable to
Lender.

 

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(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 after three (3) Business Days notice to Borrower if prior to the
date upon which any such coverage will lapse or at any time Lender deems
necessary (regardless of prior notice to Borrower) to avoid the lapse of any
such coverage. All premiums incurred by Lender in connection with such action or
in obtaining such insurance and keeping it in effect shall be paid by Borrower
to Lender upon demand and, until paid, shall be secured by the Collateral
Documents and shall bear interest at the Default Rate.

(h) In the event of foreclosure of the pledge of the Equity Interest of Borrower
pursuant to the Equity Owner Security Agreement the Policies shall remain in
full force and effect.

Section 5.2 Casualty. If a Property is damaged or destroyed, in whole or in
part, by fire or other casualty (a “Casualty”), Borrower shall give prompt
notice thereof to Lender. Lender may, but shall not be obligated to make proof
of loss if not made promptly by Borrower. In addition, Lender may participate in
any settlement discussions with any insurance companies (and shall approve any
final settlement) (i) if an Event of Default is continuing or (ii) with respect
to any single Casualty event in which the Net Proceeds or the costs of
completing the Restoration of the affected Property or Properties is reasonably
expected to be equal to or greater than the Casualty Threshold Amount and
Borrower shall deliver to Lender all instruments required by Lender to permit
such participation. Any Insurance Proceeds in connection with any Casualty
(whether or not Lender elects to settle and adjust the claim or Borrower settles
such claim) shall be due and payable solely to Lender and held by Lender in
accordance with the terms of this Agreement. If Borrower or any party other than
Lender receives any Insurance Proceeds or Condemnation Proceeds, Borrower shall
immediately deliver such proceeds to Lender and shall endorse, and cause all
such third parties to endorse, check payable therefor to the order of Lender.
Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled
with an interest, to endorse any such check payable to the order of Lender.
Borrower hereby releases Lender from any and all liability with respect to the
settlement and adjustment by Lender of any claims in respect of any Casualty.

Section 5.3 Condemnation. Borrower shall promptly give Lender notice of the
actual or, to the extent in writing, threatened commencement of any proceeding
for the Condemnation of all or any portion of a Property and shall deliver to
Lender copies of any and all papers served in connection with such proceedings.
Lender may participate in any such proceedings, and Borrower shall from time to
time deliver to Lender all instruments requested by it to permit such
participation. Borrower shall, at its expense, diligently prosecute any such
proceedings, and shall consult with Lender, its attorneys and experts, and
cooperate with them in the carrying on or defense of any such proceedings which
is reasonably expected to involve an Award of an amount greater than the
Casualty Threshold Amount. 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 Condemnation Proceeds shall have been

 

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actually received and applied by Lender, after the deduction of expenses of
collection, to the reduction or discharge of the Debt. If Borrower or any party
other than Lender receives any Condemnation Proceeds, Borrower shall immediately
deliver such proceeds to Lender and shall endorse, and cause all such third
parties to endorse, a check payable therefor to the order of Lender. 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. Net Proceeds from a Condemnation shall
be applied as follows:

(a) If a partial Condemnation of a Property does not interfere with the use of
such Property as a residential rental property, then the Net Proceeds paid by
the condemning authority shall be applied to the prepayment of the Debt in
accordance with
Section 2.4.2(c).

(b) If a partial Condemnation of a Property does interfere with the use of such
Property as a residential rental property or if there occurs a complete
Condemnation of a Property (each, a “Fully Condemned Property”), then (i) if no
Event of Default shall have occurred and be continuing and, within thirty
(30) days of the date of the occurrence of such Condemnation, Borrower delivers
to Lender a written undertaking to substitute the Fully Condemned Property with
a Substitute Property in accordance with the requirements of Section 2.4.2(a),
then (A) if Net Proceeds are paid by the condemning authority directly to
Borrower subsequent to such substitution, such Net Proceeds may be retained by
Borrower (for the avoidance of doubt, Net Proceeds received by Borrower prior to
such substitution shall be immediately paid to Lender as required by
Section 5.2), (B) if Net Proceeds are paid by the condemning authority to
Lender, such Net Proceeds will be disbursed by Lender to Borrower upon the
consummation of such substitution and (C) Borrower shall provide a Substitute
Property within ten (10) Business Days of the date of such undertaking in
accordance with the requirements of Section 2.4.2(a) and (ii) if an Event of
Default shall have occurred and be continuing or Borrower fails to deliver such
an undertaking to Lender, then (A) Lender may retain any Net Proceeds received
by it, (B) Borrower shall immediately deliver to Lender any Net Proceeds paid to
Borrower, (C) the Net Proceeds shall be applied to the prepayment of the Debt in
an amount equal to the Release Amount for the Fully Condemned Property in
accordance with Section 2.4.2(c) and (D) Borrower shall prepay the Loan in an
amount equal to the excess, if any, of the Release Amount for the Fully
Condemned Property over such Net Proceeds. Promptly following Borrower’s written
request after either (1) the substitution of a Substitute Property for such
Fully Condemned Property in accordance with the conditions set forth above or
(2) receipt by Lender of the Net Proceeds and payment of the Release Amount for
such Property, Lender shall (x) release the Fully Condemned Property from the
applicable Mortgage Documents and related Lien, provided, that (A) Borrower has
delivered to Lender a draft release (and, in the event the Mortgage and the
Collateral Assignment of Leases and Rents applicable to the Fully Condemned
Property encumbers other Property(ies) in addition to the Fully Condemned
Property, such release shall be a partial release that relates only to the Fully
Condemned Property and does not affect the Liens and security interests
encumbering or on the other Property(ies)) in form and substance appropriate for
the jurisdiction in which such Fully Condemned Property is located and shall
contain standard provisions protecting the rights of Lender and (B) Borrower
shall pay all costs, taxes and expenses associated with such release (including,
without limitation, cost to file and record the release and Lender’s reasonable
attorneys’ fees) and (y) disburse to Borrower (A) in the case of a substitution
of a Substitute Property for such Fully Condemned Property, the Net Proceeds
paid by the condemning

 

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authority and (B) in the case of the payment of the Release Amount for such
Property, the Net Proceeds paid by the condemning authority in excess of the
Release Amount for such Property; provided that, during the continuance of a
Cash Sweep Period, the applicable Net Proceeds shall instead be delivered to the
Cash Collateral Subaccount and disbursed in accordance with Section 6.6.3.

Section 5.4 Restoration.

The following provisions shall apply in connection with the Restoration of any
Property affected by a Casualty:

(a) If the Net Proceeds reasonably expected to be received in connection with
any single Casualty event is less than the Casualty Threshold Amount, then,
(i) if no Event of Default shall have occurred and be continuing and, within
sixty (60) days of the date of the occurrence of such Casualty, Borrower
delivers to Lender a written undertaking to expeditiously commence and to
satisfactorily complete with due diligence the Restoration of the affected
Properties in accordance with the terms of this Agreement, then (A) if Net
Proceeds are paid by the insurance company directly to Borrower subsequent to
delivering such undertaking, such Net Proceeds may be retained by Borrower (for
the avoidance of doubt, Net Proceeds received by Borrower prior to delivering
such undertaking shall be immediately paid to Lender as required by
Section 5.2), (B) if Net Proceeds are paid by the insurance company to Lender,
such Net Proceeds will be disbursed by Lender to Borrower and (C) Borrower shall
conduct the Restoration of the affected Properties in accordance with the terms
of Section 5.4(c) and (ii) if an Event of Default shall have occurred and be
continuing or Borrower fails to deliver such an undertaking to Lender, then
(A) Lender may retain any Net Proceeds received by it, (B) Borrower shall
immediately deliver to Lender any Net Proceeds paid to Borrower as required by
Section 5.2, (C) such Net Proceeds shall be applied to the prepayment of the
Debt in an amount equal to the Release Amount for such Property in accordance
with Section 2.4.2(c), (D) Borrower shall prepay the Loan in an amount equal to
the excess, if any, of the Release Amount for such Property over such Net
Proceeds, and (E) promptly following Borrower’s written request and receipt by
Lender of the Net Proceeds and payment by Borrower of the amounts set forth in
clause (D) above, if any, Lender shall (x) release the affected Properties from
the applicable Mortgage Documents and related Liens, provided, that (A) Borrower
has delivered to Lender draft releases (and, in the event any of the Mortgages
and the Assignments of Leases and Rents applicable to any of the affected
Properties encumber other Property(ies) in addition to the affected Properties,
such release shall be a partial release that relates only to the affected
Property(ies) and does not affect the Liens and security interests encumbering
or on the other Property(ies)) in form and substance appropriate for the
jurisdiction in which such affected Properties are located and shall contain
standard provisions protecting the rights of Lender and (B) Borrower shall pay
all costs, taxes and expenses associated with such release (including, without
limitation, cost to file and record the release and Lender’s reasonable
attorneys’ fees) and (y) disburse to Borrower (A) in the case of a substitution
of a Substitute Property for such Property, the Net Proceeds paid by the
insurance company and (B) in the case of the payment of the Release Amount for
such Property, the Net Proceeds paid by the insurance company in excess of the
Release Amount for such Property; provided that, during the continuance of a
Cash Sweep Period, the applicable Net Proceeds shall instead be delivered to the
Cash Collateral Subaccount and disbursed in accordance with Section 6.6.3.

 

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(b) If the Net Proceeds reasonably expected to be received in connection with
any single Casualty event is greater than the Casualty Threshold Amount, then,
(i) if no Event of Default shall have occurred and be continuing and, within
sixty (60) days of the date of the occurrence of such Casualty, Borrower
delivers to Lender a written undertaking to expeditiously commence and to
satisfactorily complete with due diligence the Restoration of the affected
Properties in accordance with the terms of this Agreement, then (A) Borrower
shall immediately deliver to Lender any Net Proceeds paid to Borrower as
required by Section 5.2 and (B) Borrower shall conduct the Restoration of the
affected Properties in accordance with the terms of and subject to the
conditions of Section 5.4(d) and (ii) if an Event of Default shall have occurred
and be continuing or Borrower fails to deliver such an undertaking to Lender,
then (A) Lender may retain any Net Proceeds received by it, (B) Borrower shall
immediately deliver to Lender any Net Proceeds paid to Borrower as required by
Section 5.2, (C) such Net Proceeds shall be applied to the prepayment of the
Debt in an amount equal to the Release Amount for such Property in accordance
with Section 2.4.2(c), (D) Borrower shall prepay the Loan in an amount equal to
the excess, if any, of the Release Amount for the affected Properties over such
Net Proceeds, and (E) promptly following Borrower’s written request and receipt
by Lender of the Net Proceeds and payment by Borrower of the amounts set forth
in clause (D) above, if any, Lender shall (x) release the affected Properties
from the applicable Mortgage Documents and related Liens, provided, that
(A) Borrower has delivered to Lender draft releases (and, in the event any of
the Mortgages and the Assignments of Leases and Rents applicable to any of the
affected Properties encumber other Property(ies) in addition to the affected
Properties, such release shall be a partial release that relates only to the
affected Property(ies) and does not affect the Liens and security interests
encumbering or on the other Property(ies)) in form and substance appropriate for
the jurisdiction in which such affected Properties are located and shall contain
standard provisions protecting the rights of Lender and (B) Borrower shall pay
all costs, taxes and expenses associated with such release (including, without
limitation, cost to file and record the release and Lender’s reasonable
attorneys’ fees) and (y) disburse to Borrower (A) in the case of a substitution
of a Substitute Property for such Property, the Net Proceeds paid by the
insurance company and (B) in the case of the payment of the Release Amount for
such Property, the Net Proceeds paid by the insurance company in excess of the
Release Amount for such Property; provided that, during the continuance of a
Cash Sweep Period, the applicable Net Proceeds shall instead be delivered to the
Cash Collateral Subaccount and disbursed in accordance with Section 6.6.3.

