Exhibit 10.178

 

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LOAN AGREEMENT (CALIFORNIA PROPERTY)

 

Dated as of May 21, 2004

 

Between

 

WELLS REIT – ORANGE COUNTY, CA, L.P.,

as Borrower

 

and

 

MORGAN STANLEY MORTGAGE CAPITAL INC.,

as Lender

 

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TABLE OF CONTENTS

 

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I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION

    

Section 1.1

  Definitions    1

Section 1.2

  Principles of Construction    20

II. THE LOAN

    

Section 2.1

  The Loan    20

2.1.1

  Agreement to Lend and Borrow    20

2.1.2

  Single Disbursement to Borrower    20

2.1.3

  The Note    20

2.1.4

  Use of Proceeds    20

2.1.5

  Modification of the Components.    20

Section 2.2

  Interest Rate    21

2.2.1

  Interest Rate    21

2.2.2

  Default Rate    21

2.2.3

  Interest Calculation    21

2.2.4

  Usury Savings    21

Section 2.3

  Loan Payments    22

2.3.1

  Payment Before Maturity Date    22

2.3.2

  Payment on Maturity Date    22

2.3.3

  Late Payment Charge    22

2.3.4

  Method and Place of Payment    22

Section 2.4

  Prepayments    22

2.4.1

  Voluntary Prepayments    22

2.4.2

  Mandatory Prepayments    23

2.4.3

  Prepayments After Default    23

Section 2.5

  Defeasance    24

2.5.1

  Total Defeasance    24

2.5.2

  Intentionally Deleted    26

2.5.3

  Additional Partial Defeasance Collateral    26

2.5.4

  Defeasance Collateral Account    28

2.5.5

  Successor Borrower    28

Section 2.6

  Substitution of Properties    29

III. REPRESENTATIONS AND WARRANTIES

    

Section 3.1

  Borrower Representations    36

3.1.1

  Organization    36

3.1.2

  Proceedings    37

3.1.3

  No Conflicts    37

 

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3.1.4

  Litigation    37

3.1.5

  Agreements    37

3.1.6

  Consents    37

3.1.7

  Title    38

3.1.8

  No Plan Assets    38

3.1.9

  Compliance    38

3.1.10

  Financial Information    39

3.1.11

  Condemnation    39

3.1.12

  Utilities and Public Access    39

3.1.13

  Separate Lots    39

3.1.14

  Assessments    39

3.1.15

  Enforceability    39

3.1.16

  Assignment of Leases    39

3.1.17

  Insurance    40

3.1.18

  Licenses    40

3.1.19

  Flood Zone    40

3.1.20

  Physical Condition    40

3.1.21

  Boundaries    40

3.1.22

  Leases    40

3.1.23

  Filing and Recording Taxes    41

3.1.24

  Single Purpose    41

3.1.25

  Tax Filings    44

3.1.26

  Solvency    45

3.1.27

  Federal Reserve Regulations    45

3.1.28

  Organizational Chart    45

3.1.29

  Bank Holding Company    45

3.1.30

  No Other Debt    45

3.1.31

  Investment Company Act    45

3.1.32

  Access/Utilities    45

3.1.33

  No Bankruptcy Filing    46

3.1.34

  Full and Accurate Disclosure    46

3.1.35

  Foreign Person    46

3.1.36

  No Change in Facts or Circumstances; Disclosure    46

3.1.37

  Perfection of Accounts    46

3.1.38

  REA    47

Section 3.2

  Survival of Representations    47

IV. BORROWER COVENANTS

    

Section 4.1

  Borrower Affirmative Covenants    47

4.1.1

  Existence; Compliance with Legal Requirements    47

4.1.2

  Taxes and Other Charges    47

4.1.3

  Litigation    48

4.1.4

  Access to the Individual Property    48

4.1.5

  Further Assurances; Supplemental Mortgage Affidavits    48

4.1.6

  Financial Reporting    48

 

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4.1.7

   Title to the Individual Property    51

4.1.8

   Estoppel Statement    51

4.1.9

   Leases    51

4.1.10

   Alterations    53

4.1.11

   Intentionally Deleted    53

4.1.12

   Material Agreements    53

4.1.13

   Performance by Borrower    54

4.1.14

   Costs of Enforcement/Remedying Defaults    54

4.1.15

   Business and Operations    54

4.1.16

   Loan Fees    54

Section 4.2

   Borrower Negative Covenants    54

4.2.1

   Due on Sale and Encumbrance; Transfers of Interests    54

4.2.2

   Liens    55

4.2.3

   Dissolution    55

4.2.4

   Change in Business    55

4.2.5

   Debt Cancellation    55

4.2.6

   Affiliate Transactions    55

4.2.7

   Zoning    55

4.2.8

   Assets    55

4.2.9

   No Joint Assessment    56

4.2.10

   Principal Place of Business    56

4.2.11

   ERISA    56

4.2.12

   Material Agreements    56

4.2.13

   REA    56

V. INSURANCE, CASUALTY AND CONDEMNATION

    

Section 5.1

   Insurance.    57

5.1.1

   Insurance Policies    57

5.1.2

   Insurance Company    61

Section 5.2

   Casualty and Condemnation    62

5.2.1

   Casualty    62

5.2.2

   Condemnation    62

5.2.3

   Business Interruption Insurance Proceeds    63

Section 5.3

   Delivery of Net Proceeds.    63

5.3.1

   Minor Casualty or Condemnation    63

5.3.2

   Major Casualty or Condemnation    64

VI. RESERVE FUNDS

    

Section 6.1

   Required Repair Fund    67

6.1.1

   Deposit of Required Repair Funds    67

6.1.2

   Release of Required Repair Funds    67

Section 6.2

   Tax Funds.    68

6.2.1

   Deposits of Tax Funds    68

6.2.2

   Release of Tax Funds    68

 

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Section 6.3

  Insurance Funds.    68

6.3.1

  Deposits of Insurance Funds    68

6.3.2

  Release of Insurance Funds    69

Section 6.4

  Capital Expenditure Funds    69

6.4.1

  Deposits of Capital Expenditure Funds    69

6.4.2

  Release of Capital Expenditure Funds    69

Section 6.5

  Rollover Funds.    71

6.5.1

  Deposits of Rollover Funds    71

6.5.2

  Release of Rollover Funds    71

Section 6.6

  Lease Termination Rollover Funds.    71

6.6.1

  Deposits of Rollover Funds    71

6.6.2

  Release of Lease Termination Rollover Funds    72

Section 6.7

  Ground Rent Funds.    73

6.7.1

  Deposits of Ground Rent Funds.    73

6.7.2

  Release of Ground Rent Funds.    73

Section 6.8

  Application of Reserve Funds    73

Section 6.9

  Security Interest in Reserve Funds    74

6.9.1

  Grant of Security Interest    74

6.9.2

  Income Taxes    74

6.9.3

  Prohibition Against Further Encumbrance    74

Section 6.10

  Letters of Credit    74

6.10.1

  Delivery of Letters of Credit    74

Section 6.11

  Provisions Regarding Letters of Credit    75

6.11.1

  Security for Debt    75

6.11.2

  Additional Rights of Lender    75

VII. PROPERTY MANAGEMENT

    

Section 7.1

  The Management Agreement    76

Section 7.2

  Prohibition Against Termination or Modification    76

Section 7.3

  Replacement of Manager    76

VIII. PERMITTED TRANSFERS

    

Section 8.1

  Permitted Transfer of the Individual Property    77

Section 8.2

  Permitted Transfers of Interest in Borrower    77

Section 8.3

  Permitted Easements    77

IX. SALE AND SECURITIZATION OF MORTGAGE

    

Section 9.1

  Sale of Mortgage and Securitization    78

Section 9.2

  Securitization Indemnification    79

X. DEFAULTS

    

Section 10.1

  Event of Default    81

 

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Section 10.2

  Remedies    84

Section 10.3

  Right to Cure Defaults    86

Section 10.4

  Remedies Cumulative    86

XI. MISCELLANEOUS

    

Section 11.1

  Successors and Assigns    86

Section 11.2

  Lender’s Discretion    86

Section 11.3

  Governing Law    87

Section 11.4

  Modification, Waiver in Writing    88

Section 11.5

  Delay Not a Waiver    88

Section 11.6

  Notices    89

Section 11.7

  Trial by Jury    89

Section 11.8

  Headings    90

Section 11.9

  Severability    90

Section 11.10

  Preferences    90

Section 11.11

  Waiver of Notice    90

Section 11.12

  Remedies of Borrower    90

Section 11.13

  Expenses; Indemnity    90

Section 11.14

  Schedules Incorporated    92

Section 11.15

  Offsets, Counterclaims and Defenses    92

Section 11.16

  No Joint Venture or Partnership; No Third Party Beneficiaries    92

Section 11.17

  Publicity    92

Section 11.18

  Cross Default; Cross-Collateralization; Waiver of Marshalling of Assets    92

Section 11.19

  Waiver of Offsets/Defenses/Counterclaims    93

Section 11.20

  Conflict; Construction of Documents; Reliance    93

Section 11.21

  Brokers and Financial Advisors    93

Section 11.22

  Exculpation    94

Section 11.23

  Prior Agreements    95

Section 11.24

  Servicer    96

Section 11.25

  Joint and Several Liability    96

Section 11.26

  Creation of Security Interest    96

Section 11.27

  Assignments and Participations    97

Section 11.28

  Set-Off    97

 

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SCHEDULES

 

Schedule I

  –        Rent Roll

Schedule II

  –        Required Repairs

Schedule III

  –        Organizational Chart

Schedule IV

  –        Form of Subordination, Non-Disturbance and Attornment Agreement

Schedule V

  –        [Reserved]

Schedule VI

  –        [Reserved]

Schedule VII

  –        Description of REA

Schedule VIII

  –        [Reserved]

Schedule IX

  –        The Other Loans

Schedule X

  –        Managers and Management Agreements

Schedule XI

  –        Exceptions to Representations and Warranties

Schedule XII

  –        Form of Estoppel Letter

Schedule XIII

  –        Form of Ground Lessor Estoppel

 

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LOAN AGREEMENT (CALIFORNIA PROPERTY)

 

THIS LOAN AGREEMENT (CALIFORNIA PROPERTY), dated as of May 21, 2004 (as amended,
restated, replaced, supplemented or otherwise modified from time to time, this
“Agreement”), between MORGAN STANLEY MORTGAGE CAPITAL INC., a New York
corporation, having an address at 1221 Avenue of the Americas, 27th Floor, New
York, New York 10020 (“Lender”), and WELLS REIT – ORANGE COUNTY, CA, L.P., a
Delaware limited partnership, having an address at c/o Wells Real Estate Funds,
6200 The Corners Parkway, Norcross, Georgia 30092-6040 ( “Borrower”).

 

All capitalized terms used herein shall have the respective meanings set forth
in Article I hereof.

 

W I T N E S S E T H:

 

WHEREAS, Borrower desires to obtain the Loan from Lender; and

 

WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in
accordance with the conditions and terms of this Agreement and the other Loan
Documents.

 

NOW, THEREFORE, in consideration of the covenants set forth in this Agreement,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree, represent and warrant
as follows:

 

I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION

 

Section 1.1 Definitions.

 

For all purposes of this Agreement, except as otherwise expressly provided:

 

“Acquired Properties” shall have the meaning set forth in Section 9.1(c)

 

“Acquired Property Statements” shall have the meaning set forth in Section
9.1(c).

 

“Additional Partial Defeasance Collateral” shall mean, in connection with an
Additional Partial Defeasance Event, U.S. Obligations which provide payments (i)
on or prior to, but as close as possible to, the Business Day immediately
preceding all Monthly Payment Dates and other scheduled payment dates, if any,
under the Defeased Note issued in connection with such Additional Partial
Defeasance Event after the Defeasance Date and up to and including the Maturity
Date, and (ii) in amounts equal to or greater than the Scheduled Defeasance
Payments relating to such Monthly Payment Dates and other scheduled payment
dates.

 

“Additional Partial Defeasance Date” shall have the meaning set forth in Section
2.5.3(a)(i).

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“Additional Partial Defeasance Event” shall have the meaning set forth in
Section 2.5.3(a).

 

“Affiliate” shall mean, as to any Person, any other Person that, directly or
indirectly, owns more than forty percent (40%) of, is in control of, is
controlled by or is under common ownership or control with such Person or is a
director or officer of such Person or of an Affiliate of such Person. As used in
this definition, the term “control” means the possession, directly or
indirectly, of the power to direct or cause the direction of the management,
policies or activities of a Person, whether through ownership of voting
securities, by contract or otherwise.

 

“Agent” shall mean LaSalle Bank, National Association, and any successor
Eligible Institution thereto.

 

“Allocated Loan Amount” shall mean $10,700,000.00. The Allocated Loan Amount
shall be reduced by the principal amount that the Loan is prepaid pursuant to
this Agreement in connection with a Condemnation or Casualty affecting the
Individual Property and if the Individual Property is the subject of an
Additional Partial Defeasance Event the Allocated Loan Amount shall be reduced
by the principal amount of the Defeased Note attributable to the Individual
Property.

 

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

 

“Alteration Threshold” shall mean three percent (3%) of the Allocated Loan
Amount.

 

“Annual Budget” shall mean the operating and capital budget for the Individual
Property setting forth the Borrower’s good faith estimate of Gross Revenue,
Operating Expenses, and Capital Expenditures for the applicable Fiscal Year.

 

“Approved Annual Budget” shall have the meaning set forth in Section 4.1.6(e).

 

“Assignment of Leases” shall mean, collectively, the First Assignment of Leases
and the Second Assignment of Leases.

 

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

 

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

 

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

 

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“Basic Carrying Costs” shall mean the sum of the following costs associated with
the Individual Property for the relevant Fiscal Year or payment period: (i)
Taxes and (ii) Insurance Premiums.

 

“Borrower” shall mean WELLS REIT – ORANGE COUNTY, CA, L.P., a Delaware limited
partnership, together with its permitted successors and permitted assigns.

 

“Business Day” shall mean any day other than a Saturday, a Sunday or a legal
holiday on which national banks are not open for general business in (i) the
State of New York, (ii) the state where the corporate trust office of the
Trustee is located, or (iii) the state where the servicing offices of the
Servicer are located.

 

“Cap Ex Amount” shall mean, an annual amount equal to the product of (a) $0.25
multiplied by (b) the number of square feet in the Improvements at the
Individual Property.

 

“Capital Expenditures” for any period shall mean amounts expended for
replacements and alterations to the Individual Property and required to be
capitalized according to GAAP.

 

“Capital Expenditure Funds” shall have the meaning set forth in Section 6.4.1.

 

“Capital Expenditures Work” shall mean any labor performed or materials
installed in connection with any Capital Expenditure.

 

“Cash Management Agreement” shall mean that certain Portfolio Cash Management
Agreement of even date herewith among Lender, Borrower, Wells REIT –
Bridgewater, NJ, LLC, Wells REIT – Austin, TX, L.P., Wells REIT – Nashville, TN,
LLC, Wells REIT – Multi-State Owner, LLC, Agent and the Manager as defined
therein.

 

“Casualty” shall mean the occurrence of any casualty, damage or injury, by fire
or otherwise, to any of the Individual Property or any part thereof.

 

“Casualty Consultant” shall have the meaning set forth in Section 5.3.2(c).

 

“Casualty Retainage” shall have the meaning set forth in Section 5.3.2(d).

 

“Clearing Account Agreement” shall mean that certain Clearing Account Agreement
(Multi-State) dated as of the date hereof, among Borrower, Wells REIT –
Bridgewater, NJ, LLC, Wells REIT – Austin, TX, L.P., Wells REIT – Nashville, TN,
LLC, Wells REIT – Multi-State Owner, LLC, Lender and the Clearing Bank (as
defined therein).

 

“Clearing Account” shall mean the “Clearing Account” as defined in the Clearing
Account Agreement.

 

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

 

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“Code” shall mean the Internal Revenue Code of 1986, as amended, and as it may
be further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.

 

“Component A1” shall mean that portion of the Loan in the amount of Three
Million Sixty Thousand and No/100 Dollars ($3,060,000.00) made by Lender to
Borrower pursuant to this Agreement.

 

“Component A1 Rate” shall mean a rate per annum equal to four and eighty-four
hundredths percent (4.84%).

 

“Component A2” shall mean that portion of the Loan in the amount of Two Million
Four Hundred Fifty Thousand and No/100 Dollars ($2,450,000.00) made by Lender to
Borrower pursuant to this Agreement.

 

“Component A2 Rate” shall mean a rate per annum equal to four and eighty-four
hundredths percent (4.84%).

 

“Component A3” shall mean that portion of the Loan in the amount of Two Million
One Hundred Forty Thousand and No/100 Dollars ($2,140,000.00) made by Lender to
Borrower pursuant to this Agreement.

 

“Component A3 Rate” shall mean a rate per annum equal to four and eighty-four
hundredths percent (4.84%).

 

“Component A4” shall mean that portion of the Loan in the amount of One Million
Five Hundred Thirty Thousand and No/100 Dollars ($1,530,000.00) made by Lender
to Borrower pursuant to this Agreement.

 

“Component A4 Rate” shall mean a rate per annum equal to four and eighty-four
hundredths percent (4.84%).

 

“Component A5” shall mean that portion of the Loan in the amount of Nine Hundred
Twenty Thousand and No/100 Dollars ($920,000.00) made by Lender to Borrower
pursuant to this Agreement.

 

“Component A5 Rate” shall mean a rate per annum equal to four and eighty-four
hundredths percent (4.84%).

 

“Component A6” shall mean that portion of the Loan in the amount of Six Hundred
Thousand and No/100 Dollars ($600,000.00) made by Lender to Borrower pursuant to
this Agreement.

 

“Component A6 Rate” shall mean a rate per annum equal to four and eighty-four
hundredths percent (4.84%).

 

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“Component Rates” means, collectively, the Component A1 Rate, Component A2 Rate,
Component A3 Rate, Component A4 Rate, Component A5 Rate and the Component A6
Rate.

 

“Components” shall mean, collectively, Component A1, Component A2, Component A3,
Component A4, Component A5 and Component A6.

 

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

 

“Debt” shall mean the outstanding principal amount of the Loan together with all
interest accrued and unpaid thereon (including, without limitation, any interest
that would accrue on the outstanding principal amount of the Loan through and
including the end of any applicable Interest Period) and all other sums
(including the Yield Maintenance Premium) due to Lender in respect of the Loan
under the Note, this Agreement, the Mortgage, the Environmental Indemnity, the
Guaranty of Other Loans, any other Loan Document or any Guaranty Security
Document.

 

“Debt Service” shall mean, with respect to any particular period of time,
scheduled principal, if any, and interest payments under the Note.

 

“Debt Service Coverage Ratio” shall mean (a) with respect to the Individual
Property and the Other Properties, the ratio of (i) Underwritable Cash Flow for
the Individual Property and the Other Properties (to the extent then subject to
the liens of the Other Mortgages) for the twelve (12) calendar month period
immediately preceding the date of calculation to (ii) the projected Debt Service
that would be due for the twelve (12) calendar month period immediately
following such calculation under the Note and each “Note” (as defined in the
Other Loan Agreements) (to the extent not theretofore prepaid) evidencing the
Other Loans, assuming an annual loan constant of nine percent (9.0%) of the
aggregate outstanding principal balance of the Loan and the Other Loans as of
the date of such calculation and (b) with respect to the Individual Property,
the ratio of (y) Underwritable Cash Flow for the Individual Property for the
immediately preceding twelve (12) calendar month period to (z) the projected
Debt Service that would be due with respect to the Allocated Loan Amount for the
twelve (12) month period immediately following such calculation based upon an
assumed loan constant for such period equal to nine percent (9%) of the
Allocated Loan Amount with respect to the Individual Property as of the date of
such calculation.

 

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

 

“Default Rate” shall mean, with respect to the Loan, a rate per annum equal to
the lesser of (i) the maximum rate permitted by applicable law, or (ii) four
percent (4.0%) above the Interest Rate.

 

“Defeasance Collateral Account” shall have the meaning set forth in Section
2.5.3.

 

“Defeased Note” shall have the meaning set forth in Section 2.5.3(a)(iii).

 

“Deposit Account” shall have the meaning set forth in the Cash Management
Agreement.

 

“Disclosure Document” shall have the meaning set forth in Section 9.2(a).

 

“Disclosure Document Date” shall have the meaning set forth in Section
9.1(c)(iv).

 

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

 

“Eligible Institution” shall mean a federal or state chartered 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 “AA” by Fitch and S&P and “Aa2” by Moody’s.

 

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

 

“Equipment” shall have the meaning set forth in the granting clause of the
Mortgage with respect to the Individual Property.

 

“ERISA” shall have the meaning set forth in Section 3.1.8.

 

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

 

“Excess Release Amount” shall mean the amount by which the Release Amount
exceeds the Allocated Loan Amount on the Total Defeasance Date.

 

“Exchange Act” shall have the meaning set forth in Section 9.2(a).

 

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“Exchange Act Filing” shall have the meaning set forth in Section 9.1(c)(vi).

 

“Excusable Delay” shall mean a delay due to acts of God, governmental
restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion,
fire, casualty, strikes, work stoppages, shortages of labor or materials or
other causes beyond the reasonable control of Borrower, but lack of funds in and
of itself shall not be deemed a cause beyond the control of Borrower.

 

“Extraordinary Expense” shall have the meaning set forth in Section 4.1.6(e).

 

“First Assignment of Leases” shall mean that certain first priority Assignment
of Leases and Rents, dated as of the date hereof, executed and delivered by
Borrower, as assignor, as security for its obligations under this Agreement and
the Note and encumbering the Individual Property, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

 

“First Mortgage” shall mean that certain first priority Deed of Trust and
Security Agreement, dated as of the date hereof, executed and delivered by
Borrower as security for its obligations under this Agreement and the Note, and
encumbering the Individual Property, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.

 

“Fiscal Year” shall mean each twelve month period commencing on January 1 and
ending on December 31 during each year of the term of the Loan.

 

“Fitch” shall mean Fitch, Inc.

 

“GAAP” shall mean generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board (or agencies with similar functions of
comparable stature and authority within the accounting profession), or in such
other statements by such entity as may be in general use by significant segments
of the U.S. accounting profession.

 

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

 

“Gross Revenue” shall mean all revenue, derived from the ownership and operation
of the Individual Property from whatever source, including, but not limited to,
Rents, but excluding sales, use and occupancy or other taxes on receipts
required to be accounted for by Borrower to any Governmental Authority,
non-recurring revenues as determined by Lender, proceeds from the sale or
refinancing of the Individual Property, security deposits (except to the extent
determined by Lender to be properly utilized to offset a loss of Rent), refunds
and uncollectible accounts, proceeds of casualty insurance and Awards (other
than business interruption or other loss of income insurance related to business
interruption or loss of income for the period in question), and any
disbursements to Borrower from the Reserve Funds or any other fund established
by the Loan Documents.

 

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“Ground Lease” shall mean any ground lease with Borrower as the tenant which now
or at any time during the term of the Loan becomes a part of the collateral for
the Loan in accordance with this Agreement, together with any amendments,
restatements, supplements, extensions or other modifications thereto.

 

“Ground Rent” shall mean any rent, additional rent or other charge payable by
the tenant under a Ground Lease.

 

“Ground Rent Funds” shall have the meaning set forth in Section 6.7.1.

 

“Guarantor” shall mean Wells Operating Partnership, L.P., a Delaware limited
partnership.

 

“Guarantees” shall mean, collectively, the Guaranty and the Guaranty of Other
Loans.

 

“Guaranty” shall mean that certain Guaranty of Recourse Carveouts of even date
herewith executed by Guarantor for the benefit of Lender with respect to the
Loan, as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time.

 

“Guaranty of Other Loans” shall mean that certain Guaranty as to Other Loans
executed by Borrower for the benefit of Lender of even date herewith, as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.

 

“Guaranty Security Documents” shall mean, collectively, the Second Mortgage, the
Second Assignment of Leases, the Guaranty of Other Loans, the Subordination of
Management Agreement and all other documents now or hereafter executed and/or
delivered by Borrower in connection with, and/or as security for, the Guaranty
of Other Loans.

 

“Improvements” shall have the meaning set forth in the granting clause of the
Mortgage.

 

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

 

“Indemnified Liabilities” shall have the meaning set forth in Section 11.13(b).

 

“Independent Director” shall have the meaning set forth in Section 3.1.24(p).

 

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“Individual Property” shall mean that certain parcel of real property, the
improvements thereon and all personal property owned by Borrower and encumbered
by the Mortgage, together with all rights pertaining to such property and
improvements, as more particularly described in the granting clauses of such
Mortgages, and located at 675 Placentia Avenue, Brea, California.

 

“Insurance Funds” shall have the meaning set forth in Section 6.3.1.

 

“Insurance Premiums” shall have the meaning set forth in Section 5.1.1(b).

 

“Interest Period” shall mean for each interest period commencing June 7, 2004,
the period commencing on (and including) the seventh (7th) day of each calendar
month and ending on (and including) the sixth (6th) day of the following
calendar month. Each Interest Period shall be a full month and shall not be
shortened by reason of any payment of the Loan prior to the expiration of such
Interest Period.

 

“Interest Rate” shall mean a rate per annum equal to the applicable Component
Rate or the weighted average of all Component Rates, as the context requires.

 

“Lease” shall mean any lease, sublease or subsublease, letting, license,
concession or other agreement (whether written or oral and whether now or
hereafter in effect) pursuant to which any Person is granted a possessory
interest in, or right to use or occupy all or any portion of any space in the
Individual Property, and every modification, amendment or other agreement
relating to such lease, sublease, subsublease, or other agreement entered into
in connection with such lease, sublease, subsublease, or other agreement and
every guarantee of the performance and observance of the covenants, conditions
and agreements to be performed and observed by the other party thereto.

 

“Lease Termination Fee” shall have the meaning set forth in Section 6.6.1.

 

“Lease Termination Rollover Funds” shall have the meaning set forth in Section
6.6.1.

 

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

 

“Lender” shall mean Morgan Stanley Mortgage Capital Inc., a New York
corporation, together with its successors and assigns and Participants.

 

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“Lender Indemnitees” shall have the meaning set forth in Section 11.13(b).

 

“Letter of Credit” shall mean an irrevocable, unconditional, transferable, clean
sight draft letter of credit acceptable to Lender and the Rating Agencies
(either an evergreen letter of credit or one which does not expire until at
least thirty (30) Business Days after the Maturity Date) in favor of Lender and
entitling Lender to draw thereon in New York, New York, issued by a domestic
Eligible Institution or the U.S. agency or branch of a foreign Eligible
Institution which shall provide that if at any time the bank issuing any such
Letter of Credit shall cease to be an Eligible Institution, Lender shall have
the right immediately to draw down the same in full and hold the proceeds of
such draw in accordance with the applicable provisions hereof.

 

“Liabilities” shall have the meaning set forth in Section 9.2(b).

 

“Lien” shall mean any mortgage, deed of trust, lien, pledge, hypothecation,
assignment, security interest, or any other encumbrance, charge or transfer of,
on or affecting the Individual Property or any portion thereof or any interest
therein, or any interest in Borrower, including, without limitation, any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, the filing of
any financing statement, and mechanic’s, materialmen’s and other similar liens
and encumbrances.

 

“Loan” shall mean the loan in the original principal amount of Ten Million Seven
Hundred Thousand and No/100 Dollars ($10,700,000.00) made by Lender to Borrower
pursuant to this Agreement, which loan is comprised of the Components.

 

“Loan Documents” shall mean, collectively, this Agreement, the Note, the First
Mortgage, the First Assignment of Leases, the Cash Management Agreement, the
Clearing Account Agreement, the Environmental Indemnity, the Guarantees, the
Assignment of Management Agreement and any other document pertaining to the
Individual Property as well as all other documents now or hereafter executed
and/or delivered in connection with the Loan, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

 

“Major Lease” shall mean any Lease (i) covering more than 20,000 square feet at
the Individual Property or (ii) made with a Tenant that is a Tenant under
another Lease at the Individual Property or that is an Affiliate of any other
Tenant under a Lease at the Individual Property, if the Leases together cover
more than 20,000 square feet.

 

“Management Agreement” shall mean the management agreement entered into by and
between Borrower and the Manager, pursuant to which the Manager is to provide
management and other services with respect to the Individual Property.

 

“Manager” shall have the meaning set forth on Schedule X attached hereto or any
other manager approved in accordance with the terms and conditions of the Loan
Documents.

 

“Manager Termination Ratio” shall have the meaning set forth in Section 7.3.

 

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“Material Agreements” shall mean each contract and agreement relating to the
ownership, management, development, use, operation, leasing, maintenance, repair
or improvement of the Individual Property, other than the Management Agreement
and the Leases, under which there is an obligation of Borrower to pay more than
$1,000,000.00 per annum.

 

“Maturity Date” shall mean June 7, 2014 or such other date on which the final
payment of principal of the Note becomes due and payable as therein or herein
provided, whether at such stated maturity date, by declaration of acceleration,
or otherwise; provided, however, (i) if a Total Defeasance Event occurs, the
Maturity Date shall mean the Permitted Prepayment Date, or (ii) if an Additional
Partial Defeasance Event occurs, the Maturity Date of the Defeased Note relating
to such Additional Partial Defeasance Event shall mean the Permitted Prepayment
Date.

 

“Maximum Legal Rate” shall mean the maximum nonusurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the indebtedness evidenced by the Note and as provided
for herein or the other Loan 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” shall mean Fifty Thousand and No/100 Dollars
($50,000).

 

“Monthly Payment Date” shall mean the seventh (7th) day of every calendar month
occurring during the term of the Loan.

 

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

 

“Morgan Stanley” shall have the meaning set forth in Section 9.2(b).

 

“Morgan Stanley Group” shall have the meaning set forth in Section 9.2(b).

 

“Mortgage” or “Mortgages” shall mean, individually or collectively, as the case
may be, the First Mortgage and the Second Mortgage.

 

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

 

“Net Proceeds Deficiency” shall have the meaning set forth in Section 5.3.2(f).

