Exhibit 10.1

St. Louis

 

  •   Kan Am hereby approves the refinancing of the existing third party debt
secured by St. Louis Mills on substantially the terms set forth on Exhibit A,
subject to Kan Am having the opportunity to review and approve the loan
documents which approval shall not be unreasonably withheld, conditioned or
delayed.

 

  •   Mills shall make a capital contribution to the partnership in an amount
sufficient to pay down the existing secured debt to a level which will permit a
refinancing of such debt. Such contribution shall not exceed $60 million nor be
less than $55 million (the “St. Louis Contribution”). The St. Louis Contribution
shall be subordinate capital and accrue a Priority Return of nine percent (9%).
Such Priority Return and such capital contribution shall be paid to Mills only
after (i) the payment to Kan Am of its return on capital and (ii) Kan Am’s
return of capital, with Kan Am receiving full payment of one hundred nine
percent (109%) of Kan Am’s invested capital.

 

  •   The preferred return owed to Kan Am shall be earned and paid quarterly
through December 31, 2007, with Mills to contribute capital to the partnership
if necessary to pay such amounts. Mills will receive Capital Account and
Unreturned Capital Contribution Account credit for any amounts that Mills
expends in connection with this guaranty and shall earn a nine percent
(9%) Priority Return with respect to such contributions, as of the date the
contributions are made.

 

  •   Mills shall receive no payment on account of any amounts owed by St. Louis
to Mills, and Mills shall release St. Louis from any amounts due to Mills other
than (a) the St. Louis Contribution and the Priority Return thereon, (b) any
amounts owed under development, leasing, management or joint venture agreements,
and (c) the approximate $13.2 million Mills partner loan. All other amounts due
from St. Louis to Mills shall be converted to capital, but no preferred return
shall be accrued or paid to Mills on account of such capital.

 

  •   Mills will endeavor in good faith and use commercially reasonable efforts
to promptly provide a schedule of payables due and owing to third parties by St.
Louis as of the loan closing date. Mills will represent to Kan Am as of the loan
closing date that to Mills’ knowledge, the schedule is complete in all material
respects (“all material respects” as used in this Term Sheet being defined as
omissions or misstatements which Mills should reasonably have been aware of and
which total in the aggregate at least $100,000.00). To the extent such schedule
is not complete when made in all material respects, then in that event, Mills
shall be directly liable for such undisclosed payable, and shall indemnify and
hold harmless St. Louis for such amounts. Mills obligation to indemnify shall
survive for 1 year from loan closing.

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Discover Mills

 

  •   Kan Am acknowledges that it has been provided with the loan documents
dated November 30, 2006 for the refinancing at Discover. To the extent disclosed
by Mills to Kan Am, Kan Am hereby ratifies and affirms the actions taken by
Mills to close the refinancing at Discover and the loan documents executed in
connection therewith on November 30, 2006. In consideration for the foregoing,
Mills agrees at its sole cost and expense, to cooperate with Kan Am in the event
that Kan Am elects to transfer Kan Am’s one percent (1%) general partnership
interest in Sugarloaf Mills Mezzanine Limited Partnership to a newly created
limited liability company or other entity wholly owned by Kan Am. Upon receipt
of appropriate documentation and information related to the transfer from Kan
Am, Mills promptly shall seek and use commercially reasonable efforts to obtain,
at Mills’ sole cost and expense, all required approvals for such transfer of Kan
Am’s general partnership interest in Sugarloaf Mills Mezzanine Limited
Partnership from Lender, any Rating Agency and any other third party.

 

  •   Kan Am’s preferred return shall continue to be guaranteed by Mills and
paid quarterly through December 31, 2007. Mills will receive Capital Account and
Unreturned Capital Contribution Account credit for any amounts that Mills
expends in connection with this guaranty and shall earn a nine percent
(9%) Priority Return with respect to such contributions, as of the date the
contributions are made.

 

  •   Mills shall receive no payment on account of any amounts owed by Discover
Mills to Mills, and Mills shall release Discover Mills from any amounts due to
Mills other than (a) any amounts owed under development, leasing, management or
joint venture agreements, and (b) the approximate $9.6 million Mills partner
loan (as of December 31, 2006). All other amounts due from Discover Mills to
Mills shall be converted to capital, but no preferred return shall be accrued or
paid to Mills on account of such capital.