(c) If Borrower elects to undertake the Restoration a Property or Properties
pursuant to Section 5.4(a), (i) Borrower shall commence the Restoration as soon
as reasonably practicable (but in no event later than ninety (90) days after
such Casualty occurs) and shall diligently pursue the same to satisfactory
completion; (ii) Borrower shall cause the affected Property and the use thereof
after the Restoration to be in compliance with and permitted under all
applicable Legal Requirements and such Property, after Restoration, shall be of
the same character as prior to such damage or destruction; (iii) the Restoration
shall be done and completed by Borrower in an expeditious and diligent fashion
and in compliance with all applicable Legal Requirements and the Renovation
Standards and (iv) for any Restoration of a Property with a total expected cost
exceeding $20,000, Borrower shall deliver, or cause to be delivered, to Lender a
signed detailed budget, which budget shall be reasonably acceptable to Lender.

 

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(d) If Borrower elects to undertake the Restoration of a Property or Properties
pursuant to Section 5.4(b), the following provisions shall apply:

(i) the Net Proceeds shall be made available to Borrower for Restoration upon
the determination of Lender that the following conditions are met: (A) Borrower
shall commence the Restoration as soon as reasonably practicable (but in no
event later than ninety (90) days after such Casualty occurs) and shall
diligently pursue the same to satisfactory completion; (B) Lender shall be
satisfied that any operating deficits, including all scheduled payments of
principal and interest under the Note, which will be incurred with respect to
the Properties as a result of the occurrence of the Casualty, whichever the case
may be, will be covered out of (1) the Net Proceeds, (2) the insurance coverage
referred to in Section 5.1.1(a)(ii), if applicable, or (3) by other funds of
Borrower; (C) Lender shall be satisfied that the Restoration will be completed
on or before the earliest to occur of (1) the date six (6) months prior to the
Initial Maturity Date, as extended pursuant to Section 2.8, (2) the earliest
date required for such completion under the terms of any Lease, (3) such time as
may be required under applicable Legal Requirements or (4) six (6) months prior
to the expiration of the insurance coverage referred to in Section 5.1.1(a)(ii);
(D) Borrower shall cause the affected Property and the use thereof after the
Restoration to be in compliance with and permitted under all applicable Legal
Requirements and such Property, after Restoration, shall be of the same
character as prior to such damage or destruction; (E) the Restoration shall be
done and completed by Borrower in an expeditious and diligent fashion and in
compliance with all applicable Legal Requirements and the Renovation Standards;
(F) for any Restoration of a Property with a total expected cost exceeding
$20,000, Borrower shall deliver, or cause to be delivered, to Lender a signed
detailed budget, which budget shall be reasonably acceptable to Lender and
(G) the Net Proceeds together with any cash or cash equivalent deposited by
Borrower with Lender are sufficient in Lender’s discretion to cover the cost of
the Restoration.

(ii) The Net Proceeds shall be held by Lender in the Casualty and Condemnation
Subaccount and, until disbursed in accordance with the provisions of this
Section 5.4(d), shall constitute additional security for the Debt and other
obligations under the Loan Documents. The Net Proceeds shall be disbursed by
Lender to, or as directed by, Borrower from time to time during the course of
the Restoration, upon receipt of evidence satisfactory to Lender that (A) all
materials installed and work and labor performed (except to the extent that they
are to be paid for out of the requested disbursement) in connection with the
Restoration have been paid for in full, and (B) there exist no notices of
pendency, stop orders, mechanic’s or materialman’s liens or notices of intention
to file same, or any other liens or encumbrances of any nature whatsoever on the
Properties which have 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 the prior approval of Lender and 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
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connection with the Restoration. The identity of the contractors, subcontractors
and materialmen engaged in the Restoration, as well as the contracts under which
they have been engaged, shall be subject to the approval of Lender and the
Casualty Consultant. All costs and expenses incurred by Lender in connection
with recovering, holding and advancing the Net Proceeds for the Restoration
including, without limitation, reasonable attorneys’ fees and disbursements and
the Casualty Consultant’s fees and disbursements, shall be paid by Borrower.

(iv) In no event shall Lender be obligated to make disbursements of the Net
Proceeds in excess of an amount equal to the costs actually incurred from time
to time for work in place as part of the Restoration, as certified by the
Casualty Consultant, less the Casualty Retainage. The term “Casualty Retainage”
shall mean, as to each contractor, subcontractor or materialman engaged in the
Restoration, an amount equal to ten percent (10%) of the costs actually incurred
for work in place as part of the Restoration, as certified by the Casualty
Consultant, until the Restoration has been completed. The Casualty Retainage
shall in no event, and notwithstanding anything to the contrary set forth above
in this Section 5.4(d), be less than the amount actually held back by Borrower
from contractors, subcontractors and materialmen engaged in the Restoration. The
Casualty Retainage shall not be released until the Casualty Consultant certifies
to Lender that the Restoration has been completed in accordance with the
provisions of this Section 5.4(b) and that all approvals necessary for the
re-occupancy and use of the Property have been obtained from all appropriate
Governmental Authorities, and Lender receives evidence satisfactory to Lender
that the costs of the Restoration have been paid in full or will be paid in full
out of the Casualty Retainage; provided, however, that Lender will release the
portion of the Casualty Retainage being held with respect to any contractor,
subcontractor or materialman engaged in the Restoration as of the date upon
which (x) the Casualty Consultant certifies to Lender that such contractor,
subcontractor or materialman has satisfactorily completed all work and has
supplied all materials in accordance with the provisions of such contractor’s,
subcontractor’s or materialman’s contract, (y) the contractor, subcontractor or
materialman delivers the lien waivers and evidence of payment in full of all
sums due to the contractor, subcontractor or materialman as may be reasonably
requested by Lender or by the title company issuing the Title Insurance Policy,
and (z) Lender receives an endorsement to the Title Insurance Policy insuring
the continued priority of the Lien of the Mortgage and evidence of payment of
any premium payable for such endorsement. If required by Lender, the release of
any such portion of the Casualty Retainage shall be approved by the surety
company, if any, which has issued a payment or performance bond with respect to
the contractor, subcontractor or materialman.

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

(vi) If at any time the Net Proceeds or the undisbursed balance thereof shall
not, in the opinion of Lender in consultation with the Casualty Consultant, be
sufficient to pay in full the balance of the costs which are estimated by the
Casualty Consultant to be incurred in connection with the completion of the
Restoration, Borrower shall deposit the deficiency (the “Net Proceeds
Deficiency”) with Lender (for deposit into the Casualty

 

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and Condemnation Subaccount) before any further disbursement of the Net Proceeds
shall be made. The Net Proceeds Deficiency deposited with Lender shall be
deposited by Lender into the Casualty and Condemnation Subaccount 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 5.4(d) shall constitute additional security
for the Obligations.

(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 5.4(d), and the receipt by Lender
of evidence satisfactory to Lender that all costs incurred in connection with
the Restoration have been paid in full, shall be remitted by Lender to Borrower,
provided no Event of Default shall have occurred and shall be continuing.

(e) All reasonable out-of-pocket costs and expenses incurred by Lender in
connection with any Restoration including, without limitation, reasonable
attorneys’ fees and disbursements, shall be paid by Borrower.

(f) Notwithstanding anything to the contrary set forth in this Agreement,
including the provisions of Section 5.3 or Section 5.4, if the Loan is included
in a REMIC Trust and, immediately following a release of any portion of the Lien
of a Mortgage following a Casualty or Condemnation of a Property (but taking
into account any proposed Restoration of the remaining portion of such
Property), the ratio of the unpaid principal balance of the Loan to the value of
the remaining Properties is greater than 125% (such value to be determined, in
Lender’s sole discretion, by any commercially reasonable method permitted to a
REMIC Trust; and which shall exclude the value of personal property (other than
fixtures) or going concern value, if any), the Outstanding Principal Balance
must be paid down (by application of the Net Proceeds or Award, as applicable,
or if such amounts are not sufficient, by Borrower) by a “qualified amount” as
that term is defined in the IRS Revenue Procedure 2010-30, as the same may be
amended, replaced, supplemented or modified from time to time, unless Lender
receives an opinion of counsel that if such amount is not paid, the applicable
Securitization will not fail to maintain its status as a REMIC Trust as a result
of the related release of such portion of the Lien of such Mortgage. If and to
the extent the preceding sentence applies, only such amount of the net Award or
net Insurance Proceeds (as applicable), if any, in excess of the amount required
to pay down the principal balance of the Loan may be released for purposes of
Restoration or released to Borrower as otherwise expressly provided in
Section 5.3 or Section 5.4.

(g) In the event of foreclosure of a Mortgage, or other transfer of title to a
Property or Properties in extinguishment in whole or in part of the Debt all
right, title and interest of Borrower in and to the Policies that are not
blanket Policies then in force concerning such Property or Properties and all
proceeds payable thereunder shall thereupon vest in the purchaser at such
foreclosure or Lender or other transferee in the event of such other transfer of
title.

 

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ARTICLE VI - RESERVE FUNDS

Section 6.1 Tax Funds; HOA Funds.

6.1.1 Deposits of Tax Funds. Borrower shall deposit with Lender (i) on the
Closing Date, an amount equal to $5,662,871 and (ii) on each Payment Date, an
amount equal to one-twelfth of the Property Taxes that Lender estimates will be
payable during the next ensuing twelve (12) months (initially, $776,120 per
month), in order to accumulate sufficient funds to pay all such Property Taxes
prior to their respective due dates, which amounts shall be transferred into a
Subaccount established at the Cash Management Account Bank to hold such funds
(the “Tax Subaccount”). Amounts deposited from time to time into the Tax
Subaccount pursuant to this Section 6.1.1 are referred to herein as the “Tax
Funds”. If at any time Lender reasonably determines that the Tax Funds will not
be sufficient to pay the Property Taxes, Lender shall notify Borrower of such
determination and, commencing with the first Payment Date following Borrower’s
receipt of such written notice, the monthly deposits for Property Taxes shall be
increased by the amount that Lender estimates is sufficient to make up the
deficiency at least ten (10) days prior to the respective due dates for the
Property Taxes; provided, that if Borrower receives notice of any deficiency
after the date that is ten (10) days prior to the date that Property Taxes are
due, Borrower will deposit with or on behalf of Lender such amount within two
(2) Business Days after its receipt of such notice.