 

“Non-Consolidation Opinion” shall mean that certain bankruptcy nonconsolidation
opinion letter dated the date hereof delivered by Alston & Bird LLP in
connection with the Loan.

 

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“Note” shall mean, collectively, Note A1, Note A2, Note A3, Note A4, Note A5 and
Note A6. The definition of Note shall also include any Undefeased Notes, but
shall not include any Defeased Notes.

 

“Note A1” shall mean that certain Promissory Note A1 dated the date hereof in
the original principal amount of Component A1 from Borrower for the benefit of
Lender, as the same may hereafter be amended, supplemented, split, restated,
increased, extended or consolidated from time to time.

 

“Note A2” shall mean that certain Promissory Note A2 dated the date hereof in
the original principal amount of Component A2 from Borrower for the benefit of
Lender, as the same may hereafter be amended, supplemented, split, restated,
increased, extended or consolidated from time to time.

 

“Note A3” shall mean that certain Promissory Note A3 dated the date hereof in
the original principal amount of Component A3 from Borrower for the benefit of
Lender, as the same may hereafter be amended, supplemented, split, restated,
increased, extended or consolidated from time to time.

 

“Note A4” shall mean that certain Promissory Note A4 dated the date hereof in
the original principal amount of Component A4 from Borrower for the benefit of
Lender, as the same may hereafter be amended, supplemented, split, restated,
increased, extended or consolidated from time to time.

 

“Note A5” shall mean that certain Promissory Note A5 dated the date hereof in
the original principal amount of Component A5 from Borrower for the benefit of
Lender, as the same may hereafter be amended, supplemented, split, restated,
increased, extended or consolidated from time to time.

 

“Note A6” shall mean that certain Promissory Note A6 dated the date hereof in
the original principal amount of Component A6 from Borrower for the benefit of
Lender, as the same may hereafter be amended, supplemented, split, restated,
increased, extended or consolidated from time to time.

 

“Notice” shall have the meaning set forth in Section 11.6.

 

“Obligations” shall have the meaning set forth in the Mortgage.

 

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

 

“Operating Agreements” shall mean the REA, including any other covenants,
restrictions or agreements of record relating to the construction, operation or
use of the Individual Property.

 

“Operating Expenses” shall mean all costs and expenses relating to the
operation, maintenance and management of the Individual Property, including,
without limitation, utilities, repairs and maintenance, insurance, property
taxes and assessments,

 

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advertising expenses, payroll and related taxes, equipment lease payments, a
management fee equal to the greater of three percent (3%) of annual rents or the
actual management fee, $0.25 per rentable square foot of the Improvements per
annum with respect to capital costs and $1.25 per rentable square foot of the
Improvements per annum with respect to tenant rollover expenses, but excluding
actual Capital Expenditures, depreciation, amortization, Extraordinary Expenses
and deposits required to be made to the Reserve Funds; provided, however such
costs and expenses shall be subject to adjustment by Lender to normalize such
costs and expenses.

 

“Other Assignment of Leases” shall mean, individually and collectively, the
Assignment of Leases (as defined in the Other Loan Agreements).

 

“Other Assignments of Management Agreements” shall mean, individually and
collectively, the Assignments of Management Agreements (as defined in the Other
Loan Agreements).

 

“Other Borrowers” shall mean, individually and collectively, the borrowers under
any or all of the Other Loans as more particularly set forth on Schedule IX
attached hereto.

 

“Other Charges” shall mean all ground rents, maintenance charges, impositions
other than Taxes, and any other charges, including, without limitation, vault
charges and license fees for the use of vaults, chutes and similar areas
adjoining the Individual Property, now or hereafter levied or assessed or
imposed against the Individual Property or any part thereof.

 

“Other Guarantees” shall mean, individually and collectively, each “Guaranty of
Other Loans” (as defined in the other Loan Agreements) executed by each of the
Other Borrowers, to the extent applicable.

 

“Other Lenders” shall mean Morgan Stanley Mortgage Capital Inc., a New York
corporation, as the lender under the Other Loan Agreements, together with its
successors and assigns.

 

“Other Loan Agreements” shall mean, individually and collectively, the loan
agreements dated as of the date hereof pursuant to which Lender has made the
Other Loans to the Other Borrowers, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.

 

“Other Loan Documents” shall mean, individually and collectively, the “Loan
Documents” (as defined in the Other Loan Agreements), including, without
limitation, the Other Loan Agreements.

 

“Other Loans” shall mean, individually and collectively, those loans made by the
Other Lender to the Other Borrowers contemporaneously herewith, as more
particularly set forth on Schedule IX attached hereto.

 

“Other Mortgages” shall mean, individually and collectively, the Mortgages (as
defined in the Other Loan Agreements) encumbering the Other Properties.

 

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“Other Properties” shall mean, individually and collectively, the properties
owned by the Other Borrowers, as more particularly set forth on Schedule IX
attached hereto.

 

“Otherwise Rated Insurer” shall have the meaning set forth in Section 5.1.2.

 

“Participant” shall mean any Person that has purchased a participation in this
Loan Agreement pursuant to Section 11.27.

 

“Permitted Encumbrances” shall mean, collectively, (i) the Liens and security
interests created by the Loan Documents and the Guaranty Security Documents,
(ii) all Liens, encumbrances and other matters disclosed in the Title Insurance
Policy, (iii) Liens, if any, for Taxes imposed by any Governmental Authority not
yet due or delinquent, (iv) such other title and survey exceptions as Lender has
approved or may approve in writing in Lender’s sole discretion, and (v) any
Leases permitted hereunder.

 

“Permitted Investments” shall have the meaning set forth in the Cash Management
Agreement.

 

“Permitted Prepayment Date” shall mean March 7, 2014.

 

“Permitted Transferee” shall mean a corporation, partnership or limited
liability company (i) acceptable to Lender in its reasonable discretion based on
then current underwriting and credit requirements for commercial mortgage loans
in the secondary market secured by similar properties, (ii) that qualifies as a
single purpose, bankruptcy remote entity under criteria established by the
Rating Agencies and (iii) whose counsel has delivered to Lender a
non-consolidation opinion acceptable to Lender and the Rating Agencies in their
sole discretion.

 

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

 

“Plan Assets Regulation” shall have the meaning set forth in Section 3.1.8.

 

“Policies” shall have the meaning specified in Section 5.1.1(b).

 

“Prepayment Date” shall mean the date on which the Loan is prepaid in accordance
with the terms hereof.

 

“Prescribed Laws” shall mean, collectively, (a) the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001 (Public Law 107-56) (the USA PATRIOT Act), (b) Executive
Order No. 13224 on Terrorist Financing, effective September 24, 2001, and
relating to Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism, (c) the International
Emergency Economic Power Act, 50 U.S.C. §1701 et seq. and (d) all other Legal
Requirements relating to money laundering or terrorism.

 

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“Rating Agencies” shall mean, prior to the final Securitization of the Loan,
each of S&P, Moody’s and Fitch, or any other nationally recognized statistical
rating agency which has been designated by Lender and, after the final
Securitization of the Loan, shall mean any of the foregoing that have rated any
of the Securities.

 

“Rating Agency Confirmation” shall mean a written affirmation from each of the
Rating Agencies that the credit rating of the Securities by such Rating Agency
immediately prior to the occurrence of the event with respect to which such
Rating Agency Confirmation is sought will not be qualified, downgraded or
withdrawn as a result of the occurrence of such event, which affirmation may be
granted or withheld in such Rating Agency’s sole and absolute discretion.

 

“REA” shall mean, collectively, as the same may be amended, restated,
supplemented or otherwise modified from time to time, those certain agreements
more specifically described on Schedule VII attached hereto and made a part
hereof.

 

“Registration Statement” shall have the meaning set forth in Section 9.2(b).

 

“REIT” shall mean Wells Real Estate Investment Trust, Inc., a Maryland
corporation.

 

“Related Party” or “Related Parties” shall have the meaning set forth in Section
3.1.26.

 

“Release Amount” shall mean (a) in connection with a Total Defeasance Event (as
defined herein and in each of the Other Loan Agreements) of the Loan and all the
Other Loans, an amount equal to one hundred percent (100%) of the Allocated Loan
Amount, and (b) in connection with a Total Defeasance Event (as defined herein
and in each of the Other Loan Agreements) of the Loan and less than all of the
Other Loans, an amount equal to one hundred twenty percent (120%) of the
Allocated Loan Amount; provided, however, that the Borrower shall be permitted
to increase the Release Amount under (b) above in order to satisfy the debt
service coverage ratio tests set forth in Section 2.5.1(a)(xii) hereof or to
satisfy the debt service coverage ratio tests for a “Total Defeasance Event” or
“Partial Defeasance Event” as defined in and as set forth in Sections
2.5.1(a)(xiii) and 2.5.2(a)(vii) of the Other Loan Agreements (if applicable).

 

“Release Date” shall mean the date that is two (2) years from the “startup day”
(within the meaning of Section 860G(a)(9) of the Code) of the REMIC Trust
established in connection with the last Securitization involving any portion of
this Loan.

 

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

 

“Rent Deficiency” shall have the meaning set forth in Section 6.6.2.

 

“Rents” shall mean all rents, moneys payable as damages or in lieu of rent,
revenues, deposits (including, without limitation, security, utility and other
deposits), accounts,

 

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cash, issues, profits, charges for services rendered, and other consideration of
whatever form or nature received by or paid to or for the account of or benefit
of Borrowers or its agents or employees from any and all sources arising from or
attributable to the Individual Property.

 

“Replacement Lease” shall have the meaning set forth in Section 6.6.2.

 

“Required Repair Funds” shall have the meaning set forth in Section 6.1.1.

 

“Required Repairs” shall have the meaning set forth in Section 6.1.1.

 

“Reserve Funds” shall mean, collectively, the Capital Expenditure Funds, the
Insurance Funds, the Tax Funds, the Required Repair Funds, the Rollover Funds
and to the extent required hereunder, Ground Rent Funds.

 

“Restoration” shall have the meaning set forth in Section 5.2.1.

 

“Restoration Threshold” shall mean ten percent (10%) of the Allocated Loan
Amount.

 

“Rollover Amount” shall mean, an annual amount equal to the product of (a) $1.25
multiplied by (b) the number of square feet in the Improvements at the
Individual Property.

 

“Rollover Funds” shall have the meaning set forth in Section 6.5.1.

 

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

 

“Scheduled Defeasance Payments” shall mean (a) in connection with a Total
Defeasance Event, scheduled payments of interest and principal under the Note
for all Monthly Payment Dates occurring after the Defeasance Date and up to and
including the Maturity Date (including the outstanding principal balance on the
Note as of the Maturity Date), and (b) in connection with an Additional Partial
Defeasance Event, scheduled payments of interest and principal under the
Defeased Note created in connection with such Additional Partial Defeasance
Event for all Monthly Payment Dates occurring after the Defeasance Date and up
to and including the Maturity Date (including the outstanding principal balance
on such Defeased Note as of the Maturity Date), and, in each case, all payments
required after the Defeasance Date under the Loan Documents for servicing fees
and other similar charges.

 

“Second Assignment of Leases” shall mean that certain second priority Second
Assignment of Leases and Rents, dated as of the date hereof, executed and
delivered by Borrower, as assignor, to Lender, as assignee, as security for
Borrower’s obligations under the Guaranty of Other Loans and encumbering the
Individual Property, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.

 

“Second Mortgage” shall mean that certain second priority Second Deed of Trust
and Security Agreement, dated as of the date hereof, executed and delivered by
Borrower as security for Borrower’s obligations under the Guaranty of Other
Loans and encumbering the Individual Property, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.

 

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“Secondary Market Transaction” shall have the meaning set forth in Section
9.1(a).

 

“Securities” shall have the meaning set forth in Section 9.1(a).

 

“Securities Act” shall have the meaning set forth in Section 9.2(a).

 

“Securitization” shall have the meaning set forth in Section 9.1(a).

 

“Security Agreement” shall mean a security agreement in form and substance that
would be satisfactory to a prudent lender pursuant to which Borrower grant
Lender a perfected, first priority security interest in the Defeasance
Collateral Account and the Defeasance Collateral.

 

“Servicer” shall have the meaning set forth in Section 11.24.

 

“Servicing Agreement” shall have the meaning set forth in Section 11.24.

 

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

 

“SPC Party” shall have the meaning set forth in Section 3.1.24(o).

 

“Standard Statement” shall have the meaning set forth in Section 9.1(c).

 

“State” shall mean the State or Commonwealth in which the Individual Property or
any part thereof is located.

 

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

 

“Substitute Property” and “Substitute Properties” shall have the meaning set
forth in Section 2.6.

 

“Substitute Property Loan Amount” shall have the meaning set forth in Section
2.6(k).

 

“Substituted Property” and “Substituted Properties” shall have the meaning set
forth in Section 2.6.

 

“Successor Borrower” shall have the meaning set forth in Section 2.5.3.

 

“Survey” shall mean a survey of the Individual Property prepared by a surveyor
licensed in the State and satisfactory to Lender and the company or companies
issuing the Title Insurance Policies, and containing a certification of such
surveyor satisfactory to Lender.

 

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“Tax Funds” shall have the meaning set forth in Section 6.2.1.

 

“Taxes” shall mean all real estate and personal property taxes, assessments,
water rates or sewer rents, now or hereafter levied or assessed or imposed
against the Individual Property or part thereof, together with all interest and
penalties thereon.

 

“Tenant” shall mean 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 the Individual Property.

 

“Termination Space” shall have the meaning set forth in Section 6.6.1.

 

“Terrorism Insurance Premium Limit” shall mean the aggregate amount of $500,000
which shall be reasonably allocated by Borrowers and the Other Borrowers to the
Individual Property and the Other Properties.

 

“Threshold DSCR” shall mean 1:65 to 1:00.

 

“Title Insurance Policies” shall mean an ALTA mortgagee title insurance policy
in the form acceptable to Lender issued with respect to the Individual Property
and insuring the lien of the Mortgage encumbering the Individual Property.

 

“Total Defeasance Collateral” shall mean, in connection with a Total Defeasance
Event, U.S. Obligations which provide payments (i) on or prior to, but as close
as possible to, the Business Day immediately preceding all Monthly Payment Dates
and other scheduled payment dates, if any, under the Note after the Defeasance
Date and up to and including the Maturity Date, and (ii) in amounts equal to or
greater than the Scheduled Defeasance Payments relating to such Monthly Payment
Dates and other scheduled payment dates.

 

“Total Defeasance Date” shall have the meaning set forth in Section 2.5.1(a).

 

“Total Defeasance Event” shall have the meaning set forth in Section 2.5.1(a).

 

“Treasury Rate” shall mean, as of the Maturity Date, the yield, calculated by
Lender by linear interpolation (rounded to the nearest one-thousandth of one
percent (i.e., 0.001%) of the yields of non-inflation adjusted noncallable
United States Treasury obligations with terms (one longer and one shorter) most
nearly approximating the period from such date of determination to the Maturity
Date, as determined by Lender on the basis of Federal Reserve Statistical
Release H.15-Selected Interest Rates under the heading U.S. Governmental
Security/Treasury Constant Maturities, or another recognized source of financial
market information selected by Lender. Lender’s determination of the Treasury
Rate shall be final absent manifest error.

 

“TRIA” shall mean the Terrorism Risk Insurance Act of 2002, Public Law 107-297.

 

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“Trigger Event” shall mean the occurrence of either of the following: (a) an
Event of Default or (b) Lender’s determination that the Debt Service Coverage
Ratio with respect to the Individual Property and the Other Properties combined
is less than 1.50 to 1.00.

 

“Trigger Period” shall mean the period commencing on the date upon which a
Trigger Event occurs and ending on the date that Lender determines that (a) if
the Trigger Event is of the type described in clause (a) of the definition
thereof, the Event of Default that such Trigger Event relates to has been cured
and no longer exists, or (b) if the Trigger Event is of the type described in
clause (b) of the definition thereof and provided no Event of Default has
occurred and is continuing, the Debt Service Coverage Ratio with respect to the
Individual Property and the Other Properties combined, as calculated by Lender
for each of the immediately preceding six (6) calendar months, is equal to or
greater than 1.50 to 1.00.

 

“Trustee” shall mean any trustee holding the Loan in a Securitization.

 

“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in
effect in the applicable State or Commonwealth in which the Individual Property
is located; provided, however, that when used in connection with the Accounts,
UCC or Uniform Commercial Code shall mean the Uniform Commercial Code as in
effect in the state of New York.

 

“Undefeased Note” shall have the meaning set forth in Section 2.5.3(a)(iii)
hereof.

 

“Underwritable Cash Flow” shall mean the excess of Gross Revenue over Operating
Expenses. Lender’s calculation of Underwritable Cash Flow (including
determination of items that do not qualify as Gross Revenue or Operating
Expenses) shall be calculated by Lender based upon Lender’s determination of
Rating Agency criteria and shall be final absent manifest error.

 

“Underwriter Group” shall have the meaning set forth in Section 9.2(b).

 

“Updated Information” shall have the meaning set forth in Section 9.1(b)(i).

 

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

 

“Yield Maintenance Premium” shall mean an amount equal to the greater of: (i)
one percent (1%) of the principal amount of the Loan being prepaid or (ii) the
present value as of the Prepayment Date of the Calculated Payments from the
Prepayment Date through the Maturity Date determined by discounting such
payments at the Discount Rate. As used in this definition, the term “Prepayment
Date” shall mean the date on which prepayment is made. As used in this
definition, the term “Calculated Payments” shall mean the monthly payments of
interest only which would be due based on the principal amount of the Loan being
prepaid on the Prepayment Date and assuming an interest rate per annum equal to
the difference (if such difference is greater than zero) between (y) the
Interest Rate and (z) the Yield Maintenance Treasury Rate. As used in this
definition, the term “Discount Rate” shall mean the rate which, when compounded
monthly, is equivalent to the Yield Maintenance Treasury Rate, when

 

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compounded semi-annually. As used in this definition, the term “Yield
Maintenance Treasury Rate” shall mean the yield calculated by Lender by the
linear interpolation of the yields, as reported in the Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Government Securities/Treasury Constant Maturities for the week ending prior to
the Prepayment Date, of U.S. Treasury Constant Maturities with maturity dates
(one longer or one shorter) most nearly approximating the Maturity Date. In the
event Release H.15 is no longer published, Lender shall select a comparable
publication to determine the Yield Maintenance Treasury Rate. In no event,
however, shall Lender be required to reinvest any prepayment proceeds in U.S.
Treasury obligations or otherwise.

 

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. Unless otherwise specified, the words
“hereof,” “herein” and “hereunder” and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. Unless otherwise specified, all meanings attributed
to defined terms herein shall be equally applicable to both the singular and
plural forms of the terms so defined.

 

II. THE LOAN

 

Section 2.1 The Loan.

 

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

 

2.1.2 Single Disbursement to Borrower. Borrower shall receive only one borrowing
hereunder in respect of the Loan and any amount borrowed and repaid hereunder in
respect of the Loan may not be reborrowed.

 

2.1.3 The Note. The Loan shall be evidenced by the Note in the aggregate stated
principal amount of Ten Million Seven Hundred Thousand and No/100 Dollars ($
10,700,000.00) and shall be repaid in accordance with the terms of this
Agreement and the Note.

 

2.1.4 Use of Proceeds. Borrower shall use proceeds of the Loan to (i) pay and
discharge any existing loans relating to the Individual Property, (ii) pay all
past due Basic Carrying Costs, if any, in respect of the Individual Property,
(iii) deposit the Reserve Funds, (iv) pay costs and expenses incurred in
connection with the closing of the Loan, as approved by Lender, (v) fund any
working capital requirements of the Individual Property, as approved by Lender
and (vi) retain the balance, if any.

 

2.1.5 Modification of the Components. Lender shall have the right, at any time
prior to a Securitization, to modify the Loan in order to create additional
Components, reduce the number of Components, reallocate the principal balances
of the Components or eliminate the Component structure of the Loan provided that
(a) the total principal balance of the Loan as of the effective date of such
modification equals the outstanding principal balance of the

 

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Loan immediately prior to such modification, (b) the weighted average interest
rate of all such Components on the date created shall equal the weighted average
interest rate that was applicable to the Components immediately prior to the
modification of such Components and (c) any voluntary or required prepayment of
the Loan shall be applied, provided no Event of Default has occurred and is
continuing, on a prorata basis as to all Components. Lender shall have the right
to modify the Components in accordance with this Section 2.1.5 upon notice to
Borrower in which event such modification shall then be deemed effective. If
requested by Lender, Borrower shall promptly execute an amendment to this
Agreement, the Note, the Loan Documents and the Guaranty Security Documents to
evidence such modification. Borrower shall, at Lender’s expense, cooperate with
all reasonable requests of Lender in order to establish the “component” notes
and shall execute and deliver such documents as shall reasonably be required by
Lender and any Rating Agency in connection therewith.

 

Section 2.2 Interest Rate.

 

2.2.1 Interest Rate. Interest on the outstanding principal balance of the Loan
shall accrue from the Closing Date up to but excluding the Maturity Date at the
Interest Rate.

 

2.2.2 Default Rate. In the event that, and for so long as, any Event of Default
shall have occurred and be continuing, the outstanding principal balance of the
Loan and, to the extent permitted by law, overdue interest in respect of the
Loan shall accrue interest at the Default Rate, calculated from the date such
payment was due without regard to any grace or cure periods contained herein.

 

2.2.3 Interest Calculation. Interest on the outstanding principal balance of
each Component of the Loan shall be calculated by multiplying (a) the actual
number of days elapsed in the period for which the calculation is being made by
(b) a daily rate based on a three hundred sixty (360) day year (that is, the
Interest Rate or the Default Rate, as then applicable, expressed as an annual
rate divided by 360) by (c) the outstanding principal balance. The accrual
period for calculating interest due on each Monthly Payment Date shall be the
Interest Period immediately prior to such Monthly Payment Date.

 

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

 

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Section 2.3 Loan Payments.

 

2.3.1 Payment Before Maturity Date Borrower shall make a payment to Lender of
interest only on the Closing Date for the period from the Closing Date through
June 6, 2004. On the Monthly Payment Date occurring in July 2004 and on each
Monthly Payment Date thereafter to and including the Maturity Date, Borrower
shall make a payment to Lender of interest accruing hereunder during the entire
Interest Period in which such Monthly Payment Date occurs, calculated in the
manner set forth herein. Provided no Event of Default shall have occurred, each
payment shall be applied (a) first to accrued and unpaid interest on all of the
Components on a pari passu basis and (b) on the Maturity Date, to the principal
balance of the Components in the following order of priority: pro rata and pari
passu according to the principal amount of Note A1, Note A2, Note A3, Note A4,
Note A5 and Note A6.

 

2.3.2 Payment on Maturity Date. Borrower shall pay to Lender on the Maturity
Date the outstanding principal balance of the Loan, all accrued and unpaid
interest and all other amounts due hereunder and under the Note, the Mortgages
and the other Loan Documents.

 

2.3.3 Late Payment Charge. If any principal, interest or any other sum due under
the Loan Documents, other than the payment of principal due on the Maturity
Date, is not paid by Borrower on the date on which it is due, Borrower shall pay
to Lender upon demand an amount equal to the lesser of five percent (5%) of such
unpaid sum or the maximum amount permitted by applicable law in order to defray
the expense incurred by Lender in handling and processing such delinquent
payment and to compensate Lender for the loss of the use of such delinquent
payment. Any such amount shall be secured by the Mortgages and the other Loan
Documents.

 

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

 

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

 

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

 

Section 2.4 Prepayments.

 

2.4.1 Voluntary Prepayments. Except as otherwise provided herein, Borrower shall
not have the right to prepay the Loan in whole or in part. On and after the
Permitted Prepayment Date, Borrower may, provided no Event of Default has
occurred, at its option and upon ten (10) days prior notice to Lender (or such
shorter period of time as may be permitted by

 

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Lender in its sole discretion), prepay the Debt in whole only on any date
without payment of the Yield Maintenance Premium. Any prepayment received by
Lender on a date other than a Monthly Payment Date shall include interest which
would have accrued thereon to the next Monthly Payment Date and such amounts
(i.e., principal and interest prepaid by Borrower) shall be held by Lender as
collateral security for the Loan in an interest bearing account at an Eligible
Institution, with interest accruing on such amounts to the benefit of Borrower;
such amounts prepaid shall be applied to the Loan on the next Monthly Payment
Date, with any interest on such funds paid to Borrower on such date provided no
Event of Default then exists.

 

2.4.2 Mandatory Prepayments. On each date on which Lender actually receives a
distribution of Net Proceeds, and if Lender does not make such Net Proceeds
available to Borrower for Restoration of the Individual Property, Borrower
shall, at Lender’s option, prepay the outstanding principal balance of the Note
in an amount equal to one hundred percent (100%) of such Net Proceeds together
with interest that would have accrued on such amounts through the next Monthly
Payment Date. No Yield Maintenance Premium shall be due in connection with any
prepayment made pursuant to this Section 2.4.2. Any prepayment received by
Lender pursuant to this Section 2.4.2 on a date other than a Monthly Payment
Date shall be held by Lender as collateral security for the Loan in an interest
bearing account, with such interest accruing to the benefit of Borrower, and
shall be applied by Lender on the next Monthly Payment Date. Any prepayment made
under this Section 2.4.2(a) shall be applied to the Allocated Loan Amount which
will be reduced in an amount equal to any such prepayment made pursuant to this
Section 2.4.2 and (b) shall be applied to the outstanding principal balance of
the Components in the following order of priority: pro rata and pari passu
according to the principal balance of Note A1, Note A2, Note A3, Note A4, Note
A5 and Note A6.

 

2.4.3 Prepayments After Default. If after an Event of Default, payment of all or
any part of the principal of the Loan is tendered by Borrower, a purchaser at
foreclosure or any other Person, such tender shall be deemed an attempt to
circumvent the prohibition against prepayment set forth in Section 2.4.1 and
Borrower, such purchaser at foreclosure or other Person shall pay the Yield
Maintenance Premium, in addition to the outstanding principal balance, all
accrued and unpaid interest and other amounts payable under the Loan Documents.
Any amounts received by Lender while any Event of Default exists may be applied
by Lender toward the payment of interest and/or principal of any of the
Components and/or any other amounts due under the Loan Documents and the
Guaranty Security Documents in such order, priority and proportions as Lender in
its sole discretion shall deem proper.

 

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Section 2.5 Defeasance

 

2.5.1 Total Defeasance. (a) Provided no Event of Default shall have occurred and
remain uncured, Borrower shall have the right at any time after the Release Date
and prior to the Permitted Prepayment Date, to voluntarily defease the entire
Loan and obtain a release of the lien of the Mortgage encumbering the Individual
Property by providing Lender with the Total Defeasance Collateral (hereinafter,
a “Total Defeasance Event”), subject to the satisfaction of the following
conditions precedent:

 

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

 

(ii) Borrower shall pay to Lender (A) all payments of principal and interest due
on the Loan to and including the Total Defeasance Date and (B) all other sums,
then due under the Note, this Agreement, the Mortgage and the other Loan
Documents;

 

(iii) Borrower shall deposit the Total Defeasance Collateral into the Defeasance
Collateral Account and otherwise comply with the provisions of Sections 2.5.4
and 2.5.5 hereof;

 

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

 

(v) Borrower shall deliver to Lender an opinion of counsel for Borrower that is
standard in commercial lending transactions and subject only to customary
qualifications, assumptions and exceptions opining, among other things, that (A)
Lender has a legal and valid perfected first priority security interest in the
Defeasance Collateral Account and the Total Defeasance Collateral, (B) if a
Securitization has occurred, the REMIC Trust formed pursuant to such
Securitization will not fail to maintain its status as a “real estate mortgage
investment conduit” within the meaning of Section 860D of the Code as a result
of a Total Defeasance Event pursuant to this Section 2.5.1, (C) the Total
Defeasance Event will not result in a deemed exchange for purposes of the Code
and will not adversely affect the status of the Note as indebtedness for federal
income tax purposes, (D) delivery of the Total Defeasance Collateral and the
grant of a security interest therein to Lender shall not constitute an avoidable
preference under Section 547 of the Bankruptcy Code or applicable state law and
(E) a non-consolidation opinion with respect to the Successor Borrower;

 

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

 

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(vii) Borrower shall deliver an Officer’s Certificate certifying that the
requirements set forth in this Section 2.5.1 have been satisfied;

 

(viii) Borrower shall deliver a certificate of a “big four” or other nationally
recognized public accounting firm acceptable to Lender certifying that the Total
Defeasance Collateral will generate monthly amounts equal to or greater than the
Scheduled Defeasance Payments;

 

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

 

(x) Borrower shall pay all costs and expenses of Lender incurred in connection
with the Total Defeasance Event, including Lender’s reasonable attorneys’ fees
and expenses and Rating Agency fees and expenses;

 

(xi) If all of the Other Borrowers have not elected to voluntarily defease the
entire amount of all of the Other Loans and obtain a release of the lien of the
Other Mortgages encumbering all the Other Properties, or the Other Borrowers
have not satisfied all of the conditions for a “Total Defeasance Event” (as
defined in the Other Loan Agreements) set forth in Section 2.5.1 of the Other
Loan Agreements, then Borrower shall cause the Other Borrowers to deposit with
the Other Lenders the Additional Partial Defeasance Collateral into the
“Defeasance Collateral Account” (as defined in the Other Loan Agreements) and
shall cause the Other Borrowers to satisfy the conditions set forth in Section
2.5.3 of the Other Loan Agreements. Borrower acknowledges and agrees that Lender
and the Other Lenders shall determine, in their reasonable discretion (after
consultation with the Borrower), which of the Other Borrowers that are required
to cause to comply with this subsection (xii) and which of the Other Loans shall
be affected;

 

(xii) If all of the Other Borrowers have not elected to voluntarily defease the
entire amount of all of the Other Loans and obtain a release of the lien of the
Other Mortgages encumbering all the Other Properties, or the Other Borrowers
have not satisfied all of the conditions for a “Total Defeasance Event” (as
defined in the Other Loan Agreements) set forth in Section 2.5.1 of the Other
Loan Agreements, then, after giving effect to the Total Defeasance of the Loan,
the Debt Service Coverage Ratio with respect to the remaining Other Properties
shall not be less than the greater of (A) the Debt Service Coverage Ratio of the
Individual Property encumbered by the Mortgage and the Other Properties
encumbered by the Other Mortgages prior to the release and (B) the Threshold
DSCR; and

 

(xiii) With respect to the matters referred to in clause (xii), Borrower shall
have delivered to Lender, and the Rating Agencies shall have received from
Borrower, (A) statements of the Underwritable Cash Flow and Debt Service (both
on a consolidated basis and separately for the Individual Property or Other
Properties to be released) for the applicable measuring period and (B) based on
the foregoing statements of Underwritable Cash Flow and Debt Service,
calculations of the Debt Service Coverage Ratio both with and without giving
effect to the proposed Total Defeasance Event and

 

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any “Total Defeasance Event” under any of the Other Loan Agreements, and (C)
calculations of the ratios referred to in such clause (xiii), accompanied by an
Officer’s Certificate stating that such statements, calculations and information
are true, correct and complete in all material respects.