 

  •   Mills will endeavor in good faith and use commercially reasonable efforts
to promptly provide a schedule of payables due and owing to third parties by
Discover as of the loan closing date. Mills will represent to Kan Am as of the
loan closing date that to Mills’ knowledge, the schedule is complete in all
material respects (“all material respects” as used in this Term Sheet being
defined as above). To the extent such schedule is not complete when made in all
material respects, then in that event, Mills shall be directly liable for such
undisclosed payable, and shall indemnify and hold harmless Discover for such
amounts. Mills obligation to indemnify shall survive for 1 year from loan
closing.

Mills’ Additional Contributions

 

  •  

Mills will make additional capital contributions equal to an aggregate of
$20,000,000 to the St. Louis and Discover partnerships to fund project
improvements as needed as

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determined in the reasonable discretion of Kan Am. Mills shall fund such amounts
no later than five (5) business days after requested by Kan Am. Mills will
receive capital account and unreturned capital contribution account credit for
these contributions, and shall earn a priority return with respect to these
contributions, as of the date such contributions are made. If Mills fails to
fund any portion of the $20 million in additional capital, Kan Am may offset
Mills’ obligation against Mills’ cash flow at any of the Kan Am/Mills Joint
Ventures listed on Schedule 1. At such time as the Goldman Sachs Master Loan has
been paid off, Mills’ equity in St. Louis and Discover also will be available
for Kan Am to offset such amounts. To the extent not otherwise described in this
letter agreement, upon the date of this letter agreement, all obligations of
Mills to guaranty development, leasing or any other costs described in Sections
6.2(b) of the Discover partnership agreement, 6.2(a) of the St. Louis
partnership agreement or 6.2(a) of the Pittsburgh partnership agreement shall
terminate.

 

  •   In addition to the foregoing, Mills will make a $15,000,000 capital
contribution to St. Louis Mills Limited Partnership to fund tenant improvements
in connection with the Cabela’s lease as needed. Mills will receive capital
account and unreturned capital contribution account credit for these
contributions, and shall earn a nine percent (9.0%) priority return with respect
to these contributions, as of the date such contributions are made. In the event
the Cabela’s lease is breached, the unexpended funds shall be available for
expenditures at St. Louis and/or Discover as determined in the sole discretion
of Kan Am.

FoodBrand Leases and Corporate Chargebacks

 

  •   In lieu of reconciliation and repayment of the amounts that might
otherwise be due pursuant to the return of FoodBrand back rents (and, with
respect to the Katy Mills FoodBrand lease, the prospective rent relief granted
thereunder) and/or return of corporate chargebacks allocated to the Kan Am
partners in any of the projects listed on Schedule 1 (the “Kan Am/Mills Joint
Ventures”), Mills shall make a payment in the amount of $4 million to affiliates
of Kan Am. Kan Am may, in its sole and absolute discretion, allocate the Kan Am
Payment among any of the Kan Am partners which are investors in any of the Kan
Am/Mills Joint Ventures. The source of payment for the $4 million payable to Kan
Am is the $10 million payment due to Mills with respect to the redemption of its
interest in Pittsburgh.

 

  •   In consideration for the $4 million payment, Kan Am hereby confirms the
full and unconditional release of The Mills Limited Partnership, The Mills
Corporation, and their affiliates (including but not limited to any of the Mills
partners’ under any of the joint venture agreements for the Kan Am/Mills Joint
Ventures) from any and all obligations and liabilities to any and all of the Kan
Am partners and /or affiliates relating claims arising prior to January 1, 2007
with respect to (i) the FoodBrand leases and (ii) the corporate chargebacks.

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  •   Kan Am approves all FoodBrand leases in their current form but does not
approve any rent relief for FoodBrand at Pittsburgh Mills, Colorado Mills, St.
Louis Mills or at any other project in which Kan Am is an investor (other than
Katy) without Kan Am’s approval pursuant to the terms of the joint venture
agreements.