6.1.2 Release of Tax Funds. Provided no Event of Default is continuing, Lender
shall disburse Tax Funds in the Tax Subaccount to Borrower to timely pay, or to
reimburse Borrower for payments of, Property Taxes; provided that: (i) such
disbursement is for Property Taxes then due and payable by Borrower, (ii) the
request for disbursement is accompanied by (A) an Officer’s Certificate from
Borrower (1) stating that the items to be funded by the requested disbursement
are Property Taxes then due and payable, and describing such Property Taxes and
(2) stating that the Property Taxes to be funded from the disbursement in
question have not been the subject of a previous disbursement and (iii) if all
or any portion of such disbursement will be used to fund Property Taxes in an
amount greater than $5,000 for any individual Property, Borrower has delivered
to Lender copies of any invoices, bills or statements related to the Property
Taxes for any such Property that are requested by Lender. If the amount of the
Tax Funds shall exceed the amounts due for Property Taxes, Lender shall, in its
sole discretion, return any excess to Borrower or credit such excess against
future payments to be made to the Tax Funds. Any Tax Funds remaining in the Tax
Subaccount after the Obligations have been paid in full shall be returned to
Borrower. Provided no Default or Event of Default exists, the Tax Funds reserved
for any Property shall be released upon a permitted sale and release of such
Property in accordance with the terms hereof.

6.1.3 Deposits of HOA Funds. Borrower shall deposit with Lender on the Closing
Date, an amount equal to the HOA Fees that Lender estimates will be payable with
respect to all Applicable HOA Properties during the next ensuing twelve
(12) months (initially, $269,646), which amounts shall be transferred into a
Subaccount established at the Cash Management Account Bank to hold such funds
(the “HOA Subaccount”). Amounts deposited from time to time into the HOA
Subaccount pursuant to this Section 6.1.3 are referred to herein as the “HOA
Funds”. If at any time Lender reasonably determines that the HOA Funds will not
be sufficient to pay the HOA Fees for the Applicable HOA Properties for the next
ensuring twelve (12) months, Lender shall notify Borrower of such determination
and, within thirty (30) days following Borrower’s receipt of such written
notice, Borrower shall deposit with Lender for transfer into the HOA Subaccount
an amount that Lender estimates is sufficient to make up the deficiency.

 

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6.1.4 Release of HOA Funds. If at any time Lender believes in good faith that
HOA Fees due and payable to an HOA for any HOA Property have become delinquent,
Lender may in its sole and absolute discretion apply the HOA Funds to pay such
HOA Fees. If the amount of the HOA Funds shall exceed the HOA Fees that Lender
estimates will be payable with respect to all Applicable HOA Properties during
the next ensuring twelve (12) months, Lender shall, in its sole discretion,
return any excess to Borrower or credit such excess against future payments to
be made to the HOA Funds. Any HOA Funds remaining in the HOA Subaccount after
the Obligations have been paid in full shall be returned to Borrower. Provided
no Default or Event of Default exists, the HOA Funds reserved for any Applicable
HOA Property shall be released upon a permitted sale and release of such
Property in accordance with the terms hereof.

Section 6.2 Insurance Funds.

6.2.1 Deposits of Insurance Funds. Borrower shall deposit with or on behalf of
Lender on each Payment Date, an amount equal to one-twelfth of the Insurance
Premiums that Lender estimates will be payable for the renewal of the coverage
afforded by the Policies upon the expiration thereof, in order to accumulate
sufficient funds to pay all such Insurance Premiums prior to the expiration of
the Policies, which amounts shall be transferred into a Subaccount established
at the Cash Management Account Bank to hold such funds (the “Insurance
Subaccount”). Amounts deposited from time to time into the Insurance Subaccount
pursuant to this Section 6.2.1 are referred to herein as the “Insurance Funds”.
If at any time Lender reasonably determines that the Insurance Funds will not be
sufficient to pay the Insurance Premiums, Lender shall notify Borrower of such
determination and the monthly deposits for Insurance Premiums shall be increased
by the amount that Lender estimates is sufficient to make up the deficiency at
least thirty (30) days prior to expiration of the Policies.

6.2.2 Release of Insurance Funds. Provided no Event of Default is continuing,
Lender shall disburse Insurance Funds in the Insurance Subaccount to the
Borrower to timely pay, or to reimburse Borrower for payments of, Insurance
Premiums. If the amount of the Insurance Funds shall exceed the amounts due for
Insurance Premiums, Lender shall, in its sole discretion, return any excess to
Borrower or credit such excess against future payments to be made to the
Insurance Funds. Any Insurance Funds remaining in the Insurance Subaccount after
the Obligations have been paid in full shall be returned to Borrower. Provided
no Default or Event of Default exists, the Insurance Funds reserved for any
Property shall be released upon a permitted sale and release of such Property in
accordance with the terms hereof.

6.2.3 Acceptable Blanket Policy. Notwithstanding anything to the contrary
contained in Section 6.2.1, if an Acceptable Blanket Policy is in effect with
respect to the Policies required pursuant to Section 5.1.1, deposits into the
Insurance Subaccount required for Insurance Premiums pursuant to Section 6.2.1
shall be suspended to the extent that Insurance Premiums relate to such
Acceptable Blanket Policy. As of the Closing Date, an Acceptable Blanket Policy
is in effect with respect to the Policies required as of the Closing Date
pursuant to Section 5.1.1. Notwithstanding the foregoing, Borrower may, by
written notice to Lender given not less than ten (10) Business Days prior to a
Payment Date, elect to reinstate, as of such Payment Date, deposits to the
Insurance Subaccount with respect to the Insurance Premiums for one or more of
the Policies required pursuant to Section 5.1.1 for which an Acceptable Blanket
Policy is in effect. Further, if Borrower makes such an election, then Borrower
may rescind such election by

 

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providing a written notice thereof to Lender, which notice shall be effective as
of the Payment Date that follows such notice by more than ten (10) Business Days
or such later Payment Date as Borrower specifies in its election.

Section 6.3 Capital Expenditure Funds.

6.3.1 Deposits of Capital Expenditure Funds. Borrower shall deposit with or on
behalf of Lender on each Payment Date, an amount equal to one-twelfth of the
product of (i) $1,003 multiplied by (ii) the number of Properties to which the
Loan is applicable, in order to accumulate sufficient funds, for annual Capital
Expenditures (other than Discretionary Capital Expenditures), which amounts
shall be transferred into a Subaccount established at the Cash Management
Account Bank to hold such funds (the “Capital Expenditure Subaccount”). Amounts
deposited from time to time into the Capital Expenditure Subaccount pursuant to
this Section 6.3.1 are referred to herein as the “Capital Expenditure Funds”.

6.3.2 Release of Capital Expenditure Funds. Provided no Event of Default is
continuing, Lender shall disburse Capital Expenditure Funds out of the Capital
Expenditure Subaccount to Borrower to pay, or to reimburse Borrower for payments
of, Capital Expenditures required to be paid for by Borrower, provided that:
(i) such disbursement is for an Approved Capital Expenditure, (ii) the request
for disbursement is accompanied by (A) an Officer’s Certificate from Borrower
(1) stating that the items to be funded by the requested disbursement are
Approved Capital Expenditures, and a description thereof, (2) stating that all
Approved Capital Expenditures to be funded by the requested disbursement have
been completed (or completed to the extent of the requested disbursement) in a
good and workmanlike manner and in accordance, in all material respects, with
all applicable Legal Requirements and the Renovation Standards and, (3) stating
that the Approved Capital Expenditures to be funded from the disbursement in
question have not been the subject of a previous disbursement and are required
to be paid for by Borrower and (iii) for any individual expenditure greater than
$25,000, Borrower has delivered to Lender copies of any invoices, bills or
statements related to such Approved Capital Expenditures that are requested by
Lender. For the avoidance of doubt, Borrower shall not be entitled to receive a
distribution of Capital Expenditure Funds for expenses related to the
refurbishment or repair of a Property to the extent that Borrower has been or
will be entitled to reimbursement for such expenses from a Tenant’s security
deposit.

Section 6.4 Casualty and Condemnation Subaccount. Borrower shall pay, or cause
to be paid, to Lender all Insurance Proceeds or Awards due to any Casualty or
Condemnation in accordance with the provisions of Section 5.2 and Section 5.3,
which amounts shall be transferred into a Subaccount established at the Cash
Management Bank to hold such funds (the “Casualty and Condemnation Subaccount”).
Amounts deposited from time to time into the Casualty and Condemnation
Subaccount pursuant to this Section 6.4 are referred to herein as the “Casualty
and Condemnation Funds”. All Casualty and Condemnation Funds shall be held,
disbursed and/or applied in accordance with the provisions of Section 5.3 or
Section 5.4, as applicable.

 

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Section 6.5 Eligibility Reserve Subaccount.

6.5.1 Deposit of Eligibility Funds. If Borrower shall be required to make a
prepayment in respect of any Property pursuant to Section 2.4.2(a) (other than
in the case of any Property that constitutes a Disqualified Property due to the
occurrence of a Voluntary Action in respect thereof), Borrower shall have an
option to deposit into a Subaccount established at the Cash Management Bank to
hold such funds (the “Eligibility Reserve Subaccount”) an amount equal to 100%
of the Allocated Loan Amount for any such Property (“Eligibility Funds”),
provided that Borrower provides Lender with written notice of any such
Eligibility Funds and, no later than the due date for the prepayment required
under Section 2.4.2(a), delivers such Eligibility Funds with Lender for deposit
to the Eligibility Reserve Subaccount.

6.5.2 Release of Eligibility Funds. Provided no Default or Event of Default
exists, Lender shall disburse the Eligibility Funds with respect to a Property
to Borrower upon (i) the sale of such Property and payment in full of the
applicable Release Amount, (ii) upon such Property becoming an Eligible Property
or (iii) upon the substitution of the applicable Disqualified Property with a
Substitute Property in accordance with the conditions of Section 2.4.2(a).

Section 6.6 Cash Collateral.

6.6.1 Cash Collateral Subaccount. If a Cash Sweep Period shall be continuing,
all Available Cash (after payment of the Monthly Budgeted Amount and any
Approved Extraordinary Expenses in accordance with Section 2.6.3) shall be paid
to Lender, which amounts shall be transferred by Lender into a Subaccount (the
“Cash Collateral Subaccount”) to be held by Lender as cash collateral for the
Debt. Amounts on deposit from time to time in the Cash Collateral Subaccount
pursuant to this Section 6.6.1 are referred to as the “Cash Collateral Funds”.
Lender shall have the right, but not the obligation, at any time during the
continuance of an Event of Default, in its sole and absolute discretion to apply
any and all Cash Collateral Funds then on deposit in the Cash Collateral
Subaccount to the Debt, in such order and in such manner as Lender shall elect
in its sole and absolute discretion, including to make a prepayment of principal
(together with the applicable Spread Maintenance Premium, Interest Shortfall and
Breakage Costs, if any, applicable thereto) or any other amounts due hereunder.