 

(b) If Borrower has elected to defease the Note and the requirements of this
Section 2.5 have been satisfied, the Individual Property shall be released from
the lien of the First Mortgage and security agreements or pledges and the Second
Mortgage and the other security agreements or pledges entered into as, or in
connection with, the other Guaranty Security Documents, and the Total Defeasance
Collateral pledged pursuant to the Security Agreement shall be the sole source
of collateral securing the Note. In connection with the release of the Liens,
Borrower shall submit to Lender, not less than thirty (30) days prior to the
Defeasance Date (or such shorter time as is acceptable to Lender in its sole
discretion), a release of Lien (and related Loan Documents) for execution by
Lender. Such release shall be in a form appropriate in the jurisdiction in which
the Individual Property is located and that contains standard provisions
protecting the rights of the releasing lender. In addition, Borrower shall
provide all other documentation Lender reasonably requires to be delivered by
Borrower in connection with such release, together with an Officer’s Certificate
certifying that such documentation (i) is in compliance with all Legal
Requirements, and (ii) will effect such releases in accordance with the terms of
this Agreement. Borrower shall pay all costs, taxes and expenses associated with
the releases of the lien of each Mortgage, including Lender’s reasonable
attorneys’ fees. Except as set forth in this Section 2.5, no repayment,
prepayment or defeasance of all or any portion of the Note shall cause, give
rise to a right to require, or otherwise result in, the release of the lien of
any Mortgage on the Individual Property.

 

2.5.2 Intentionally Deleted.

 

2.5.3 Additional Partial Defeasance Collateral. (a) If (1) a “Total Defeasance
Event” (as defined in the Other Loan Documents) or a “Partial Defeasance Event”
(as defined in the Other Loan Agreements) has occurred, and (2) the Lender and
the Other Lenders have determined, in their reasonable discretion (after
consultation with the Borrower and the Other Borrowers) that all or a portion of
the “Excess Release Amount” (as defined in the Other Loan Agreements) with
respect to the Other Loans that are being defeased shall be allocated to one or
more Individual Properties and subject to the terms and provisions of this
Section 2.5.3 (an “Additional Partial Defeasance Event”), then Borrower shall
satisfy each of the following provisions:

 

(i) Borrower shall pay to Lender (A) all payments of principal and interest due
on the Loan to and including the Monthly Payment Date on which the “Total
Defeasance Event” (as defined in the Other Loan Agreements) or the “Partial
Defeasance Event” (as defined in the Other Loan Agreements) of the applicable
Other Loan is to occur (the “Additional Partial Defeasance Date”) and (B) all
other sums then due under the Note, this Agreement, the Mortgage and the other
Loan Documents with respect to the Individual Property;

 

(ii) Borrower shall deposit the Additional Partial Defeasance Collateral
relating to the “Excess Release Amount” (as defined in the Other Loan

 

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Agreement pursuant to which the Other Loans were defeased) which Lender and the
Other Lenders have allocated to the Individual Property into the Defeasance
Collateral Account and otherwise comply with the provisions of Sections 2.5.4
and 2.5.5 hereof;

 

(iii) Borrower shall prepare all necessary documents to modify this Agreement
and to amend and restate the Note and issue two substitute notes (or, if the
Note consists of separate component notes, two groups of component notes), one
note (or one group of component notes) having an aggregate principal balance
equal to the portion of the “Excess Release Amount” (as defined in the Other
Loan Agreement pursuant to which the Other Loans were defeased) that is
allocated to the Loan (the “Defeased Note”), and the other note (or group of
component notes) having an aggregate principal balance equal to the outstanding
principal balance of the Note immediately prior to the Additional Partial
Defeasance Event minus the principal amount of the Defeased Note executed in
connection with such Additional Partial Defeasance Event (the “Undefeased
Note”). The Defeased Note and the Undefeased Note shall be cross defaulted and
cross collateralized unless the Rating Agencies shall require otherwise or
unless a Successor Borrower that is not an Affiliate of the Borrower is
established pursuant to Section 2.5.4. A Defeased Note may not be the subject of
any further defeasance;

 

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

 

(v) Borrower shall deliver to Lender an opinion of counsel for Borrower that is
standard in commercial lending transactions and subject only to customary
qualifications, assumptions and exceptions opining, among other things, that (A)
Lender has a legal and valid perfected first priority security interest in the
Defeasance Collateral Account and the Additional Partial Defeasance Collateral,
(B) if a Securitization has occurred, the REMIC Trust formed pursuant to such
Securitization will not fail to maintain its status as a “real estate mortgage
investment conduit” within the meaning of Section 860D of the Code as a result
of the Additional Partial Defeasance Event pursuant to this Section 2.5.3, (C)
the Additional Partial Defeasance Event will not result in a deemed exchange for
purposes of the Code and will not adversely affect the status of the Defeased
Note and the Undefeased Note as indebtedness for federal income tax purposes,
(D) delivery of the Additional Partial Defeasance Collateral and the grant of a
security interest therein to Lender shall not constitute an avoidable preference
under Section 547 of the Bankruptcy Code or applicable state law and (E) a
non-consolidation opinion with respect to the Successor Borrower;

 

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

 

(vii) Borrower shall deliver to Lender a certificate of a “Big Four” or other
nationally recognized public accounting firm acceptable to Lender certifying
that the Additional Partial Defeasance Collateral will generate monthly amounts
equal to or greater than the Scheduled Defeasance Payments;

 

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(viii) Borrower shall deliver to Lender an Officer’s Certificate certifying that
the requirements set forth in this Section 2.5.3(a) have been satisfied; and

 

(ix) Borrower shall pay all costs and expenses of Lender incurred in connection
with the Additional Partial Defeasance Event, including Lender’s reasonable
attorneys’ fees and expenses.

 

(b) No defeasance of all or any portion of the Note pursuant to this Section
2.5.3 shall cause, give rise to a right to require, or otherwise result in, the
release of the Lien of the First Mortgage or the Second Mortgage.

 

2.5.4 Defeasance Collateral Account. On or before the date on which Borrower
delivers the Total Defeasance Collateral or Additional Partial Defeasance
Collateral, Borrower shall open at any Eligible Institution the defeasance
collateral account (the “Defeasance Collateral Account”) which shall at all
times be an Eligible Account. The Defeasance Collateral Account shall contain
only (i) Total Defeasance Collateral or Additional Partial Defeasance
Collateral, and (ii) cash from interest and principal paid on the Total
Defeasance Collateral or Additional Partial Defeasance Collateral. All cash from
interest and principal payments paid on the Total Defeasance Collateral or
Additional Partial Defeasance Collateral shall be paid over to Lender on each
Monthly Payment Date and applied to accrued and unpaid interest and on the
Maturity Date, shall be first applied to accrued and unpaid interest and then to
principal. Any cash from interest and principal paid on the Total Defeasance
Collateral or Additional Partial Defeasance Collateral not needed to pay the
Scheduled Defeasance Payments shall be retained in the Defeasance Collateral
Account and applied to payments due on subsequent Monthly Payment Dates or
released to Borrower upon the payment and satisfaction in full of the Debt.
Borrower shall cause the Eligible Institution at which the Total Defeasance
Collateral or Additional Partial Defeasance Collateral is deposited to enter an
agreement with Borrower and Lender, satisfactory to Lender in its reasonable
discretion, pursuant to which such Eligible Institution shall agree to hold and
distribute the Total Defeasance Collateral or Additional Partial Defeasance
Collateral in accordance with this Agreement. Borrower or Successor Borrower, as
applicable, shall be the owner of the Defeasance Collateral Account and shall
report all income accrued on Total Defeasance Collateral or Additional Partial
Defeasance Collateral for federal, state and local income tax purposes in its
income tax return. Borrower shall prepay all cost and expenses associated with
opening and maintaining the Defeasance Collateral Account. Lender shall not in
any way be liable by reason of any insufficiency in the Defeasance Collateral
Account.

 

2.5.5 Successor Borrower. In connection with a Total Defeasance Event or
Additional Partial Defeasance Event under this Section 2.5, Borrower shall, if
required by the Rating Agencies or if Borrower elects to do so, establish or
designate a successor entity (the “Successor Borrower”) which shall be a single
purpose bankruptcy remote entity and which shall be approved by the Rating
Agencies. Any such Successor Borrower may, at Borrower’s option, be an Affiliate
of the Borrower unless the Rating Agencies shall require otherwise. Borrower
shall transfer and assign all obligations, rights and duties under and to the
Note or the Defeased Note, as applicable, together with the Total Defeasance
Collateral or Additional Partial Defeasance Collateral, as applicable, to such
Successor Borrower. Such Successor Borrower shall assume the obligations under
the Note or the Defeased Note, as applicable, and the Security

 

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Agreement and Borrower that owned the Individual Property released pursuant to
Section 2.5 hereof shall be relieved of its obligations under such documents
except to the extent of any cross-collateralization required hereunder. Borrower
shall pay a minimum of $1,000 to any such Successor Borrower as consideration
for assuming the obligations under the Note or the Defeased Note, as applicable,
and the Security Agreement. Borrower shall pay all costs and expenses incurred
by Lender, including Lender’s attorney’s fees and expenses, incurred in
connection therewith.

 

Section 2.6 Substitution of Properties

 

Subject to the terms and conditions set forth in this Section 2.6, on and after
the Release Date, Borrower may obtain a release of the Lien of the Mortgage (and
the Loan Documents) encumbering the Individual Property (the “Substituted
Property”), by substituting therefor one or more properties of like kind and
quality acquired by Borrower (individually, a “Substitute Property” and
collectively, the “Substitute Properties”), provided that no such substitution
may occur after the date that is eight (8) years after the date of this
Agreement. In addition, any such substitution shall be subject, in each case, to
the satisfaction of the following conditions precedent:

 

(a) Lender shall have received at least thirty (30) days prior written notice
requesting the substitution and identifying the Substitute Property and the
Substituted Property;

 

(b) The Substitute Property must be a property as to which Borrower will hold
indefeasible fee or ground leasehold title free and clear of any lien or other
encumbrance except for Permitted Encumbrances, Leases and easements, restrictive
covenants and other title exceptions which do not have a material adverse effect
on the utility or value of such property for its current use.

 

(c) Lender and the Rating Agencies shall have received a copy of a deed
conveying all of Borrower’s right, title and interest in and to the Substituted
Property to an entity other than Borrower or an Affiliate of Borrower (such
transferee, the “Buyer”) in an arms’ length transaction together with a copy of
a fully executed contract of sale between the Buyer and the Borrower which
contract of sale (i) at the time of substitution, is not subject to any
unsatisfied contingencies, except for the payment of the purchase price by the
purchaser and the delivery of title by Borrower and (ii) evidence that any
good-faith deposit required under such contract of sale has been deposited into
escrow.

 

(d) Lender and the applicable Rating Agencies shall have received an MAI
appraisal of the Substitute Property dated no more than thirty (30) days prior
to the substitution by an appraiser acceptable to such Rating Agencies,
indicating an appraised value of the Substitute Property that is at least equal
to the greater of the appraised value of the Substituted Property determined by
Lender as of the date hereof or determined by an Independent Appraiser within
thirty (30) days of the encumbrance of the Substitute Property by the related
Mortgage.

 

(e) The Debt Service Coverage Ratio for the Substitute Property shall be equal
to the greater of (i) the Threshold DSCR and (ii) the Debt Service Coverage
Ratio, as determined by Lender in its sole and absolute discretion, immediately
prior to such substitution.

 

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(f) The Underwritten Cash Flow for the Substitute Property either (i) does not
show a successive decrease over the three (3) years immediately prior to the
date of substitution, or (ii) if the Substitute Property has been substantially
renovated within such three (3) year period, the Underwritten Cash Flow shall
not show a successive decrease for such a period of not less than twelve (12)
months.

 

(g) The Underwritten Cash Flow for the twelve (12) month period immediately
preceding the substitution for the Substitute Property shall not be less than
the Underwritten Cash Flow for the twelve (12) month period immediately
preceding the substitution for the Substituted Property.

 

(h) The Person transferring the Substitute Property is solvent and the
Substitute Property was transferred to Borrower in an arm’s length transaction,
which may include a transfer by an Affiliate of Borrower to Borrower as long as
Borrower is giving a reasonably equivalent value (as determined by the appraisal
obtained pursuant to clause (d) above) for the Substitute Property.

 

(i) If the Loan is part of a Securitization, Lender shall have received a Rating
Agency Confirmation with respect to such substitution.

 

(j) No Event of Default shall have occurred and be continuing and Lender and the
Rating Agencies shall have received an Officer’s Certificate certifying as to
such absence of an Event of Default.

 

(k) The Borrower shall have executed, acknowledged and delivered to Lender (A) a
First Mortgage and a Second Mortgage, a First Assignment of Leases and a Second
Assignment of Leases and UCC Financing Statements with respect to the Substitute
Property, together with a letter from Borrower countersigned by a title
insurance company acknowledging receipt of such documents and agreeing to record
or file, as applicable, such documents in the real estate records for the county
in which the Substitute Property is located and to file one of the UCC-1
Financing Statements in the office of the Secretary of State of the state in
which Borrower is organized, so as to effectively create upon such recording and
filing valid and enforceable liens upon the Substitute Property, of the
requisite priority, in favor of Lender (or such other trustee as may be required
under local law), subject only to the Permitted Encumbrances and such other
liens as are permitted pursuant to the Loan Documents, (B) an Environmental
Indemnity Agreement with respect to the Substitute Property, and (C) written
confirmation and acceptance from each Guarantor and the Other Borrowers of such
substitution and a reaffirmation by such Guarantor and Other Borrowers with
respect to guarantees executed by such Guarantor and Other Borrowers which
relate to the Loan. The Mortgage, UCC-1 Financing Statements and Environmental
Indemnity Agreement shall be the same in form and substance as the counterparts
of such documents executed and delivered with respect to the related Substituted
Property subject to modifications reflecting the Substitute Property as the
Individual Property and such modifications reflecting the laws of the state in
which the Substitute Property is located as shall be recommended by the counsel
admitted to practice in such state and delivering the opinion as to the
enforceability of such documents required pursuant to clause (p) below. The
First Mortgage encumbering the Substitute Property shall secure all amounts
evidenced by the Note, provided that in the event that the jurisdiction in

 

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which the Substitute Property is located imposes a mortgage recording,
intangibles or similar tax and does not permit the allocation of indebtedness
for the purpose of determining the amount of such tax payable, the principal
amount secured by such First Mortgage shall be equal to one hundred twenty-five
percent (125%) of the amount of the Loan allocated to the Substitute Property.
The amount of the Loan allocated to the Substitute Property (such amount being
hereinafter referred to as the “Substitute Property Loan Amount”) shall equal
the Allocated Loan Amount of the related Substituted Property.

 

(l) Lender shall have received (i) a “tie-in” or similar endorsement to each
Title Insurance Policy insuring the lien of an existing Mortgage as of the date
of the substitution available with respect to the Title Insurance Policy
insuring the lien of the Mortgage with respect to the Substitute Property and
(ii) a Title Insurance Policy (or a marked, signed and redated commitment to
issue such Title Insurance Policy) insuring the lien of the Mortgage encumbering
the Substitute Property, issued by the title company that issued the Title
Insurance Policies insuring the lien of the existing Mortgages and dated as of
the date of the substitution, with reinsurance and direct access agreements that
replace such agreements issued in connection with the Title Insurance Policy
insuring the lien of the Mortgage encumbering the Substituted Property, to the
extent such agreements are available in the jurisdiction in which the Substitute
Property is located. The Title Insurance Policy issued with respect to the
Substitute Property shall (1) provide coverage in the amount of the Allocated
Loan Amount if the “tie-in” or similar endorsement described above is available
or, if such endorsement is not available, in an amount equal to one hundred
twenty-five percent (125%) of the Allocated Loan Amount, (2) insure Lender that
the relevant Mortgage creates a valid first lien on the Substitute Property
encumbered thereby, free and clear of all exceptions from coverage other than
Permitted Encumbrances and standard exceptions and exclusions from coverage (as
modified by the terms of any endorsements), (3) contain such endorsements and
affirmative coverages as are contained in the Title Insurance Policies insuring
the liens of the existing Mortgage, to the extent available in the jurisdiction
in which the Substitute Property is located and (4) name Lender as the insured.
Lender also shall have received copies of paid receipts or a closing statement
showing that all premiums in respect of such endorsements and Title Insurance
Policies have been paid or will be paid at closing of the purchase of the
Substitute Property.

 

(m) Lender shall have received a current title survey for each Substitute
Property, certified to the title company and Lender and their successors and
assigns, in the same form and having the same content as the certification of
the Survey of the Substituted Property prepared by a professional land surveyor
licensed in the state in which the Substitute Property is located and acceptable
to the Rating Agencies in accordance with the 1997 Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys, including items 1, (if readily
available) 2, 3, 4, 6, 7 (a) (b) (c) , 8, 9, 10, 11 and 13 from Table A, or in
accordance with similar successor standards typically accepted by prudent
lenders in similar transactions. Such survey shall reflect the same legal
description contained in the Title Insurance Policy relating to such Substitute
Property and shall include, among other things, a metes and bounds description
of the real property comprising part of such Substitute Property. The surveyor’s
seal shall be affixed to each survey and each survey shall certify that the
Improvements located on the surveyed property is not located in an area
identified by the Federal Emergency Management Agency as a “special flood hazard
area”.

 

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(n) Lender shall have received valid certificates of insurance indicating that
the requirements for the Policies of insurance required for an Individual
Property hereunder have been satisfied with respect to the Substitute Property
and evidence of the payment of all premiums payable for the existing policy
period.

 

(o) Lender shall have received a Phase I environmental report and, if
recommended under the Phase I environmental report, a Phase II environmental
report from a nationally recognized environmental consultant approved by the
Rating Agencies (if applicable), not less than thirty (30) days prior to such
release and substitution, which conclude that the Substitute Property does not
contain any Hazardous Materials (except for cleaning and other products used in
connection with the routine maintenance or repair of the Substitute Property or
the operation thereof as an office building and in full compliance with
Hazardous Materials Laws) and is not subject to any risk of contamination from
any off-site Hazardous Materials. If any such report discloses the presence of
any Hazardous Materials (except for cleaning and other products used in
connection with the routine maintenance or repair of the Substitute Property or
the operation thereof as an office building, in full compliance with Hazardous
Materials Laws) or the risk of contamination from any off-site Hazardous
Materials, such report shall include an estimate of the cost of any related
remediation and Borrower shall deposit with Lender an amount equal to one
hundred twenty-five percent (125%) of such estimated cost, which deposit shall
constitute additional security for the Loan and shall be released to Borrower
upon the delivery to Lender of (i) an update to such report indicating that
there is no longer any Hazardous Materials (except for cleaning and other
products used in connection with the routine maintenance or repair of the
Substitute Property or the operation thereof as an office building, in full
compliance with Hazardous Materials Laws) on the Substitute Property or any
danger of contamination from any off-site Hazardous Materials that has not been
fully remediated in accordance with all applicable laws and (ii) paid receipts
indicating that the costs of all such remediation work have been paid. Such
report shall also state the amount of time that will be necessary to complete
such remediation, as may be required by applicable law. Borrower covenants to
undertake any repairs, cleanup or remediation indicated.

 

(p) Borrower shall deliver or cause to be delivered to Lender (i) an Officer’s
Certificate and updates of all organizational documentation related to the
Borrower substituting an Individual Property and/or the formation, structure,
existence, good standing and/or qualification to do business delivered to Lender
on the Closing Date; (ii) good standing certificates, certificates of
qualification to do business in the jurisdiction in which the Substitute
Property is located (if required in such jurisdiction) and (iii) resolutions of
the managing member of the Borrower substituting an Individual Property
authorizing the substitution and any actions taken in connection with such
substitution.

 

(q) Lender shall have received the following opinions of Borrower’s counsel
(which opinions, with respect to the opinions set forth in clauses (i), (ii) and
(iii) below, shall be in form similar to the corresponding opinions delivered to
Lender on the Closing Date: (i) an opinion or opinions of counsel admitted to
practice under the laws of the state in which the Substitute Property is located
stating that the Loan Documents delivered with respect to the Substitute
Property pursuant to clause (j) above are valid and enforceable in accordance
with their terms, subject to the laws applicable to creditors’ rights and
equitable principles, and that Borrower is qualified to do business and in good
standing under the laws of the jurisdiction

 

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where the Substitute Property is located or that the Borrower is not required by
applicable law to qualify to do business in such jurisdiction; (ii) an opinion
of counsel stating that the Loan Documents delivered with respect to the
Substitute Property pursuant to clause (j) above were duly authorized, executed
and delivered by the Borrower and that, to the best of Borrower’s counsel’s
knowledge, the execution and delivery of such Loan Documents and the performance
by the Borrower of its obligations thereunder will 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 its properties are bound; (iii) title endorsements or,
if such title endorsements are not available, an opinion of counsel insuring or
opining, as applicable, that subjecting the Substitute Property to the lien of
the related Mortgage and the execution and delivery of the related Loan
Documents does not and will not affect or impair the ability of Lender to
enforce its remedies under all of the Loan Documents or the Guaranty Security
Documents or to realize the benefits of the cross-collateralization provided for
thereunder; (iv) an update of the Non-Consolidation Opinion indicating that the
substitution does not affect the opinions set forth therein; (v) an Officer’s
Certificate and other reasonable evidence acceptable to the applicable Rating
Agencies confirming that the substitution and the related transactions do not
constitute a fraudulent conveyance under applicable bankruptcy and insolvency
laws and (vi) an opinion of counsel acceptable to the applicable Rating Agencies
that the substitution does not constitute a “significant modification” of the
Loan under Section 1001 of the Code or otherwise cause a tax to be imposed on a
“prohibited transaction” by any REMIC.

 

(r) Borrower shall have paid or caused to be paid all Basic Carrying Costs
relating to the Individual Property and the Substitute Property, including,
without limitation, (i) accrued but unpaid insurance premiums relating to the
Individual Property and the Substitute Property, (ii) currently due taxes
(including any in arrears) relating to the Individual Property and the
Substitute Property and (iii) any other charges relating to the Individual
Property and Substitute Property which are currently due.

 

(s) Borrower shall have paid or reimbursed Lender for all third party
out-of-pocket costs and expenses incurred by Lender (including, without
limitation, reasonable attorneys fees and disbursements) in connection with the
substitution and Borrower shall have paid all recording charges, filing fees,
taxes or other expenses (including, without limitation, mortgage and intangibles
taxes and documentary stamp taxes) payable in connection with the substitution.
Borrower shall have paid all costs and expenses of the Rating Agencies incurred
in connection with the substitution.

 

(t) Lender shall have received annual operating statements and occupancy
statements for the Substitute Property for the three (3) most recently completed
fiscal years and a current operating statement for the Substituted Property or,
if information is not available for a three (3) year period or if the
Substituted Property has been substantially renovated within such three (3) year
period, such lesser period as is available, but in no event less than twelve
(12) months. Each of the statements required under this clause (t) shall be
certified to Lender as being true and correct and an Officer’s Certificate
certifying that there has been no material adverse change in the financial
condition of the Substitute Property since the date of such operating
statements.

 

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(u) The Borrower that owns the Substitute Property shall have used commercially
reasonable efforts to obtain and deliver to Lender estoppel certificates from
all of the Tenants of the Substitute Property, provided, that, Borrower shall be
required to deliver estoppel certificates acceptable to Lender from a minimum of
seventy-five percent (75%) of the Tenants of the rentable square footage of such
Substitute Property prior to effectuating the substitution contemplated by this
Section 2.6. All such estoppel certificates shall be in the form attached hereto
as Schedule XII (with such commercially reasonable changes as may be requested
by Tenants, from time to time, and which are reasonably acceptable to Lender)
and shall indicate, among other things, that (i) the subject Lease is a valid
and binding obligation of the tenant thereunder, (ii) there are no defaults
under such Lease on the part of the landlord or Tenant thereunder, (iii) the
Tenant thereunder has no defense or offset to the payment of rent under such
leases, (iv) no rent under such lease has been paid more than one (1) month in
advance, (v) the Tenant thereunder has no option or right of first refusal under
such Lease to purchase all or any portion of the Substitute Property and (vi)
all Tenant improvement work required under such Lease has been completed and the
Tenant under such Lease is in actual occupancy of its leased premises. If an
estoppel certificate indicates that all tenant improvement work required under
the subject Lease has not yet been completed, Borrower shall, if required by the
Rating Agencies, deliver to Lender financial statements indicating that Borrower
has adequate funds to pay all costs related to such tenant improvement work as
required under such Lease.

 

(v) Lender shall have received copies of all Leases affecting the Substitute
Property which shall be accompanied by an Officer’s Certificate certifying that
such Leases being delivered are true and correct copies thereof. Lender shall
have received a current Rent Roll of the Substitute Property certified pursuant
to an Officer’s Certificate as being true and correct.

 

(w) Lender shall have received (A) an endorsement to the Title Insurance Policy
insuring the lien of the Mortgage encumbering the Substitute Property insuring
that the Substitute Property constitutes a separate tax lot or, if such an
endorsement is not available in the state in which the Substitute Property is
located, a letter from the title insurance company issuing such Title Insurance
Policy stating that the Substitute Property constitutes a separate tax lot or
(B) a letter from the appropriate taxing authority stating that the Substitute
Property constitutes a separate tax lot.

 

(x) Lender shall have received a physical conditions report with respect to the
Substitute Property from a nationally recognized structural consultant approved
by the Rating Agencies (if applicable) in a form recognized and approved by such
Rating Agencies not less than thirty (30) days prior to such release and
substitution stating that the Substitute Property and its use comply in all
material respects with all applicable Legal Requirements (including, without
limitation, zoning, subdivision and building laws) and that the Substitute
Property is in good condition and repair and free of material damage or waste.
If compliance with any Legal Requirements are not addressed by the physical
conditions report, such compliance shall be confirmed by delivery to Lender of a
zoning report issued to Lender by a nationally recognized zoning review
consultant, a certificate of an architect licensed in the state in which the
Substitute Property is located, a letter from the municipality in which such
Substitute Property is located, a certificate of a surveyor that is licensed in
the state in which the Substitute Property is located

 

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(with respect to zoning and subdivision laws), an ALTA 3.1 zoning endorsement to
the Title Insurance Policy delivered pursuant to clause (k) above (with respect
to zoning laws) or a subdivision endorsement to the Title Insurance Policy
delivered pursuant to clause (k) above (with respect to subdivision laws) to the
extent such endorsements are available in the jurisdiction in which the
Substitute Property is located. If the physical conditions report recommends
that any repairs be made with respect to the Substitute Property, such physical
conditions report shall either (i) include an estimate of the cost of such
recommended repairs (in which case Borrower shall deposit into the Repair Escrow
Account an amount equal to one hundred twenty-five percent (125%) of such
estimated cost), or (ii) state the specific amounts that need to be reserved
over time in order to meet the requirements of such replacements (in which case
Borrower shall deposit such reserves into the Replacement Reserve Account on a
monthly basis). Any such deposits shall constitute additional security for the
Loan pursuant to Section 6.9 and shall be released to Borrower pursuant to
Section 6.4.2. Borrower covenants to undertake any repairs, cleanup or
remediation indicated in the physical conditions report before the earlier of
(A) the time required by Legal Requirements or (B) the time recommended in the
physical conditions report.

 

(y) Lender shall have received the Management Agreement, if any, relating to the
Substitute Property, and the Borrower shall have demonstrated that such
agreement is on substantially similar terms as the agreement then in place at
the Substituted Property.

 

(z) If the Substitute Property is located in California or a seismic area
designated as Zone 3 or 4 by the Rating Agencies (Source: ICBC, 1994 Uniform
Building Code), Lender shall have received a PML study and a seismic report
indicating the seismic zone in which the Substitute Property is located and
otherwise acceptable to a prudent institutional mortgage lender and, if the
reports would have been acceptable to a prudent institutional lender, Borrower
shall obtain earthquake insurance in accordance with Section 5.1.1(a)(i).

 

(aa) Lender shall have received such other and further approvals, opinions,
documents and information in connection with the substitution as the Rating
Agencies may request.

 

(bb) If the Borrower owns a ground leasehold estate in the Substitute Property,
Lender shall have received (i) a certified copy of the ground lease for the
Substitute Property, together with all amendments and modifications thereto and
a recorded memorandum thereof, which ground lease would be reasonably
satisfactory to a prudent institutional mortgage lender and which contains
customary leasehold mortgagee provisions and protections, and which shall
provide, among other things, (A) for a remaining term of not less than thirty
(30) years from the Maturity Date (including any extensions that are exercisable
by Lender in the event Borrower fails to do so when permitted or obligated
thereunder), (B) that the ground lease shall not be terminated until Lender has
received of an event of default thereunder and has been afforded a reasonable
opportunity to cure the default or complete foreclosure, and fails to do so in a
diligent manner, (C) for a new lease on the same terms to Lender as the tenant
if the ground lease is terminated for any reason, (D) the non-merger of fee and
leasehold estates, and (E) that insurance proceeds and condemnation awards (from
the fee interest as well as the leasehold interest) will be applied pursuant to
the terms of this Agreement or to the restoration of the improvements, (ii) and
a ground lessor estoppel in the form attached hereto as Exhibit XIII, with such
modifications and additions as reasonably required after a review of the ground
lease by Lender.