 

  •   Mills and Kan Am agree that from and after the date hereof, except as
otherwise expressly set forth in the joint venture agreements and/or related
agreements among the parties, the management fee paid to Mills for each project
is intended to cover the corporate overhead costs of Mills. From and after
December 31, 2006, no corporate charge-backs shall be made to the projects
unless specifically delineated in an operating budget approved by Kan Am or as
expressly set forth in the joint venture agreements and/or related agreements
among the parties. Notwithstanding anything to the contrary contained herein,
this agreement related to corporate chargebacks is not intended to amend the
underlying joint venture and/or related agreements, but rather to clarify that
if Mills is charging back costs to the joint ventures from and after
December 31, 2006, those costs must be permitted by joint venture or related
agreements, or otherwise are subject to approval by Kan Am in a budget.

Grapevine

 

  •   Mills shall make a capital contribution in the amount of $500,000 to the
partnership to restore rent relief funds provided to Polar Ice; no preferred
return shall accrue or be paid on such capital contribution, and such capital
shall not be returned upon a major capital event but shall be deemed to be net
ordinary cash flow and distributed in accordance with the provisions of the
partnership agreement.

 

  •   Mills shall make a capital contribution in the amount of $64,000 to the
partnership as reimbursement for development costs; no preferred return shall
accrue or be paid on such capital contribution, and such capital shall not be
returned upon a major capital event but shall be deemed to be net ordinary cash
flow and distributed in accordance with the provisions of the partnership
agreement.

 

  •   Mills is not currently aware of any outstanding loans from the Grapevine
partnership.

Colorado

 

  •   Mills shall make a cash contribution to the partnership to make Mills’
capital account equal to the Kan Am capital account of $25,500,000. Mills will
receive capital account and unreturned capital contribution account credit for
these contributions, and shall earn a priority return with respect to these
contributions, as of the date such contributions are made.

 

  •   Mills and Kan Am shall endeavor in good faith and work cooperatively to
secure, and Mills shall use its best efforts promptly to provide to Kan Am all
documents, statements and other materials which are reasonably necessary in
connection with documenting and

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memorializing the status of any claim against the PIF district with respect to
(i) the $3 million anchor tenant improvements, and (ii) the $1 million in
eligible but unreimbursed costs under the PIF. These efforts will include making
key personnel available and working together to recover all appropriate
reimbursements from the PIF district.

 

  •   Kan Am hereby approves and will execute the Distribution and Contribution
Agreement in the form previously provided to Kan Am related to the two notes for
Lucky Strike and Indiana Valley Metropolitan District.

Katy Mills

 

  •   The net proceeds from the pending bulk land sale by Katy Mills Residual
Limited Partnership shall be distributed to the partners of Katy Mills Residual
Limited Partnership, who will then contribute such funds to Katy Mills Mall
Limited Partnership. Such funds shall be credited to the capital account of each
partner, but no Priority Return shall accrue or be payable on such contributions
and the funds shall not be included in the calculation of Kan Am’s one hundred
twenty (120%) return. Katy Mills Mall Limited Partnership shall use such funds
first, to repay the approximate $20 million inter-company loan to Mills; next to
pay Kan Am one year of its Priority Return; with any remaining funds to be
treated in accordance with the waterfall provisions in the partnership
agreement. In the event the net proceeds from the bulk land sale and available
distributable cash are insufficient to pay the Mills loan and Kan Am’s one year
of Priority Return, the shortfall shall be allocated fifty percent (50%) to
Mills and fifty percent (50%) to Kan Am and deducted from the amounts otherwise
payable pursuant to this paragraph.

Loan Placement Fees

 

  •   Mills hereby confirms that Mills is not entitled to loan placement fees at
Discover, St. Louis and Pittsburgh for the 2006 refinancings contemplated on
such projects.

Conversion of Mills Loans and Operating Deficits in 2007

 

  •  

In no event, for any calendar quarter or any calendar year, shall the Discover,
St. Louis or Katy partnerships pay to Mills on account of the approximate $9.6
million Discover partner loan, the approximate $13.2 million St. Louis partner
loan, and/or the approximate $21 million Katy partner loan, in excess of sixty
percent (60%) of Adjusted Cash Flow from such partnership (defined as Net
Ordinary Cash Flow before the deduction of any interest expense or principal
payment of such partner loan of the applicable partnership). The Discover, St.
Louis, and Katy partnerships shall distribute to the partners no less than forty
percent (40%) of Adjusted Cash Flow for each quarter,

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such amounts to be distributed in accordance with the waterfall related to the
payment of Net Ordinary Cash Flow in each applicable partnership agreement.