6.6.2 Withdrawal of Cash Collateral Funds. Provided no Default or an Event of
Default hereunder is continuing and there is an amount exceeding one percent
(1%) of the Outstanding Principal Balance on deposit in the Cash Collateral
Subaccount (the “Cash Collateral Floor”), Lender shall make disbursements from
the Cash Collateral Subaccount of Cash Collateral Funds in excess of the Cash
Collateral Floor to pay costs and expenses in connection with the ownership,
management and/or operation of the Properties to the extent such amounts are not
otherwise paid pursuant to Section 6.6.1 or by Manager pursuant to the
Management Agreement for the following items: (i) Operating Expenses (including
management fees, but subject to the Management Fee Cap) set forth in an Approved
Annual Budget (subject to a five percent (5%) variation for Operating Expenses
in such Approved Annual Budget), (ii) emergency repairs and/or life-safety items
(including applicable Capital Expenditures for such purpose), (iii) Capital
Expenditures set forth in an Approved Annual Budget (subject to a five percent
(5%) variation for Capital Expenditures in such Approved Annual Budget),
(iv) legal, audit and accounting costs associated with the Properties or
Borrower, excluding legal fees incurred in connection with the enforcement of
Borrower’s, rights pursuant to the Loan

 

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Documents, (v) payment of Debt Service on the Loan, (vi) voluntary or mandatory
prepayment of the Loan (together with any applicable Spread Maintenance
Premium), including, without limitation, any Debt Yield Cure Prepayment,
(vii) expenses and shortfalls relating to Restoration and (viii) cash
Concessions owing to Tenants but only to the extent such Concessions were
deducted in determining GPR pursuant to clause (i) of the definition thereof;
provided, that no disbursements shall be made from the Cash Collateral
Subaccount for any of the Operating Expenses or Capital Expenditures described
in the foregoing clauses (i) through (iv) to the extent amounts for such
Operating Expenses or Capital Expenditures have been distributed to Borrower
from the Cash Management Account under Section 2.6.3(j)(ii)(B), or may be
distributed to Borrower from the Tax Subaccount, the Insurance Subaccount or the
Capital Expenditure Subaccount, as applicable.

6.6.3 Release of Cash Collateral Funds. Provided no Cash Sweep Period is
continuing as of two consecutive Calculation Dates, Lender shall release Cash
Collateral Funds in the Cash Collateral Subaccount to Borrower; provided, that
in the event of a Debt Yield Cure Prepayment, Lender is required to release the
Cash Collateral Funds to Borrower within one (1) Business Day of the date of
such Debt Yield Cure Prepayment.

6.6.4 Extraordinary Expense. If, during any Cash Sweep Period, Borrower incurs
or is required to incur an operating expense or capital expense which is not set
forth in the Approved Annual Budget (each an “Extraordinary Expense”), then
Borrower shall promptly deliver to Lender in writing a reasonably detailed
explanation of such Extraordinary Expense. If a Cash Sweep Period then exists,
then such Extraordinary Expense shall be subject to Lender’s approval, which
approval may not be unreasonably withheld or delayed so long as no Event of
Default then exists; provided, however, that during a Cash Sweep Period, so long
as no Event of Default then exists, Lender shall be deemed to have approved any
Extraordinary Expense (other than fees paid to any Manager or any amounts paid
to any Affiliates of Borrower) that (a) does not exceed (when aggregated with
any and all other requested and unpaid Extraordinary Expenses covered by the
same line item of the Approved Annual Budget) ten percent (10%) of the monthly
amount of the applicable line item set forth in the Approved Annual Budget for
such month and (b) does not exceed (when aggregated with any and all other
requested and unpaid Extraordinary Expenses of the same type (i.e., Operating
Expenses or Capital Expenditures)) five percent (5%) of the aggregate monthly
amount of the Approved Annual Budget with respect to Operating Expenses or
Capital Expenditures, as applicable, for such month. Any Extraordinary Expense
incurred by Borrower and approved (or deemed approved) by Lender is referred to
herein as an (“Approved Extraordinary Expense”). Any amounts distributed to
Borrower for the payment of Approved Extraordinary Expenses pursuant to
Section 6.6.4 shall be used by Borrower only to pay for such Approved
Extraordinary Expenses or reimburse Borrower for such Approved Extraordinary
Expenses, as applicable.

Section 6.7 Advance Rent Funds.

6.7.1 Deposits of Advance Rent Funds. In the event Borrower receives any Advance
Rent, Borrower shall deposit (or cause to be deposited) any such Advance Rent
into a Subaccount established at the Cash Management Account Bank to hold such
funds (the “Advance Rent Subaccount”). Amounts deposited from time to time in
the Advance Rent Subaccount pursuant to this Section 6.7.1 are referred to
herein as the “Advance Rent Funds”.

 

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6.7.2 Release of Advance Rent Funds. Provided no Event of Default has occurred
and is continuing, on each Payment Date, Lender shall disburse the applicable
Advance Rent Funds to the Cash Management Account in accordance with the Advance
Rent Disbursement Schedule.

Section 6.8 Reserve Funds, Generally.

(a) Notwithstanding anything to the contrary contained in this Article 6,
disbursements of Reserve Funds to Borrower shall only occur on the Reserve
Release Date after receipt by Lender of a Reserve Release Request from Borrower
not less than five (5) Business Days prior to such date; provided, that if the
amount of Reserve Funds to be released to Borrower on any Reserve Release Date
is less than the Minimum Disbursement Amount, then such Reserve Funds shall
continue to be maintained in the Subaccounts until the next Reserve Release Date
on which an amount equal to or greater than the Minimum Disbursement Amount is
available for disbursement or until the payment in full of the Obligations.

(b) Borrower grants to Lender a first-priority perfected security interest in
each of the Reserve Funds and any and all monies now or hereafter deposited in
each Reserve Fund as additional security for payment of the Debt. Until expended
or applied in accordance herewith, the Reserve Funds shall constitute additional
security for the Debt.

(c) During the continuance of an Event of Default, Lender may, in addition to
any and all other rights and remedies available to Lender, apply any sums then
present in any or all of the Reserve Funds to the payment of the Debt in any
order in its sole discretion.

(d) The Reserve Funds shall be held in an Eligible Account in cash or Permitted
Investments as directed by Lender or Lender’s Servicer. All interest on a
Reserve Fund shall be added to and become a part thereof and shall be the sole
property of Borrower. Borrower shall be responsible for payment of any federal,
state or local income or other tax applicable to the interest earned on the
Reserve Funds credited or paid to Borrower.

(e) Borrower shall not, without obtaining the prior written consent of Lender,
further pledge, assign or grant any security interest in any Reserve Fund or the
monies deposited therein or permit any lien or encumbrance to attach thereto, or
any levy to be made thereon, or any UCC-1 financing statements, except those
naming Lender as the secured party, to be filed with respect thereto.

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

 

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ARTICLE VII - DEFAULTS

Section 7.1 Event of Default.

(a) Each of the following events shall constitute an event of default hereunder
(an “Event of Default”):

(i) if (A) the Debt is not paid in full on the Maturity Date, (B) any regularly
scheduled monthly payment of interest or principal due under the Note is not
paid in full on the applicable Payment Date, (C) any prepayment of principal due
under this Agreement or the Note is not paid when due or (D) any Spread
Maintenance Premium, Interest Shortfall or Breakage Costs is not paid when due,

(ii) if any deposit to the Reserve Funds is not made on the required deposit
date therefor, with such failure continuing for two (2) Business Days after
Lender delivers written notice thereof to Borrower;

(iii) if any other amount payable pursuant to this Agreement, the Note or any
other Loan Document (other than as set forth in the foregoing clauses (i) and
(ii)) is not paid in full when due and payable in accordance with the provisions
of the applicable Loan Document, with such failure continuing for ten (10) days
after Lender delivers written notice thereof to Borrower;

(iv) if the Policies are not (A) delivered to Lender within five (5) days of
Lender’s written request and (B) kept in full force and effect, each in
accordance with the terms and conditions hereof;

(v) a Transfer other than a Permitted Transfer occurs;

(vi) if any certification, representation or warranty made by a Relevant Party
herein or any other Loan Document, other than a Property Representation, or in
any report, certificate, financial statement or other instrument, agreement or
document furnished to Lender shall have been false or misleading in any material
and adverse respect as of the date such representation or warranty was made;
provided, however, if any untrue certification, representation or warranty made
after the Closing Date is susceptible of being cured, Borrower shall have the
right to cure such certification, representation or warranty within thirty
(30) days after receipt of notice from Lender;

(vii) if any Relevant Party shall make an assignment for the benefit of
creditors;

(viii) if a receiver, liquidator or trustee shall be appointed for any Relevant
Party, any Relevant Party shall be adjudicated a bankrupt or insolvent, or if
any petition for bankruptcy, reorganization or arrangement pursuant to federal
bankruptcy law, or any similar federal or state law, shall be filed by or
against, consented to, or acquiesced in by, Relevant Party, or if any proceeding
for the dissolution or liquidation of any Relevant Party shall be instituted, or
if any Loan Party is substantively consolidated with any Person other than a
Loan Party; provided, however, if such appointment,

 

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adjudication, petition, proceeding or consolidation was involuntary and not
consented to by such Relevant Party, upon the same not being discharged, stayed
or dismissed within sixty (60) days following its filing;

(ix) if any Loan Party attempts to assign its rights under this Agreement or any
of the other Loan Documents or any interest herein or therein in contravention
of the Loan Documents;

(x) if any of the assumptions contained in the Insolvency Opinion, or in any
Additional Insolvency Opinion delivered to Lender in connection with the Loan,
is or shall become untrue in any material respect or Borrower shall be in breach
of the covenants set forth in Section 4.1.3 provided, that, any such breach
shall not constitute an Event of Default (1) if such breach is inadvertent and
non-recurring, (2) if such breach is curable, Borrower shall promptly cure such
breach within thirty (30) days after such breach occurs and (3) Borrower shall
have delivered to Lender an Additional Insolvency Opinion to the effect that
such breach or violation does not negate or impair (i) the Insolvency Opinion,
or (ii) if an Additional Insolvency Opinion has been previously delivered, such
Additional Insolvency Opinion;

(xi) a breach of the covenants set forth in Sections 4.1.1 (with respect to
maintenance of its limited liability company existence), 4.1.13, 4.1.20, 4.2.2,
4.2.3, 4.2.5, 4.2.8, 4.2.9, 4.2.11, 4.2.13, 4.2.14 or 4.2.15;