 

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(cc) Lender shall have received copies of all contracts and agreements relating
to the leasing and operation of the Substitute Property together with an
Officer’s Certificate attached to each such contract or agreement certifying
that the attached copy is a true and correct copy of such contract or agreement
and all amendments thereto.

 

(dd) Borrower shall submit to Lender, not less than thirty (30) days prior to
the date of such substitution, a release of lien (and related Loan Documents)
for the Substituted Property for execution by Lender. Such release shall be in a
form appropriate for the jurisdiction in which the Substituted Property is
located. Borrower shall deliver an Officer’s Certificate certifying that the
requirements set forth in this Section 2.6 have been satisfied.

 

(ee) The total Allocated Loan Amount, in the aggregate, for all prior
Substituted Properties (including the current Substituted Property) under this
Agreement and the Other Loan Agreements is less than thirty percent (30%) of the
aggregate Original Principal Amount of the Loan and all of the Other Loans.

 

(ff) The Substitute Property shall be subject to the lien of the Mortgage and
subject to any cross-collateralization and cross-default provisions of this Loan
Agreement and the Mortgage.

 

Upon the satisfaction of the foregoing conditions precedent, Lender will release
its lien from the Substituted Property to be released and the Substitute
Property shall be deemed to be the Individual Property for purposes of this
Agreement and the Substitute Property Loan Amount with respect to such
Substitute Property shall be deemed to be the Allocated Loan Amount with respect
to the Substituted Property for all purposes hereunder.

 

III. REPRESENTATIONS AND WARRANTIES

 

Section 3.1 Borrower Representations.

 

Borrower represents and warrants that:

 

3.1.1 Organization. (a) Borrower and each SPC Party is duly organized, validly
existing and in good standing with full power and authority to own its assets
and conduct its business, and is duly qualified in all jurisdictions in which
the ownership of its property or the conduct of its business requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on its ability to perform its obligations hereunder, and
Borrower has taken all necessary action to authorize the execution, delivery and
performance of this Agreement and the other Loan Documents by it, and has the
power and authority to execute, deliver and perform under this Agreement, the
other Loan Documents and all the transactions contemplated hereby.

 

(b) Borrower’s exact legal name is correctly set forth in the first paragraph of
this Agreement. Borrower is an organization of the type specified in the first
paragraph of this

 

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Agreement. Borrower is incorporated or organized under the laws of the state
specified in the first paragraph of this Agreement. Borrower’s principal place
of business and chief executive office, and the place where Borrower keeps its
books and records, including recorded data of any kind or nature, regardless of
the medium of recording, including software, writings, plans, specifications and
schematics, has been for the preceding four (4) months (or, if less than four
(4) months, the entire period of the existence of Borrower) and will continue to
be the address of Borrower set forth in the first paragraph of this Agreement
(unless Borrower notifies Lender in writing at least thirty (30) days prior to
the date of such change). The organizational identification number of Wells REIT
– Orange County, L.P. assigned by the state of its incorporation or organization
is 3797225 and its federal tax identification number is 20-1068331. Borrower is
not subject to back-up withholding taxes.

 

3.1.2 Proceedings. This Agreement and the other Loan Documents have been duly
authorized, executed and delivered by Borrower and constitute the legal, valid
and binding obligation of Borrower, enforceable against Borrower in accordance
with their respective terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors’ rights generally, and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).

 

3.1.3 No Conflicts. The execution and delivery of this Agreement and the other
Loan Documents by Borrower and the performance of its obligations hereunder and
thereunder will not conflict with any provision of any law or regulation to
which Borrower is subject, or conflict with, result in a breach of, or
constitute a default under, any of the terms, conditions or provisions of any of
Borrower’s organizational documents or any agreement or instrument to which
Borrower is a party or by which it is bound, or any order or decree applicable
to Borrower, or result in the creation or imposition of any lien on any of
Borrower’s assets or property (other than the Individual Property and pursuant
to the Loan Documents and the Guaranty Security Documents).

 

3.1.4 Litigation. There is no action, suit, proceeding or investigation pending
or, to Borrower’s knowledge, threatened against Borrower in any court or by or
before any other Governmental Authority which would materially and adversely
affect the ability of Borrower to carry out the transactions contemplated by
this Agreement.

 

3.1.5 Agreements. Borrower is not in default with respect to any order or decree
of any court or any order, regulation or demand of any Governmental Authority,
which default might have consequences that would materially and adversely affect
the condition (financial or other) or operations of Borrower or its properties
or might have consequences that would adversely affect its performance
hereunder.

 

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 Borrower of, or compliance by Borrower with, this Agreement or the
consummation of the transactions contemplated hereby, other than those which
have been obtained by Borrower.

 

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3.1.7 Title. Borrower has good, marketable and insurable fee simple title to the
real property comprising part of the Individual Property and good title to the
balance of the Individual Property, free and clear of all Liens whatsoever
except the Permitted Encumbrances, the Second Mortgage and the Second Assignment
of Leases. The First Mortgage and the First Assignment of Leases, when properly
recorded in the appropriate records, together with any Uniform Commercial Code
financing statements required to be filed in connection therewith, will create
(i) a valid, first priority, perfected lien on the Individual Property, subject
only to Permitted Encumbrances 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 any
Permitted Encumbrances. The Second Mortgage and Second Assignment of Leases,
when properly recorded in the appropriate records, together with any Uniform
Commercial Code financing statements required to be filed in connection
therewith, will create (i) a valid, second priority, perfected lien on the
Individual Property, subject only to Permitted Encumbrances and the First
Mortgage 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 any Permitted
Encumbrances and the First Mortgage and the First Assignment of Leases. There
are no mechanics’, materialman’s or other similar liens or claims which have
been filed for work, labor or materials affecting the Individual Property which
are or may be liens prior to, or equal or coordinate with, the lien of the
related Mortgage. None of the Permitted Encumbrances, individually or in the
aggregate, materially interfere with the benefits of the security intended to be
provided by the Mortgage and this Loan Agreement, materially and adversely
affect the value of the Individual Property, impair the use or operations of the
Individual Property or impair Borrower’s ability to pay its obligations in a
timely manner.

 

3.1.8 No Plan Assets. As of the date hereof and throughout the term of the Loan
(a) Borrower is not, and Borrower will not be, an “employee benefit plan,” as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended (“ERISA”), whether or not subject to Title I of ERISA, or a “plan” as
defined in Section 4975 of the Code, (b) none of the assets of Borrower
constitutes or will constitute “plan assets” of one or more such plans within
the meaning of U.S. Department of Labor Regulation 29 C.F.R. Section 2510.3-101
(the “Plan Assets Regulation”), and (c) transactions by or with Borrower are not
and will not be subject to any state statute regulating investments of, or
fiduciary obligations with respect to, governmental plans, as defined in Section
3(32) of ERISA.

 

3.1.9 Compliance. Except as set forth on Schedule XI attached hereto, Borrower
and the Individual Property and the use thereof comply in all material respects
with all applicable Legal Requirements, including, without limitation, building
and zoning ordinances and codes and Prescribed Laws. Borrower is not in default
or violation of any order, writ, injunction, decree or demand of any
Governmental Authority, the violation of which might materially adversely affect
the condition (financial or otherwise) or business of Borrower. Borrower has not
committed any act which may give any Governmental Authority the right to cause
Borrower to forfeit the Individual Property or any part thereof or any monies
paid in performance of the Borrower’s obligations under any of the Loan
Documents or the Guaranty Security Documents.

 

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3.1.10 Financial Information. All financial data, including, without limitation,
the statements of cash flow and income and operating expense, that have been
delivered to Lender in respect of the Individual Property (i) are true, complete
and correct in all material respects, (ii) accurately represent the financial
condition of the Individual Property as of the date of such reports, and (iii)
have been prepared in accordance with GAAP throughout the periods covered,
except as disclosed therein. Borrower has no contingent liabilities, liabilities
for taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments that are known to Borrower and
reasonably likely to have a materially adverse effect on the Individual Property
or the operation thereof, except as referred to or reflected in said financial
statements. Since the date of the financial statements, there has been no
material adverse change in the financial condition, operations or business of
Borrower or the Individual Property from that set forth in said financial
statements.

 

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

 

3.1.12 Utilities and Public Access. The Individual Property has rights of access
to public ways and is served by water, sewer, sanitary sewer and storm drain
facilities adequate to service the Individual Property for its respective
intended uses.

 

3.1.13 Separate Lots. The Individual Property is comprised of one (1) or more
parcels which constitutes a separate tax lot and does not constitute a portion
of any other tax lot not a part of the Individual Property.

 

3.1.14 Assessments. There are no pending or proposed special or other
assessments for public improvements or otherwise affecting the Individual
Property, nor are there any contemplated improvements to the Individual Property
that may result in such special or other assessments.

 

3.1.15 Enforceability. The Loan Documents are not subject to any right of
rescission, set off, counterclaim or defense by Borrower, 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 Borrower has not asserted any right of rescission, set off, counterclaim or
defense with respect thereto. The Guaranty Security Documents are not subject to
any right of rescission, set off, counterclaim or defense by Borrower, including
the defense of usury, nor would the operation of any of the terms of the
Guaranty Security Documents, or the exercise of any right thereunder, render the
Guaranty Security Documents unenforceable, and Borrower has not asserted any
right of rescission, set off, counterclaim or defense with respect thereto.

 

3.1.16 Assignment of Leases. Each Assignment of Leases creates a valid
assignment of, or a valid security interest in, certain rights under the Leases
at the Individual Property, subject only to a license granted to the Borrower to
exercise certain rights and to perform certain obligations of the lessor under
such Leases, including the right to operate the Individual Property. No Person
other than Lender has any interest in or assignment of the Leases or any portion
of the Rents due and payable or to become due and payable thereunder.

 

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3.1.17 Insurance. Borrower has obtained and has delivered to Lender certificates
evidencing the insurance coverage provided under the Policies, with all premiums
prepaid thereunder, reflecting the insurance coverages, amounts and other
requirements set forth in this Agreement. Except as set forth on Schedule XI
attached hereto, no claims have been made under any of the Policies, and no
Person, including Borrower, has done, by act or omission, anything which would
impair the coverage of any of the Policies.

 

3.1.18 Licenses. All permits and approvals, including without limitation,
certificates of occupancy required by any Governmental Authority for the use,
occupancy and operation of the Individual Property in the manner in which the
Individual Property is currently being used, occupied and operated have been
obtained and are in full force and effect.

 

3.1.19 Flood Zone. Except as may be shown on the Survey, none of the
Improvements on the Individual Property are located in an area identified by the
Federal Emergency Management Agency as a special flood hazard area.

 

3.1.20 Physical Condition. Except as may be disclosed in the engineering reports
described on Schedule XI attached hereto, the Individual Property, including,
without limitation, all buildings, improvements, parking facilities, sidewalks,
storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection
systems, electrical systems, equipment, elevators, exterior sidings and doors,
landscaping, irrigation systems and all structural components, is in good
condition, order and repair in all material respects; there exists no structural
or other material defects or damages in the Individual Property, whether latent
or otherwise, and Borrower has not received any notice from any insurance
company or bonding company of any defects or inadequacies in the Individual
Property, or any part thereof, which would adversely affect the insurability of
the same or cause the imposition of extraordinary premiums or charges thereon or
of any termination or threatened termination of any policy of insurance or bond.

 

3.1.21 Boundaries. Except as may be shown on the Survey, all of the improvements
which were included in determining the appraised value of the Individual
Property lie wholly within the boundaries and building restriction lines of the
Individual Property, and no improvements on adjoining properties encroach upon
the Individual Property, and no easements or other encumbrances affecting the
Individual Property encroach upon any of the improvements, so as to affect the
value or marketability of the Individual Property except those which are insured
against by title insurance.

 

3.1.22 Leases. Except as set forth on Schedule XI attached hereto, Borrower
represents and warrants to Lender with respect to the Leases at the Individual
Property: (a) the rent roll attached hereto as Schedules I is true, complete and
correct and the Individual Property is not subject to any Leases other than the
Leases for the Individual Property that are described in the applicable Schedule
I, (b) the Leases identified on Schedules I are in full force and effect and
there are no defaults thereunder by either party (other than non-material
defaults by Tenants that it is commercially reasonable for the Borrower to
excuse), (c) the copies of the Leases delivered

 

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to Lender are true and complete, and there are no oral agreements with respect
thereto, (d) no Rent (including security deposits) has been paid more than one
(1) month in advance of its due date, (e) all work to be performed by Borrower
under each Lease has been performed as required and has been accepted by the
applicable Tenant, (f) any payments, free rent, partial rent, rebate of rent or
other payments, credits, allowances or abatements required to be given by
Borrower to any Tenant has already been received by such Tenant and (g) all
security deposits are being held in accordance with Legal Requirements.

 

3.1.23 Filing and Recording Taxes. 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 Individual
Property to the applicable Borrower have been paid or are being paid
simultaneously herewith. All mortgage, mortgage recording, stamp, intangible or
other similar tax required to be paid under applicable Legal Requirements in
connection with the execution, delivery, recordation, filing, registration,
perfection or enforcement of any of the Loan Documents and the Guaranty Security
Documents, including, without limitation, the Mortgages, have been paid or are
being paid simultaneously herewith. All taxes and governmental assessments due
and owing in respect of the Individual 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 to be issued in
connection with the Mortgages

 

3.1.24 Single Purpose. Borrower hereby represents and warrants to, and covenants
with, Lender that as of the date hereof and until such time as the Debt shall be
paid in full:

 

(a) Borrower does not own and will not own any asset or property other than (i)
the Individual Property, and (ii) incidental personal property or other assets
necessary for the ownership or operation of the Individual Property.

 

(b) Borrower will not engage in any business other than the ownership,
management and operation of the Individual Property, entering into the Loan as a
co-borrower and Borrower will conduct and operate its business as presently
conducted and operated.

 

(c) Borrower will not enter into any contract or agreement with any Affiliate of
Borrower, any constituent party of Borrower or any Affiliate of any constituent
party, except upon terms and conditions that are intrinsically fair and
substantially similar to those that would be available on an arm’s-length basis
with third parties other than any such party.

 

(d) Borrower has not incurred and will not incur any Indebtedness other than (i)
the Debt, (ii) unsecured trade payables and operational debt not evidenced by a
note and (iii) Indebtedness incurred in the financing of equipment and other
personal property used at the Individual Property; provided that any
Indebtedness incurred pursuant to subclauses (ii) and (iii) shall be (x) not in
excess of three percent (3%) of the Allocated Loan Amount, (y) paid not more
than sixty (60) days from the date incurred as to the matters in subclause (ii)
above and not more than sixty (60) days from the date due as to the matters in
subclause (iii) above, subject only to Borrower’s right to diligently prosecute
a good faith dispute as to amounts due and payable in accordance with the
provisions of this Agreement and (z) incurred in the ordinary course of

 

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business. No Indebtedness other than the Debt may be secured (subordinate or
pari passu) by the Individual Property except with respect to the Guaranty of
Other Loans and the Guaranty Security Documents delivered by Borrower in
connection therewith.

 

(e) Borrower has not made and will not make any loans or advances to any third
party (including any Affiliate or constituent party), and shall not acquire
obligations or securities of its Affiliates.

 

(f) Borrower is and will remain solvent and Borrower will pay its debts and
liabilities (including, as applicable, shared personnel and overhead expenses)
from its assets as the same shall become due.

 

(g) Borrower has done or caused to be done and will do all things necessary to
observe organizational formalities and preserve its existence, and Borrower will
not, nor will Borrower permit any constituent party to amend, modify or
otherwise change the partnership certificate, partnership agreement, articles of
incorporation and bylaws, operating agreement, trust or other organizational
documents of Borrower or such constituent party without the prior consent of
Lender in any manner that (i) violates the single purpose covenants set forth in
this Section 3.1.24, or (ii) amends, modifies or otherwise changes any provision
thereof that by its terms cannot be modified at any time when the Loan is
outstanding or by its terms cannot be modified without Lender’s consent.

 

(h) Borrower will maintain all of its books, records, financial statements and
bank accounts separate from those of its Affiliates and any constituent party.
Borrower’s assets will not be listed as assets on the financial statement of any
other Person; provided, however, that Borrower’s assets may be included in a
consolidated financial statement of its Affiliates provided that (i) appropriate
notation shall be made on such consolidated financial statements (or the notes
thereto) to indicate the separateness of Borrower and such Affiliates and to
indicate that Borrower’s assets and credit are not available to satisfy the
debts and other obligations of such Affiliates or any other Person and (ii) such
assets shall be listed on Borrower’s own separate balance sheet. Borrower will
file its own tax returns (to the Borrower is required to file any such tax
returns) and will not file a consolidated federal income tax return with any
other Person except to the extent Borrower is a disregarded entity for federal
income tax purposes. Borrower shall maintain its books, records, resolutions and
agreements as official records.

 

(i) Borrower will be, and at all times will hold itself out to the public as, a
legal entity separate and distinct from any other entity (including any
Affiliate of Borrower or any constituent party of Borrower), shall correct any
known misunderstanding regarding its status as a separate entity, shall conduct
business in its own name, shall not identify itself or any of its Affiliates as
a division or part of the other.

 

(j) Borrower will 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.

 

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(k) Neither Borrower nor any constituent party will seek or effect the
liquidation, dissolution, winding up, liquidation, consolidation or merger, in
whole or in part, of Borrower.

 

(l) Borrower will not commingle the funds and other assets of Borrower with
those of any Affiliate or constituent party or any other Person, and will hold
all of its assets in its own name.

 

(m) Borrower has and will maintain its assets in such a manner that it will not
be costly or difficult to segregate, ascertain or identify its individual assets
from those of any Affiliate or constituent party or any other Person.

 

(n) Borrower will not guarantee, other than as set forth in the Guaranty of
Other Loans, or become obligated for the debts of any other Person and does not
and will not hold itself out to be responsible for or have its credit available
to satisfy the debts or obligations of any other Person.

 

(o) (i) If Borrower is a limited partnership or a limited liability company
(other than a single member limited liability company), each general partner or
managing member (each, an “SPC Party”), as applicable, shall be a corporation or
a Delaware single member limited liability company acceptable to Lender whose
sole asset is its interest in Borrower and each such SPC Party will at all times
comply, and will cause Borrower to comply, with each of the representations,
warranties, and covenants contained in this Section 3.1.24 as if such
representation, warranty or covenant was made directly by such SPC Party. Upon
the withdrawal or the disassociation of an SPC Party from Borrower, Borrower
shall immediately appoint a new SPC Party whose articles of incorporation are
substantially similar to those of such SPC Party and deliver a new
non-consolidation opinion to the Rating Agency or Rating Agencies, as
applicable, with respect to the new SPC Party and its equity owners.

 

(ii) If Borrower or any SPC Party of Borrower is a single member limited
liability company, Borrower or such SPC Party shall have at least two (2)
springing members, one of which, upon the dissolution of such sole member or the
withdrawal or the disassociation of the sole member from Borrower or such SPC
Party, shall immediately become the sole member of Borrower or such SPC Party,
and the other of which shall become the sole member of Borrower or such SPC
Party if the first such springing member no longer is available to serve as such
sole member.

 

(p) Borrower shall at all times cause there to be at least two (2) duly
appointed members of the board of directors of each SPC Party and the Borrower
who are provided by a nationally recognized company that provides professional
independent directors (each, an “Independent Director”) and which are reasonably
satisfactory to Lender who shall not have been at the time of such individual’s
appointment or at any time while serving as a director of such SPC Party and
Borrower, and may not have been at any time during the preceding five years (i)
a stockholder, director (other than as an Independent Director), officer,
employee, partner, attorney or counsel of such SPC Party, Borrower or any
Affiliate of either of them, (ii) a customer, supplier or other Person who
derives any of its purchases or revenues from its activities with such SPC
Party, Borrower or any Affiliate of either of them (other than as an

 

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Independent Director), (iii) a Person or other entity controlling or under
common control with any such stockholder, partner, customer, supplier or other
Person, or (iv) a member of the immediate family of any such stockholder,
director, officer, employee, partner, customer, supplier or other Person. A
natural person who otherwise satisfies the foregoing definition of Independent
Director except for being the independent director, manager or special member of
a “special purpose entity” affiliated with the Borrower that does not own a
direct or indirect equity interest in the Borrower shall not be disqualified
from serving as an Independent Director if such individual is at the time of
initial appointment, or at any time while serving as an Independent Director, is
an independent manager, director or special member provided by a
nationally-recognized company that provides professional independent managers,
directors or special members. As used in this definition, the term “control”
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management, policies or activities of a Person, whether
through ownership of voting securities, by contract or otherwise.

 

(q) Borrower shall not cause or permit the board of directors of any SPC Party
and Borrower to take any action which, under the terms of any certificate of
incorporation, by-laws or any voting trust agreement with respect to any common
stock or under any organizational document of Borrower or SPC Party, requires a
unanimous vote of the board of directors of each SPC Party and Borrower unless
at the time of such action there shall be at least two members who are each an
Independent Director.

 

(r) Borrower shall conduct its business so that the assumptions made with
respect to Borrower in the Non-Consolidation Opinion shall be true and correct
in all respects. In connection with the foregoing, Borrower hereby covenants and
agrees that it will comply with or cause the compliance with, (i) all of the
facts and assumptions (whether regarding the Borrower or any other Person) set
forth in the Non-Consolidation Opinion, (ii) all the representations, warranties
and covenants in this Section 3.1.24, and (iii) all the organizational documents
of the Borrower and any SPC Party.

 

(s) Borrower will not permit any Affiliate or constituent party independent
access to its bank accounts other than a Manager approved by Lender, and then in
such circumstances, only in accordance with the terms of its respective
Management Agreement.

 

(t) Borrower shall pay the salaries of its own employees (if any) from its own
funds and maintain a sufficient number of employees (if any) in light of its
contemplated business operations.

 

(u) Borrower shall compensate each of its consultants and agents from its funds
for services provided to it and pay from its own assets all obligations of any
kind incurred.

 

3.1.25 Tax Filings. To the extent required, Borrower has filed (or has obtained
effective extensions for filing) all federal, state and local tax returns
required to be filed and have paid or made adequate provision for the payment of
all federal, state and local taxes, charges and assessments payable by Borrower.
Borrower believes that its tax returns (if any) properly reflect the income and
taxes of Borrower for the periods covered thereby, subject only to reasonable
adjustments required by the Internal Revenue Service or other applicable tax
authority upon audit.

 

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

 

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

 

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

 

3.1.29 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.

 

3.1.30 No Other Debt. Borrower has not borrowed or received debt financing
(other than permitted pursuant to this Agreement) that has not been heretofore
repaid in full.

 

3.1.31 Investment Company Act. Borrower is not (1) an “investment company” or a
company “controlled” by an “investment company,” within the meaning of the
Investment Company Act of 1940, as amended; (2) a “holding company” or a
“subsidiary company” of a “holding company” or an “affiliate” of either a
“holding company” or a “subsidiary company” within the meaning of the Public
Utility Holding Company Act of 1935, as amended; or (3) subject to any other
federal or state law or regulation which purports to restrict or regulate its
ability to borrow money.

 

3.1.32 Access/Utilities. All public utilities necessary to the continued use and
enjoyment of the Individual Property as presently used and enjoyed are located
in the public

 

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right-of-way abutting the Individual Property. All roads necessary for the full
utilization of the Individual Property for its current purpose have been
completed and dedicated to public use and accepted by all governmental
authorities or are the subject of access easements for the benefit of the
Individual Property.

 

3.1.33 No Bankruptcy Filing. Borrower is not contemplating either the filing of
a petition by it under any state or federal bankruptcy or insolvency laws or the
liquidation of its assets or property, and Borrower has no knowledge of any
Person contemplating the filing of any such petition against it.

 

3.1.34 Full and Accurate Disclosure. To the best of Borrower’s knowledge, no
information contained in this Agreement, the other Loan Documents, the Guaranty
Security Documents or any written statement furnished by or on behalf of
Borrower pursuant to the terms of this Agreement contains any untrue statement
of a material fact or omits to state a material fact necessary to make the
statements contained herein or therein not materially misleading in light of the
circumstances under which they were made. There is no material fact or
circumstance presently known to Borrower which have not been disclosed to Lender
and which materially adversely affects, or is reasonably likely to materially
adversely affect, the Individual Property, Borrower, the Guaranty of Other Loans
or its business, operations or condition (financial or otherwise).

 

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

 

3.1.36 No Change in Facts or Circumstances; Disclosure. To the best of
Borrower’s knowledge, there has been no material adverse change in any
condition, fact, circumstance or event that would make the financial statements,
rent rolls, reports, certificates or other documents submitted in connection
with the Loan inaccurate, incomplete or otherwise misleading in any material
respect or that otherwise materially and adversely affects the business
operations or the financial condition of Borrower or the Individual Property.

 

3.1.37 Perfection of Accounts. Borrower hereby represents and warrants to Lender
that:

 

(a) This Agreement, together with the other Loan Documents create a valid and
continuing security interest (as defined in the Uniform Commercial Code) in the
Accounts (as defined in the Cash Management Agreement) in favor of Lender, which
security interest is prior to all other Liens, other than Permitted
Encumbrances, and is enforceable as such against creditors of and purchasers
from Borrower. Other than in connection with the Loan Documents and the Guaranty
Security Documents and except for Permitted Encumbrances, Borrower has not sold
or otherwise conveyed the Accounts;

 

(b) The Accounts constitute “deposit accounts” or “securities accounts” within
the meaning of the Uniform Commercial Code, as set forth in the Cash Management
Agreement;

 

(c) Pursuant and subject to the terms of the Cash Management Agreement, Agent
has agreed to comply with all instructions originated by Lender, without further
consent

 

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by Borrower, directing disposition of the Accounts and all sums at any time
held, deposited or invested therein, together with any interest or other
earnings thereon, and all proceeds thereof (including proceeds of sales and
other dispositions), whether accounts, general intangibles, chattel paper,
deposit accounts, instruments, documents or securities; and

 

(d) The Accounts are not in the name of any Person other than Borrower, as
pledgor, or Lender, as pledgee. Borrower has not consented to Agent’s complying
with instructions with respect to the Accounts from any Person other than
Lender.

 

3.1.38 REA. Except as disclosed on Schedule XI attached hereto, each REA is in
full force and effect and neither Borrower nor, to Borrower’s knowledge, any
other party to any REA, is in default thereunder, and to the best of Borrower’s
knowledge, there are no conditions which, with the passage of time or the giving
of notice, or both, would constitute a default thereunder. Except as set forth
on Schedule VII, the REA has not been modified, amended or supplemented.

 

Section 3.2 Survival of Representations.

 

The representations and warranties set forth in Section 3.1 shall survive, and
any covenants contained in Section 3.1 shall continue, for so long as any amount
remains payable to Lender under this Agreement or any of the other Loan
Documents or the Guaranty Security Documents.

 

IV. BORROWER COVENANTS

 

Section 4.1 Borrower Affirmative Covenants.

 

Borrower hereby covenants and agrees with Lender that:

 

4.1.1 Existence; Compliance with Legal Requirements. Borrower shall do or cause
to be done all things necessary to preserve, renew and keep in full force and
effect its existence, rights, licenses, permits and franchises and comply with
all Legal Requirements applicable to it and the Individual Property, including,
without limitation, Prescribed Laws.

 

4.1.2 Taxes and Other Charges. Borrower shall pay all Taxes and Other Charges
now or hereafter levied or assessed or imposed against the Individual Property
or any part thereof as the same become due and payable; provided, however,
Borrower’s obligation to directly pay Taxes shall be suspended for so long as
Borrower is required to make deposits of Tax Funds and in such case complies
with the terms and provisions of Section 6.2 hereof. Borrower shall furnish to
Lender receipts for the payment of the Taxes and the Other Charges prior to the
date the same shall become delinquent; provided, however, that Borrower is not
required to furnish such receipts for payment of Taxes in the event that such
Taxes have been paid by Lender with Tax Funds on deposit with Lender pursuant to
Section 6.2 hereof. Borrower shall not permit or suffer and shall promptly
discharge any lien or charge against the Individual Property. After prior notice
to Lender, Borrower, at its own expense, may contest by appropriate legal
proceeding, conducted in good faith and with due diligence, the amount or
validity of any Taxes or Other Charges, provided that (i) no Event of Default
has occurred and remains uncured;

 

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(ii) such proceeding shall be permitted under and be conducted in accordance
with all applicable statutes, laws and ordinances; (iii) no Individual Property
nor any part thereof or interest therein will be in danger of being sold,
forfeited, terminated, canceled or lost; (iv) Borrower shall promptly upon final
determination thereof pay the amount of any such Taxes or Other Charges,
together with all costs, interest and penalties which may be payable in
connection therewith; (v) such proceeding shall suspend the collection of Taxes
or Other Charges from the Individual Property; and (vi) to the extent required
by law, Borrower shall have paid under protest or deposited with the appropriate
taxing authority any such security as may be required by applicable law (which
must be in an amount equal to at least 100% of Taxes plus interest thereon for
an additional period of three (3) years) to insure the payment of any such Taxes
or Other Charges, together with all interest and penalties thereon, provided,
that, if the applicable taxing authority does not require Borrower to deliver
cash as security while Taxes or Other Charges are being contested by Borrower,
Borrower shall deposit cash with Lender or, in lieu of a cash deposit, a Letter
of Credit, in the amount required above as security for the payment of such
Taxes or Other Charges, as the case may be. Lender may pay over any such cash,
Letter of Credit or other security held by Lender to the claimant entitled
thereto at any time when, in the judgment of Lender, the entitlement of such
claimant is established.

 

4.1.3 Litigation. Borrower shall give prompt notice to Lender of any litigation
or governmental proceedings pending or threatened against Borrower which might
materially adversely affect the Individual Property or Borrower’s ability to
perform its obligations hereunder or under the other Loan Documents or the
Guaranty Security Documents.