Cooperation

 

  •   Mills shall endeavor in good faith and use commercially reasonable efforts
to respond timely to any future notice or reasonable request delivered from Kan
Am related to the joint ventures. Kan Am shall endeavor in good faith and use
commercially reasonable efforts to respond timely to any future notice or
reasonable request delivered from Mills related to the joint ventures. To avoid
confusion and duplication of effort, Mills and Kan Am agree to meet once every
other month starting in January 2007 (rotating between Mills and Kan Am’s
offices) to review the joint venture projects and any current requests and open
issues. The parties will work together to prepare a format and agenda for the
meetings and follow-up. There will be at least one member of executive
management from both Mills and Kan Am present at the meeting. The necessity of
meetings beyond completion of a strategic transaction or December 2007 will be a
joint decision.

 

  •   Except for those items identified on Schedule 2 attached hereto, Kan Am
represents and agrees that as of the date hereof (a) Kan Am does not have
knowledge of any material financial dispute with respect to any Kan Am/Mills
Joint Venture or any material breaches or defaults by Mills (or its affiliates)
under any Kan Am/Mills Joint Venture, or under any related agreement to which
Kan Am and/or its affiliates are a party related to Mills assets (including but
not limited to each joint venture, partnership, operating, property management,
development, and leasing agreement), (b) this Term Sheet is a complete
resolution of all material financial disputes known to both parties with respect
to each Kan Am/Mills Joint Venture and each agreement related thereto, and
(c) upon request from Mills, Kan Am will deliver and cause its affiliates to
deliver confirmation of the foregoing together with a statement of the amount of
each of the current capital accounts in respect of the Kan Am/Mills Joint
Ventures, the status of preference payments in respect of the Kan Am/Mills Joint
Ventures, confirmation of “waterfall” distributions and such other information
as Mills may reasonably request from time to time.

 

  •  

Except for those items identified on Schedule 2 attached hereto, Mills
represents and agrees that as of the date hereof (a) Mills does not have
knowledge of any material financial dispute with respect to any Kan Am/Mills
Joint Venture or any material breaches or defaults by Kan Am (or its affiliates)
under any Kan Am/Mills Joint Venture, or under any related agreement to which
Mills and/or its affiliates are a party related to Mills assets (including but
not limited to each joint venture, partnership, operating, property management,
development, and leasing agreement), (b) this Term Sheet is a complete
resolution of all material financial disputes known to both parties with respect
to each Kan Am/Mills Joint Venture and each agreement related thereto, and
(c) upon request from Kan Am, Mills will deliver and cause its affiliates to
deliver confirmation of

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the foregoing together with a statement of the amount of each of the current
capital accounts in respect of the Kan Am/Mills Joint Ventures, the status of
preference payments in respect of the Kan Am/Mills Joint Ventures, confirmation
of “waterfall” distributions and such other information as Kan Am may reasonably
request from time to time.

Mills Preferences/Working Capital

 

  •   The Preferred Return of Mills with respect to Discover and St. Louis shall
be paid current through December 31, 2007

 

  •   As of December 31, 2007, the “net working capital” at all of the Kan
Am/Mills Joint Ventures in which Mills ceases to be a partner or in which the
guaranty of Kan Am’s Preferred Return ends, shall be no less than zero. “Net
working capital” shall mean current assets less current liabilities on a GAAP
basis. Deferred gains on land sales, partner loans and similar items shall be
excluded from current liabilities for purposes of calculating net working
capital.

Non-Compete

 

  •   With respect to Pittsburgh and Meadowlands, Mills acknowledges that Kan Am
has been released from any and all obligations of Kan Am under any non-compete
agreement.

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Intercompany Funding

 

  •   Kan Am confirms the treatment of the following amounts (as of December 31,
2006) as Mills partner loans:

 

Debtor

   Principal    Interest    Total

Sugarloaf Mills Mezzanine Limited Partnership

   $ 7,198,381.00    $ 2,388,035.77    $ 9,586,416.77

St. Louis Mills Limited Partnership

   $ 12,449,536.84    $ 779,791.17    $ 13,229,328.01

Income Tax Withholding and Binding Nature of Term Sheet

Approximately $6 million has been withheld from distributions to Kan Am unit
holders in TMLP. TMLP and Kan Am will work together to recover such amounts from
the U.S. Treasury and/or state Treasuries and remit them to the appropriate Kan
Am unit holders as quickly as possible.