(xii) if with respect to any Disqualified Property, Borrower fails to within the
time periods specified in Section 2.4.2(a) either: (A) pay the Release Amount in
respect thereof, (B) substitute such Disqualified Property with a Substitute
Property in accordance with Section 2.4.2(a) or (C) or deposit an amount equal
to 100% of the Allocated Loan Amount for the Disqualified Property in the
Eligibility Reserve Subaccount in accordance with Section 2.4.2(a) and such
failure continues for more than five (5) Business Days after written notice
thereof from Lender to Borrower;

(xiii) if, without Lender’s prior written consent, (i) any Management Agreement
is terminated (unless simultaneously therewith, Borrower and a new Qualified
Manager enter into a Replacement Management Agreement in accordance with
Section 4.2.1), or (ii) there is a default by Borrower under any Management
Agreement beyond any applicable notice or grace period that permits such Manager
to terminate or cancel the applicable Management Agreement (unless, within
thirty (30) days after the expiration of such notice or grace period, Borrower
and a new Qualified Manager enter into a Replacement Management Agreement in
accordance with Section 4.2.1);

(xiv) if any Loan Party, Sponsor, any Qualified Transferee, or any subsidiary of
Sponsor or any Qualified Transferee that owns a direct or indirect ownership
interest in any Loan Party shall be convicted of a Patriot Act Offense by a
court of competent jurisdiction;

(xv) any failure on the part of any Borrower to duly observe or perform any of
its covenants set forth in Section 4.1.21 or the representation and warranty in

 

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Section 3.1.24 shall fail to be correct in respect of a Tenant of any Property
and, in each case, Borrower fails to notify OFAC within five (5) Business Days
of Borrower or Manager obtaining knowledge that such Tenant is on any of the
lists described in those sections and promptly take such steps as may be
required by OFAC with respect to such Tenant;

(xvi) if there shall be a default under any of the other Loan Documents beyond
any applicable cure periods contained in such Loan Documents, whether as to any
Relevant Party or the Properties, or 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 Obligations or to permit Lender to accelerate
the maturity of all or any portion of the Obligations;

(xvii) if Borrower fails to obtain or maintain an Interest Rate Cap Agreement or
replacement thereof in accordance with Section 2.2.7;

(xviii) if any Loan Document or any Lien granted thereunder by any Relevant
Party shall (except in accordance with its terms or pursuant to Lender’s written
consent), in whole or in part, terminate, cease to be effective or cease to be
the legally valid, binding and enforceable obligation of the parties thereto or
any Relevant Party, any Affiliate of any Relevant Party or Manager shall
disaffirm or contest, in writing, in any manner such effectiveness, validity,
binding nature or enforceability (other than as a result of the occurrence of
the payment in full of the Obligations);

(xix) one or more final judgments for the payment of $2,500,000 or more rendered
against any Loan Party, and such amount is not covered by insurance or indemnity
or discharged, paid or stayed within sixty (60) days after (i) the date on which
the right to appeal thereof has expired if no such appeal has commenced, or
(ii) the date on which all rights to appeal have been extinguished;

(xx) Sponsor or any Qualified Transferee that executes and delivers a
replacement guaranty pursuant to
Section 4.2.17(e) fails to comply with the Sponsor Financial Covenant; provided,
that the foregoing shall not be an Event of Default if an Affiliate of the
Borrower or such Qualified Transferee has agreed in writing to be primarily
liable for all obligations of the Sponsor or such Qualified Transferee, as
applicable, under the Sponsor Guaranty and such Affiliate satisfies the Sponsor
Financial Covenant; or

(xxi) if any Relevant Party shall continue to be in Default under any of the
other terms, covenants or conditions of this Agreement or any other Loan
Document not specified in subsections (i) to (xx) above, and such Default shall
continue for ten (10) days after notice to Borrower from Lender, in the case of
any such Default which can be cured by the payment of a sum of money, or for
thirty (30) days after notice to Borrower from Lender in the case of any other
such Default; provided, however, that if such non-monetary Default is
susceptible of cure but cannot reasonably be cured within such 30-day period,
and provided further that Borrower shall have commenced to cure such Default
within such 30-day period and thereafter diligently and expeditiously proceeds
to

 

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cure the same, such 30-day period shall be extended for such time as is
reasonably necessary for Borrower in the exercise of due diligence to cure such
Default, such additional period not to exceed ninety (90) days.

(b) During the continuance of an Event of Default (other than an Event of
Default described in clauses (vii), (viii) or (ix) above), in addition to any
other rights or remedies available to it pursuant to this Agreement and the
other Loan Documents or at law or in equity, Lender may take such action,
without notice or demand, that Lender deems advisable to protect and enforce its
rights against any Relevant Party and in and to any or all of the Properties,
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 the Loan Documents against the Relevant Parties and any or all of
the Properties, including, without limitation, all rights or remedies available
at law or in equity; and upon any Event of Default described in clauses (vii),
(viii) or (ix) above, the Debt and Other Obligations of Borrower hereunder and
under the other Loan Documents shall immediately and automatically become due
and payable, without notice or demand, and Borrower hereby expressly waives any
such notice or demand, anything contained herein or in any other Loan Document
to the contrary notwithstanding.

Section 7.2 Remedies.

(a) 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 each
Relevant Party under this Agreement or any of the other Loan Documents executed
and delivered by, or applicable to, a Relevant Party or at law or in equity may
be exercised by Lender at any time and from time to time, whether or not all or
any of the Debt shall be declared due and payable, and whether or not Lender
shall have commenced any foreclosure proceeding or other action for the
enforcement of its rights and remedies under any of the Loan Documents with
respect to all or any part of any Property. Any such actions taken by Lender
shall be cumulative and concurrent and may be pursued independently, singularly,
successively, together or otherwise, at such time and in such order as Lender
may determine in its sole discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies of Lender
permitted by law, equity or contract or as set forth herein or in the other Loan
Documents. Without limiting the generality of the foregoing, Borrower agrees
that if an Event of Default is continuing (i) Lender is not subject to any “one
action” or “election of remedies” law or rule, and (ii) all liens and other
rights, remedies or privileges provided to Lender shall remain in full force and
effect until Lender has exhausted all of its remedies against the Properties and
each Mortgage has been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Debt or the Debt has been paid in full.

(b) With respect to Borrower and the Properties, nothing contained herein or in
any other Loan Document shall be construed as requiring Lender to resort to any
Property for the satisfaction of any of the Debt in any preference or priority
to any other Property, and Lender may seek satisfaction out of all of the
Properties, or any part thereof, in its absolute discretion in respect of the
Debt. In addition, Lender shall have the right from time to time to partially
foreclose the Lien of the Mortgages and the other Collateral Documents in any
manner and for any amounts secured by the Mortgages and the other Collateral
Documents then due and payable as determined by Lender in its sole discretion
including, without limitation, the following

 

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circumstances: (i) in the event Borrower defaults beyond any applicable grace
period in the payment of one or more scheduled payments of principal and
interest, Lender may foreclose the Lien of one or more of the Mortgages and/or
the other Collateral Documents to recover such delinquent payments or (ii) in
the event Lender elects to accelerate less than the entire Outstanding Principal
Balance of the Loan, Lender may foreclose the Lien of one or more of the
Mortgages and/or the other Collateral Documents to recover so much of the
principal balance of the Loan as Lender may accelerate and such other sums
secured by the Mortgages and the other Collateral Documents as Lender may elect.
Notwithstanding one or more partial foreclosures, the Collateral shall remain
subject to the Mortgages and the other Collateral Documents to secure payment of
sums secured by the Collateral Documents and not previously recovered.

(c) During the continuance of an Event of Default, Lender shall have the right
from time to time to sever the Note and the other Loan Documents into one or
more separate notes, Collateral Documents 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. The Loan Parties hereby absolutely and irrevocably appoint 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 a Loan
Party by Lender of Lender’s intent to exercise its rights under such power.
Borrower shall be obligated to pay any costs or expenses incurred in connection
with the preparation, execution, recording or filing of the Severed Loan
Documents and the Severed Loan Documents shall not contain any representations,
warranties or covenants not contained in the Loan Documents and any such
representations and warranties contained in the Severed Loan Documents will be
given by Borrower only as of the Closing Date.

(d) As used in this Section 7.2, a “foreclosure” shall include, without
limitation, any sale by power of sale.

Section 7.3 Remedies Cumulative; Waivers. The rights, powers and remedies of
Lender under this Agreement shall be cumulative and not exclusive of any other
right, power or remedy which Lender may have against Borrower pursuant to this
Agreement or the other Loan Documents, or existing at law or in equity or
otherwise. Lender’s rights, powers and remedies may be pursued singularly,
concurrently or otherwise, at such time and in such order as Lender may
determine in Lender’s sole discretion. No delay or omission to exercise any
remedy, right or power accruing upon an Event of Default shall impair any such
remedy, right or power or shall be construed as a waiver thereof, but any such
remedy, right or power may be exercised from time to time and as often as may be
deemed expedient. A waiver of one Default or Event of Default with respect to
Borrower shall not be construed to be a waiver of any subsequent Default or
Event of Default by Borrower or to impair any remedy, right or power consequent
thereon.

 

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Section 7.4 Lender’s Right to Perform. If Borrower fails to perform any covenant
or obligation contained herein and such failure shall continue for a period of
five (5) Business Days after Borrower’s receipt of written notice thereof from
Lender, without in any way limiting Lender’s right to exercise any of its
rights, powers or remedies as provided hereunder, or under any of the other Loan
Documents, Lender may, but shall have no obligation to, perform, or cause the
performance of, such covenant or obligation, and all costs, expenses,
liabilities, penalties and fines of Lender incurred or paid in connection
therewith shall be payable by Borrower to Lender upon demand and if not paid
shall be added to the Obligations (and to the extent permitted under applicable
laws, secured by the Mortgages and the other Collateral Documents) and shall
bear interest thereafter at the Default Rate. Notwithstanding the foregoing,
Lender shall have no obligation to send notice to Borrower of any such failure.

ARTICLE VIII - SPECIAL PROVISIONS

Section 8.1 Securitization.

8.1.1 Sale of Notes and Securitization. (a) Borrower acknowledges and agrees
that Lender may sell all or any portion of the Loan and the Loan Documents, or
issue one or more participations therein, or consummate one or more private or
public securitizations of rated single- or multi-class securities (the
“Securities”) secured by or evidencing ownership interests in all or any portion
of the Loan and the Loan Documents or a pool of assets that include the Loan and
the Loan Documents (such sales, participations and/or securitizations,
collectively, a “Securitization”). Lender shall promptly notify Borrower of any
such sale of all or any portion of the Loan. Lender or its designee, acting
solely for this purpose as an agent of Borrower, shall maintain a register
(“Register”) for the recordation of the names and addresses of the Lenders, and
principal amounts (and stated interest) of the Loans owing to, each Lender
pursuant to the terms hereof from time to time. The entries in the Register
shall be conclusive absent manifest error. The Register shall be available for
inspection by Borrower, at any reasonable time and from time to time upon
reasonable prior notice.