 

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

 

4.1.5 Further Assurances; Supplemental Mortgage Affidavits. Borrower shall, at
Borrower’s sole cost and expense:

 

(a) execute and deliver to Lender such documents, instruments, certificates,
assignments and other writings, and do such other acts necessary or desirable,
to evidence, preserve and/or protect the collateral at any time securing or
intended to secure the obligations of Borrower under the Loan Documents and/or
the Guaranty Security Documents, as Lender may reasonably require; and

 

(b) do and execute all and such further lawful and reasonable acts, conveyances
and assurances for the better and more effective carrying out of the intents and
purposes of this Agreement and the other Loan Documents and the Guaranty
Security Documents, as Lender shall reasonably require from time to time.

 

4.1.6 Financial Reporting. (a) Borrower shall keep and maintain or will cause to
be kept and maintained proper and accurate books and records, in accordance with
GAAP, reflecting the financial affairs of Borrower. Lender shall have the right
from time to time during normal business hours upon reasonable notice to the
Borrower to examine such books and records at the office of Borrower or other
Person maintaining such books and records and to make such copies or extracts
thereof as Lender shall desire.

 

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(b) Borrower shall furnish Lender annually, within one hundred twenty (120) days
following the end of each Fiscal Year, a complete copy of Borrower’s annual
financial statements audited by a “Big Four” accounting firm or other
independent certified public accountant acceptable to Lender prepared in
accordance with GAAP covering the Individual Property, such financial statements
to include statements of income and expense and cash flow for Borrower and the
Individual Property and a balance sheet for Borrower. Such statements shall set
forth gross revenue and operating expenses for the Individual Property.
Borrower’s annual financial statements shall be accompanied by a certificate
executed by the chief financial officer of Borrower stating that such annual
financial statement presents fairly the financial condition and the results of
operations of Borrower and the Individual Property. Borrower shall furnish a
balance sheet and income statement for the preceding Fiscal Year for the
Individual Property, certified by the chief financial officer of Borrower that
each statement fairly presents the financial condition and results of operations
of the Individual Property. Together with Borrower’s annual financial
statements, Borrower shall furnish to Lender an Officer’s Certificate certifying
as of the date thereof whether to the best of Borrower’s knowledge there exists
an event or circumstance which constitutes a Default or Event of Default by
Borrower under the Loan Documents and if such Default or Event of Default
exists, the nature thereof, the period of time it has existed and the action
then being taken to remedy the same.

 

(c) Borrower will furnish Lender on or before the sixtieth (60th) day after the
end of each fiscal quarter (based on Borrower’s Fiscal Year), the following
items, accompanied by a certificate from the chief financial officer of
Borrower, certifying that such items are true, correct, accurate and complete
and fairly present the financial condition and results of the operations of
Borrower and the Individual Property in accordance with GAAP as applicable:

 

(i) quarterly and year-to-date statements of income and expense prepared for
such quarter with respect to the Individual Property, with a balance sheet for
such quarter for Borrower;

 

(ii) a calculation reflecting the Debt Service Coverage Ratio as of the last day
of such quarter, for such quarter and the last four quarters;

 

(iii) a current rent roll for the Individual Property;

 

(iv) a comparison of the budgeted income and expenses and the actual income and
expenses for such quarter and year to date for the Individual Property, together
with a detailed explanation of any variances of more than five percent (5%)
between budgeted and actual amounts for such period and year to date; and

 

(v) with respect to any Major Leases, any notice received from a Tenant
threatening non-payment of Rent or other default, alleging or acknowledging a
default by landlord, requesting a termination of a Lease or a material
modification of any Lease or notifying Borrower of the exercise or non-exercise
of any option provided for in such Tenant’s Lease, or any other similar material
correspondence received by Borrower from Tenants during the subject fiscal
quarter.

 

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(d) Prior to the last Securitization of any portion of the Loan and upon request
by Lender, Borrower will furnish Lender on or before the thirty-fifth (35th) day
after the end of each calendar month, the following items, accompanied by a
certificate from the chief financial officer of Borrower, certifying that such
items are true, correct, accurate, and complete and fairly present the financial
condition and results of the operations of Borrower and the Individual Property
in a manner consistent with GAAP, as applicable:

 

(i) monthly and year-to-date statements of income and expense and cash flow
prepared for such month with respect to the Individual Property; and

 

(ii) a current rent roll for the Individual Property.

 

(e) Borrower shall submit a proposed draft of the Annual Budget to Lender not
later than thirty (30) days prior to the commencement of each Fiscal Year and a
final Annual Budget to Lender not later than ten (10) days prior to the
commencement of each Fiscal Year. Lender shall have the right to approve each
Annual Budget covering any period of time after the occurrence of a Trigger
Event. In the event that Lender objects to a proposed Annual Budget (draft or
final) submitted by Borrower at any time after a Trigger Event, Lender shall
advise Borrower of such objections within fifteen (15) days after receipt
thereof (and deliver to Borrower a reasonably detailed description of such
objections) and Borrower shall promptly revise such Annual Budget and resubmit
the same to Lender. Lender shall advise Borrower of any objections to its
revised Annual Budget within ten (10) days after receipt thereof (and deliver to
Borrower a reasonably detailed description of such objections) and Borrower
shall promptly revise the same in accordance with the process described in this
subsection until Lender approves the Annual Budget. Until such time that Lender
approves a proposed Annual Budget, which approval shall not be unreasonably
withheld, conditioned or delayed unless an Event of Default exists, in which
case Lender’s approval shall be in its sole and absolute discretion, the most
recent Annual Budget (or the most recent Approved Annual Budget, if such
previous Annual Budget was subject to Lender’s approval) shall apply; provided
that, such Annual Budget (or Approved Annual Budget, as applicable) shall be
adjusted to reflect actual increases in Taxes, Insurance Premiums, utility
expenses and management fees under the Management Agreement. Each Annual Budget
approved by Lender shall hereinafter be referred to as an “Approved Annual
Budget.” In the event that, after the occurrence of a Trigger Event, Borrower
incurs an extraordinary operating expense or extraordinary capital expenditure
not set forth in the applicable Annual Budget (each, an “Extraordinary
Expense”), then Borrower shall promptly deliver to Lender a reasonably detailed
explanation of such proposed Extraordinary Expense for Lender’s approval.

 

(f) Borrower shall furnish to Lender, within ten (10) Business Days after
request (or as soon thereafter as may be reasonably possible), such further
detailed information with respect to the operation of the Individual Property
and the financial affairs of Borrower as may be reasonably requested by Lender,
including, without limitation, a comparison of the budgeted income and expenses
and the actual income and expenses for a quarter and year to date for the
Individual Property, together with a detailed explanation of any variances of
more than the greater of five percent (5%) or $10,000 between budgeted and
actual amounts for such period and year to date.

 

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4.1.7 Title to the Individual Property. Borrower will warrant and defend the
validity and priority of the Liens of the Mortgage and the Assignment of Leases
on the Individual Property against the claims of all Persons whomsoever, subject
only to Permitted Encumbrances and, in the case of the Second Mortgage and the
Second Assignment of Leases, the First Mortgage and the First Assignment of
Leases.

 

4.1.8 Estoppel Statement. (a) After request by Lender, Borrower shall within ten
(10) Business Days furnish Lender with a statement, duly acknowledged and
certified, stating (i) the unpaid principal amount of the Note, (ii) the
Interest Rate of the Note, (iii) the date installments of interest and/or
principal were last paid, (iv) any offsets or defenses to the payment of the
Debt, if any, and (v) that this Agreement, the other Loan Documents and the
Guaranty Security Documents have not been modified or if modified, giving
particulars of such modification.

 

(b) After request by Borrower, Lender shall within ten (10) Business Days
furnish Borrower with a statement, duly acknowledged and certified, stating (i)
the unpaid principal amount of the Note, (ii) the Interest Rate of the Note,
(iii) the date installments of interest and/or principal were last paid and (iv)
whether or not Lender has sent any notice of default under the Loan Documents
which remains uncured in the opinion of Lender.

 

(c) Borrower shall deliver to Lender, upon request, an estoppel certificate from
each Tenant under any Lease (provided that Borrower shall only be required to
use commercially reasonable efforts to obtain an estoppel certificate from any
Tenant not required to provide an estoppel certificate under its Lease);
provided that such certificate may be in the form required under such Lease;
provided, further, that Borrower shall not be required to deliver such
certificates more frequently than once in any calendar year (or twice during any
calendar year in which a Securitization occurs).

 

(d) Borrower shall deliver to Lender, upon request, estoppel certificates from
each party under the REA; provided that such certificates may be in the form
required under the REA; provided, further, that Borrower shall not be required
to deliver such certificates more than three (3) times during the term of the
Loan and not more frequently than once per calendar year (or twice during any
calendar year in which a Securitization occurs).

 

4.1.9 Leases. (a) All Leases and all renewals of Leases executed after the date
hereof shall (i) provide for rental rates comparable to existing local market
rates for similar properties, (ii) be on commercially reasonable terms, (iii)
provide that such Lease is subordinate to the Mortgage encumbering the
Individual Property and that the lessee will attorn to Lender and any purchaser
at a foreclosure sale and (iv) not contain any terms which would materially
adversely affect Lender’s rights under the Loan Documents. All Major Leases and
all renewals, amendments and modifications thereof executed after the date
hereof shall be subject to Lender’s prior approval, which approval shall not be
unreasonably withheld or delayed. Lender shall execute and deliver a
Subordination Non-Disturbance and Attornment Agreement in the form annexed as
Schedule IV to Tenants under future Major Lease approved by Lender promptly upon
request with such commercially reasonable changes as may be requested by
Tenants, from time to time, and which are reasonably acceptable to Lender.

 

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(b) Borrower (i) shall observe and perform the obligations imposed upon the
lessor under the Leases in a commercially reasonable manner; (ii) shall enforce
the terms, covenants and conditions contained in the Leases upon the part of the
lessee thereunder to be observed or performed in a commercially reasonable
manner; provided, however, Borrower shall not terminate or accept a surrender of
a Major Lease without Lender’s prior approval, not to be unreasonably withheld
or delayed in the event of a material default under a Major Lease; (iii) shall
not collect any of the Rents more than one (1) month in advance (other than
security deposits); (iv) shall not execute any assignment of lessor’s interest
in the Leases or the Rents (except as contemplated by the Loan Documents and the
Guaranty Security Documents); (v) shall not alter, modify or change any Major
Lease so as to change the amount of or payment date for rent, change the
expiration date, grant any option for additional space or term, materially
reduce the obligations of the lessee or increase the obligations of lessor
without Lender’s prior written approval, such approval not to be unreasonably
withheld or delayed if no Trigger Event has occurred and is continuing; and (vi)
shall hold all security deposits under all Leases in accordance with Legal
Requirements. Upon request, Borrower shall furnish Lender with executed copies
of all Leases.

 

(c) Notwithstanding anything to the contrary contained in this Section 4.1.9:

 

(i) whenever Lender’s approval or consent is required pursuant to the provisions
of this Section 4.1.9, Borrower shall have the right to submit a term sheet of
such transaction to Lender for Lender’s approval, such approval not to be
unreasonably withheld or delayed. Any such term sheet submitted to Lender shall
set forth all material terms of the proposed transaction including, without
limitation, identity of tenant, square footage, term, rent, rent credits,
abatements, work allowances and tenant improvements to be constructed by
Borrower. Lender shall use good faith efforts to respond within ten (10)
Business Days after Lender’s receipt of the Borrower’s written request for
approval or consent of such term sheet. If Lender fails to respond to such
request within ten (10) Business Days, and the Borrower sends a second request
containing a legend in bold letters stating that Lender’s failure to respond
within five (5) Business Days shall be deemed consent or approval, Lender shall
be deemed to have approved or consented to such term sheet if Lender fails to
respond to such second written request before the expiration of such five (5)
Business Day period;

 

(ii) whenever Lender’s approval or consent is required pursuant to the
provisions of this Section 4.1.9 for any matter that Lender has not previously
approved a term sheet pursuant to Section 4.1.9(c)(i) above, Lender shall use
good faith efforts to respond within ten (10) Business Days after Lender’s
receipt of Borrower’s written request for such approval or consent. If Lender
fails to respond to such request within ten (10) Business Days, and Borrower
sends a second request containing a legend in bold letters stating that Lender’s
failure to respond within ten (10) Business Days shall be deemed consent or
approval, Lender shall be deemed to have approved or consented to the matter for
which Lender’s consent or approval was sought if Lender fails to respond to such
second written request before the expiration of such ten (10) Business Day
period;

 

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(iii) whenever Lender’s approval or consent is required pursuant to the
provisions of this Section 4.1.9 for any matter that Lender has previously
approved a term sheet pursuant to Section 4.1.9(c)(i) above, Lender shall use
good faith efforts to respond within five (5) Business Days after Lender’s
receipt of Borrower’s written request for such approval or consent. If Lender
fails to respond to such request within five (5) Business Days, and Borrower
sends a second request containing a legend in bold letters stating that Lender’s
failure to respond within five (5) Business Days shall be deemed consent or
approval, Lender shall be deemed to have approved or consented to the matter for
which Lender’s consent or approval was sought if Lender fails to respond to such
second written request before the expiration of such five (5) Business Day
period, provided that there have been no material deviations from the term sheet
and that the aggregate economics of the transaction are no less favorable to
Borrower than as set forth in the term sheet;

 

(iv) in the event that Lender shall have approved (or be deemed to have
approved) a term sheet submitted by Borrower with respect to a certain Lease,
Lender shall not withhold its approval or consent with respect to such Lease on
the basis of any provisions of such Lease dealing with the items contained in
the approved term sheet; and

 

(v) Borrower shall have the right, without the consent or approval of Lender in
any instance, to terminate or accept a surrender of any Lease that is not a
Major Lease.

 

4.1.10 Alterations. Lender’s prior approval shall be required in connection with
any alterations to any Improvements (except tenant improvements under any Lease
approved by Lender or under any Lease for which approval was not required by
Lender under this Agreement) at the Individual Property (a) that may have a
material adverse effect on Borrower’s financial condition, the value of the
Individual Property or the ongoing revenues and expenses of the Individual
Property, or (b) the cost of which (including any related alteration,
improvement or replacement), is reasonably anticipated to exceed the Alteration
Threshold, which approval may be granted or withheld in Lender’s sole
discretion. If the total unpaid amounts incurred and to be incurred with respect
to such alterations to the Improvements shall at any time exceed the Alteration
Threshold, Borrower shall promptly deliver to Lender as security for the payment
of such amounts and as additional security for Borrower’s obligations under the
Loan Documents and the Guaranty Security Documents any of the following: (i)
cash, (ii) Letters of Credit, (iii) U.S. Obligations, (iv) other securities
acceptable to Lender, provided that Lender shall have received a Rating Agency
Confirmation as to the form and issuer of same, or (v) a completion bond,
provided that Lender shall have received a Rating Agency Confirmation as to the
form and issuer of same. Such security shall be in an amount equal to the excess
of the total unpaid amounts incurred and to be incurred with respect to such
alterations to the Improvements on the Individual Property (other than such
amounts to be paid or reimbursed by Tenants under the Leases) over the
Alteration Threshold.

 

4.1.11 Intentionally Deleted.

 

4.1.12 Material Agreements. Borrower shall (a) promptly perform and/or observe
all of the material covenants and agreements required to be performed and
observed by

 

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it under each Material Agreement to which it is a party, and do all things
necessary to preserve and to keep unimpaired its rights thereunder, (b) promptly
notify Lender in writing of the giving of any notice of any default by any party
under any Material Agreement of which it is aware and (c) promptly enforce the
performance and observance of all of the material covenants and agreements
required to be performed and/or observed by the other party under each Material
Agreement to which it is a party in a commercially reasonable manner.

 

4.1.13 Performance by Borrower. Borrower shall in a timely manner observe,
perform and fulfill each and every covenant, term and provision of each Loan
Document and each Security Document executed and delivered by Borrower, and
shall not enter into or otherwise suffer or permit any amendment, waiver,
supplement, termination or other modification of any Loan Document or Security
Document executed and delivered by Borrower without the prior consent of Lender.

 

4.1.14 Costs of Enforcement/Remedying Defaults. In the event (a) that the
Mortgage is foreclosed in whole or in part or the Note or any other Loan
Document or Security Document is put into the hands of an attorney for
collection, suit, action or foreclosure, (b) of the foreclosure of any Lien or
Mortgage prior to or subsequent to the Mortgage in which proceeding Lender is
made a party, (c) of the bankruptcy, insolvency, rehabilitation or other similar
proceeding in respect of Borrower or Guarantor or an assignment by Borrower or
Guarantor for the benefit of its creditors, or (d) Lender shall remedy or
attempt to remedy any Event of Default hereunder, Borrower shall be chargeable
with and agree to pay all costs incurred by Lender as a result thereof,
including costs of collection and defense (including reasonable attorneys’,
experts’, consultants’ and witnesses’ fees and disbursements) in connection
therewith and in connection with any appellate proceeding or post-judgment
action involved therein, which shall be due and payable on demand, together with
interest thereon from the date incurred by Lender at the Default Rate, and
together with all required service or use taxes.

 

4.1.15 Business and Operations. Borrower will continue to engage in the
businesses currently conducted by them as and to the extent the same are
necessary for the ownership and leasing of the Individual Property. Borrower
will 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
and leasing of the Individual Property. Borrower shall at all times cause the
Individual Property to be maintained as an office building.

 

4.1.16 Loan Fees. Borrower shall pay all fees and costs (including, without
limitation, all origination and commitment fees) required of Borrower pursuant
to the terms of that certain summary of terms letter between Wells Real Estate
Funds and Morgan Stanley Mortgage Capital, Inc. dated March 2, 2004.

 

Section 4.2 Borrower Negative Covenants.

 

Borrower covenants and agrees with Lender that:

 

4.2.1 Due on Sale and Encumbrance; Transfers of Interests. Without the prior
written consent of Lender, neither Borrower nor any other Person having a direct
or indirect ownership or beneficial interest in Borrower shall sell, convey,
mortgage, grant, bargain,

 

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encumber, pledge, assign or transfer any interest, direct or indirect, in
Borrower, the Individual Property or any part thereof, whether voluntarily or
involuntarily, in violation of the covenants and conditions set forth in the
Mortgages and this Agreement.

 

4.2.2 Liens. Borrower shall not create, incur, assume or suffer to exist any
Lien on any portion of the Individual Property except for Permitted
Encumbrances.

 

4.2.3 Dissolution. Borrower shall not (i) engage in any dissolution, liquidation
or consolidation or merger with or into any other business entity, (ii) engage
in any business activity not related to the ownership and operation of the
Individual Property, (iii) transfer, lease or sell, in one transaction or any
combination of transactions, all or substantially all of the properties or
assets of Borrower except to the extent expressly permitted by the Loan
Documents, or (iv) cause, permit or suffer any SPC Party to (A) dissolve, wind
up or liquidate or take any action, or omit to take an action, as a result of
which such SPC Party would be dissolved, wound up or liquidated in whole or in
part, or (B) amend, modify, waive or terminate the certificate of incorporation,
limited partnership or formation, as applicable, or bylaws, partnership
agreement or operating agreement, as applicable, of such SPC Party, in each case
without obtaining the prior consent of Lender, but only to the extent such
action requires consent of the Lender pursuant to the terms of the partnership
agreement or operating agreement delivered to Lender in connection with the
closing of the Loan.

 

4.2.4 Change in Business. Borrower shall not enter into any line of business
other than the ownership and operation of the Individual Property.

 

4.2.5 Debt Cancellation. Borrower shall not cancel or otherwise forgive or
release any claim or debt (other than termination of Leases in accordance
herewith) owed to Borrower by any Person, except for adequate consideration and
in the ordinary course of Borrower’s business, provided, that, nothing contained
in this Section shall in and of itself require Borrower to pursue collection of
debts in a manner that is not commercially reasonable.

 

4.2.6 Affiliate Transactions. Borrower shall not enter into, or be a party to,
any transaction with an Affiliate of Borrower or any of the partners or members
of Borrower except in the ordinary course of business and on terms which are
fully disclosed to Lender in advance and are no less favorable to Borrower or
such Affiliate than would be obtained in a comparable arm’s length transaction
with an unrelated third party.

 

4.2.7 Zoning. Borrower shall not initiate or consent to any zoning
reclassification of any portion of the Individual Property or seek any variance
under any existing zoning ordinance or use or permit the use of any portion of
the Individual Property in any manner that could result in such use becoming a
non conforming use under any zoning ordinance or any other applicable land use
law, rule or regulation, without the prior consent of Lender which shall not be
unreasonably withheld or delayed if such action is required to be undertaken by
Borrower pursuant to a Lease that Lender has approved.

 

4.2.8 Assets. Borrower shall not purchase or own any properties other than the
Individual Property and any property necessary or incidental for the operation
of the Individual Property.

 

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

 

4.2.10 Principal Place of Business. Borrower shall not change its principal
place of business from the address set forth on the first page of this Agreement
without first giving Lender thirty (30) days prior notice.

 

4.2.11 ERISA. (a) Borrower shall not engage in any transaction which would cause
any obligation, or action taken or to be taken, hereunder (or the exercise by
Lender of any of its rights under the Note, this Agreement or the other Loan
Documents or the Guaranty Security Documents) to be a non-exempt (under a
statutory or administrative class exemption) prohibited transaction under the
ERISA or Section 4975 of the Code.

 

(b) Borrower shall deliver to Lender such certifications or other evidence from
time to time throughout the term of the Loan, as requested by Lender in its sole
discretion, that (A) Borrower is not an “employee benefit plan” as defined in
Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “plan” within
the meaning of Section 4975 of the Code; (B) Borrower is not subject to any
state statute regulating investments of, or fiduciary obligations with respect
to, governmental plans as defined in Section 3(32) of ERISA; and (C) one or more
of the following circumstances is true:

 

(i) Equity interests in Borrower are publicly offered securities, within the
meaning of the Plan Assets Regulation;

 

(ii) Less than twenty-five percent (25%) of each outstanding class of equity
interests in Borrower is held by “benefit plan investors” within the meaning of
the Plan Assets Regulation; or

 

(iii) Borrower qualifies as an “operating company” or a “real estate operating
company” within the meaning of the Plan Assets Regulation.

 

4.2.12 Material Agreements. Borrower shall not, without Lender’s prior written
consent which shall not be unreasonably withheld or delayed: (a) enter into,
surrender or terminate any Material Agreement to which it is a party (unless the
other party thereto is in material default and the termination of such agreement
would be commercially reasonable), (b) increase or consent to the increase of
the amount of any charges under any Material Agreement to which it is a party,
except as provided therein or on an arms’-length basis and commercially
reasonable terms; or (c) otherwise modify, change, supplement, alter or amend,
or waive or release any of its rights and remedies under any Material Agreement
to which it is a party in any material respect, except on an arm’s length basis
and commercially reasonable terms.

 

4.2.13 REA. Borrower agrees that without the prior consent of Lender, Borrower
will not execute modifications to any REA it is a party to if such modifications
will

 

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have a material adverse effect on the use, operation or value (including the
Underwritable Cash Flow) of the Individual Property, taken as a whole, or the
ability of Borrower to pay its obligations in respect of the Loan.

 

V. INSURANCE, CASUALTY AND 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 Individual Property providing at
least the following coverages:

 

(i) comprehensive all risk insurance on the Improvements and the personal
property, if any, owned by the respective Borrower at the Individual Property,
including contingent liability from Operation of Building Laws, Demolition Costs
and Increased Cost of Construction Endorsements, in each case (A) in an amount
equal to one hundred percent (100%) of the “Full Replacement Cost,” which for
purposes of this Agreement shall mean actual replacement value (exclusive of
costs of excavations, foundations, underground utilities and footings) with a
waiver of depreciation, but the amount shall in no event be less than the
Allocated Loan Amount for the Individual Property; (B) containing an agreed
amount endorsement with respect to the Improvements and personal property at the
Individual Property waiving all co-insurance provisions; (C) providing for
deductibles no greater than $250,000 for all such insurance coverage (provided,
that, upon request of Borrower a higher deductible may be approved by Lender in
its reasonable discretion, such approval or rejection to be based on
then-current insurance market conditions and the then-current amount of equity
that the Borrower has in the Individual Property); and (D) containing an
“Ordinance or Law Coverage” or “Enforcement” endorsement if any of the
Improvements or the use of the Individual Property shall at any time constitute
legal non-conforming structures or uses. In addition, Borrower shall obtain: (y)
if any portion of the Improvements is currently or at any time in the future
located in an area identified by the Federal Emergency Management Agency as a
“special flood hazard area,” flood hazard insurance in an amount equal to the
lesser of (1) the Allocated Loan Amount or (2) the maximum amount of such
insurance available under the National Flood Insurance Act of 1968, the Flood
Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of
1994, as each may be amended or such greater amount as Lender shall require or
(3) $50,000,000 for flood zones A& C and $250,000,000 for other flood coverage;
and (z) earthquake insurance in amounts and in form and substance satisfactory
to Lender in the event the Individual Property is located in a seismic area
designated as a Zone 3 or 4 by the Rating Agencies (Source: ICBC 1994 Uniform
Building Code, or similar designation under successor standards), provided that
the insurance pursuant to clauses (y) and (z) hereof shall be on terms
consistent with the comprehensive all risk insurance policy required under this
subsection (i).

 

(ii) commercial general liability insurance against claims for personal injury,
bodily injury, death or property damage occurring upon, in or about each of the
Individual Property, such insurance (A) to be on the so-called “occurrence” form
with a

 

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combined limit, excluding umbrella coverage, of not less than One Million and
No/100 Dollars ($1,000,000) per occurrence and $2,000,000 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 cover at least the following hazards: (1)
premises and operations; (2) products and completed operations on an “if any”
basis; (3) independent contractors; (4) blanket contractual liability for all
legal contracts; and (5) contractual liability covering the indemnities
contained in Article 9 of the Mortgage to the extent the same is available;

 

(iii) business income insurance (A) with loss payable to Lender; (B) covering
all risks required to be covered by the insurance provided for in subsection (i)
above for a period commencing at the time of loss for such length of time as it
takes to repair or replace with the exercise of due diligence and dispatch; (C)
containing an extended period of indemnity endorsement which provides that after
the physical loss to the Improvements and Personal Property has been repaired,
the continued loss of income at the Individual Property will be insured until
such income either returns to the same level it was at prior to the loss, or the
expiration of twelve (12) months from the date that the Individual Property is
repaired or replaced and operations are resumed, whichever first occurs, and
notwithstanding that the policy may expire prior to the end of such period; and
(D) in an amount equal to one hundred percent (100%) of the projected gross
income (less non-continuing expenses) from the Individual Property for a period
from the date of loss to a date (assuming total destruction) which is twelve
(12) months from the date that the Individual Property is repaired or replaced
and operations are resumed. The amount of such business income insurance shall
be determined prior to the date hereof and at least once each year thereafter
based on the Borrower’s reasonable estimate of the gross income (less
non-continuing expenses) from the Individual Property for the succeeding
twenty-four (24) month period. All proceeds payable to Lender pursuant to this
subsection shall be held by Lender and shall be applied to the obligations
secured by the Loan Documents from time to time due and payable hereunder and
under the Note; provided, however, that nothing herein contained shall be deemed
to relieve Borrower of its obligations to pay the obligations secured by the
Loan Documents on the respective dates of payment provided for in the Note and
the other Loan Documents except to the extent such amounts are actually paid out
of the proceeds of such business income insurance;

 

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

 

(v) workers’ compensation, subject to the statutory limits of the state in which
the Individual Property is located, and employer’s liability insurance, in an

 

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amount satisfying statutory requirements, in respect of any work or operations
on or about the Individual Property, or in connection with the Individual
Property or its operation (if applicable), provided, that, Borrower shall not be
required to maintain insurance pursuant to this clause (v) for such time that it
does not have any employees;

 

(vi) comprehensive boiler and machinery insurance, if applicable, in amounts as
shall be reasonably required by Lender on terms consistent with the commercial
property insurance policy required under subsection (i) above;

 

(vii) umbrella liability insurance in addition to primary coverage in an amount
not less than Fifty Million and No/100 Dollars ($50,000,000) per occurrence on
terms consistent with the commercial general liability insurance policy required
under subsection (ii) above and (viii) below;

 

(viii) motor vehicle liability coverage for all owned and non-owned vehicles,
including rented and leased vehicles containing minimum limits per occurrence,
including umbrella coverage, of One Million and No/100 Dollars ($1,000,000),
provided, that, Borrower shall not be required to maintain insurance pursuant to
this clause (viii) for such time that it does not own any automobiles or require
any employees to use automobiles in their business duties;

 

(ix) so-called “dramshop” insurance or other liability insurance required in
connection with the sale of alcoholic beverages, provided, that, Borrower shall
not be required to maintain insurance pursuant to this clause (ix) for such time
that Borrower does not operate a business at the Individual Property that would
cause a prudent lender to require such coverage;

 

(x) insurance against employee dishonesty in an amount not less than one (1)
month of gross revenue from the Individual Property and with a deductible
reasonably approved by Lender, provided, that, Borrower shall not be required to
maintain insurance pursuant to this clause (x) for such time that it does not
have any employees;

 

(xi) (A) during any period of the term of the Loan that TRIA is in effect, if
“acts of terrorism” or other similar acts or events are hereafter excluded from
Borrower’s comprehensive all risk insurance policy (including business income),
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
Moody’s (that is, “Baa3”) and/or S&P (that is, “BBB-“) (provided that neither
Moody’s nor S&P rates such provider less than investment grade), insuring
against all “certified acts of terrorism” as defined by TRIA and “fire
following”, each in an amount equal to one hundred percent (100%) of the “Full
Replacement Cost,” which for purposes of this Agreement shall mean actual
replacement value (exclusive of costs of excavations, foundations, underground
utilities and footings) with a waiver of depreciation, but the amount shall in
no event be less than the total outstanding principal balance of the Loan;
provided, however, the total annual premium payable by Borrower for the
Individual Property shall not exceed the Terrorism Insurance Premium Limit for
such coverage for

 

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the Individual Property. The endorsement or policy shall be in form and
substance reasonably satisfactory to Lender and shall meet Rating Agency
criteria for securitized loans; or

 

(B) during any period of the term of the Loan that TRIA is not in effect, if
“acts of terrorism” or other similar acts or events or “fire following” are
hereafter excluded from Borrower’s comprehensive all risk insurance policy or
business income insurance coverage, 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 Moody’s (that is, “Baa3”) and/or S&P (that is,
“BBB-“) (provided that neither Moody’s nor S&P rates such provider less than
investment grade), insuring against all such excluded acts or events, to the
extent such policy or endorsement is available, in an amount determined by
Lender in its sole discretion (but in no event greater than the total insurable
value plus business income insurance coverage satisfying the provisions of
clause (iii) above; provided, however, Borrower shall not be required to pay
annual premiums in excess of the Terrorism Insurance Premium Limit for such
coverage. The endorsement or policy shall be in form and substance reasonably
satisfactory to Lender and shall meet Rating Agency criteria for securitized
loans; and

 

(xii) upon sixty (60) days’ 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
property similar to the Individual Property located in or around the region in
which the Individual Property is located.