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This Term Sheet constitutes a valid and binding agreement. It is understood and
agreed that to the extent the terms set out herein necessitate an amendment or
modification of other existing joint venture or related agreements, Mills and
Kan Am will work expeditiously and in good faith to document such amendment or
modification. Such effort shall not obviate the binding nature of the terms
hereof unless and until replaced by such fully executed amendments or
modifications. The terms herein shall not be severable and shall be governed by
the laws of the State of Delaware.

ACCEPTED AND AGREED TO:

THE MILLS CORPORATION

THE MILLS LIMITED PARTNERSHIP

 

/s/ Mark S. Ordan

Name:

   

Title:

   

Date: December 27, 2006

ACCEPTED AND AGREED TO:

KAN AM

 

/s/ T. Kent Hammond

Name:

   

Title:

   

Date: December 27, 2006

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SCHEDULE 1

Kan Am/Mills Joint Ventures

Grapevine Mills

The Block @ Orange

Concord Mills

Katy Mills

Arundel Mills

Discover Mills

Colorado Mills

St. Louis Mills

Pittsburgh Mills

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SCHEDULE 2

Unresolved Issues

 

  •   West Houston/Katy Mills – ownership and capital structure (partners’
requirement to fund capital).

 

  •   Katy Mills – if the bulk land sale referenced in the Term Sheet does not
occur, Kan Am and Mills have not resolved the interpretation of the applicable
side letter on land sale proceeds and use of proceeds from future land sales.

 

  •   Leasing Commissions – the calculation and/or entitlement of leasing
commissions due for certain executed lease transactions at certain of the Kan
Am/Mills Joint Ventures is under review by Kan AM but is not expected to be a
material amount.

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EXHIBIT A

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October 27, 2006

Mr. Michael Gaffney

Vice President

The Mills Corporation

5425 Wisconsin Avenue, Suite 500

Chevy Chase, MD 20815

 

Re: Proposed Loan (the “Loan”)

     St Louis Mills, St. Louis, Missouri (the “Property”)

Dear Mike:

We are pleased to summarize the basis upon which Morgan Stanley Mortgage
Capital, Inc. (“Morgan Stanley” or the “Lender”), would be prepared (subject to
our satisfactory completion of due diligence and underwriting of the asset and
satisfactory documentation) to provide financing secured by the Property. Set
forth below are the principal terms that would apply to such a transaction.

This letter constitutes neither an offer nor a commitment by us, but rather
summarizes the general terms under which we would be willing to fund the Loan.
The terms outlined below will be subject to satisfactory completion of due
diligence items customary for such a transaction including an appraisal, tenant
estoppels, title, survey, casualty and liability coverage (including coverage
against acts of terrorism), etc. and approval by Lender’s loan committee.

We look forward to working with you on this transaction.

 

Lender:   Morgan Stanley or any of its affiliates, successors and/or assigns.
Borrower   A newly formed single-purpose, bankruptcy remote entity (“Borrower”)
controlled by The Mills Limited Partnership (“Mills”) and owned by Mills and a
KanAm sponsored fund. Borrower will cooperate in providing a non-consolidation
opinion meeting rating agency criteria. Loan Amount   The Maximum Loan Amount
shall not exceed the lesser of: (i) $90,000,000 or (ii) 65% of the current
“as-is” appraised value based on a new MAI appraisal acceptable to Lender. The
Loan Amount may be evidenced by one or more notes. Minimum NOI:   $9.2 million
based on Lender’s determination of “as-is” underwritable net operating income
using applicable rating agency criteria (“NOI”).