(b) At the request of Lender, and to the extent not already required to be
provided by or on behalf of Borrower under this Agreement, Borrower shall
provide information not in the possession of Lender which is in the possession
or control of Borrower or its Affiliates or which may be reasonably required by
Lender, in each case in order to satisfy the market standards to which Lender
customarily adheres or which may be reasonably required by prospective investors
and/or the Approved Rating Agencies in connection with any such Securitization.
Lender shall have the right to provide to investors, prospective investors and
the Approved Rating Agencies any information in its possession that it is
required to provide to such Persons pursuant to the Servicing Agreement,
including financial statements relating to Borrower, Sponsor and the Properties.
Borrower acknowledges that certain information regarding the Loan and the
parties thereto and the Properties may be included in a private placement
memorandum, prospectus or other disclosure documents. Borrower agrees that
Borrower, shall, at Lender’s request, cooperate with Lender’s efforts to arrange
for a Securitization in accordance with the market standards to which Lender
customarily adheres and/or which may be required by prospective investors and/or
the Approved Rating Agencies in connection with any such Securitization. Within
a reasonable period of time following Lender’s request in connection with a
Securitization, Borrower agrees to review only those portions of the Disclosure
Documents that

 

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relate to Borrower, Equity Owner, Sponsor, the Properties and the Loan, which is
contained in the sections of the Disclosure Documents entitled “Risk Factors,”
“Special Considerations,” “Description of the Mortgage,” “Description of the
Mortgage Loan and Mortgaged Properties,” “The Manager,” “The Borrower,” and
“Certain Legal Aspects of the Mortgage Loan” (or sections similarly titled or
covering similar subject matters) (collectively, the “Covered Disclosure
Information”), and shall certify that the factual statements and representations
contained in the Covered Disclosure Information do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements made, in the light of the circumstances under which they
were made, not misleading.

8.1.2 Securitization Costs. All reasonable third party costs and expenses
incurred by Borrower and Equity Owners in connection with Borrower’s complying
with requests made under this Section 8.1 (including, without limitation, the
fees and expenses of the Approved Rating Agencies, any mortgage recording taxes,
title insurance premiums and UCC insurance premiums) shall be paid by Borrower
with respect to the Securitization on the Closing Date and otherwise as required
by the Lender, except as otherwise provided herein.

Section 8.2 Securitization Cooperation.

(a) Borrower understands that certain of the Provided Information may be
included in Disclosure Documents in connection with the Securitization and may
also be included in filings with the Securities and Exchange Commission pursuant
to the Securities Act or the Exchange Act, or provided or made available to
investors or prospective investors in the Securities, the Approved Rating
Agencies, and service providers relating to the Securitization. In the event
that the Disclosure Document is required to be revised prior to the sale of all
Securities, Borrower will cooperate with the holder of the Note in providing
current information necessary to keep the Disclosure Document accurate and
complete in all material respects to the extent such information is in
Borrower’s possession or control.

(b) Notwithstanding anything to the contrary contained herein, Borrower shall
have no obligation to act as depositor with respect to the Loan or an issuer or
registrant with respect to the Securities issued in any Securitization.

Section 8.3 Servicer. At the option of Lender, the Loan may be serviced by a
master servicer, primary servicer, special servicer and/or trustee (any such
master servicer, primary servicer, special servicer, and trustee, together with
its agents, nominees or designees, are collectively referred to as “Servicer”)
selected by Lender and Lender may delegate all or any portion of its
responsibilities under this Agreement and the other Loan Documents to Servicer
pursuant to a pooling and servicing agreement, servicing agreement, special
servicing agreement or other agreement providing for the servicing of one or
more mortgage loans (collectively, the “Servicing Agreement”) between Lender and
Servicer. Borrower shall not be responsible for any set-up fees or any other
initial costs relating to or arising under the Servicing Agreement. Borrower
shall not be responsible for payment of the monthly master servicing fee due to
the Servicer under the Servicing Agreement. Notwithstanding the foregoing,
Borrower shall pay all Trust Fund Expenses. For the avoidance of doubt, this
Section 8.3 shall not be deemed to limit Borrower’s obligations under
Section 9.13(a).

 

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ARTICLE IX - MISCELLANEOUS

Section 9.1 Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery to Lender of the Note, and shall continue in full force and effect
so long as all or any of the Debt is outstanding and unpaid unless a longer
period is expressly set forth herein or in the other Loan Documents. Whenever in
this Agreement any of the parties hereto is referred to, such reference shall be
deemed to include the legal representatives, successors and assigns of such
party. All covenants, promises and agreements in this Agreement, by or on behalf
of Borrower, shall inure to the benefit of the legal representatives, successors
and assigns of Lender.

Section 9.2 Lender’s Discretion; Rating Agency Review Waiver.

(a) Whenever pursuant to this Agreement Lender exercises any right given to it
to approve or disapprove any matter, or any arrangement or term is to be
satisfactory to Lender, the decision of Lender to approve or disapprove such
matter or to decide whether arrangements or terms are satisfactory or not
satisfactory shall (except as is otherwise specifically herein provided) be in
the sole discretion of Lender and shall be final and conclusive. Prior to a
Securitization, whenever pursuant to this Agreement the Approved Rating Agencies
are given any right to approve or disapprove any matter, or any arrangement or
term is to be satisfactory to the Approved Rating Agencies, the decision of
Lender to approve or disapprove such matter or to decide whether arrangements or
terms are satisfactory or not satisfactory, based upon Lender’s determination of
Rating Agency criteria, shall be substituted therefor.

(b) Whenever, pursuant to this Agreement or any other Loan Documents, a Rating
Agency Confirmation is required from each Approved Rating Agency, in the event
that any Approved Rating Agency “declines review”, “waives review” or otherwise
indicates to Lender’s or Servicer’s satisfaction that no Rating Agency
Confirmation will or needs to be issued with respect to the matter in question
(each, a “Review Waiver”), then the requirement to obtain a Rating Agency
Confirmation from such Approved Rating Agency shall not apply with respect to
such matter; provided, however, if a Review Waiver occurs with respect to an
Approved Rating Agency and Lender does not have a separate and independent
approval right with respect to the matter in question, then such matter shall
require the written reasonable approval of Lender. It is expressly agreed and
understood, however, that receipt of a Review Waiver (i) from any one Approved
Rating Agency shall not be binding or apply with respect to any other Approved
Rating Agency and (ii) with respect to one matter shall not apply or be deemed
to apply to any subsequent matter for which Rating Agency Confirmation is
required.

Section 9.3 Governing Law.

(a) 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

 

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THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE, THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE
OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN SUCH STATE 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 BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAW OF THE STATE IN WHICH THE APPLICABLE 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.

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

Section 9.4 Modification, Waiver in Writing. No modification, amendment,
extension, discharge, termination or waiver of any provision of this Agreement,
or of the Note, or of any other Loan Document, nor consent to any departure by
Borrower therefrom, shall in any event be effective unless the same shall be in
a writing signed by the party against whom enforcement is sought, and then such
waiver or consent shall be effective only in the specific instance, and for the
purpose, for which given. Except as otherwise expressly provided herein, no
notice to, or demand on Borrower, shall entitle Borrower to any other or future
notice or demand in the same, similar or other circumstances.

Section 9.5 Delay Not a Waiver. Neither any failure nor any delay on the part of
Lender in insisting upon strict performance of any term, condition, covenant or
agreement, or

 

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exercising any right, power, remedy or privilege hereunder, or under the Note or
under any other Loan Document, or any other instrument given as security
therefor, shall operate as or constitute a waiver thereof, nor shall a single or
partial exercise thereof preclude any other future exercise, or the exercise of
any other right, power, remedy or privilege. In particular, and not by way of
limitation, by accepting payment after the due date of any amount payable under
this Agreement, the Note or any other Loan Document, Lender shall not be deemed
to have waived any right either to require prompt payment when due of all other
amounts due under this Agreement, the Note or the other Loan Documents, or to
declare a default for failure to effect prompt payment of any such other amount.

Section 9.6 Notices. All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document shall be given in writing
and shall be effective for all purposes if hand delivered or sent by
(a) certified or registered United States mail, postage prepaid, return receipt
requested, or (b) expedited prepaid delivery service, either commercial or
United States Postal Service, with proof of attempted delivery, addressed as
follows (or at such other address and Person as shall be designated from time to
time by any party hereto, as the case may be, in a written notice to the other
parties hereto in the manner provided for in this Section):

 

If to Lender:   JPMorgan Chase Bank, National Association   383 Madison Avenue,
Floor 31   New York, New York 10179   Attention: Chuckie C. Reddy with a copy
to:   Dentons US LLP   1221 Avenue of the Americas   New York, New York 10020  
Attention: John Kim, Esq.   and   Midland Loan Services, a Division of PNC Bank,
National Association   10851 Mastin Street, Suite 700   Overland Park, Kansas
66210   Attention: Executive Vice President – Division Head   and   Andrascik &
Tita LLC   1425 Locust Street, Suite 26B   Philadelphia, Pennsylvania 19102  
Attention: Stephanie M. Tita If to Borrower:   SWAY 2014-1 Borrower, LLC   1999
Harrison Street   Oakland, California 94612   Attention: Tamra Browne, General
Counsel

 

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A notice shall be deemed to have been given: in the case of hand delivery, at
the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery, upon the first attempted delivery on a Business Day.

Section 9.7 Trial by Jury. BORROWER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY
OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY
FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD
TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY
AND VOLUNTARILY BY BORROWER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH
INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE
ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY
PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.

Section 9.8 Headings. The Article and/or Section headings and the Table of
Contents in this Agreement are included herein for convenience of reference only
and shall not constitute a part of this Agreement for any other purpose.

Section 9.9 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.

Section 9.10 Preferences. Lender shall have the continuing and exclusive right
to apply or reverse and reapply any and all payments by Borrower to any portion
of the obligations of Borrower hereunder. To the extent Borrower makes a payment
or payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the obligations hereunder or
part thereof intended to be satisfied shall be revived and continue in full
force and effect, as if such payment or proceeds had not been received by
Lender.

Section 9.11 Waiver of Notice. Borrower shall not be entitled to any notices of
any nature whatsoever from Lender except with respect to matters for which this
Agreement or the other Loan Documents specifically and expressly provide for the
giving of notice by Lender to Borrower and except with respect to matters for
which Borrower is not, pursuant to applicable Legal Requirements, permitted to
waive the giving of notice. Borrower hereby expressly waives the right to
receive any notice from Lender with respect to any matter for which this
Agreement or the other Loan Documents do not specifically and expressly provide
for the giving of notice by Lender to Borrower.