 

(b) All insurance provided for in Section 5.1.1(a) shall be obtained under valid
and enforceable policies (collectively, the “Policies” or, in the singular, the
“Policy”) and, to the extent not specified above, shall be subject to the
reasonable approval of Lender as to deductibles, loss payees and insureds.
Borrower shall deliver to Lender certified copies of the Policies promptly upon
Lender’s request therefor. Not less than ten (10) days prior to the expiration
dates of the Policies theretofore furnished to Lender, certificates of insurance
evidencing the Policies accompanied by evidence satisfactory to Lender of
payment of the premiums then due thereunder (the “Insurance Premiums”), shall be
delivered by Borrower to Lender.

 

(c) Any blanket insurance Policy shall specifically allocate to the Individual
Property the amount of coverage from time to time required hereunder and shall
otherwise provide the same protection as would a separate Policy insuring only
the Individual Property in compliance with the provisions of Section 5.1.1(a).

 

(d) All Policies of insurance provided for or contemplated by Section 5.1.1(a)
shall be primary coverage and, except for the Policy referenced in Section
5.1.1(a)(v), shall name Borrower as the insured and Lender and its successors
and/or assigns as the additional insured, as its interests may appear, and in
the case of property damage, boiler and machinery, flood, earthquake and
terrorism insurance, shall contain a so-called New York standard
non-contributing mortgagee clause or similar endorsement in favor of Lender
providing that the loss thereunder shall be payable to Lender. Borrower shall
not procure or permit any of its constituent entities to procure any other
insurance coverage which would be on the same level of payment as the Policies
or would adversely impact in any way the ability of Lender or Borrower to
collect any proceeds under any of the Policies.

 

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

 

(i) with respect to the insurance coverage obtained pursuant to Section
5.1.1(a)(i), (iii), (iv) and (vi) above, 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 and,
if obtainable by Borrower using commercially reasonable efforts, shall not be
materially changed (other than to increase the coverage provided thereby)
without such a thirty (30) day notice; and

 

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

 

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

 

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

 

5.1.2 Insurance Company. The Policies shall be issued by financially sound and
responsible insurance companies authorized to do business in the state in which
the Individual Property is located and having a claims paying ability rating of
“A” or better by S&P and Fitch and an insurance financial strength rating of
“Aa2” by Moody’s. If a Securitization occurs, (i) the foregoing required
insurance company rating by a Rating Agency not rating any Securities shall be
disregarded and (ii) if the insurance company complies with the aforesaid S&P
required rating (and S&P is rating the Securities) and the other Rating Agencies
rating the Securities do not rate the insurance company, such insurance company
shall be deemed

 

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acceptable with respect to such Rating Agency not rating such insurance company.
If a Securitization occurs and S&P is not a Rating Agency, each of the insurance
companies shall have a claims paying ability rating of at least A- by Fitch and
an insurance financial strength rating of A3 by Moody’s and at least sixty-seven
percent (67%) of the coverage shall be provided by insurance companies having
claims paying ability ratings of AA by Fitch and an insurance financial strength
rating of Aa2 by Moody’s; provided, however, if Fitch or Moody’s shall not
provide a rating for an insurance company, then an A.M. Best rating of A(X)
shall be substituted for each of the foregoing rating requirements of Fitch or
Moody’s, as applicable. Notwithstanding the foregoing, Borrower shall be
permitted to maintain the Policies with insurance companies which do not meet
the foregoing requirements (an “Otherwise Rated Insurer”), provided Borrower
obtains a “cut-through” endorsement (that is, an endorsement which permits
recovery against the provider of such endorsement) with respect to any Otherwise
Rated Insurer from an insurance company which meets the claims paying ability
ratings required above. Moreover, if Borrower desires to maintain insurance
required hereunder from an insurance company which does not meet the claims
paying ability ratings set forth herein but the parent of such insurance
company, which owns at least fifty-one percent (51%) of such insurance company,
maintains such ratings, Borrower may use such insurance companies if approved by
the Rating Agencies (such approval may be conditioned on items required by the
Rating Agencies including a requirement that the parent guarantee the
obligations of such insurance company).

 

Section 5.2 Casualty and Condemnation.

 

5.2.1 Casualty. If the Individual Property shall sustain a Casualty, Borrower
shall give prompt notice of such Casualty to Lender and shall promptly commence
and diligently prosecute to completion the repair and restoration of the
Individual Property as nearly as possible to the condition the Individual
Property was in immediately prior to such Casualty (a “Restoration”) and
otherwise in accordance with Section 5.3, it being understood, however, that
Borrower shall not be obligated to restore the Individual Property to the
precise condition of the Individual Property prior to such Casualty provided the
Individual Property is restored, to the extent practicable, to be of at least
equal value and of substantially the same character as prior to the Casualty.
The Borrower shall pay all costs of such Restoration whether or not such costs
are covered by insurance. Lender may, but shall not be obligated to, make proof
of loss if not made promptly by the applicable Borrower. In the event of a
Casualty where the loss does not exceed Restoration Threshold, Borrower may
settle and adjust such claim; provided that (a) no Event of Default has occurred
and is continuing and (b) such adjustment is carried out in a commercially
reasonable and timely manner. In the event of a Casualty where the loss exceeds
the Restoration Threshold or if an Event of Default then exists, Borrower may
settle and adjust such claim only with the consent of Lender (which consent
shall not be unreasonably withheld or delayed) and Lender shall have the
opportunity to participate, at Borrower’s cost, in any such adjustments.
Notwithstanding any Casualty, 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.

 

5.2.2 Condemnation. Borrower shall give Lender prompt notice of any actual or
threatened Condemnation by any Governmental Authority of all or any part of the
Individual Property and shall deliver to Lender a copy of any and all papers
served in connection with such proceedings. Provided no Event of Default has
occurred and is continuing, in the event of a

 

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Condemnation where the amount of the taking does not exceed the Restoration
Threshold, Borrower may settle and compromise such Condemnation; provided that
the same is effected in a commercially reasonable and timely manner. In the
event a Condemnation where the amount of the taking exceeds the Restoration
Threshold or if an Event of Default then exists, Borrower may settle and
compromise the Condemnation only with the consent of Lender (which consent shall
not be unreasonably withheld or delayed) and Lender shall have the opportunity
to participate, at Borrower’s cost, in any litigation and settlement discussions
in respect thereof and Borrower shall from time to time deliver to Lender all
instruments requested by Lender to permit such participation. Borrower shall, at
its expense, diligently prosecute any such proceedings, and shall consult with
Lender, its attorneys and experts, and cooperate with them in the carrying on or
defense of any such proceedings. Notwithstanding any Condemnation, 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. Lender shall not be limited to the
interest paid on the Award by any Governmental Authority but shall be entitled
to receive out of the Award interest at the rate or rates provided herein or in
the Note. If the Individual Property or any portion thereof is taken by any
Governmental Authority, Borrower shall promptly commence and diligently
prosecute the Restoration of the Individual Property and otherwise comply with
the provisions of Section 5.3. If the Individual Property is sold, through
foreclosure or otherwise, prior to the receipt by Lender of the Award, Lender
shall have the right, whether or not a deficiency judgment on the Note shall
have been sought, recovered or denied, to receive the Award, or a portion
thereof sufficient to pay the Debt.

 

5.2.3 Business Interruption Insurance Proceeds. Notwithstanding the
second-to-last sentence of Section 5.1.1(a)(iii) and provided no Event of
Default exists hereunder, proceeds received by Lender on account of the business
interruption insurance specified in Subsection 5.1.1(a)(iii) above with respect
to any Casualty shall be deposited by Lender directly into the Clearing Account;
however, during the continuance of a Trigger Period such proceeds shall be
deposited directly into the Deposit Account (as defined in the Cash Management
Agreement) but (a) only to the extent it reflects a replacement for (i) lost
Rents that would have been due under Leases existing on the date of such
Casualty, and/or (ii) lost Rents under Leases that had not yet been executed and
delivered at the time of such Casualty which Borrower has proven to the
insurance company would have been due under such Leases (and then only to the
extent such proceeds disbursed by the insurance company reflect a replacement
for such past due Rents) and (b) only to the extent necessary to fully make the
disbursements required by Section 3.3(a)(i) through 3.3(a)(vii) of the Cash
Management Agreement. All other such proceeds shall be held by Lender and
disbursed in accordance with Section 5.3 hereof.

 

Section 5.3 Delivery of Net Proceeds.

 

5.3.1 Minor Casualty or Condemnation. If a Casualty or Condemnation has occurred
to the Individual Property and the Net Proceeds shall be less than the
Restoration Threshold and the costs of completing the Restoration shall be less
than the Restoration Threshold, and provided no Event of Default shall have
occurred and remain uncured, the Net Proceeds will be disbursed by Lender to
Borrower. Promptly after receipt of the Net Proceeds, Borrower shall commence
and satisfactorily complete with due diligence the Restoration in accordance
with the terms of this Agreement. If any Net Proceeds are received by Borrower
and may be retained by Borrower pursuant to the terms hereof, such Net Proceeds
shall, until

 

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completion of the Restoration, be held in trust for Lender and shall be
segregated from other funds of Borrower to be used to pay for the cost of
Restoration in accordance with the terms hereof.

 

5.3.2 Major Casualty or Condemnation. (a) If a Casualty or Condemnation has
occurred to the Individual Property and the Net Proceeds are equal to or greater
than the Restoration Threshold or the costs of completing the Restoration is
equal to or greater than the Restoration Threshold, Lender shall make the Net
Proceeds available for the Restoration, provided that each of the following
conditions are met:

 

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

 

(ii) (A) in the event the Net Proceeds are insurance proceeds, less than
thirty-three percent (33%) of the total floor area of the Improvements at the
Individual Property that has been damaged, destroyed or rendered unusable as a
result of such Casualty or (B) in the event the Net Proceeds are an Award, less
than ten percent (10%) of the land constituting the Individual Property is
taken, and such land is located along the perimeter or periphery of the
Individual Property, and no portion of the Improvements is the subject of the
Condemnation;

 

(iii) Leases requiring payment of annual rent equal to eighty percent (80%) of
the Gross Revenue at the Individual Property received by Borrower during the
twelve (12) month period immediately preceding the Casualty or Condemnation and
all Major Leases shall remain in full force and effect during and after the
completion of the Restoration without abatement of rent beyond the time required
for Restoration, notwithstanding the occurrence of such Casualty or
Condemnation.

 

(iv) Borrower shall commence the Restoration as soon as reasonably practicable
(but in no event later than ninety (90) days after such Casualty or
Condemnation, whichever the case may be, occurs) and shall diligently pursue the
same to satisfactory completion;

 

(v) Lender shall be satisfied that any operating deficits and all payments of
principal and interest under the Note will be paid during the period required
for Restoration from (A) the Net Proceeds, or (B) other funds of Borrower;

 

(vi) Lender shall be satisfied that the Restoration will be completed on or
before the earliest to occur of (A) the date six (6) months prior to the
Maturity Date, (B) the earliest date required for such completion under the
terms of any Lease at the Individual Property or other Leases necessary to meet
the condition set forth in clause (iii) above, (C) such time as may be required
under applicable Legal Requirements in order to repair and restore the
Individual Property to the condition it was in immediately prior to such
Casualty or to as nearly as possible the condition it was in immediately prior
to such Condemnation, as applicable or (D) the expiration of the insurance
coverage referred to in Section 5.1.1(a)(iii) unless Borrower deposits with
Lender additional amounts necessary to pay Debt Service and Operating Expenses
for the period not covered by the insurance referred to in Section 5.1.1(a)(iii)
through completion of the

 

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Restoration (provided, that, in no event shall Borrower’s deposit of additional
funds extend the deadline for completion of the Restoration otherwise set forth
in (A)-(C) of this clause (vi));

 

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

 

(viii) the Restoration shall be done and completed by Borrower in an expeditious
and diligent fashion and in compliance with all applicable Legal Requirements;
and

 

(ix) such Casualty or Condemnation, as applicable, does not result in the loss
of access to the Individual Property or the related Improvements.

 

(b) The Net Proceeds shall be paid directly to Lender and held by Lender in an
interest-bearing account and, until disbursed in accordance with the provisions
of this Section 5.3.2, shall constitute additional security for the Debt. 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 requirements set forth in Section 5.3.2(a)
have been satisfied, (B) 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
(C) 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 Individual Property arising out of the
Restoration which have not either been fully bonded to the satisfaction of
Lender and discharged of record or in the alternative fully insured to the
satisfaction of Lender by the title company issuing the Title Insurance Policy.

 

(c) All plans and specifications required in connection with the Restoration
shall be subject to prior approval of Lender (such approval not to be
unreasonably withheld or delayed) and an independent architect selected by
Lender (the “Casualty Consultant”). The plans and specifications shall require
that the Restoration be completed in a first-class workmanlike manner at least
equivalent to the quality and character of the original work in the Improvements
(provided, however, that in the case of a partial Condemnation, the Restoration
shall be done to the extent reasonable practicable after taking into account the
consequences of such partial Condemnation), so that upon completion thereof, the
Individual Property shall be at least equal in value and general utility to the
Individual Property prior to the damage or destruction; it being understood,
however, that Borrower shall not be obligated to restore the Individual Property
to the precise condition of the Individual Property prior to such Casualty
provided the Individual Property is restored, to the extent practicable, to be
of at least equal value and of substantially the same character as prior to the
Casualty. Borrower shall restore all Improvements such that when they are fully
restored and/or repaired, such Improvements and their contemplated use fully
comply with all applicable material Legal Requirements. The identity of the
general contractor and material subcontractors and materialmen engaged in the
Restoration, as well as the contracts under which they have been engaged, shall
be subject to approval of Lender and the Casualty Consultant, such approval not
to be unreasonably withheld or delayed. 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.

 

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(d) 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 5.3.2(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 5.3.2(d) and that all approvals necessary for the
re-occupancy and use of the Individual 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 the Casualty Consultant certifies to Lender that the contractor,
subcontractor or materialman has satisfactorily completed all work and has
supplied all materials in accordance with the provisions of the contractor’s,
subcontractor’s or materialman’s contract, the contractor, subcontractor or
materialman delivers the lien waivers and evidence of payment in full of all
sums due to the contractor, subcontractor or materialman as may be reasonably
requested by Lender or by the title company issuing the Title Insurance Policy,
and Lender receives an endorsement to the Title Insurance Policy insuring the
continued priority of the lien of the related 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.

 

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

 

(f) If at any time the Net Proceeds or the undisbursed balance thereof shall
not, in the opinion of Lender in consultation with the Casualty Consultant, be
sufficient to pay in full the balance of the costs which are estimated by the
Casualty Consultant to be incurred in connection with the completion of the
Restoration, Borrower shall deposit the deficiency (the “Net Proceeds
Deficiency”) with Lender before any further disbursement of the Net Proceeds
shall be made. The Net Proceeds Deficiency deposited with Lender shall be held
by Lender and shall be disbursed for costs actually incurred in connection with
the Restoration on the same conditions applicable to the disbursement of the Net
Proceeds, and until so disbursed pursuant to this Section 5.3.2 shall constitute
additional security for the Debt.

 

(g) 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

 

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Lender that the Restoration has been completed in accordance with the provisions
of this Section 5.3.2, 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 under any of the Loan Documents or
the Guaranty Security Documents; provided, however, the amount of such excess
returned to Borrower in the case of a Condemnation shall not exceed the amount
of Net Proceeds Deficiency deposited by Borrower with the balance being applied
to the Debt in the manner provided for in Subsection 5.3.2(h).

 

(h) All Net Proceeds not required (i) to be made available for the Restoration
or (ii) to be returned to Borrower as excess Net Proceeds pursuant to Section
5.3.2(g) may be retained and applied by Lender toward the payment of the
Components, whether or not due and payable, in the manner and priority specified
in Section 2.4.2 or, at the discretion of Lender, the same may be paid, either
in whole or in part, to Borrower for such purposes as Lender shall designate.

 

VI. RESERVE FUNDS

 

Section 6.1 Required Repair Fund.

 

6.1.1 Deposit of Required Repair Funds. Borrower shall perform the repairs at
the Individual Property as more particularly set forth on Schedule II hereto
(such repairs hereinafter referred to as “Required Repairs”) and shall complete
each of the Required Repairs on or before the respective deadline for each
repair as set forth on Schedule II. On the Closing Date, Borrower shall deposit
with Agent the amount for the Individual Property set forth on such Schedule II
hereto to perform the Required Repairs for the Individual Property. Amounts
deposited pursuant to this Section 6.1.1 are referred to herein as the “Required
Repair Funds.”

 

6.1.2 Release of Required Repair Funds. Lender shall direct Agent to disburse to
the applicable Borrower the Required Repair Funds upon satisfaction by Borrower
of each of the following conditions: (a) Borrower shall submit a written request
for payment to Lender at least ten (10) days prior to the date on which Borrower
requests such payment be made and specifies the Required Repairs to be paid, (b)
on the date such request is received by Lender and on the date such payment is
to be made, no Event of Default shall exist and remain uncured, (c) Lender shall
have received an Officer’s Certificate (i) stating that all Required Repairs to
be funded by the requested disbursement have been completed in a good and
workmanlike manner and in accordance with all applicable Legal Requirements,
such certificate to be accompanied by a copy of any license, permit or other
approval by any Governmental Authority required in connection with the Required
Repairs, (ii) identifying the general contractor and material subcontractors and
suppliers that supplied materials or labor in connection with the Required
Repairs performed at the Individual Property to be funded by the requested
disbursement, and (iii) stating that each such Person has been paid in full or
will be paid in full upon such disbursement, such certificate to be accompanied
by lien waivers or other evidence of payment satisfactory to Lender, (d) at
Lender’s option, a title search for the Individual Property for which Required
Repair Funds are being disbursed indicating that the Individual Property is free
from all liens, claims and other encumbrances not previously approved by Lender,
(e) at Lender’s option, if the cost of the Required Repairs exceeds $500,000,
Lender shall have received a report

 

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satisfactory to Lender in its reasonable discretion from an architect or
engineer approved by Lender in respect of such architect or engineer’s
inspection of the required repairs, and (f) Lender shall have received such
other evidence as Lender shall reasonably request that the Required Repairs to
be funded by the requested disbursement have been completed and are paid for or
will be paid upon such disbursement to Borrower. Lender shall not be required to
disburse Required Repair Funds more frequently than once each calendar month, or
with respect to the Individual Property unless such requested disbursement is in
an amount greater than the Minimum Disbursement Amount (or a lesser amount if
the total Required Repair Funds is less than the Minimum Disbursement Amount, in
which case only one disbursement of the amount remaining in the account shall be
made).

 

Section 6.2 Tax Funds.

 

6.2.1 Deposits of Tax Funds. During the continuance of a Trigger Period only,
pursuant to the Cash Management Agreement there shall be deposited on each
Monthly Payment Date an amount equal to one-twelfth of the Taxes that Lender
estimates will be payable during the next ensuing twelve (12) months in order to
accumulate sufficient funds to pay all such Taxes at least ten (10) days prior
to their respective due dates. Amounts deposited pursuant to this Section 6.2.1
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 Taxes, Lender
shall notify Borrower of such determination and the monthly deposits for 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
Taxes; provided that if Borrower receives notice of any deficiency after the
date that is ten (10) days prior to the date that Taxes are due, Borrower will
deposit such amount within three (3) Business Days after its receipt of such
notice.

 

6.2.2 Release of Tax Funds. Provided no Event of Default has occurred and is
continuing, Lender shall apply the Tax Funds, if any, to payments of Taxes. In
making any payment relating to Taxes, Lender may do so according to any bill,
statement or estimate procured from the appropriate public office (with respect
to Taxes) without inquiry into the accuracy of such bill, statement or estimate
or into the validity of any tax, assessment, sale, forfeiture, tax lien or title
or claim thereof. If the amount of the Tax Funds shall exceed the amounts due
for 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 after the Debt has been paid in full shall be returned to
Borrower.

 

Section 6.3 Insurance Funds.

 

6.3.1 Deposits of Insurance Funds. During the continuance of a Trigger Period
only, pursuant to the Cash Management Agreement there shall be deposited on each
Monthly 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 at least thirty (30) days prior to the
expiration of the Policies. Any amounts deposited pursuant to this Section 6.3.1
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.

 

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6.3.2 Release of Insurance Funds. Provided no Event of Default has occurred and
is continuing, Lender shall apply the Insurance Funds, if any, to payment of
Insurance Premiums. In making any payment relating to Insurance Premiums, Lender
may do so according to any bill, statement or estimate procured from the insurer
or its agent, without inquiry into the accuracy of such bill, statement or
estimate. 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 after the Debt has been paid in
full shall be returned to Borrower.

 

Section 6.4 Capital Expenditure Funds.

 

6.4.1 Deposits of Capital Expenditure Funds. During the continuance of a Trigger
Period only, Borrowers shall deposit with Lender on each Monthly Payment Date an
aggregate amount equal to one-twelfth of the Cap Ex Amount for annual Capital
Expenditures approved by Lender under Section 4.1.10 hereof or otherwise
approved by Lender, which approval shall not be unreasonably withheld or
delayed. Any amounts deposited pursuant to this Section 6.4.1 are referred to
herein as the “Capital Expenditure Funds.” Lender may reassess its estimate of
the amount necessary for capital expenditures from time to time and, and may
require Borrower to increase the monthly deposits required pursuant to this
Section 6.4.1 upon thirty (30) days notice to Borrower if Lender determines in
its reasonable discretion that an increase is necessary to maintain proper
operation of the Individual Property.

 

6.4.2 Release of Capital Expenditure Funds. (a) Lender shall direct Agent to
disburse Capital Expenditure Funds only for Capital Expenditures.

 

(b) Lender shall direct Agent to disburse to Borrower the Capital Expenditure
Funds upon satisfaction by the requesting Borrower of each of the following
conditions: (i) Borrower shall submit a written request for payment to Lender at
least ten (10) days prior to the date on which Borrower requests such payment be
made and specifies the Capital Expenditures to be paid, (ii) on the date such
request is received by Lender and on the date such payment is to be made, no
Event of Default shall exist and remain uncured, (iii) Lender shall have
received an Officer’s Certificate (A) stating that the items to be funded by the
requested disbursement are Capital Expenditures, (B) stating that all Capital
Expenditures at the Individual Property to be funded by the requested
disbursement have been completed in a good and workmanlike manner and in
accordance with all applicable Legal Requirements, such certificate to be
accompanied by a copy of any license, permit or other approval required by any
Governmental Authority in connection with the Capital Expenditures, (C)
identifying the general contractor and material subcontractors and suppliers
that supplied materials or labor in connection with the Capital Expenditures
performed at the Individual Property to be funded by the requested disbursement,
and (D) stating that each such Person has been paid in full or will be paid in
full upon such disbursement, such certificate to be accompanied by lien waivers
or other evidence of payment satisfactory to Lender, (iv) at Lender’s option, a
title search for the Individual Property for which Capital Expenditure Funds are
being disbursed indicating that the Individual Property is free from all Liens,
claims and other encumbrances not previously

 

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approved by Lender, and (v) at Lender’s option, if the cost of the individual
Capital Expenditure exceeds $500,000, Lender shall have received a report
satisfactory to Lender in its reasonable discretion from an architect or
engineer approved by Lender in respect of such architect or engineer’s
inspection of the required repairs, and (vi) Lender shall have received such
other evidence as Lender shall reasonably request that the Capital Expenditures
at the Individual Property to be funded by the requested disbursement have been
completed and are paid for or will be paid upon such disbursement to Borrower.
Lender shall not be required to disburse Capital Expenditure Funds more
frequently than once each calendar month, or with respect to the Individual
Property unless such requested disbursement is in an amount greater than the
Minimum Disbursement Amount (or a lesser amount if the total amount of Capital
Expenditure Funds is less than the Minimum Disbursement Amount, in which case
only one disbursement of the amount remaining in the account shall be made).

 

(c) Nothing in this Section 6.4.2 shall (i) make Lender responsible for making
or completing the Capital Expenditures Work; (ii) require Lender to expend funds
in addition to the Capital Expenditure Funds to complete any Capital
Expenditures Work; (iii) obligate Lender to proceed with the Capital
Expenditures Work; or (iv) obligate Lender to demand from Borrower additional
sums to complete any Capital Expenditures Work.

 

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

 

(e) If a disbursement will exceed $[250,000], Lender may require an inspection
of the Individual Property at Borrower’s expense prior to making a disbursement
of Capital Expenditure Funds in order to verify completion of the Capital
Expenditures Work for which reimbursement is sought. Lender may require that
such inspection be conducted by an appropriate independent qualified
professional selected by Lender and may require a certificate of completion by
an independent qualified professional architect acceptable to Lender prior to
the disbursement of Capital Expenditure Funds. Borrower shall pay the expense of
the inspection as required hereunder, whether such inspection is conducted by
Lender or by an independent qualified professional architect.

 

(f) In addition to any insurance required under the Loan Documents and/or the
Guaranty Security Documents, Borrower shall provide or cause to be provided
workmen’s compensation insurance, builder’s risk, and public liability insurance
and other insurance to the extent required under applicable law in connection
with Capital Expenditures Work. All such policies shall be in form and amount
reasonably satisfactory to Lender.

 

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Section 6.5 Rollover Funds.

 

6.5.1 Deposits of Rollover Funds. During the continuance of a Trigger Period
only, Borrowers shall deposit with Lender on each Monthly Payment Date an
aggregate amount equal to one-twelfth of the Rollover Amount for tenant
improvements and leasing commissions that may be incurred at each Individual
Property following the date hereof. Any amounts deposited pursuant to this
Section 6.5.1 are referred to herein as the “Rollover Funds.”

 

 

6.5.2 Release of Rollover Funds. Lender shall direct Agent to disburse to
Borrower the Rollover Funds upon satisfaction by Borrower of each of the
following conditions: (i) the requesting Borrower shall submit a written request
for payment to Lender at least ten (10) days prior to the date on which Borrower
requests such payment be made and specifies the tenant improvement costs and
leasing commissions to be paid, (ii) on the date such request is received by
Lender and on the date such payment is to be made, no Event of Default shall
exist and remain uncured, (iii) the Lease in respect of which Borrower is
obligated to pay or reimburse certain tenant improvement costs and leasing
commissions shall (A) have been approved or deemed approved by Lender pursuant
to the terms of this Agreement or (B) not be subject to Lender approval pursuant
to the terms of this Agreement, (iv) to the extent not set forth in the Approved
Annual Budget, Lender shall have received and approved a budget for tenant
improvement costs and a schedule of leasing commissions payments and the
requested disbursement will be used to pay all or a portion of such costs and
payments, (v) Lender shall have received an Officer’s Certificate (A) stating
that all tenant improvements at the Individual Property to be funded by the
requested disbursement have been completed in good and workmanlike manner and in
accordance with all applicable federal, state and local laws, rules and
regulations, such certificate to be accompanied by a copy of any license, permit
or other approval by any Governmental Authority required in connection with such
tenant improvements, (B) identifying the general contractor and material
subcontractors and suppliers that supplied materials or labor in connection with
the tenant improvements performed at the Individual Property to be funded by the
requested disbursement, and (C) stating that each such Person has been paid in
full or will be paid in full upon such disbursement, such certificate to be
accompanied by lien waivers or other evidence of payment satisfactory to Lender,
(vi) at Lender’s option, a title search for the Individual Property for which
Rollover Funds are being disbursed indicating that the Individual Property is
free from all Liens, claims and other encumbrances not previously approved by
Lender, and (vii) Lender shall have received such other evidence as Lender shall
reasonably request that the tenant improvements at the Individual Property to be
funded by the requested disbursement have been completed and are paid for or
will be paid upon such disbursement to the requesting Borrower. Lender shall not
be required to disburse Rollover Funds more frequently than once each calendar
month, or with respect to the Individual Property unless such requested
disbursement is in an amount greater than the Minimum Disbursement Amount (or a
lesser amount if the total amount of Rollover Funds is less than the Minimum
Disbursement Amount, in which case only one disbursement of the amount remaining
in the account shall be made).

 

Section 6.6 Lease Termination Rollover Funds.

 

6.6.1 Deposits of Rollover Funds. In the event that Borrower receives a fee,
payment or other compensation from any Tenant relating to or in exchange for the
termination of

 

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such Tenant’s Lease (a “Lease Termination Fee”), Borrower shall, during the
continuance of a Trigger Period only, immediately deposit such Lease Termination
Fee with Lender, to be utilized for tenant improvements and leasing commissions
that may be incurred with respect to the space relating to such Lease
Termination Fee (a “Termination Space”) and, in the event that there is a Rent
Deficiency (as hereinafter defined) for the Termination Space from and after the
date that the Lease for the Termination Space was terminated, in replacement of
Rent. Amounts deposited pursuant to this Section 6.6.1 are referred to herein as
the “Lease Termination Rollover Funds.”