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Interest Rate:   130 bp + 5-year Mid-Market Swap Rate.   Interest will be
calculated on an actual/360 basis. The Interest Rate shall be subject to change
of Lender’s discretion based upon changes in the U.S. swap rate until the
earlier to occur of (i) the date on which the Borrower locks the coupon with
Morgan Stanley in accordance with the Rate Lock section below and (ii) the
funding of the Loan.   Interest will be due on the ninth day of each month (or
previous business day) with no grace period. Loan Term:   5 years. Amortization:
  None. Security:   (i) Non-recourse (with customary exceptions) first mortgage
lien on land and improvements at the Property, (ii) a first priority assignment
of leases and rents and (iii) other items as required in Lender’s sole
discretion. Origination Fee:   None. Rate Lock:   Lender will lock the interest
rate upon receipt by Lender of a good faith deposit in the amount of 2% of the
Loan Amount and the execution by The Mills Limited Partnership of Lender’s
standard rate lock agreement. Upon receipt of such good faith deposit and rate
lock agreement, Lender will hedge the loan. The good faith deposit less the
carrying cost of the hedge shall be refunded to the Borrower at closing.
Prepayment:   Closed to prepayment prior to the date that is one month before
the maturity date. Defeasance permitted commencing 2 years from the date the
Loan is finally securitized. Cash Management Account   All revenues from the
Property will flow through an account (the “Cash Management Account”)
established by the Borrower with a financial institution acceptable to Lender.
The Lender will receive a first priority pledge of the Cash Management Account
as additional security for the Loan. Escrows:   Monthly interest, reserve and
escrow payments will be funded from the Cash Management Account before funds are
released to the Borrower. Monthly escrows will be required for taxes, insurance
and capital expenditures ($0.20/sf/annum).

 

2

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TI/LC Reserve:   At closing, Borrower shall fund all unfunded TI’s and LC’s
(including those in connection with Cabela’s, regardless of whether the Cabela’s
lease has been executed) into a TI/LC Reserve for tenant improvement and leasing
costs. In addition, Borrower will deposit $2.7 million at closing into a
separate TI/LC Reserve for general tenant improvement and leasing costs
associated with the Property. Up-Front Reserves:   125% of any deferred
maintenance or environmental remediation costs as determined by third party
studies. Cash Trap:   During a Trigger Period all excess cash will be held in
escrow.

Trigger Event/

Trigger Period:

  A “Trigger Event” shall occur at any time the NOI drops below $8.2 million.  
A “Trigger Period” shall occur upon the occurrence of a Trigger Event and shall
last until the NOI is greater than or equal to $8.2 million for 6 consecutive
months. Terrorism Insurance:   The following language shall be included in the
Loan Agreement:   “If “acts of terrorism” or other similar acts or events are
hereafter excluded from Borrower’s comprehensive all risk insurance policy,
Borrower shall obtain an endorsement to such policy, or a separate policy from
an insurance provider which maintains at least an Investment Grade Rating from
S&P, Moody’s or Fitch insuring against all such excluded acts or events, to the
extent such policy or endorsement is available, in an amount determined by
Lenders in its reasonable discretion (but in not event more than an amount equal
to the principal balance of the Loan), provided, however, Borrower shall not be
required to pay annual premiums in excess of $250,000 for such coverage. The
endorsement or policy shall be in form and substance reasonably satisfactory to
Lenders.”   Notwithstanding the foregoing, for so long as the Terrorism Risk
Insurance Act of 2002 (“TRIA”) is in effect (including any extensions), Lender
shall accept terrorism insurance which covers against “covered acts” as defined
by TRIA. The maximum insurance premium shall be increased by changes in the
consumer price index.   Additionally, Lenders shall permit such coverage to be
obtained as part of a blanket policy so long as it provides at least as much
coverage as would be available on a “stand-alone” basis. Additional Financing:  
None permitted. Expenses:   The Borrower shall pay all third party expenses of
processing, underwriting and closing the Loan. Lender will pay securitization
expenses. TIF:   The Loan will be subject to Lender’s review and approval of the
TIF structure in place at the property.

 

3

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Component Note Option   Lender shall have the right at any time (including
following the closing of the Loan) to establish “component” notes provided that
(i) the total loan amount shall equal the Loan Amount outstanding immediately
prior to the creation of such “component” notes and (ii) the weighted average
interest rate of all such “component” notes shall initially equal the weighted
average interest rate immediately prior to the creation of such “component”
notes.

Please call Kevin at (212) 762-6605 or Brie at (212) 762-6608 when you have had
an opportunity to review this letter to discuss any questions you may have.

Sincerely,

 

/s/ Kevin Swartz

      Kevin Swartz       Brie Wu Executive Director       Associate

cc:    Jim Flaum

     

/s/ Richard J. Nadeau

      Richard J. Nadeau      

Executive Vice President and Chief Financial Officer

 

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