 

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Section 9.12 Remedies of Borrower. In the event that a claim or adjudication is
made that Lender or its agents have acted unreasonably or unreasonably delayed
acting in any case where by law or under this Agreement or the other Loan
Documents, Lender or such agent, as the case may be, has an obligation to act
reasonably or promptly, Borrower agrees that neither Lender nor its agents shall
be liable for any monetary damages, and Borrower’s sole remedies shall be
limited to commencing an action seeking injunctive relief or declaratory
judgment. The parties hereto agree that any action or proceeding to determine
whether Lender has acted reasonably shall be determined by an action seeking
declaratory judgment.

Section 9.13 Expenses; Indemnity.

(a) Borrower covenants and agrees to pay or, if Borrower fails to pay, to
reimburse, Lender upon receipt of written notice from Lender for all costs and
expenses (including reasonable attorneys’ fees and expenses) incurred by Lender
in connection with (i) the preparation, negotiation, execution and delivery of
this Agreement and the other Loan Documents and the consummation of the
transactions contemplated hereby and thereby and all the costs of furnishing all
opinions by counsel for Borrower (including without limitation any opinions
requested by Borrower as to any legal matters arising under this Agreement or
the other Loan Documents with respect to the Property); (ii) Borrower’s ongoing
performance of and compliance with Borrower’s respective agreements and
covenants contained in this Agreement and the other Loan Documents on its part
to be performed or complied with after the Closing Date, including, without
limitation, confirming compliance with environmental and insurance requirements;
(iii) Lender’s ongoing performance and compliance with all agreements and
conditions contained in this Agreement and the other Loan Documents on its part
to be performed or complied with after the Closing Date; (iv) the negotiation,
preparation, execution, delivery and administration of any consents, amendments,
waivers or other modifications to this Agreement and the other Loan Documents
and any other documents or matters requested by 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
fees and expenses of counsel for providing to Lender all required legal
opinions, and other similar expenses incurred in creating and perfecting the
Liens in favor of Lender pursuant to this Agreement and the other Loan
Documents; (vii) enforcing or preserving any rights, in response to third party
claims or the prosecuting or defending of any action or proceeding or other
litigation, in each case against, under or affecting Borrower, this Agreement,
the other Loan Documents, the Properties, or any other security given for the
Loan; and (viii) enforcing any obligations of or collecting any payments due
from Borrower under this Agreement, the other Loan Documents or with respect to
the Properties (including Trust Fund Expenses associated therewith), 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 or any other amounts required under Section 8.3;
provided, however, that Borrower shall not be liable for the payment of any such
costs and expenses to the extent the same arise by reason of the gross
negligence, illegal acts, fraud or willful misconduct of Lender. Any cost and
expenses due and payable to Lender may be paid from any amounts in the Rent
Deposit Accounts or Cash Management Account, as applicable.

 

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(b) Borrower shall indemnify, defend and hold harmless the Indemnified Persons
from and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including, without limitation, the reasonable
fees and disbursements of counsel in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not an
Indemnified Person shall be designated a party thereto), that may be imposed on,
incurred by, or asserted against any Indemnified Person in any manner relating
to or arising out of (i) any breach by Borrower of its obligations under, or any
material misrepresentation by Borrower contained in, this Agreement or the other
Loan Documents, or (ii) the use or intended use of the proceeds of the Loan
(collectively, the “Indemnified Liabilities”); provided, however, that Borrower
shall not have any obligation to any Indemnified Person hereunder to the extent
that such Indemnified Liabilities arise from the gross negligence, illegal acts,
fraud or willful misconduct of such Indemnified Person. To the extent that the
undertaking to indemnify, defend and hold harmless set forth in the preceding
sentence may be unenforceable because it violates any law or public policy,
Borrower shall pay the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnified Persons.

(c) Borrower covenants and agrees to pay for or, if Borrower fails to pay, to
reimburse Lender for, any fees and expenses incurred by any Rating Agency in
connection with any Rating Agency review of the Loan, the Loan Documents or any
transaction contemplated thereby or any consent, approval, waiver or
confirmation obtained from such Rating Agency pursuant to the terms and
conditions of this Agreement or any other Loan Document and Lender shall be
entitled to require payment of such fees and expenses as a condition precedent
to the obtaining of any such consent, approval, waiver or confirmation.

(d) Borrower shall indemnify Lender and each of its respective officers,
directors, partners, employees, representatives, agents and Affiliates against
any liabilities to which Lender, each of its respective officers, directors,
partners, employees, representatives, agents and Affiliates, may become subject
in connection with any indemnification to the Approved Rating Agencies in
connection with issuing, monitoring or maintaining the Securities insofar as the
liabilities arise out of or are based upon any untrue statement of any material
fact in any information provided by or on behalf of the Borrowers to the
Approved Rating Agencies (the “Covered Rating Agency Information”) or arise out
of or are based upon the omission to state a material fact in the Covered Rating
Agency Information required to be stated therein or necessary in order to make
the statements in the Covered Rating Agency Information, in light of the
circumstances under which they were made, not misleading.

Section 9.14 Schedules and Exhibits 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.

Section 9.15 Offsets, Counterclaims and Defenses. Any assignee of Lender’s
interest in and to this Agreement, the Note and the other Loan Documents shall
take the same free and clear of all offsets, counterclaims or defenses which are
unrelated to such documents 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

 

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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 9.16 No Joint Venture or Partnership; No Third Party; Beneficiaries.

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

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

Section 9.17 Publicity. All news releases, publicity or advertising by Borrower
or its Affiliates through any media intended to reach the general public which
refers to the Loan Documents or the financing evidenced by the Loan Documents,
to Lender, JPMorgan Chase Bank, National Association or any of their Affiliates
(with respect to the Loan and the Securitization of the Loan only) shall be
subject to the prior written approval of Lender and JPMorgan Chase Bank,
National Association in their sole discretion (other than to the extent included
in any disclosures or filings required under the Securities and Exchange
Commission or state securities laws, in which case the Borrower’s obligations
hereunder shall be limited to taking reasonable actions to provide the Lender
prior written notice thereof). Lender shall have the right to publicly describe
the Loan in general terms advertising and public communications of all kinds,
including press releases, direct mail, newspapers, magazines, journals, e-mail,
or internet advertising or communications. Details such as the addresses of the
Properties, the amount of the Loan, the date of the closing and descriptions of
the size/locations of the Properties shall only be included subject to
Borrower’s approval in advance. Notwithstanding the foregoing, Borrower’s
approval shall not be required for the publication by Lender of notice of the
Loan and the Securitization of the Loan by means of a customary tombstone
advertisement, which, for the avoidance of doubt, may include the amount of the
Loan, the amount of securities sold, the number of Properties as of the Closing
Date, the settlement date and the parties involved in the transactions
contemplated hereby and the Securitization.

 

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Section 9.18 Cross Default; Cross Collateralization; Waiver of Marshalling of
Assets.

(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 Property taken separately. Borrower agrees that
the Mortgages are and will be cross-collateralized and cross-defaulted with each
other so that (i) an Event of Default under any of the Mortgages shall
constitute an Event of Default under each of the other Mortgages which secure
the Note; (ii) an Event of Default under the Note or this Agreement shall
constitute an Event of Default under each Mortgage; (iii) each Mortgage 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) To the fullest extent permitted by law, Borrower, for itself and its
successors and assigns, waives all rights to a marshalling of the assets of
Borrower, Borrower’s partners and others with interests in Borrower, and of the
Properties, or to a sale in inverse order of alienation in the event of
foreclosure of all or any of the Mortgages, and agrees not to assert any right
under any laws pertaining to the marshalling of assets, the sale in inverse
order of alienation, homestead exemption, the administration of estates of
decedents, or any other matters whatsoever to defeat, reduce or affect the right
of Lender under the Loan Documents to a sale of the Properties for the
collection of the Debt without any prior or different resort for collection or
of the right of Lender to the payment of the Debt out of the net proceeds of the
Properties in preference to every other claimant whatsoever. In addition,
Borrower, for itself and its successors and assigns, waives in the event of
foreclosure of any or all of the Mortgages, 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 Property or any combination
of the Properties before proceeding against any other Property or combination of
Properties; and further in the event of such foreclosure Borrower does hereby
expressly consents to and authorizes, at the option of Lender, the foreclosure
and sale either separately or together of any combination of the Properties.

Section 9.19 Conflict; Construction of Documents; Reliance. In the event of any
conflict between the provisions of this Agreement and any of the other Loan
Documents, the provisions of this Agreement shall control. The parties hereto
acknowledge that they were represented by competent counsel in connection with
the negotiation, drafting and execution of the Loan Documents and that such Loan
Documents shall not be subject to the principle of construing their meaning
against the party which drafted same. Borrower acknowledges that, with respect
to the Loan, Borrower shall rely solely on its own judgment and advisors in
entering into the Loan without relying in any manner on any statements,
representations or recommendations of Lender or any parent, subsidiary or
Affiliate of Lender. Lender shall not be subject to any limitation whatsoever in
the exercise of any rights or remedies available to it under any of the Loan
Documents or any other agreements or instruments which govern the Loan by virtue
of the ownership by it or any parent, subsidiary or Affiliate of Lender of any
equity interest any of them may acquire in Borrower, and Borrower hereby
irrevocably waives the right to raise any defense or take any action on the
basis of the foregoing with respect to Lender’s exercise of any such rights or
remedies. Borrower acknowledges that Lender engages in the business of real
estate financings and other real estate transactions and investments which may
be viewed as adverse to or competitive with the business of Borrower or its
Affiliates.

 

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Section 9.20 Brokers and Financial Advisors. Borrower hereby represents that
neither it nor Sponsor has dealt with any financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the
transactions contemplated by this Agreement other than J.P. Morgan Securities
LLC, Citigroup Global Markets Inc. and Deutsche Bank Securities Inc. Borrower
hereby agrees to indemnify, defend and hold Lender harmless from and against any
and all claims, liabilities, costs and expenses of any kind (including Lender’s
attorneys’ fees and expenses) in any way relating to or arising from a claim by
any Person that such Person acted on behalf of Borrower or Lender in connection
with the transactions contemplated herein. The provisions of this Section 9.20
shall survive the expiration and termination of this Agreement and the payment
of the Debt.

Section 9.21 Prior Agreements. This Agreement and the other Loan Documents
contain the entire agreement of the parties hereto and thereto in respect of the
transactions contemplated hereby and thereby, and all prior agreements among or
between such parties, whether oral or written, between Borrower and Lender are
superseded by the terms of this Agreement and the other Loan Documents.

Section 9.22 Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. Copies
of originals, including copies delivered by facsimile, pdf or other electronic
means shall have the same import and effect as original counterparts and shall
be valid, enforceable and binding for the purposes of this Agreement.

Section 9.23 Document Delivery. Borrower will deliver to Lender all documents
required to be delivered under this Agreement in an electronic format reasonably
agreed by Lender and Borrower.