 

6.6.2 Release of Lease Termination Rollover Funds. (a) Lender shall direct Agent
to disburse to the applicable Borrower the Lease Termination Rollover Funds upon
satisfaction by the requesting Borrower of each of the following conditions: (i)
the requesting Borrower shall submit a written request for payment to Lender at
least ten (10) days prior to the date on which Borrower requests such payment be
made and (A) specifies the tenant improvement costs and leasing commissions to
be paid for the Termination Space or (B) specifies the amount by which the rent
expected to be obtained by Borrower for the Termination Space during the next
succeeding calendar month pursuant to the Lease or Leases for such Termination
Space (a “Replacement Lease”) is less than the amount of monthly rent received
from the previous Tenant in the Termination Space pursuant to its Lease prior to
such termination (the “Rent Deficiency”), (ii) on the date such request is
received by Lender and on the date such payment is to be made, no Event of
Default shall exist and remain uncured, (iii) the Replacement Lease in respect
of which Borrower is obligated to pay or reimburse certain tenant improvement
costs and leasing commissions shall (A) have been approved or deemed approved by
Lender pursuant to the terms of this Agreement or (B) not be subject to Lender
approval pursuant to the terms of this Agreement, (iv) with respect to any Lease
Termination Rollover Funds to be released by Lender for tenant improvements or
leasing commissions pursuant to a Replacement Lease, Lender shall have received
a budget for tenant improvement costs and a schedule of leasing commissions
payments and the requested disbursement will be used to pay all or a portion of
such costs and payments, (v) with respect to any Lease Termination Rollover
Funds to be released by Lender for tenant improvements or leasing commissions
pursuant to a Replacement Lease, Lender shall have received an Officer’s
Certificate from Borrower (A) stating that all tenant improvements at the
Individual Property to be funded by the requested disbursement have been
completed in good and workmanlike manner and in accordance with all applicable
federal, state and local laws, rules and regulations, such certificate to be
accompanied by a copy of any license, permit or other approval by any
Governmental Authority required in connection with the Capital Expenditures, (B)
identifying the general contractor and material subcontractors and suppliers
that supplied materials or labor in connection with the tenant improvements
performed at the Individual Property to be funded by the requested disbursement,
and (C) stating that each such Person has been paid in full or will be paid in
full upon such disbursement, such certificate to be accompanied by lien waivers
or other evidence of payment satisfactory to Lender, (vi) with respect to any
Lease Termination Rollover Funds to be released by Lender for tenant
improvements or leasing commissions pursuant to a Replacement Lease, at Lender’s
option, a title search for the Individual Property for which Lease Termination
Rollover Funds are being disbursed indicating that the Individual Property is
free from all Liens, claims and other encumbrances not previously approved by
Lender and (vii) with respect to any Lease Termination Rollover Funds to be
released by Lender for tenant improvements or leasing commissions pursuant to a
Replacement Lease, Lender shall have received such other evidence as Lender
shall reasonably request that the tenant improvements at

 

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the Individual Property to be funded by the requested disbursement have been
completed and are paid for or will be paid upon such disbursement to the
Borrower. Lender shall not be required to disburse Lease Termination Rollover
Funds more frequently than once each calendar month, or with respect to the
Individual Property, unless such requested disbursement is in an amount greater
than the Minimum Disbursement Amount (or a lesser amount if the total amount of
Lease Termination Rollover Funds is less than the Minimum Disbursement Amount,
in which case only one disbursement of the amount remaining in the account shall
be made). All Rent Deficiency disbursements made by Lender shall be deposited
into the Deposit Account as if such sums were received by Borrower as Rent
during the calendar month after such request is made by Borrower.

 

(b) Notwithstanding the foregoing, upon receipt by Lender of evidence that, with
respect to any new Replacement Lease with a term of at least five (5) years, all
tenant improvements required to be completed by the applicable Borrower pursuant
to the Replacement Lease, if any, have been completed and all leasing
commissions required to be paid by Borrower with respect to the Replacement
Lease, if any, have been paid, and provided no Event of Default then exists,
Lender shall direct Agent to disburse to Borrower the Lease Termination Rollover
Funds on deposit with respect to such Termination Space provided that the rent
to be obtained by Borrower for such Termination Space during the next succeeding
sixty (60) calendar months pursuant to the respective Replacement Lease is equal
to or greater than the sum of the monthly rent last received from the previous
Tenant in such Termination Space pursuant to its Lease multiplied by sixty (60).

 

Section 6.7 Ground Rent Funds.

 

6.7.1 Deposits of Ground Rent Funds. If any Substitute Property shall consist of
a Ground Lease, Borrower shall deposit with Lender, at least ten (10) Business
Days prior to each Monthly Payment Date, an amount (the “Monthly Ground Rent
Deposit”) equal to the Ground Rent that will be payable under such Ground
Lease(s) for the month in which such Monthly Payment Date occurs (such amounts
so deposited shall hereinafter be referred to as the “Ground Rent Funds”). Such
deposit may be increased by Lender in the amount Lender deems is necessary in
its reasonable discretion based on any increases in the Ground Rent.

 

6.7.2 Release of Ground Rent Funds. Provided no Event of Default has occurred
and is continuing, Lender shall apply the Ground Rent Funds to payments of
Ground Rent. In making any payment relating to Ground Rent, Lender may do so
according to any bill or statement given by the ground lessor under any Ground
Lease without inquiry into the accuracy of such bill or statement or into the
validity of any rent, additional rent or other charge thereof. If the amount of
the Ground Rent Funds shall exceed the amounts due for Ground Rent, Lender
shall, in its sole discretion, either (a) return any excess to Borrower or (b)
credit such excess against future payments to be made to the Ground Rent Funds.
Any Ground Rent Funds remaining after the Debt has been paid in full shall be
returned to Borrower.

 

Section 6.8 Application of Reserve Funds. Upon the occurrence of an Event of
Default, Lender, at its option, may withdraw the Reserve Funds and apply the
Reserve Funds to the items for which the Reserve Funds were established or to
payment of the Debt in such order, proportion and priority as Lender may
determine in its sole discretion. Lender’s right to withdraw and apply the
Reserve Funds shall be in addition to all other rights and remedies provided to
Lender under the Loan Documents and the Guaranty Security Documents.

 

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Section 6.9 Security Interest in Reserve Funds.

 

6.9.1 Grant of Security Interest. Borrower shall be the owner of the Reserve
Funds. Borrower hereby pledges, assigns and grants a security interest to
Lender, as security for payment of the Debt and the performance of all other
terms, conditions and covenants of the Loan Documents and the Guaranty Security
Documents on Borrower’s part to be paid and performed, in all of Borrower’s
right, title and interest in and to the Reserve Funds. The Reserve Funds shall
be under the sole dominion and control of Lender.

 

6.9.2 Income Taxes. Borrower shall report on its federal, state and local income
tax returns all interest or income accrued on the Reserve Funds to the extent
that it constitutes reportable income.

 

6.9.3 Prohibition Against Further Encumbrance. Borrower shall not, without the
prior consent of Lender, further pledge, assign or grant any security interest
in the Reserve Funds 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.

 

Section 6.10 Letters of Credit.

 

6.10.1 Delivery of Letters of Credit. (a) In lieu of making the payments to any
of the Reserve Funds as required pursuant to the terms hereof, Borrower may
deliver to Lender a Letter of Credit in accordance with the provisions of this
Section 6.10. Additionally, Borrower may deliver to Lender a Letter of Credit in
accordance with the provisions of this Section 6.10 in lieu of deposits
previously made to the Reserve Funds. The aggregate amount of any Letter of
Credit and cash on deposit with respect to the Capital Expenditure Funds, the
Required Repair Funds and Rollover Funds shall at all times be at least equal to
the aggregate amount which Borrower is required to have on deposit in such
Reserve Fund pursuant to this Agreement. The aggregate amount of any Letter of
Credit and cash on deposit with respect to the Tax Funds shall at all times be
at least equal to the aggregate which Borrower would be required to deposit in
such Reserve Fund over the next twelve (12) month period. The aggregate amount
of any Letter of Credit and cash on deposit with respect to the Insurance Funds
and the Ground Rent Funds, if applicable, shall at all times be at least equal
to the aggregate which Borrower would be required to deposit in such Reserve
Fund over the next twelve (12) month period. In the event that a Letter of
Credit is delivered in lieu of any portion of the Tax Funds, the Insurance Funds
or the Ground Rent Funds, if applicable, Borrower shall be responsible for the
payment of Taxes, Insurance Premiums or Ground Rent, as applicable, and Lender
shall not be responsible therefor. In the event that a Letter of Credit is
delivered in lieu of any portion of the Tax Funds, the Insurance Funds or the
Ground Rent Funds, if applicable, Lender shall return to Borrower any cash
deposits that are no longer required to be on deposit (based on the provisions
of this clause(a)).

 

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(b) Borrower shall give Lender no less than thirty (30) days notice of
Borrower’s election to deliver a Letter of Credit and Borrower shall pay to
Lender all of Lender’s reasonable out-of-pocket costs and expenses in connection
therewith. Borrower shall not be entitled to draw from any such Letter of
Credit. Upon thirty (30) days notice to Lender, Borrower may replace a Letter of
Credit with a cash deposit to the applicable Reserve Fund if a Letter of Credit
has been outstanding for more than six (6) months. Prior to the return of a
Letter of Credit, Borrower shall deposit an amount equal to the amount that
would have accumulated in the applicable Reserve Fund and not been disbursed in
accordance with this Agreement if such Letter of Credit had not been delivered.

 

(c) Borrower shall provide Lender with notice of any increases in the annual
payments for Taxes, Insurance Premiums and Ground rent, if applicable, thirty
(30) days prior to the effective date of any such increase and any applicable
Letter of Credit shall be increased by such increased amount at least ten (10)
days prior to the effective date of such increase.

 

Section 6.11 Provisions Regarding Letters of Credit.

 

6.11.1 Security for Debt. Each Letter of Credit delivered under this Agreement
shall be additional security for the payment of the Debt. Upon the occurrence of
an Event of Default, Lender shall have the right, at its option, to draw on any
Letter of Credit and to apply all or any part thereof to the payment of the
items for which such Letter of Credit was established or to apply each such
Letter of Credit to payment of the Debt in such order, proportion or priority as
Lender may determine. Any such application to the Debt shall be subject to the
Yield Maintenance Premium. On the Maturity Date, any such Letter of Credit may
be applied to reduce the Debt.

 

6.11.2 Additional Rights of Lender. In addition to any other right Lender may
have to draw upon a Letter of Credit pursuant to the terms and conditions of
this Agreement, Lender shall have the additional rights to draw in full any
Letter of Credit: (a) with respect to any evergreen Letter of Credit, if Lender
has received a notice from the issuing bank that the Letter of Credit will not
be renewed and a substitute Letter of Credit is not provided at least thirty
(30) days prior to the date on which the outstanding Letter of Credit is
scheduled to expire; (b) with respect to any Letter of Credit with a stated
expiration date, if Lender has not received a notice from the issuing bank that
it has renewed the Letter of Credit at least thirty (30) days prior to the date
on which such Letter of Credit is scheduled to expire and a substitute Letter of
Credit is not provided at least thirty (30) days prior to the date on which the
outstanding Letter of Credit is scheduled to expire; (c) upon receipt of notice
from the issuing bank that the Letter of Credit will be terminated (except if
the termination of such Letter of Credit is permitted pursuant to the terms and
conditions of this Agreement or a substitute Letter of Credit is provided); or
(d) if Lender has received notice that the bank issuing the Letter of Credit
shall cease to be an Eligible Institution. Notwithstanding anything to the
contrary contained in the above, Lender is not obligated to draw any Letter of
Credit upon the happening of an event specified in (a), (b), (c) or (d) above
and shall not be liable for any losses sustained by Borrower due to the
insolvency of the bank issuing the Letter of Credit if Lender has not drawn the
Letter of Credit. Provided no Event of Default is continuing, draws of a Letter
of Credit under this Section 6.11.2 shall thereafter be held as Reserve Funds in
accordance with this Agreement.

 

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VII. PROPERTY MANAGEMENT

 

Section 7.1 The Management Agreement. Borrower shall cause the Manager of the
Individual Property to manage the Individual Property substantially in
accordance with its Management Agreement. Borrower shall (i) diligently perform
and observe all of the material terms, covenants and conditions of its
Management Agreement on the part of Borrower to be performed and observed, (ii)
promptly notify Lender of any notice to Borrower of any default by Borrower in
the performance or observance of any of the terms, covenants or conditions of
its Management Agreement on the part of Borrower to be performed and observed,
and (iii) upon request of Lender, promptly deliver to Lender a copy of each
financial statement, business plan, capital expenditures plan, report and
estimate received by it under each Management Agreement. If Borrower shall
default in the performance or observance of any material term, covenant or
condition of any 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 Borrower
from any of its obligations hereunder or under such Management Agreement, upon
five (5) Business Days’ prior notice to Borrower, 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 such
Management Agreement on the part of the Borrower to be performed or observed.

 

Section 7.2 Prohibition Against Termination or Modification. Borrower shall not
surrender, terminate, cancel, modify, renew or extend any Management Agreement,
or enter into any other agreement relating to the management or operation of the
Individual Property with Manager or any other Person, or consent to the
assignment by the Manager of its interest under the related Management
Agreement, in each case without the express consent of Lender, which consent
shall not be unreasonably withheld; provided, however, with respect to a new
manager such consent may be conditioned upon Borrower delivering a Rating Agency
Confirmation as to such new manager and management agreement and, if such new
manager is an Affiliate of Borrower, upon delivery of a non-consolidation
opinion acceptable to the Rating Agencies. If at any time Lender consents to the
appointment of a new manager, such new manager and the applicable Borrower
shall, as a condition of Lender’s consent, execute a subordination of management
agreement in the form then used by Lender. Notwithstanding anything contained in
this Section 7.2 to the contrary, Wells Management Company, Inc. is hereby
approved by Lender as a substitute property manager for any Manager currently
managing an Individual Property, provided, that, prior to Wells Management
Company, Inc. becoming the manager of the Individual Property, Borrower shall be
required to satisfy each of the conditions set forth in this Section other than
obtaining Lender’s approval or a Rating Agency Confirmation.

 

Section 7.3 Replacement of Manager. Lender shall have the right to require
Borrower to replace any Manager at the Individual Property with a Person which
is not an Affiliate of, but is chosen by, Borrower and approved by Lender upon
the occurrence of any one or more of the following events: (i) from and after
the Maturity Date, (ii) at any time following the occurrence of an Event of
Default, (iii) if at any time the Debt Service Coverage Ratio falls below 1.20
to 1.0 (the “Manager Termination Ratio”), as determined by Lender in its sole
discretion on a quarterly basis and/or (iv) if such Manager shall be in monetary
default or any other material default under its Management Agreement beyond any
applicable notice and cure

 

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period or if at any time such Manager has engaged in gross negligence, fraud or
willful misconduct. Notwithstanding the provisions of clause (iii) above, the
applicable Borrower shall nevertheless have the right to retain such Manager if,
prior to the replacement of such Manager, Borrower shall provide additional
collateral in the form of Letters of Credit for a portion of the Loan,
satisfactory to Lender, such that the Manager Termination Ratio can be
maintained on the Loan Amount net of such additional collateral. Lender may
require the Borrower to increase the additional collateral to the extent such
Debt Service Coverage Ratio continues to decline in subsequent quarters. Such
additional collateral shall be released to Borrower when the Debt Service
Coverage Ratio equals or exceeds the Manager Termination Ratio for six (6)
consecutive months and provided no Event of Default has occurred. Letters of
Credit provided under this section shall be additional security for the
repayment of the Indebtedness and may be drawn upon by Lender upon the
occurrence of an Event of Default and applied by Lender in such order and
priority as Lender may determine in its sole discretion.

 

VIII. PERMITTED TRANSFERS

 

Section 8.1 Permitted Transfer of the Individual Property. Lender shall not
withhold its consent to the one-time conveyance of the Individual Property to a
Permitted Transferee provided that (a) Lender has received a Rating Agency
Confirmation as to the conveyance of the Individual Property to the Permitted
Transferee, (b) Lender has received an agreement, acceptable to it in its sole
discretion, pursuant to which Permitted Transferee assumes all of Borrower’s
obligations under the Loan Documents, (c) Lender receives a transfer fee equal
to one percent (1.0%) of the original Loan Amount, (d) Lender shall have
received such documents, certificates and legal opinions as it may reasonably
request and (e) the Other Borrowers simultaneously transfer the Other Properties
to such Transferee and satisfy the conditions set forth in Section 8.1 of each
of the Other Loan Agreements.

 

Section 8.2 Permitted Transfers of Interest in Borrower. The restrictions on
Transfers of ownership interests in the Borrower set forth in Article 6 of the
Mortgage shall not apply to the issuance, sale, transfer or pledge of publicly
traded shares of the REIT or the issuance, transfer or pledge of limited
partnership interests (including the conversion of general partnership interests
to limited partnership interests) in Wells Operating Partnership, L.P. (“the
OP”), provided that (x) no one Person or its Affiliates owns more than
forty-nine percent (49%) of the REIT or the OP (other than the REIT pursuant to
clause (ii) below) and the REIT shall at all times (i) be and remain the sole
general partner of the OP and have the right and power to direct the management,
policies and day-to-day business and affairs of the OP and (ii) directly own a
minimum of ninety percent (90%) of the interests in the OP, (y) the OP directly
or indirectly at all times owns at least one hundred percent (100%) of the
ownership interests in Borrower and retains control of the Borrower and the
day-to-day management of the Individual Property and (z) if after giving effect
to such transfer and all prior transfers, more than forty-nine percent (49%) in
the aggregate of direct or indirect interests in the Borrower are owned by any
Person and its Affiliates that owned less than a forty-nine percent (49%) direct
or indirect interest in Borrower as of the Closing Date, Lender receives a
non-consolidation opinion acceptable to Lender and the Rating Agencies.

 

Section 8.3 Permitted Easements. Lender shall not unreasonably withhold or delay
its consent to grants of easements, restrictions, covenants, reservations and
rights of way in

 

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the ordinary course of business for water and sewer lines, telephone and
telegraph lines, electric lines and other utilities or for other similar
purposes, provided that no such grant shall materially impair the utility and
operation of the Individual Property or materially adversely affect the value of
the Individual Property or materially adversely affect Borrower’s ability to pay
the Loan.

 

IX. SALE AND SECURITIZATION OF MORTGAGE

 

Section 9.1 Sale of Mortgage and Securitization.

 

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

 

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

 

(i) (A) provide updated financial and other information with respect to the
Individual Property, the business operated at the Individual Property, Borrower
and, to the extent reasonably available to Borrower, each Manager, (B) provide
updated budgets relating to the Individual Property and (C) at Lender’s expense
provide updated appraisals, market studies, environmental reviews (Phase I’s
and, if appropriate, Phase II’s), property condition reports and other due
diligence investigations of the Individual Property (the “Updated Information”),
together, if customary, with appropriate verification of the Updated Information
through letters of auditors or opinions of counsel acceptable to Lender and the
Rating Agencies;

 

(ii) provide opinions of counsel, which may be relied upon by Lender, the Rating
Agencies and their respective counsel, agents and representatives, as to
non-consolidation, fraudulent conveyance, and true sale or any other opinion
customary in Secondary Market Transactions or required by the Rating Agencies
with respect to the Individual Property and Borrower and Affiliates, which
counsel and opinions shall be satisfactory to Lender and the Rating Agencies;

 

(iii) provide updated, as of the closing date of the Secondary Market
Transaction, representations and warranties made in the Loan Documents and such
additional representations and warranties substantially similar to the
representations and warranties contained in the Loan Documents as the Rating
Agencies may require; and

 

(iv) execute amendments to the Loan Documents and the Guaranty Security
Documents and Borrower’s organizational documents reasonably requested by
Lender; provided, however, that Borrower shall not be required to modify or
amend any

 

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Loan Document if such modification or amendment would (A) change the interest
rate, the stated maturity or the amortization of principal as set forth herein
or in the Note, (B) modify or amend any other material economic term of the
Loan, or (C) materially decrease the rights or materially increase the
obligations of the Borrower.

 

Any reports, statements or other information required to be delivered under this
Section 9.1 shall be delivered in paper form or transmitted electronically in
PDF or other similar format or Borrower may deliver such reports, statements and
other information (A) on a diskette, or (B) in electronic form and prepared
using Microsoft Word for Windows or WordPerfect for Windows files (which files
may be prepared using a spreadsheet program and saved as word processing files),
provided, that, delivery of such reports, statements and other information in
such formats shall be subject to Borrower’s satisfaction of the reporting and
delivery obligations and requirements of the Servicer. Notwithstanding the
foregoing, Borrower shall be required to deliver original opinions, agreements,
amendments, certificates of the Borrower or its Affiliates, and title insurance
policies or endorsements, and Borrower shall be required to deliver originals of
any other agreements, documents, certificates and reports if such originals are
reasonably requested by Lender, the Servicer or the Rating Agencies or otherwise
required pursuant to the Loan Documents.

 

Section 9.2 Securitization Indemnification.

 

(a) Borrower understands that information provided to Lender by Borrower and its
agents, counsel and representatives may be included in disclosure documents in
connection with the Securitization, including, without limitation, an offering
circular, a prospectus, prospectus supplement, private placement memorandum or
other offering document (each, a “Disclosure Document”) and may also be included
in filings with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the “Securities Act”), or the Securities and
Exchange Act of 1934, as amended (the “Exchange Act”), and may be made available
to investors or prospective investors in the Securities, the Rating Agencies,
and service providers relating to the Securitization.

 

(b) Borrower shall provide in connection with each of (i) a preliminary and a
final private placement memorandum or (ii) a preliminary and final prospectus or
prospectus supplement, as applicable, an agreement (A) certifying that Borrower
has examined such Disclosure Documents specified by Lender and that, to the best
of Borrower’s knowledge, each such Disclosure Document, as it relates to
Borrower, Borrower’s Affiliates, the Individual Property, Manager and all other
aspects of the Loan, does not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements made, in
the light of the circumstances under which they were made, not misleading, (B)
indemnifying Lender (and for purposes of this Section 9.2, Lender hereunder
shall include its officers and directors), the Affiliate of Morgan Stanley Dean
Witter & Co. (“Morgan Stanley”) that has filed the registration statement
relating to the Securitization (the “Registration Statement”), each of its
directors, each of its officers who have signed the Registration Statement and
each Person that controls the Affiliate within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act (collectively, the “Morgan
Stanley Group”), and Morgan Stanley, and any other placement agent or

 

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underwriter with respect to the Securitization, each of their respective
directors and each Person who controls Morgan Stanley or any other placement
agent or underwriter within the meaning of Section 15 of the Securities Act and
Section 20 of the Exchange Act (collectively, the “Underwriter Group”) for any
losses, claims, damages or liabilities (collectively, the “Liabilities”) to
which Lender, the Morgan Stanley Group or the Underwriter Group may become
subject insofar as the Liabilities arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in such
sections or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated in such sections or
necessary in order to make the statements in such sections, in light of the
circumstances under which they were made, not misleading and (C) agreeing to
reimburse Lender, the Morgan Stanley Group and/or the Underwriter Group for any
legal or other expenses reasonably incurred by Lender, the Morgan Stanley Group
and the Underwriter Group in connection with investigating or defending the
Liabilities; provided, however, that Borrower will be liable in any such case
under clauses (B) or (C) above only to the extent that any such loss claim,
damage or liability arises out of or is based upon any such untrue statement or
omission made therein in reliance upon and in conformity with information
furnished to Lender by or on behalf of Borrower in connection with the
preparation of the Disclosure Document or in connection with the underwriting or
closing of the Loan, including, without limitation, financial statements of
Borrower, operating statements and rent rolls with respect to the Individual
Property. This indemnity agreement will be in addition to any liability which
Borrower may otherwise have.

 

(c) In connection with Exchange Act Filings, Borrower shall (i) indemnify
Lender, the Morgan Stanley Group and the Underwriter Group for Liabilities to
which Lender, the Morgan Stanley Group or the Underwriter Group may become
subject insofar as the Liabilities arise out of or are based upon the omission
or alleged omission to state in the Disclosure Document a material fact required
to be stated in the Disclosure Document in order to make the statements in the
Disclosure Document, in light of the circumstances under which they were made,
not misleading and (ii) reimburse Lender, the Morgan Stanley Group or the
Underwriter Group for any legal or other expenses reasonably incurred by Lender,
the Morgan Stanley Group or the Underwriter Group in connection with defending
or investigating the Liabilities; provided, however, that Borrower will be
liable in any such case under clauses (i) or (ii) above only to the extent that
any such loss claim, damage or liability arises out of or is based upon any such
untrue statement or omission made therein in reliance upon and in conformity
with information furnished to Lender by or on behalf of Borrower in connection
with the preparation of the Disclosure Document or in connection with the
underwriting or closing of the Loan, including, without limitation, financial
statements of Borrower, operating statements and rent rolls with respect to the
Individual Property. This indemnity agreement will be in addition to any
liability which Borrower may otherwise have.

 

(d) Promptly after receipt by an indemnified party under this Section 9.2 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 9.2, notify the indemnifying party in writing of the commencement
thereof, but the omission to so notify the indemnifying party will not relieve
the indemnifying party from any liability which the indemnifying party may have
to any indemnified party hereunder except to the extent that failure to notify
causes prejudice to the indemnifying party. In the event that any action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled, jointly with
any other indemnifying party, to

 

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participate therein and, to the extent that it (or they) may elect by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party. After notice from the
indemnifying party to such indemnified party under this Section 9.2, such
indemnified party shall pay for any legal or other expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided, however, if the defendants in
any such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there are any
legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assert such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party at the cost of the indemnifying
party. The indemnifying party shall not be liable for the expenses of more than
one separate counsel unless an indemnified party shall have reasonably concluded
that there may be legal defenses available to it that are different from or
additional to those available to another indemnified party.

 

(e) In order to provide for just and equitable contribution in circumstances in
which the indemnity agreement provided for in Section 9.2(b) or (c) is for any
reason held to be unenforceable as to an indemnified party in respect of any
losses, claims, damages or liabilities (or action in respect thereof) referred
to therein which would otherwise be indemnifiable under Section 9.2(b) or (c),
the indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such losses, claims, damages or liabilities (or
action in respect thereof); provided, however, that no Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. In determining the amount of
contribution to which the respective parties are entitled, the following factors
shall be considered: (i) Morgan Stanley’s and Borrower’s relative knowledge and
access to information concerning the matter with respect to which the claim was
asserted; (ii) the opportunity to correct and prevent any statement or omission;
and (iii) any other equitable considerations appropriate in the circumstances.
Lender and Borrower hereby agree that it would not be equitable if the amount of
such contribution were determined by pro rata or per capita allocation.

 

(f) The liabilities and obligations of both of Borrower and Lender under this
Section 9.2 shall survive the termination of this Agreement and the satisfaction
and discharge of the Debt.

 

X. DEFAULTS

 

Section 10.1 Event of Default.

 

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

 

(i) if (A) any monthly installment of principal and/or interest due under the
Note or the payment due on the Maturity Date is not paid when due or (B) any

 

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other portion of the Debt is not paid when due and such non-payment continues
for five (5) days following notice to Borrower that the same is due and payable;

 

(ii) if any of the Taxes or Other Charges are not paid when due;

 

(iii) if the Policies are not kept in full force and effect;

 

(iv) if Borrower breaches or permits or suffers a breach of Article 6 of the
Mortgage;

 

(v) if any representation or warranty made by Borrower herein or in any other
Loan Document or any Guaranty Security Document, or in any report, certificate,
financial statement or other instrument, agreement or document furnished to
Lender shall have been false or misleading in any material respect as of the
date the representation or warranty was made;

 

(vi) if Borrower, any SPC Party, any of the Other Borrowers or Guarantor shall
make an assignment for the benefit of creditors;

 

(vii) if a receiver, liquidator or trustee shall be appointed for Borrower, any
SPC Party, any of the Other Borrowers or Guarantor or if Borrower, any SPC
Party, any of the Other Borrowers or Guarantor shall be adjudicated a bankrupt
or insolvent, or if any petition for bankruptcy, reorganization or arrangement
pursuant to federal bankruptcy law, or any similar federal or state law, shall
be filed by or against, consented to, or acquiesced in by, Borrower, any SPC
Party, any of the Other Borrowers or Guarantor, or if any proceeding for the
dissolution or liquidation of Borrower, any SPC Party, any of the Other
Borrowers or Guarantor shall be instituted; provided, however, if such
appointment, adjudication, petition or proceeding was involuntary and not
consented to by Borrower, and SPC Party, any of the Other Borrowers or
Guarantor, upon the same not being discharged, stayed or dismissed within sixty
(60) days;

 

(viii) if Borrower attempts to assign its rights under this Agreement or any of
the other Loan Documents or the Guaranty Security Documents or any interest
herein or therein in contravention of the Loan Documents or the Guaranty
Security Documents;

 

(ix) if any of the assumptions contained in the Non-Consolidation Opinion, or in
any other non-consolidation opinion delivered to Lender in connection with the
Loan, or in any other non-consolidation delivered subsequent to the closing of
the Loan, is or shall become untrue in any material respect;

 

(x) if Borrower breaches any representation, warranty or covenant contained in
Section 3.1.24 hereof;

 

(xi) if Borrower fails to comply with the covenants as to Prescribed Laws set
forth in Section 4.1.1, provided, that, it shall not be an Event of Default
under this clause (xi) if Borrower’s failure to comply with Prescribed Laws (A)
is unintentional, (B) occurs after the date of this Agreement, (C) is
susceptible of cure in the reasonable

 

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discretion of the Lender and is actually cured within thirty (30) days of the
date upon which Borrower receives notice of, or becomes aware of, any breach of
the covenant with respect to Prescribed Laws as set forth in Section 4.1.1
hereof, (D) can be cured within such thirty (30) day period in such a way so
that Lender will not incur any damages or liability and (E) is due to the direct
or indirect action(s) of an unaffiliated third party with which Borrower or its
Affiliates is then doing business;

 

(xii) if Borrower breaches any of the negative covenants contained in Sections
4.2.12 or 4.2.13 hereof or acts or neglects to act in such a manner as to be
considered a default under the Operating Agreements and such failure is not
cured within ten (10) days of written notice from Lender;

 

(xiii) if any Ground Lease is part of the collateral for the Loan, (A) Borrower
shall fail in the payment of any rent, additional rent or other charge mentioned
in or made payable by the Ground Lease as and when such rent or other charge is
payable (unless waived by the landlord under the Ground Lease), (B) there shall
occur any default by Borrower, as tenant under the Ground Lease, in the
observance or performance of any term, covenant or condition of the Ground Lease
on the part of Borrower, to be observed or performed (unless cured within
applicable grace, notice or cure periods set forth in such Ground Lease or
otherwise waived by the landlord under the Ground Lease), (C) if any one or more
of the events referred to in the Ground Lease shall occur which would cause the
Ground Lease to terminate without notice or action by the landlord under the
Ground Lease or which would entitle the landlord to terminate the Ground Lease
and the term thereof by giving notice to Borrower, as tenant thereunder (unless
waived by the landlord under the Ground Lease), (D) if the leasehold estate
created by the Ground Lease shall be surrendered or the Ground Lease shall be
terminated or canceled for any reason or under any circumstances whatsoever or
(E) if any of the terms, covenants or conditions of the Ground Lease shall in
any manner be modified, changed, supplemented, altered, or amended without the
consent of Lender except as otherwise permitted by this Agreement;

 

(xiv) if Guarantor breaches in any material respect any covenant, warranty or
representation contained in the Guaranty or if Borrower breaches in any material
respect any covenant, warranty or representation contained in the Guaranty of
Other Loans which is not cured within any applicable notice and cure period
provided therein;

 

(xv) if Borrower shall continue to be in Default under any of the other terms,
covenants or conditions of this Agreement not specified in Subsections (i) to
(xiv) above, for ten (10) days after notice to Borrower from Lender, in the case
of any Default which can be cured by the payment of a sum of money, or for
thirty (30) days after notice from Lender in the case of any other Default;
provided, however, that if such non monetary Default is susceptible of cure but
cannot reasonably be cured within such 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 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 sixty (60) days plus time permitted for Excusable Delays;

 

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(xvi) an “Event of Default” shall occur under, and as defined in, any of the
Other Loan Documents or the Guaranty Security Documents; or

 

(xvii) if there shall be default under any of the other Loan Documents or the
Guaranty Security Documents beyond any applicable cure periods contained in such
Loan Documents or such Guaranty Security Documents, whether as to Borrower or
the Individual Property, 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 Debt or to permit Lender to accelerate the
maturity of all or any portion of the Debt.