Section 9.24 Exculpation of Lender. Lender neither undertakes nor assumes any
responsibility or duty to Borrower or any other party to select, review,
inspect, examine, supervise, pass judgment upon or inform Borrower or any third
party of (a) the existence, quality, adequacy or suitability of Broker Price
Opinions of the Properties or other Collateral, (b) any environmental report, or
(c) any other matters or items, including property inspections that are
contemplated in the Loan Documents. Any such selection, review, inspection,
examination and the like, and any other due diligence conducted by Lender, is
solely for the purpose of protecting Lender’s rights under the Loan Documents,
and shall not render Lender liable to Borrower or any third party for the
existence, sufficiency, accuracy, completeness or legality thereof.

Section 9.25 Patriot Act Records. Lender hereby notifies Borrower that pursuant
to the requirements of the Patriot Act, it is required to obtain, verify and
record information that identifies Borrower and Sponsor, which information
includes the name and address of Borrower and Sponsor and other information that
will allow Lender to identify Borrower or Sponsor in accordance with the Patriot
Act.

 

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Section 9.26 No Fiduciary Duty.

(a) Borrower acknowledges that, in connection with this Agreement, the other
Loan Documents and the Transaction, Lender has relied upon and assumed the
accuracy and completeness of all of the financial, legal, regulatory,
accounting, tax and other information provided to, discussed with or reviewed by
Lender for such purposes, and Lender does not assume any liability therefor or
responsibility for the accuracy, completeness or independent verification
thereof. Lender, its affiliates and their respective equityholders and employees
(for purposes of this Section, the “Lending Parties”) have no obligation to
conduct any independent evaluation or appraisal of the assets or liabilities
(including any contingent, derivative or off-balance sheet assets and
liabilities) of Sponsor, Borrower or any other Person or any of their respective
affiliates or to advise or opine on any related solvency or viability issues.

(b) It is understood and agreed that (i) the Lending Parties shall act under
this Agreement and the other Loan Documents as an independent contractor,
(ii) the Transaction is an arm’s-length commercial transaction between the
Lending Parties, on the one hand, and Borrower, on the other, (iii) each Lending
Party is acting solely as principal and not as the agent or fiduciary of
Borrower, Sponsor or their respective affiliates, stockholders, employees or
creditors or any other Person and (iv) nothing in this Agreement, the other Loan
Documents, the Transaction or otherwise shall be deemed to create (A) a
fiduciary duty (or other implied duty) on the party of any Lending Party to
Sponsor, Borrower, any of their respective affiliates, stockholders, employees
or creditors, or any other Person or (B) a fiduciary or agency relationship
between Sponsor, Borrower or any of their respective affiliates, stockholders,
employees or creditors, on the one hand, and the Lending Parties, on the other.
Borrower agrees that neither it nor Sponsor nor any of their respective
affiliates shall make, and hereby waives, any claim against the Lending Parties
based on an assertion that any Lending Party has rendered advisory services of
any nature or respect, or owes a fiduciary or similar duty to Borrower, Sponsor
or their respective affiliates, stockholders, employees or creditors. Nothing in
this Agreement or the other Loan Documents is intended to confer upon any other
Person (including affiliates, stockholders, employees or creditors of Borrower
and Sponsor) any rights or remedies by reason of any fiduciary or similar duty.

(c) Borrower acknowledges that it has been advised that the Lending Parties are
a full service financial services firm engaged, either directly or through
affiliates in various activities, including securities trading, investment
banking and financial advisory, investment management, principal investment,
hedging, financing and brokerage activities and financial planning and benefits
counseling for both companies and individuals. In the ordinary course of these
activities, the Lending Parties may make or hold a broad array of investments
and actively trade debt and equity securities (or related derivative securities)
and/or financial instruments (including loans) for their own account and for the
accounts of their customers and may at any time hold long and short positions in
such securities and/or instruments. Such investment and other activities may
involve securities and instruments of affiliates of Borrower, including Sponsor,
as well as of other Persons that may (i) be involved in transactions arising
from or relating to the Transaction, (ii) be customers or competitors of
Borrower, Sponsor and/or their respective affiliates, or (iii) have other
relationships with Borrower, Sponsor and/or their respective affiliates. In
addition, the Lending Parties may provide investment banking, underwriting and
financial advisory services to such other Persons. The Lending Parties may also
co-invest with, make direct investments in, and invest or co-invest client
monies in or with funds or other investment vehicles managed by other parties,
and such funds or other

 

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investment vehicles may trade or make investments in securities of affiliates of
Borrower, including Sponsor, or such other Persons. The Transaction may have a
direct or indirect impact on the investments, securities or instruments referred
to in this Section 9.26(c). Although the Lending Parties in the course of such
other activities and relationships may acquire information about the Transaction
or other Persons that may be the subject of the Transaction, the Lending Parties
shall have no obligation to disclose such information, or the fact that the
Lending Parties are in possession of such information, to Borrower, Sponsor or
any of their respective affiliates or to use such information on behalf of
Borrower, Sponsor or any of their respective affiliates.

(d) Borrower acknowledges and agrees that Borrower has consulted its own legal
and financial advisors to the extent it deemed appropriate and that it is
responsible for making its own independent judgment with respect to this
Agreement, the other Loan Documents, the Transaction and the process leading
thereto.

Section 9.27 State Specific Provisions.

9.27.1 Arizona. The following Arizona provisions are not intended to, and do
not, limit the express choice of New York law set forth in Section 9.3 of this
Agreement and as set forth in the other Loan Documents, and are set forth
herein, if and to the extent that, notwithstanding the choice of law provisions
contained in this Agreement and the other Loan Documents, Arizona law is held to
govern any Mortgage encumbering a Property located in Arizona or any other Loan
Document:

(a) Each Loan Party hereby expressly waives, to the extent permitted by law, any
and all defenses and discharges available to a surety, guarantor or
accommodation co-obligor, including, without limitation, the benefits of Arizona
Revised Statutes Sections 12-1641 through 12-1646 and Rule 17(f) of the Arizona
Rules of Civil Procedure, and, to the extent permitted by law, the benefits, if
any, of Arizona Revised Statutes Section 33-814, in each case as amended, and
any successor statutes or rules, or any similar statute.

(b) Anything to the contrary herein or elsewhere notwithstanding, the Equity
Owner Guaranty and the Sponsor Guaranty and all obligations arising under any of
them are not and shall not be secured in any manner whatsoever, including by any
Mortgage or by any lien encumbering any Property; provided, however, that any
environmental indemnity provisions set forth in this Agreement or any
Environmental Indemnity shall be so secured, except as to the obligations of
Sponsor and the Equity Owner and subject to the rights of Lender to proceed on
an unsecured basis thereunder pursuant to applicable law.

9.27.2 California. The following California provisions are not intended to, and
do not, limit the express choice of New York law set forth in Section 9.3 of
this Agreement and as set forth in the other Loan Documents, and are set forth
herein, if and to the extent that, notwithstanding the choice of law provisions
contained in this Agreement and the other Loan Documents, California law is held
to govern any Mortgage Document encumbering a Property located in California or
any other Loan Document:

(a) Anything to the contrary herein or elsewhere notwithstanding, in no event
shall Borrower have any liability or other obligation under or with respect to
the Sponsor Guaranty or the Equity Owner Guaranty or any guaranty executed and
delivered by a Borrower TRS in accordance with Section 4.1.23.

 

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(b) Notwithstanding anything contained herein to the contrary, no portion of any
of the Obligations shall be or be deemed to be offset or compensated by all or
any part of any claim, cause of action, counterclaim, or cross-claim, whether
liquidated or unliquidated, that Borrower may have or claim to have against
Lender. Borrower hereby waives, to the fullest extent permitted by applicable
law, the benefits of California Code of Civil Procedure Section 431.70.

(c) Lender hereby notifies Borrower of the provisions of Section 2955.5(a) of
the California Civil Code, which reads as follows:

“No lender shall require a borrower, as a condition of receiving or maintaining
a loan secured by real property, to provide hazard insurance coverage against
risks to the improvements on that real property in an amount exceeding the
replacement value of the improvements on the property.”

This disclosure is being made by Lender to Borrower pursuant to
Section 2955.5(b) of the California Civil Code. Borrower hereby acknowledges
receipt of this disclosure and acknowledges that this disclosure has been made
by Lender before execution of the Note.

(d) The provisions contained in Section 3.2.1 of this Agreement are intended by
the parties to constitute “environmental provisions” as defined in California
Code of Civil Procedure Section 736, and Lender shall have all rights and
remedies provided in such section.

(e) Lender’s rights under Section 4.1.4 of this Agreement shall be deemed to
include, without limitation, its rights under California Civil Code
Section 2929.5, as such provisions may be amended from time to time.

9.27.3 Florida. The following Florida provision does not limit the express
choice of New York law set forth in Section 9.3 of this Agreement and as set
forth in the other Loan Documents, and is set forth herein, if and to the extent
that, notwithstanding the choice of law provisions contained in this Agreement
and the other Loan Documents, Florida law is held to govern this Agreement, any
Mortgage Document encumbering a Property located in Florida or any other Loan
Document:

(a) The parties acknowledge and agree that the Default Rate provided for herein
shall also be the rate of interest payable on any judgments entered in favor of
Lender in connection with the loan evidenced hereby.

 

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9.27.4 Georgia. The following Georgia provisions are not intended to, and do
not, limit the express choice of New York law set forth in Section 9.3 of this
Agreement and as set forth in the other Loan Documents, and are set forth
herein, if and to the extent that, notwithstanding the choice of law provisions
contained in this Agreement and the other Loan Documents, Georgia law is held to
govern any Mortgage encumbering a Property located in Georgia or any other Loan
Document:

(a) Notwithstanding anything contained in this Agreement or any other Loan
Document, in any instance where Borrower or any other Relevant Party is required
to reimburse Lender for any legal fees or expenses incurred by Lender or
Servicer, (i) “reasonable attorneys’ fees,” “reasonable counsel’s fees,”
“attorneys’ fees” and other words of similar import, are not, and shall not be
statutory attorneys’ fees under O.C.G.A. § 13-1-11, (ii) if, under any
circumstances a Relevant Party is required to pay any or all of Lender’s or
Servicer’s attorneys’ fees and expenses, howsoever described or referenced, such
Relevant Party shall be responsible only for reasonable legal fees and out of
pocket expenses actually incurred by Lender or Servicer at customary hourly
rates actually charged to Lender or Servicer for the work done, and (iii) no
Relevant Party shall be liable under any circumstances for additional attorneys’
fees or expenses, howsoever described or referenced, under O.C.G.A. § 13-1-11.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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

 

BORROWER: SWAY 2014-1 BORROWER, LLC,
a Delaware limited liability company

By:

 

/s/ Nina Tran

Name: Nina Tran

Title: Chief Financial Officer and Treasurer

SIGNATURE PAGE TO LOAN AGREEMENT

--------------------------------------------------------------------------------

LENDER:

JPMORGAN CHASE BANK,

NATIONAL ASSOCIATION, a banking association chartered under the laws of the
United States of America

By:  

/s/ Chuckie C. Reddy

Name: Chuckie C. Reddy Title: Managing Director

SIGNATURE PAGE TO LOAN AGREEMENT