 

(b) Upon the occurrence of an Event of Default (other than an Event of Default
described in clause (vi), (vii) or (viii) above) and at any time thereafter
Lender may, in addition to any other rights or remedies available to it pursuant
to this Agreement and the other Loan Documents or the Guaranty Security
Documents or at law or in equity, take such action, without notice or demand,
that Lender deems advisable to protect and enforce its rights against Borrower
and in and to the Individual Property, including, without limitation, declaring
the Debt to be immediately due and payable, and Lender may enforce or avail
itself of any or all rights or remedies provided in the Loan Documents against
Borrower and any or all of the Individual Property, including, without
limitation, all rights or remedies available at law or in equity; and upon any
Event of Default described in clauses (vi), (vii) or (viii) above, the Debt and
all other obligations of Borrower hereunder and under the other Loan Documents
and the Guaranty Security 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 or in any of the Guaranty Security Documents to the contrary
notwithstanding.

 

Section 10.2 Remedies.

 

(a) Upon the occurrence of an Event of Default, all or any one or more of the
rights, powers, privileges and other remedies available to Lender against
Borrower under this Agreement or any of the other Loan Documents or any of the
Guaranty Security Documents executed and delivered by, or applicable to,
Borrower or at law or in equity may be exercised by Lender at any time and from
time to time, whether or not all or any of the Debt shall be declared due and
payable, and whether or not Lender shall have commenced any foreclosure
proceeding or other action for the enforcement of its rights and remedies under
any of the Loan Documents or the Guaranty Security Documents with respect to the
Individual Property. Any such actions taken by Lender shall be cumulative and
concurrent and may be pursued independently, singly, 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 or in
the Guaranty Security Documents. Without limiting the generality of the
foregoing, 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 Individual
Property and the Mortgage has been foreclosed, sold and/or otherwise realized
upon in satisfaction of the Debt or the Debt has been paid in full.

 

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(b) With respect to the Borrower and the Individual Property, nothing contained
herein or in any other Loan Document shall be construed as requiring Lender to
resort to the Individual Property for the satisfaction of any of the Debt in
preference or priority to any other Individual Property, and Lender may seek
satisfaction out of the Individual Property or any part thereof, in its absolute
discretion in respect of the Debt. In addition, Lender shall have the right from
time to time to partially foreclose the Mortgages in any manner and for any
amounts secured by the Mortgages then due and payable as determined by Lender in
its sole discretion including, without limitation, the following circumstances:
(i) in the event Borrower default beyond any applicable grace period in the
payment of one or more scheduled payments of principal and interest, Lender may
foreclose one or more Mortgages 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 one or more Mortgage to recover so
much of the principal balance of the Loan as Lender may accelerate and such
other sums secured by one or more Mortgages as Lender may elect. Notwithstanding
one or more partial foreclosures, the Individual Property shall remain subject
to the Mortgages to secure payment of sums secured by the Mortgages and not
previously recovered.

 

(c) Lender shall have the right from time to time to sever the Note and the
other Loan Documents into one or more separate notes, mortgages and other
Guaranty Security Documents (the “Severed Loan Documents”) in such denominations
as Lender shall determine in its sole discretion for purposes of evidencing and
enforcing its rights and remedies provided hereunder. Borrower shall execute and
deliver to Lender from time to time, promptly after the request of Lender, a
severance agreement and such other documents as Lender shall request in order to
effect the severance described in the preceding sentence, all in form and
substance reasonably satisfactory to Lender. Borrower hereby absolutely and
irrevocably appoints Lender as its true and lawful attorney, coupled with an
interest, in its name and stead to make and execute all documents necessary or
desirable to effect the aforesaid severance, Borrower ratifying all that their
said attorney shall do by virtue thereof; provided, however, Lender shall not
make or execute any such documents under such power until three (3) days after
notice has been given to Borrower by Lender of Lender’s intent to exercise its
rights under such power. Except as may be required in connection with a
Securitization pursuant to Section 9.1 hereof, (i) Borrower shall not be
obligated to pay any costs or expenses incurred in connection with the
preparation, execution, recording or filing of the Severed Loan Documents, and
(ii) the Severed Loan Documents shall not contain any representations,
warranties or covenants not contained in the Loan Documents or the Guaranty
Security 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) Any amounts recovered from the Individual Property or any other collateral
for the Loan after an Event of Default may be applied by Lender toward the
payment of any interest and/or principal of the Components and/or any other
amounts due under the Loan Documents or the Guaranty Security Documents in such
order, priority and proportions as Lender in its sole discretion shall
determine.

 

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Section 10.3 Right to Cure Defaults. Lender may, but without any obligation to
do so and without notice to or demand on Borrower and without releasing Borrower
from any obligation hereunder or being deemed to have cured any Event of Default
hereunder, make, do or perform any obligation of Borrower hereunder in such
manner and to such extent as Lender may deem necessary. Lender is authorized to
enter upon the Individual Property for such purposes, or appear in, defend, or
bring any action or proceeding to protect its interest in the Individual
Property for such purposes, and the cost and expense thereof (including
reasonable attorneys’ fees to the extent permitted by law), with interest as
provided in this Section 10.3, shall constitute a portion of the Debt and shall
be due and payable to Lender upon demand. All such costs and expenses incurred
by Lender in remedying such Event of Default or such failed payment or act or in
appearing in, defending, or bringing any action or proceeding shall bear
interest at the Default Rate, for the period after such cost or expense was
incurred until the date of payment to Lender. All such costs and expenses
incurred by Lender together with interest thereon calculated at the Default Rate
shall be deemed to constitute a portion of the Debt and be secured by the liens,
claims and security interests provided to Lender under the Loan Documents and
shall be immediately due and payable upon demand by Lender therefore.

 

Section 10.4 Remedies Cumulative. 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 singly,
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.

 

XI. MISCELLANEOUS

 

Section 11.1 Successors and Assigns. 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 11.2 Lender’s Discretion. Whenever pursuant to this Agreement Lender
exercises any right given to it to approve or disapprove, or any arrangement or
term is to be satisfactory to Lender, the decision of Lender to approve or
disapprove or to decide whether arrangements or terms are satisfactory or not
satisfactory shall (except as is otherwise specifically herein provided) be in
the sole discretion of Lender and shall be final and conclusive. Prior to a
Securitization, whenever pursuant to this Agreement the Rating Agencies are
given any right to approve or disapprove, or any arrangement or term is to be
satisfactory to the Rating Agencies, the decision of Lender to approve or
disapprove or to decide whether arrangements or terms are satisfactory or not
satisfactory, based upon Lender’s determination of Rating Agency criteria, shall
be substituted therefore.

 

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Section 11.3 Governing Law.

 

(A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, AND THE LOAN WAS
MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE
PROCEEDS OF THE LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF
NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE
PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS,
INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT, THE NOTE AND THE OTHER
LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO
PRINCIPLES OF CONFLICT OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW (THE “GOL”)) AND ANY APPLICABLE LAW OF THE UNITED STATES
OF AMERICA, EXCEPT THAT AT ALL TIMES (I) THE PROVISIONS OF THIS AGREEMENT
GOVERNING THE CREATION, PERFECTION, PRIORITY AND ENFORCEMENT OF THE LIENS AND
SECURITY INTERESTS CREATED PURSUANT HERETO WITH RESPECT TO THE PROPERTY (OTHER
THAN AS DESCRIBED IN SUBSECTION II BELOW) SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAW OF THE STATE IN WHICH THE INDIVIDUAL PROPERTY AND FIXTURES
ARE LOCATED AND (II) WITH RESPECT TO THE LIENS AND SECURITY INTERESTS CREATED BY
THIS AGREEMENT IN PROPERTY COVERED BY ARTICLE 9 OF THE UNIFORM COMMERCIAL CODE
(OTHER THAN THE ACCOUNTS), THE LAW OF THE JURISDICTION APPLICABLE IN ACCORDANCE
WITH SECTIONS 9-301 THROUGH 9-307 OF THE UNIFORM COMMERCIAL CODE IN EFFECT IN
THE STATE WHERE THE INDIVIDUAL PROPERTY IS LOCATED SHALL GOVERN THE PERFECTION,
THE EFFECT OF PERFECTION OR NON-PERFECTION, AND THE PRIORITY THEREOF. 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 AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO
SECTION 5-1401 OF THE GOL EXCEPT AS SPECIFICALLY SET FORTH ABOVE.

 

(B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT
OF OR RELATING TO THIS AGREEMENT MAY AT LENDER’S OPTION BE INSTITUTED IN ANY
FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF

 

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NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND
BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE
AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER
HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT,
ACTION OR PROCEEDING. BORROWER HEREBY DESIGNATES AND APPOINTS:

 

CT CORPORATION SYSTEM

111 EIGHTH AVENUE

NEW YORK, NEW YORK 10011

ATTN: SERVICE OF PROCESS DEPT.

 

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

 

Section 11.4 Modification, Waiver in Writing. No modification, amendment,
extension, discharge, termination or waiver of any provision of this Agreement
or of any other Loan Document or any other Guaranty Security Documents, nor
consent to any departure by Borrower therefrom, shall in any event be effective
unless the same shall be in a writing signed by the party against whom
enforcement is sought, and then such waiver or consent shall be effective only
in the specific instance, and for the purpose, for which given. Except as
otherwise expressly provided herein, no notice to, or demand on Borrower, shall
entitle Borrower to any other or future notice or demand in the same, similar or
other circumstances.

 

Section 11.5 Delay Not a Waiver. Neither any failure nor any delay on the part
of Lender in insisting upon strict performance of any term, condition, covenant
or agreement, or exercising any right, power, remedy or privilege hereunder, or
under any other Loan Document or Security Document, 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 or any
other Loan Document or Security

 

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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 or the
other Loan Documents or Security Document, or to declare a default for failure
to effect prompt payment of any such other amount. Lender shall have the right
to waive or reduce any time periods that Lender is entitled to under the Loan
Documents or the Guaranty Security Documents in its sole and absolute
discretion.

 

Section 11.6 Notices. All notices, demands, requests, consents, approvals or
other communications (any of the foregoing, a “Notice”) required, permitted, or
desired to be given hereunder shall be in writing sent by registered or
certified mail, postage prepaid, return receipt requested, or delivered by hand
or reputable overnight courier addressed to the party to be so notified at its
address hereinafter set forth, or to such other address as such party may
hereafter specify in accordance with the provisions of this Section 11.6. Any
Notice shall be deemed to have been received: (a) three (3) days after the date
such Notice is mailed, (b) on the date of delivery by hand if delivered during
business hours on a Business Day (otherwise on the next Business Day), and (c)
on the next Business Day if sent by an overnight commercial courier, in each
case addressed to the parties as follows:

 

If to Lender:   Morgan Stanley Mortgage Capital Inc.     1221 Avenue of the
Americas, 27th Floor     New York, New York 10020     Attention: James Flaum and
Kevin Swartz with a copy to:   Cadwalader, Wickersham & Taft LLP     100 Maiden
Lane     New York, New York 10038     Attention: John M. Zizzo, Esq.
If to Borrower:   c/o Wells Real Estate Funds     6200 The Corners Parkway,
Suite 250     Norcross, Georgia 30092-6040     Attention: Finance Department
with a copy to:   Alston & Bird LLP     1201 West Peachtree Street     Atlanta,
Georgia 30309-3424     Attention: Steven D. Collier, Esq.

 

Section 11.7 Trial by Jury. BORROWER AND LENDER EACH 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 THE BORROWER AND LENDER, AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
TRIAL BY

 

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JURY WOULD OTHERWISE ACCRUE. EACH PARTY IS HEREBY AUTHORIZED TO FILE A COPY OF
THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER.

 

Section 11.8 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 11.9 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 11.10 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 11.11 Waiver of Notice. s 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 or the Guaranty Security 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
or the Guaranty Security Documents do not specifically and expressly provide for
the giving of notice by Lender to Borrower.

 

Section 11.12 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 or the other Guaranty Security Documents, Lender or such agent, as the
case may be, has an obligation to act reasonably or promptly, neither Lender nor
its agents shall be liable for any monetary damages, and Borrower’s sole remedy
shall be limited to commencing an action seeking injunctive relief or
declaratory judgment. Any action or proceeding to determine whether Lender has
acted reasonably shall be determined by an action seeking declaratory judgment.

 

Section 11.13 Expenses; Indemnity.

 

(a) Borrower shall pay or, if Borrower fails to pay, reimburse Lender upon
receipt of notice from Lender, for all reasonable costs and expenses (including
reasonable

 

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attorneys’ fees and disbursements) incurred by Lender in connection with (i)
Borrower’s ongoing performance of and compliance with Borrower’s agreements and
covenants contained in this Agreement and the other Loan Documents and the
Guaranty Security Documents on its part to be performed or complied with after
the Closing Date, including, without limitation, confirming compliance with
environmental and insurance requirements; (ii) Lender’s ongoing performance of
and compliance with all agreements and covenants contained in this Agreement and
the other Loan Documents and the Guaranty Security Documents on its part to be
performed or complied with after the Closing Date; (iii) the negotiation,
preparation, execution, delivery and administration of any consents, amendments,
waivers or other modifications to this Agreement and the other Loan Documents
and the Guaranty Security Documents and any other documents or matters requested
by Borrower; (iv) the filing and recording fees and expenses, title insurance
and reasonable fees and expenses of counsel for providing to Lender all required
legal opinions, and other similar expenses incurred, in creating and perfecting
the Liens in favor of Lender pursuant to this Agreement and the other Loan
Documents and the Guaranty Security Documents; (v) enforcing or preserving any
rights, in response to third party claims or the prosecuting or defending of any
action or proceeding or other litigation or otherwise, in each case against,
under or affecting Borrower, this Agreement, the other Loan Documents, the
Guaranty Security Documents, the Individual Property, or any other security
given for the Loan; and (vi) enforcing any obligations of or collecting any
payments due from Borrower under this Agreement, the other Loan Documents, the
Guaranty Security Documents or with respect to the Individual Property or in
connection with any refinancing or restructuring of the credit arrangements
provided under this Agreement in the nature of a “work out” or of any insolvency
or bankruptcy proceedings; 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 costs due and payable to Lender may be paid to Lender pursuant to
the Cash Management Agreement.

 

(b) Borrower shall indemnify, defend and hold harmless Lender and its officers,
directors, agents, employees (and the successors and assigns of the foregoing)
(the “Lender Indemnitees”) from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for the
Lender Indemnitees in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not the Lender
Indemnitees shall be designated a party thereto), that may be imposed on,
incurred by, or asserted against the Lender Indemnitees 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 the Guaranty Security 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 the Lender
Indemnitees hereunder to the extent that such Indemnified Liabilities arise from
the gross negligence, illegal acts, fraud or willful misconduct of the Lender
Indemnitees. 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 Lender Indemnitees.

 

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Section 11.14 Schedules Incorporated. The Schedules annexed hereto are hereby
incorporated herein as a part of this Agreement with the same effect as if set
forth in the body hereof.

 

Section 11.15 Offsets, Counterclaims and Defenses. Any assignee of Lender’s
interest in and to this Agreement and the other Loan Documents and the Guaranty
Security Documents shall take the same free and clear of all offsets,
counterclaims or defenses which are unrelated to such documents which Borrower
may otherwise have against any assignor of such documents, and no such unrelated
counterclaim or defense shall be interposed or asserted by Borrower in any
action or proceeding brought by any such assignee upon such documents and any
such right to interpose or assert any such unrelated offset, counterclaim or
defense in any such action or proceeding is hereby expressly waived by Borrower.

 

Section 11.16 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 and the Guaranty Security 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 Individual
Property other than that of mortgagee, beneficiary or lender.

 

(b) This Agreement and the other Loan Documents and the Guaranty Security
Documents are solely for the benefit of Lender and nothing contained in this
Agreement or the other Loan Documents and the Guaranty Security Documents shall
be deemed to confer upon anyone other than Lender 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 11.17 Publicity. All news releases, publicity or advertising by either
party to this Agreement through any media intended to reach the general public
which refers to the Loan Documents, to the parties, or any of their Affiliates
shall be subject to the prior approval of the other party, not to be
unreasonably withheld or delayed.

 

Section 11.18 Cross Default; Cross-Collateralization; Waiver of Marshalling of
Assets.

 

(a) 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
Individual Property, or to a sale in inverse order of alienation in the event of
foreclosure of all or any of the Mortgage, and agrees

 

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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 or the Guaranty Security
Documents to a sale of the Individual Property for the collection of the Debt
without any prior or different resort for collection or of the right of Lender
to the payment of the Debt out of the net proceeds of the Individual Property 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 Mortgage, any equitable right otherwise available to Borrower which would
require the separate sale of the Individual Property or require Lender to
exhaust its remedies against the Individual Property.

 

Section 11.19 Waiver of Offsets/Defenses/Counterclaims. Borrower hereby waives
the right to assert a counterclaim, other than a compulsory counterclaim, in any
action or proceeding brought against it by Lender or its agents or otherwise to
offset any obligations to make the payments required by the Loan Documents or
the Guaranty Security Documents. No failure by Lender to perform any of its
obligations hereunder shall be a valid defense to, or result in any offset
against, any payments which Borrower is obligated to make under any of the Loan
Documents.

 

Section 11.20 Conflict; Construction of Documents; Reliance. In the event of any
conflict between the provisions of this Agreement and any of the other Loan
Documents or the Guaranty Security 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 and Guaranty Security 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 their own judgment and advisors in entering into
the Loan without relying in any manner on any statements, representations or
recommendations of Lender or any parent, subsidiary or Affiliate of Lender.
Lender shall not be subject to any limitation whatsoever in the exercise of any
rights or remedies available to it under any of the Loan Documents or any other
agreements or instruments which govern the Loan by virtue of the ownership by it
or any parent, subsidiary or Affiliate of Lender of any equity interest any of
them may acquire in Borrower, and Borrower hereby irrevocably waives the right
to raise any defense or take any action on the basis of the foregoing with
respect to Lender’s exercise of any such rights or remedies. Borrower
acknowledges that Lender engages in the business of real estate financings and
other real estate transactions and investments which may be viewed as adverse to
or competitive with the business of Borrower or its Affiliates.

 

Section 11.21 Brokers and Financial Advisors. Borrower hereby represents that it
has dealt with no financial advisors, brokers, underwriters, placement agents,
agents or finders in connection with the transactions contemplated by this
Agreement. Borrower shall 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 11.21 shall survive the expiration and termination of
this Agreement and the payment of the Debt.

 

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Section 11.22 Exculpation. Subject to the qualifications below, Lender shall not
enforce the liability and obligation of Borrower to perform and observe the
obligations contained in the Note, this Agreement, the Mortgage, the other Loan
Documents or the Guaranty Security Documents by any action or proceeding wherein
a money judgment shall be sought against Borrower, except that Lender may bring
a foreclosure action, an action for specific performance or any other
appropriate action or proceeding to enable Lender to enforce and realize upon
its interest under the Note, this Agreement, the Mortgages, the other Loan
Documents and the Guaranty Security Documents, or in the Individual Property,
the Rents, or any other collateral given to Lender pursuant to the Loan
Documents and the Guaranty Security Documents; provided, however, that, except
as specifically provided herein, any judgment in any such action or proceeding
shall be enforceable against Borrower only to the extent of Borrower’s interest
in the Individual Property, in the Rents and in any other collateral given to
Lender, and Lender, by accepting the Note, this Agreement, the Mortgages, the
other Loan Documents and the Guaranty Security Documents, shall not sue for,
seek or demand any deficiency judgment against Borrower in any such action or
proceeding under or by reason of or under or in connection with the Note, this
Agreement, the Mortgages, the other Loan Documents or the Guaranty Security
Documents. The provisions of this Section shall not, however, (a) constitute a
waiver, release or impairment of any obligation evidenced or secured by any of
the Loan Documents or the Guaranty Security Documents; (b) impair the right of
Lender to name Borrower as a party defendant in any action or suit for
foreclosure and sale under any of the Mortgages; (c) affect the validity or
enforceability of any guaranty made in connection with the Loan or any of the
rights and remedies of Lender thereunder; (d) impair the right of Lender to
obtain the appointment of a receiver; (e) impair the enforcement of any of the
Assignments of Leases; (f) constitute a prohibition against Lender to seek a
deficiency judgment against Borrower in order to fully realize on any security
given by Borrower in connection with the Loan or to commence any other
appropriate action or proceeding in order for Lender to exercise its remedies
against such security; or (g) constitute a waiver of the right of Lender to
enforce the liability and obligation of Borrower, by money judgment or
otherwise, to the extent of any loss, damage, cost, expense, liability, claim or
other obligation incurred by Lender (including attorneys’ fees and costs
reasonably incurred) arising out of or in connection with the following:

 

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

 

(ii) the gross negligence or intentionally tortious conduct of Borrower;

 

(iii) the breach of any representation, warranty, covenant or indemnification
provision in the Environmental Indemnity or in the Mortgage concerning
environmental laws, hazardous substances and asbestos and any indemnification of
Lender with respect thereto in either document;

 

(iv) the removal or disposal of any portion of the Individual Property after an
Event of Default;

 

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

 

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(vi) failure to pay charges for labor or materials or other charges that can
create Liens on any portion of the Individual Property unless Borrower promptly
bonds off the resulting Lien from the Individual Property to the reasonable
satisfaction of the Lender and in compliance with applicable law;

 

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

 

(viii) Borrower’s indemnification of Lender set forth in Section 9.2 hereof.

 

Notwithstanding anything to the contrary in this Agreement, the Note or any of
the Loan Documents, (A) Lender shall not be deemed to have waived any right
which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
Debt or to require that all collateral shall continue to secure all of the Debt
owing to Lender in accordance with the Loan Documents, and (B) the Debt shall be
fully recourse to Borrower in the event that: (i) Borrower fails to obtain
Lender’s prior written consent to any subordinate financing or other voluntary
Lien encumbering the Individual Property; (ii) Borrower fails to obtain Lender’s
prior written consent to any assignment, transfer, or conveyance of the
Individual Property or any interest therein as required by the Mortgages or this
Agreement; (iii) Borrower files a voluntary petition under the Bankruptcy code
or any other Federal or state bankruptcy or insolvency law; (iv) an Affiliate,
officer, director, or representative which controls, directly or indirectly,
Borrower files, or joins in the filing of, an involuntary petition against
Borrower under the Bankruptcy Code or any other Federal or state bankruptcy or
insolvency law, or solicits or causes to be solicited petitioning creditors for
any involuntary petition against Borrower from any Person; (v) Borrower files an
answer consenting to or otherwise acquiescing in or joining in any involuntary
petition filed against it, by any other Person under the Bankruptcy Code or any
other Federal or state bankruptcy or insolvency law, or solicits or causes to be
solicited petitioning creditors for any involuntary petition from any Person;
(vi) any Affiliate, officer, director, or representative which controls Borrower
consents to or acquiesces in or joins in an application for the appointment of a
custodian, receiver, trustee, or examiner for Borrower or any portion of the
Property; or (vii) Borrower makes an assignment for the benefit of creditors, or
admits, in writing or in any legal proceeding, its insolvency or inability to
pay its debts as they become due.

 

Section 11.23 Prior Agreements. This Agreement and the other Loan Documents and
the Guaranty Security 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, are superseded by the terms of this Agreement, the other Loan Documents
and the Guaranty Security Documents.

 

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Section 11.24 Servicer.

 

(a) At the option of Lender, the Loan may be serviced by a servicer (the
“Servicer”) selected by Lender and Lender may delegate all or any portion of its
responsibilities under this Agreement, the other Loan Documents and the Guaranty
Security Documents to the Servicer pursuant to a servicing agreement (the
“Servicing Agreement”) between Lender and Servicer. Borrower shall be
responsible for any reasonable set-up fees or any other costs relating to or
arising under the Servicing Agreement, including the payment, on a monthly
basis, of the monthly servicing fee due to the Servicer under the Servicing
Agreement in an amount not to exceed one basis point on the amount of the Loan
per annum. Servicer shall also be entitled to reimbursement of costs and
expenses as and to the same extent (but without duplication) as Lender is
entitled thereto under the applicable provisions of this Agreement and the other
Loan Documents.

 

(b) Upon notice thereof from Lender, Servicer shall have the right to exercise
all rights of Lender and enforce all obligations of Borrower pursuant to the
provisions of this Agreement, the Note and the other Loan Documents.

 

(c) Provided Borrower shall have been given notice of Servicer’s address by
Lender, Borrower shall deliver to Servicer duplicate originals of all notices
and other instruments which Borrower may or shall be required to deliver to
Lender pursuant to this Agreement, the Note, the other Loan Documents and the
Guaranty Security Documents (and no delivery of such notices or other
instruments by Borrower shall be of any force or effect unless delivered to
Lender and Servicer as provided above).

 

Section 11.25 Joint and Several Liability. If Borrower is comprised of more than
one Person, all representations, warranties, covenants (both affirmative and
negative) and all other Obligations hereunder shall be the joint and several
obligation of each entity making up Borrower and a Default or Event of Default
by any such Person shall be deemed a Default or Event of Default by all such
entities and Borrower. The representations, covenants and warranties contained
herein or in any other Loan Document shall be read to apply to the individual
entities comprising Borrower when the context so requires but a breach of any
such representation, covenant or warranty or a breach of any obligation under
the Loan Documents shall be deemed a breach by all such entities and Borrower,
entitling the Lender to exercise all of its rights and remedies under all the
Loan Documents and under applicable law.

 

Section 11.26 Creation of Security Interest. Notwithstanding any other provision
set forth in this Agreement, the Note, the Mortgage, the other Loan Documents or
the Guaranty Security Documents, Lender may at any time create a security
interest in all or any portion of its rights under this Agreement, the Note, the
Mortgage, the Loan Documents and any other Security Document (including, without
limitation, the advances owing to it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal Reserve
System.

 

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Section 11.27 Assignments and Participations.

 

(a) The Lender may assign to one or more Persons all or a portion of its rights
and obligations under this Agreement, the Note, the Mortgage, any Loan Document
and any Security Document.

 

(b) Upon such execution and delivery, from and after the effective date of any
such Assignment, the assignee thereunder shall be a party hereto and have the
rights and obligations of Lender hereunder.

 

(c) Lender may sell participations to one or more Persons in or to all or a
portion of its rights and obligations under this Agreement; provided, however,
that (i) Lender’s obligations under this Agreement shall remain unchanged, (ii)
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (ii) Lender shall remain the holder of any Note
for all purposes of this Agreement and (iv) Borrower shall continue to deal
solely and directly with Lender in connection with Lender’s rights and
obligations under and in respect of this Agreement and the other Loan Documents
and the Guaranty Security Documents.

 

(d) Lender may, in connection with any assignment or participation or proposed
assignment or participation pursuant to this Section 11.27, disclose to the
assignee or participant or proposed assignee or participant, as the case may be,
any information relating to Borrower or any of its Affiliates or to any aspect
of the Loan that has been furnished to the Lender by or on behalf of Borrower or
any of its Affiliates.

 

Section 11.28 Set-Off. In addition to any rights and remedies of Lender provided
by this Loan Agreement and by law, the Lender shall have the right, without
prior notice to Borrower, any such notice being expressly waived by Borrower to
the extent permitted by applicable law, upon any amount becoming due and payable
by Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) and the expiration of any applicable grace, notice and cure periods,
to set-off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by Lender or any Affiliate thereof to or for the credit or the
account of Borrower. Lender agrees promptly to notify Borrower after any such
set-off and application made by Lender; provided that the failure to give such
notice shall not affect the validity of such set-off and application.

 

[SIGNATURE PAGES IMMEDIATELY FOLLOW]

 

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

 

LENDER:    

MORGAN STANLEY MORTGAGE CAPITAL

INC., a New York corporation

By:  

 

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Name:     Title:     BORROWER:

WELLS REIT – ORANGE COUNTY, CA, L.P., a

Delaware limited partnership

By:   Wells REIT – Orange County, CA, LLC, a Delaware limited liability company,
its general partner     By:  

 

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    Name:         Title: