Exhibit 10.4
 
LOAN AGREEMENT
Dated as of August 25, 2005
Between
AFL05 DUNCAN SC LLC,
as a Borrower
and
LITTLE ARCH CHARLOTTE NC LLC,
as a Borrower
and
BANK OF AMERICA, N.A.,
as Lender
 

 

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TABLE OF CONTENTS

              Page  
ARTICLE 1 DEFINITIONS; PRINCIPLES OF CONSTRUCTION
    1  
 
       
ARTICLE 2 GENERAL TERMS
    16  
 
       
ARTICLE 3 CONDITIONS PRECEDENT
    16  
 
       
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
    17  
 
       
ARTICLE 5 BORROWER COVENANTS
    27  
 
       
ARTICLE 6 ENTITY COVENANTS
    37  
 
       
ARTICLE 7 NO SALE OR ENCUMBRANCE
    41  
 
       
ARTICLE 8 INSURANCE; CASUALTY; CONDEMNATION; RESTORATION
    46  
 
       
ARTICLE 9 RESERVE FUNDS
    54  
 
       
ARTICLE 10 CASH MANAGEMENT
    70  
 
       
ARTICLE 11 EVENTS OF DEFAULT; REMEDIES
    78  
 
       
ARTICLE 12 ENVIRONMENTAL PROVISIONS
    81  
 
       
ARTICLE 13 SECONDARY MARKET
    85  
 
       
ARTICLE 14 INDEMNIFICATIONS
    87  
 
       
ARTICLE 15 EXCULPATION
    88  
 
       
ARTICLE 16 NOTICES
    91  
 
       
ARTICLE 17 FURTHER ASSURANCES
    92  
 
       
ARTICLE 18 WAIVERS
    95  
 
       
ARTICLE 19 GOVERNING LAW
    98  
 
       
ARTICLE 20 MISCELLANEOUS
    98  

 

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LOAN AGREEMENT
     THIS LOAN AGREEMENT, dated as of August 25, 2005 (as amended, restated,
replaced, supplemented or otherwise modified from time to time, this
“Agreement”), between BANK OF AMERICA, N.A., a national banking association,
having an address at c/o LJ Melody and Company, GEMSA Loan Services, LP, 1500
City West Blvd., Suite 200, Houston, Texas 77042 (together with its successors
and/or assigns, “Lender”), and AFL05 DUNCAN SC LLC, a Delaware limited liability
company, having an address at 1521 Westbranch Drive, Suite 200, McLean, VA 22102
(together with its successors and/or assigns, “AFL”) and LITTLE ARCH CHARLOTTE
NC LLC, a Delaware limited liability company, having an address at 1521
Westbranch Drive, Suite 200, McLean, VA 22102 (together with its successors and
assigns, “Little Arch”, and, together with AFL, individually and collectively,
as the context may require, “Borrower”).
RECITALS:
     Borrower desires to obtain the Loan (defined below) from Lender.
     Lender is willing to make the Loan to Borrower, subject to and in
accordance with the terms of this Agreement and the other Loan Documents
(defined below).
     In consideration of the making of the Loan by Lender and the covenants,
agreements, representations and warranties set forth in this Agreement, the
parties hereto hereby covenant, agree, represent and warrant as follows:
ARTICLE 1
DEFINITIONS; PRINCIPLES OF CONSTRUCTION
     Section 1.1 Definitions
     For all purposes of this Agreement, except as otherwise expressly required
or unless the context clearly indicates a contrary intent:
     “Additional Replacement” shall have the meaning set forth in Section 9.5(g)
hereof.
     “Additional Required Repair” shall have the meaning set forth in
Section 9.5(f) hereof.
     “Affiliate” shall mean, as to any Person, any other Person that, directly
or indirectly, is in control of, is controlled by or is under common control
with such Person or is a director or officer of such Person or of an Affiliate
of such Person.
     “Affiliated Manager” shall have the meaning set forth in Section 7.1
hereof.

 

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     “AFL Acceptable Replacement Tenant” shall have the meaning set forth in
Section 9.3(c) hereof.
     “AFL Acceptable Replacement Tenant Requirements” shall have the meaning set
forth in Section 9.3(c) hereof.
     “AFL Lease” shall mean that certain Lease of the AFL Property by and
between AFL, as landlord, and AFL Tenant, as tenant, together with all
amendments, modifications, renewals and replacements therefor.
     “AFL Leasing Reserve Account” shall have the meaning set forth in
Section 9.3(b).
     “AFL Partial Release Provisions” shall have the meaning set forth in
Section 9.3(c) hereof.
     “AFL Property” shall mean the portion of the Property currently owned by
AFL.
     “AFL Space” shall mean the space currently occupied by the AFL Tenant on
the AFL Property.
     “AFL Tenant” shall mean the current tenant occupying the AFL Property
pursuant to a written lease agreement.
     “ALTA” shall mean American Land Title Association, or any successor
thereto.
     “Alteration Threshold” means $100,000.00.
     “Annual Budget” shall mean the operating budget, including all planned
capital expenditures, for the Property approved by Lender in its sole and
absolute discretion for the applicable calendar year or other period.
     “Assignment of Management Agreement” shall mean, with respect to the Little
Arch Property, that certain Assignment and Subordination of Management Agreement
and Consent of Manager dated the date hereof among Lender, Borrower and Manager,
as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time, together with any other assignment and subordination
of any Management Agreement now or hereafter relating to any portion of the
Property.
     “Award” shall mean any compensation paid by any Governmental Authority in
connection with a Condemnation in respect of all or any part of the Property.
     “Borrower Account” shall mean account #5235413681 entitled “Commercial
Limited Partnership” maintained by Borrower at BB&T, which account shall be
under the exclusive domain and control of Borrower.

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     “Borrower Principal” shall mean Gladstone Commercial Corporation, a
Delaware corporation.
     “Business Day” shall mean a day on which Lender is open for the conduct of
substantially all of its banking business at its office in the city in which the
Note is payable (excluding Saturdays and Sundays).
     “Cash Management Account” shall have the meaning set forth in
Section 10.1(a) hereof.
     “Cash Management Period” shall mean the period commencing on the earlier to
occur of (a) the occurrence and continuance of an Event of Default, (b) AFL
Tenant vacates the AFL Space, gives notice of its intent to vacate or does not
give notice of its election to extend the term of the AFL Lease in accordance
with the provisions thereof for the entire AFL Space on or before February 1,
2011 or (c) there is a monetary default of the AFL Lease which is not cured
within ninety (90) days, and ending on the earlier to occur of (i) AFL Tenant’s
renewal of the AFL Lease for the entire AFL Space, or (ii) occupancy of 100% of
the AFL Space by Acceptable Replacement Tenants.
     “Casualty” shall have the meaning set forth in Section 8.2.
     “Closing Date” shall mean the date of the funding of the Loan.
     “Control” shall have the meaning set forth in Section 7.1 hereof.
     “Condemnation” shall mean a temporary or permanent taking by any
Governmental Authority as the result, in lieu or in anticipation, of the
exercise of the right of condemnation or eminent domain, of all or any part of
the Property, or any interest therein or right accruing thereto, including any
right of access thereto or any change of grade affecting the Property or any
part thereof.
     “Creditors Rights Laws” shall mean with respect to any Person any existing
or future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, conservatorship, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to its debts or debtors.
     “Debt” shall mean the outstanding principal amount set forth in, and
evidenced by, this Agreement and the Note together with all interest accrued and
unpaid thereon and all other sums due to Lender in respect of the Loan under the
Note, this Agreement, the Mortgage or any other Loan Document.
     “Debt Service” shall mean, with respect to any particular period of time,
scheduled principal and/or interest payments under the Note.
     “Debt Service Coverage Ratio” shall mean, as of any date of determination,
for the applicable period of calculation, the ratio, as determined by Lender, of
(i) Net Operating Income

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to (ii) the aggregate amount of Debt Service which would be due for the same
period assuming the maximum principal amount of the Loan is outstanding and
calculated at a mortgage constant equal to 6.69% or such other mortgage constant
as may be required from time to time by the Rating Agencies.
     “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 have the meaning set forth in the Note.
     “Eligible Account” shall mean a separate and identifiable account from all
other funds held by the holding institution that is either (a) an account or
accounts maintained with a federal or state chartered depository institution or
trust company which complies with the definition of Eligible Institution or
(b) a segregated trust account or accounts maintained with 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 federally
chartered depository institution or trust company acting in its fiduciary
capacity is subject to the regulations regarding adversary funds on deposit
therein under 12 C.F.R. §9.10(b), and 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 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 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 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 (or “A-” by S&P,
if such depository’s short term unsecured debt rating is at least “A-1” by S&P)
and “Aa2” by Moody’s). Notwithstanding the foregoing, prior to a Securitization,
Bank of America, N.A. shall be an Eligible Institution.
     “Embargoed Person” shall mean any person identified by OFAC or any other
Person with whom a Person resident in the United States of America may not
conduct business or transactions by prohibition of federal law or Executive
Order of the President of the United States of America.
     “Environmental Law” shall have the meaning set forth in Section 12.5
hereof.
     “Environmental Liens” shall have the meaning set forth in Section 12.5
hereof.
     “Environmental Report” shall have the meaning set forth in Section 12.5
hereof.
     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statutes thereto and applicable
regulations issued pursuant thereto in temporary or final form.

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     “Event of Default” shall have the meaning set forth in Section 11.1 hereof.
     “Excess Cash” shall mean an amount equal to all funds remaining in the Cash
Management Account on each Scheduled Payment Date following the disbursements
and application of funds from the Cash Management Account in accordance with the
terms of Section 10.2(c)(i)-(vi) hereof.
     “Excess Cash Reserve Account” shall have the meaning set forth in
Section 9.7 hereof.
     “Excess Cash Reserve Funds” shall have the meaning set forth in Section 9.7
hereof.
     “Extraordinary Expense” shall mean an operating expense or capital
expenditure with respect to the Property that (i) is not set forth on the Annual
Budget and (ii) is not subject to payment by withdrawals from the Replacement
Reserve Account or the Leasing Reserve Account. Borrower shall deliver promptly
to Lender a reasonably detailed explanation of such proposed Extraordinary
Expense for the approval of Lender.
     “Extraordinary Expense Reserve Account” shall have the meaning set forth in
Section 9.8 hereof.
     “Extraordinary Expense Reserve Funds” shall have the meaning set forth in
Section 9.8 hereof.
     “Fitch” shall mean Fitch, Inc.
     “GAAP” shall mean generally accepted accounting principles in the United
States of America as of the date of the applicable financial report.
     “Governmental Authority” shall mean any court, board, agency, department,
commission, office or other authority of any nature whatsoever for any
governmental unit (federal, state, county, municipal, city, town, special
district or otherwise) whether now or hereafter in existence.
     “Hazardous Materials” shall have the meaning set forth in Section 12.5
hereof.
     “Improvements” shall have the meaning set forth in the granting clause of
the Mortgage.
     “Indemnified Parties” shall mean (a) Lender, (b) any prior owner or holder
of the Loan or Participations in the Loan, (c) any servicer or prior servicer of
the Loan, (d) any Investor or any prior Investor in any Securities, (e) any
trustees, custodians or other fiduciaries who hold or who have held a full or
partial interest in the Loan for the benefit of any Investor or other third
party, (f) any receiver or other fiduciary appointed in a foreclosure or other
Creditors Rights Laws proceeding, (g) any officers, directors, shareholders,
partners, members, employees, agents, servants, representatives, contractors,
subcontractors, affiliates or subsidiaries of any and all of the foregoing, and
(h) the heirs, legal representatives, successors and assigns of any and all

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of the foregoing (including, without limitation, any successors by merger,
consolidation or acquisition of all or a substantial portion of the Indemnified
Parties’ assets and business), in all cases whether during the term of the Loan
or as part of or following a foreclosure of the Mortgage.
     “Individual Property” shall mean each separate tract or parcel of real
property identified in the legal description attached to the Mortgage, 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 each Mortgage and referred to
therein as the “Property”, including without limitation, the AFL Property and
the Little Arch Property
     “Insurance Premiums” shall have the meaning set forth in Section 8.1(b)
hereof.
     “Insurance Proceeds” shall have the meaning set forth in Section 8.4(b)
hereof.
     “Interest Bearing Reserve Accounts” shall mean all Reserve Accounts other
than the Tax and Insurance Reserve Account.
     “Internal Revenue Code” shall mean the Internal Revenue Code of 1986, as
amended, as it may be further amended from time to time, and any successor
statutes thereto, and applicable U.S. Department of Treasury regulations issued
pursuant thereto in temporary or final form.
     “Investor” shall have the meaning set forth in Section 13.3 hereof.
     “Lease” shall have the meaning set forth in the Mortgage.
     “Leasing Reserve Account” shall have the meaning set forth in
Section 9.3(b) hereof.
     “Legal Requirements” shall mean all statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities affecting the Property or any part thereof, or the construction,
use, alteration or operation thereof, whether now or hereafter enacted and in
force, and all permits, licenses, 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 Property or any part thereof, including, without limitation, any
which may (a) require repairs, modifications or alterations in or to the
Property or any part thereof, or (b) in any way limit the use and enjoyment
thereof.
     “Letter of Credit Requirements” shall mean the requirements set forth on
Schedule II.
     “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 Borrower, the Property, any portion thereof or any interest
therein, including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the

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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.
     “Little Arch Acceptable Replacement Tenant” shall have the meaning set
forth in Section 9.3(d) hereof.
     “Little Arch Acceptable Replacement Tenant Requirements” shall have the
meaning set forth in Section 9.3(d) hereof.
     “Little Arch Lease” shall mean that certain Lease of the Little Arch
Property by and between Little Arch, as Landlord, and Little Arch Tenant, as
tenant, together with all amendments, modifications, renewals and replacements
therefore.
     “Little Arch Leasing Reserve Account” shall have the meaning set forth in
Section 9.3(b).
     “Little Arch Partial Release Provisions” shall have the meaning set forth
in Section 9.3(d) hereof.
     “Little Arch Property” shall mean the portion of the Property currently
owned by Little Arch.
     “Little Arch Space” shall mean the space currently occupied by the Little
Arch Tenant on the Little Arch Property.
     “Little Arch Tenant” shall mean the current tenant occupying the Little
Arch Property pursuant to a written lease agreement.
     “LLC Agreement” shall have the meaning set forth in Section 6.1(c).
     “Loan” shall mean the loan made by Lender to Borrower pursuant to this
Agreement.
     “Loan Documents” shall mean, collectively, this Agreement, the Note, the
Mortgage, the Assignment of Management Agreement, the certain Certificate and
Agreement Regarding Property Management dated the date hereof between AFL and
Lender, the Lockbox Agreement following the occurrence of a Lockbox Event, and
any and all other documents, agreements and certificates 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.
     “Lockbox” shall mean the post office address established pursuant to the
Lockbox Agreement and maintained by Lockbox Bank on behalf of Borrower and
Lender pursuant to the terms thereof and to which Borrower shall direct all
Rents and other income from the Property be sent pursuant to the Tenant
Direction Letters.
     “Lockbox Account” shall have the meaning set forth in Section 10.1(a)
hereof.

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     “Lockbox Agreement” shall mean that certain Three Party Agreement Relating
to Lockbox Services to be executed by Borrower, Lender and Lockbox Bank, in form
and substance satisfactory to Lender in its discretion, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time, relating to the operation and maintenance of, and application of funds in,
the Lockbox Account.
     “Lockbox Bank” shall mean Bank of America, N.A. or any successor Eligible
Institution approved or appointed by Lender acting as Lockbox Bank under the
Lockbox Agreement.
     “Lockbox Event” shall mean the occupancy of the Property by more than two
(2) tenants.
     “Losses” shall mean any and all claims, suits, liabilities (including,
without limitation, strict liabilities), actions, proceedings, obligations,
debts, damages, losses, costs, expenses, fines, penalties, charges, fees,
judgments, awards, amounts paid in settlement of whatever kind or nature
(including but not limited to legal fees and other costs of defense).
     “Major Lease” shall mean as to the Property (i) any Lease which,
individually or when aggregated with all other leases at the Property with the
same Tenant or its Affiliate, either (A) accounts for five percent (5%) or more
of the Property’s rental income, or (B) demises 5,000 square feet or more of the
Property’s gross leasable area, (ii) any Lease which contains any option, offer,
right of first refusal or other similar entitlement to acquire all or any
portion of the Property, or (iii) any instrument guaranteeing or providing
credit support for any Lease meeting the requirements of (i) or (ii) above.
     “Management Agreement” shall mean the management agreement entered into by
and between Borrower and Manager, pursuant to which Manager is to provide
management and other services with respect to the Property, as the same may be
amended, restated, replaced, supplemented or otherwise modified in accordance
with the terms of this Agreement.
     “Manager” shall mean MCI Management LLC, a North Carolina limited liability
company, in the case of the Little Arch Property, and the Borrower, in the case
of the AFL Property, or such other entity selected as the manager of the
Property in accordance with the terms of this Agreement.
     “Maturity Date” shall have the meaning set forth in the Note.
     “Member” shall have the meaning set forth in Section 6.1(c ).
     “Mold” shall have the meaning set forth in Section 12.5 hereof.
     “Moody’s” shall mean Moody’s Investor Services, Inc.
     “Mortgage” shall mean, individually and collectively as the context may
require, each first priority mortgage/deed of trust/deed to secure debt and
security agreement dated the date hereof, executed and delivered by a Borrower
as security for the Loan and encumbering any

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Individual Property, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
     “Net Operating Income” shall mean, with respect to any period of time, the
amount obtained by subtracting Operating Expenses from Operating Income, as such
amount may be adjusted by Lender in its good faith discretion based on Lender’s
underwriting standards, including without limitation, adjustments for vacancy
allowance.
     “Net Proceeds” shall have the meaning set forth in Section 8.4(b) hereof.
     “Net Proceeds Deficiency” shall have the meaning set forth in
Section 8.4(b)(vi) hereof.
     “Note” shall mean that certain promissory note of even date herewith in the
principal amount of $21,757,000.00, made by Borrower in favor of Lender, as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.
     “OFAC” shall have the meaning set forth in Section 4.38 hereof.
     “Operating Expense Reserve Account” shall have the meaning set forth in
Section 9.8 hereof.
     “Operating Expense Reserve Funds” shall have the meaning set forth in
Section 9.8 hereof.
     “Operating Expenses” shall mean, with respect to any period of time, the
total of all expenses actually paid or payable, computed in accordance with
GAAP, of whatever kind relating to the operation, maintenance and management of
the Property, including without limitation, utilities, ordinary repairs and
maintenance, Insurance Premiums, license fees, Taxes and Other Charges,
advertising expenses, payroll and related taxes, computer processing charges,
management fees equal to the greater of 3% of the Operating Income and the
management fees actually paid under the Management Agreement, operational
equipment or other lease payments as approved by Lender, normalized capital
expenditures equal to $58,228.00 per annum (as adjusted in Lender’s discretion)
and normalized tenant improvement costs and/or leasing commissions equal to
$173,556.00 per annum (as adjusted in Lender’s discretion), but specifically
excluding depreciation and amortization, income taxes, Debt Service, any
incentive fees due under the Management Agreement, any item of expense that in
accordance with GAAP should be capitalized but only to the extent the same would
qualify for funding from the Reserve Accounts, any item of expense that would
otherwise be covered by the provisions hereof but which is paid by any Tenant
under such Tenant’s Lease or other agreement, and deposits into the Reserve
Accounts.
     “Operating Income” shall mean, with respect to any period of time, all
income, computed in accordance with GAAP, derived from the ownership and
operation of the Property from whatever source, including, but not limited to,
Rents (using a vacancy rate equal to the greater of market, actual or 13.5%),
utility charges, escalations, forfeited security deposits, interest on credit
accounts, service fees or charges, license fees, parking fees, rent concessions
or

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credits, and other required pass-throughs but excluding sales, use and occupancy
or other taxes on receipts required to be accounted for by Borrower to any
Governmental Authority, refunds and uncollectible accounts, sales of furniture,
fixtures and equipment, interest income from any source other than the escrow
accounts, Reserve Accounts or other accounts required pursuant to the Loan
Documents, Insurance Proceeds (other than business interruption or other loss of
income insurance), Awards, percentage rent, unforfeited security deposits,
utility and other similar deposits, income from tenants not paying rent, income
from tenants in bankruptcy, non-recurring or extraordinary income, including,
without limitation lease termination payments, and any disbursements to Borrower
from the Reserve Accounts.
     “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 Property, now or hereafter levied or assessed or
imposed against the Property or any part thereof.
     “Participations” shall have the meaning set forth in Section 13.1 hereof.
     “Patriot Act” shall have the meaning set forth in Section 4.38 hereof.
     “Permitted Encumbrances” shall mean collectively, (a) the Lien and security
interests created by the Loan Documents, (b) all Liens, encumbrances and other
matters disclosed in the Title Insurance Policy, (c) Liens, if any, for Taxes
imposed by any Governmental Authority not yet due or delinquent, and (d) such
other title and survey exceptions as Lender has approved or may approve in
writing in Lender’s sole discretion, all of which Lender determines in the
aggregate as of the date hereof do not materially adversely affect the value or
use of the Property or Borrower’s ability to repay the Loan.
     “Permitted Investments” shall mean to the extent available from Lender or
Lender’s servicer for deposits in the Reserve Accounts and the Cash Management
Account, any one or more of the following obligations or securities acquired at
a purchase price of not greater than par, including those issued by a servicer
of the Loan, the trustee under any securitization or any of their respective
Affiliates, payable on demand or having a maturity date not later than the
Business Day immediately prior to the date on which the funds used to acquire
such investment are required to be used under this Agreement and meeting one of
the appropriate standards set forth below:
     (a) obligations of, or obligations fully guaranteed as to payment of
principal and interest by, the United States or any agency or instrumentality
thereof provided such obligations are backed by the full faith and credit of the
United States of America including, without limitation, obligations of: the U.S.
Treasury (all direct or fully guaranteed obligations), the Farmers Home
Administration (certificates of beneficial ownership), the General Services
Administration (participation certificates), the U.S. Maritime Administration
(guaranteed Title XI financing), the Small Business Administration (guaranteed
participation certificates and guaranteed pool certificates), the U.S.
Department of Housing and Urban Development (local authority bonds) and the
Washington Metropolitan Area Transit Authority (guaranteed transit bonds);
provided, however, that the investments described in this clause must (i) have a

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predetermined fixed dollar of principal due at maturity that cannot vary or
change, (ii) be rated “AAA” or the equivalent by each of the Rating Agencies,
(iii) if rated by S&P, must not have an “r” highlighter affixed to their rating,
(iv) if such investments have a variable rate of interest, such interest rate
must be tied to a single interest rate index plus a fixed spread (if any) and
must move proportionately with that index, and (v) such investments must not be
subject to liquidation prior to their maturity;
     (b) Federal Housing Administration debentures;
     (c) obligations of the following United States government sponsored
agencies: Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit
System (consolidated systemwide bonds and notes), the Federal Home Loan Banks
(consolidated debt obligations), the Federal National Mortgage Association (debt
obligations), the Financing Corp. (debt obligations), and the Resolution Funding
Corp. (debt obligations); provided, however, that the investments described in
this clause must (i) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (ii) if rated by S&P, must not have an “r”
highlighter affixed to their rating, (iii) if such investments have a variable
rate of interest, such interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move proportionately with that
index, and (iv) such investments must not be subject to liquidation prior to
their maturity;
     (d) federal funds, unsecured certificates of deposit, time deposits,
bankers’ acceptances and repurchase agreements with maturities of not more than
365 days of any bank, the short term obligations of which at all times are rated
in the highest short term rating category by each Rating Agency (or, if not
rated by all Rating Agencies, rated by at least one Rating Agency in the highest
short term rating category and otherwise acceptable to each other Rating Agency,
as confirmed in writing that such investment would not, in and of itself, result
in a downgrade, qualification or withdrawal of the initial, or, if higher, then
current ratings assigned to the Securities); provided, however, that the
investments described in this clause must (i) have a predetermined fixed dollar
of principal due at maturity that cannot vary or change, (ii) if rated by S&P,
must not have an “r” highlighter affixed to their rating, (iii) if such
investments have a variable rate of interest, such interest rate must be tied to
a single interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (iv) such investments must not be subject
to liquidation prior to their maturity;
     (e) fully Federal Deposit Insurance Corporation-insured demand and time
deposits in, or certificates of deposit of, or bankers’ acceptances with
maturities of not more than 365 days and issued by, any bank or trust company,
savings and loan association or savings bank, the short term obligations of
which at all times are rated in the highest short term rating category by each
Rating Agency (or, if not rated by all Rating Agencies, rated by at least one
Rating Agency in the highest short term rating category and otherwise acceptable
to each other Rating Agency, as confirmed in writing that such investment would
not, in and of itself, result in a downgrade, qualification or withdrawal of the
initial, or, if higher, then current ratings assigned to the Securities);
provided, however, that the investments described in this clause must (i) have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (ii) if rated by S&P, must not have an “r” highlighter affixed to their
rating, (iii) if such investments have a

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variable rate of interest, such interest rate must be tied to a single interest
rate index plus a fixed spread (if any) and must move proportionately with that
index, and (iv) such investments must not be subject to liquidation prior to
their maturity;
     (f) debt obligations with maturities of not more than 365 days and at all
times rated by each Rating Agency (or, if not rated by all Rating Agencies,
rated by at least one Rating Agency and otherwise acceptable to each other
Rating Agency, as confirmed in writing that such investment would not, in and of
itself, result in a downgrade, qualification or withdrawal of the initial, or,
if higher, then current ratings assigned to the Securities) in its highest
long-term unsecured rating category; provided, however, that the investments
described in this clause must (i) have a predetermined fixed dollar of principal
due at maturity that cannot vary or change, (ii) if rated by S&P, must not have
an “r” highlighter affixed to their rating, (iii) if such investments have a
variable rate of interest, such interest rate must be tied to a single interest
rate index plus a fixed spread (if any) and must move proportionately with that
index, and (iv) such investments must not be subject to liquidation prior to
their maturity;
     (g) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a specified
date not more than one year after the date of issuance thereof) with maturities
of not more than 365 days and that at all times is rated by each Rating Agency
(or, if not rated by all Rating Agencies, rated by at least one Rating Agency
and otherwise acceptable to each other Rating Agency, as confirmed in writing
that such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current ratings
assigned to the Securities) in its highest short-term unsecured debt rating;
provided, however, that the investments described in this clause must (i) have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (ii) if rated by S&P, must not have an “r” highlighter affixed to their
rating, (iii) if such investments have a variable rate of interest, such
interest rate must be tied to a single interest rate index plus a fixed spread
(if any) and must move proportionately with that index, and (iv) such
investments must not be subject to liquidation prior to their maturity;
     (h) units of taxable money market funds with maturities of not more than
365 days, which funds are regulated investment companies, seek to maintain a
constant net asset value per share and invest solely in obligations backed by
the full faith and credit of the United States, which funds have the highest
rating available from each Rating Agency (or, if not rated by all Rating
Agencies, rated by at least one Rating Agency and otherwise acceptable to each
other Rating Agency, as confirmed in writing that such investment would not, in
and of itself, result in a downgrade, qualification or withdrawal of the
initial, or, if higher, then current ratings assigned to the Securities) for
money market funds; and
     (i) any other security, obligation or investment which has been approved as
a Permitted Investment in writing by (i) Lender and (ii) each Rating Agency, as
evidenced by a written confirmation that the designation of such security,
obligation or investment as a Permitted Investment will not, in and of itself,
result in a downgrade, qualification or withdrawal of the initial, or, if
higher, then current ratings assigned to the Securities by such Rating Agency;

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     provided, however, that no obligation or security shall be a Permitted
Investment if (A) such obligation or security evidences a right to receive only
interest payments, (B) the right to receive principal and interest payments on
such obligation or security are derived from an underlying investment that
provides a yield to maturity in excess of one hundred twenty percent (120%) of
the yield to maturity at par of such underlying investment or (C) such
obligation or security has a remaining term to maturity in excess of one
(1) year.
     “Person” shall mean any individual, corporation, partnership, joint
venture, limited liability company, estate, trust, unincorporated association,
any federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
     “Personal Property” shall have the meaning set forth in the granting clause
of the Mortgage.
     “Policies” shall have the meaning specified in Section 8.1(b) hereof.
     “Prohibited Transfer” shall have the meaning set forth in Section 7.2
hereof.
     “Property” shall mean, individually or collectively as the context may
require, each and every Individual Property which is subject to the terms of
this Agreement.
     “Property Condition Report” shall mean a report prepared by a company
satisfactory to Lender regarding the physical condition of the Property,
satisfactory in form and substance to Lender in its sole discretion.
     “Rating Agencies” shall mean each of S&P, Moody’s and Fitch, or any other
nationally-recognized statistical rating agency which has been approved by
Lender.
     “REA” shall mean any construction, operation and reciprocal easement
agreement or similar agreement (including any separate agreement or other
agreement between Borrower and one or more other parties to an REA with respect
to such REA) affecting the Property or portion thereof.
     “Release” shall have the meaning set forth in Section 12.5 hereof.
     “Rent Roll” shall have the meaning set forth in Section 4.25 hereof.
     “Rents” shall have the meaning set forth in the Mortgage.
     “Replacement Reserve Account” shall have the meaning set forth in
Section 9.2(b) hereof.
     “Replacement Reserve Funds” shall have the meaning set forth in
Section 9.2(b) hereof.

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     “Replacement Reserve Monthly Deposit” shall have the meaning set forth in
Section 9.2(b) hereof.
     “Replacements” shall have the meaning set forth in Section 9.2(a) hereof.
     “Required Repair Account” shall have the meaning set forth in
Section 9.1(b) hereof.
     “Required Repair Funds” shall have the meaning set forth in Section 9.1(b)
hereof.
     “Required Repairs” shall have the meaning set forth in Section 9.1(a)
hereof.
     “Required Work” shall have the meaning set forth in Section 9.4 hereof.
     “Reserve Accounts” shall mean the Required Repair Account and the following
sub-accounts of the Cash Management Account: the Tax and Insurance Reserve
Account, the Replacement Reserve Account, the Leasing Reserve Account, the
Excess Cash Reserve Account, the Extraordinary Expense Reserve Account, the
Operating Expense Reserve Account or any other escrow account established by the
Loan Documents.
     “Reserve Funds” shall mean the Tax and Insurance Reserve Funds, the
Replacement Reserve Funds, the Required Repair Funds, the Leasing Reserve Funds,
the Excess Cash Reserve Funds, the Extraordinary Expense Reserve Funds, the
Operating Expense Reserve Funds or any other escrow funds established by the
Loan Documents.
     “Restoration” shall mean, following the occurrence of a Casualty or a
Condemnation which is of a type necessitating the repair of the Property, the
completion of the repair and restoration of the Property as nearly as possible
to the condition the Property was in immediately prior to such Casualty or
Condemnation, with such alterations as may be reasonably approved by Lender.
     “Restoration Consultant” shall have the meaning set forth in
Section 8.4(b)(iii) hereof.
     “Restoration Retainage” shall have the meaning set forth in
Section 8.4(b)(iv) hereof.
     “Restricted Party” shall have the meaning set forth in Section 7.1 hereof.
     “Sale or Pledge” shall have the meaning set forth in Section 7.1 hereof.
     “Scheduled Payment Date” shall have the meaning set forth in the Note.
     “Securities” shall have the meaning set forth in Section 13.1 hereof.
     “Securities Act” shall mean the Securities Act of 1933, as amended.
     “Securitization” shall have the meaning set forth in Section 13.1 hereof.

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     “Special Member” shall have the meaning set forth in Section 6.1(c).
     “SPE Component Entity” shall have the meaning set forth in Section 6.1(b)
hereof.
     “S&P” shall mean Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc.
     “State” shall mean the state in which the Property or any part thereof is
located.
     “Tax and Insurance Reserve Funds” shall have the meaning set forth in
Section 9.6 hereof.
     “Tax and Insurance Reserve Account” shall have the meaning set forth in
Section 9.6 hereof.
     “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 Property or part thereof.
     “Tenant” shall mean any Person leasing, subleasing or otherwise occupying
any portion of the Property under a Lease or other occupancy agreement with
Borrower.
     “Tenant Direction Letter” shall have the meaning set forth in
Section 10.2(a)(i) or 10.3(a)(i), as applicable.
     “Tenant Letter of Credit” shall have the meaning set forth in
Section 9.10(a).
     “Termination Fee Deposit” shall have the meaning set forth in
Section 9.3(b).
     “Title Insurance Policy” shall mean that certain ALTA (or its equivalent)
mortgagee title insurance policy issued with respect to the Property and
insuring the lien of the Mortgage.
     “Transferee” shall have the meaning set forth in Section 7.5 hereof.
     “UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code
as in effect in the State where the applicable Property is located.
     Section 1.2 Principles of Construction
     All references to sections and schedules are to sections and schedules in
or to this Agreement unless otherwise specified. All uses of the word
“including” shall mean “including, without limitation” unless the context shall
indicate otherwise. Unless otherwise specified, the words “hereof,” “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specified, all meanings attributed to defined terms
herein shall be equally applicable to both the singular and plural forms of the
terms so defined.

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ARTICLE 2
GENERAL TERMS
     Section 2.1 The Loan
     Subject to and upon the terms and conditions set forth herein, Lender
hereby agrees to make and Borrower hereby agrees to accept the Loan on the
Closing Date.
     Section 2.2 Disbursement to Borrower
     Borrower may request and receive only one borrowing in respect of the Loan
and any amount borrowed and repaid in respect of the Loan may not be reborrowed.
     Section 2.3 The Note, Mortgage and Loan Documents
     The Loan shall be evidenced by the Note and secured by the Mortgage and the
other Loan Documents.
     Section 2.4 Loan Payments
     The Loan and interest thereon shall be payable pursuant to the terms of the
Note.
     Section 2.5 Loan Prepayments
     The Loan may not be prepaid, in whole or in part, except in strict
accordance with the express terms and conditions of the Note.
ARTICLE 3
CONDITIONS PRECEDENT
     Section 3.1 Conditions Precedent
     The obligation of Lender to make the Loan hereunder is subject to the
fulfillment by Borrower or waiver by Lender of all of the conditions precedent
to closing set forth in the application or term sheet for the Loan delivered by
Borrower to Lender and any commitment or commitment rider to the application for
the Loan issued by Lender.

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ARTICLE 4
REPRESENTATIONS AND WARRANTIES
     Borrower and, where specifically indicated, Borrower Principal, represents
and warrants to Lender as of the Closing Date that:
     Section 4.1 Organization
     Borrower and Borrower Principal (when not an individual) each (a) has been
duly organized and is validly existing and in good standing with requisite power
and authority to own its properties and to transact the businesses in which it
is now engaged, (b) is duly qualified to do business and is in good standing in
each jurisdiction where it is required to be so qualified in connection with its
properties, businesses and operations, (c) possesses all rights, licenses,
permits and authorizations, governmental or otherwise, necessary to entitle it
to own its properties and to transact the businesses in which it is now engaged,
and the sole business of Borrower is the ownership, management and operation of
the Property, and (d) in the case of Borrower, has full power, authority and
legal right to mortgage, grant, bargain, sell, pledge, assign, warrant, transfer
and convey the Property pursuant to the terms of the Loan Documents, and in the
case of Borrower and each Borrower Principal, has full power, authority and
legal right to keep and observe all of the terms of the Loan Documents to which
it is a party. Borrower and Borrower Principal each represent and warrant that
the chart attached hereto as Exhibit A sets forth an accurate listing of the
direct and indirect owners of the equity interests in Borrower, each SPE
Component Entity (if any) and each Borrower Principal (when not an individual).
     Section 4.2 Status of Borrower
     Borrower’s exact legal name is correctly set forth on the first page of
this Agreement, on the Mortgage and on any UCC-1 Financing Statements filed in
connection with the Loan. Borrower is an organization of the type specified on
the first page of this Agreement. Borrower is incorporated in or organized under
the laws of the state of Delaware. 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 months (or, if less, the entire
period of the existence of Borrower) the address of Borrower set forth on the
first page of this Agreement. Borrower’s organizational identification number,
if any, assigned by the state of incorporation or organization is correctly set
forth on the first page of the Note.
     Section 4.3 Validity of Documents
     Borrower and Borrower Principal have taken all necessary action to
authorize the execution, delivery and performance of this Agreement and the
other Loan Documents to which they are parties. This Agreement and such other
Loan Documents have been duly executed and delivered by or on behalf of Borrower
and Borrower Principal respectively and constitute the

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legal, valid and binding obligations of Borrower and Borrower Principal
enforceable against Borrower and Borrower Principal in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency and similar
laws affecting rights of creditors generally, and subject, as to enforceability,
to general principles of equity (regardless of whether enforcement is sought in
a proceeding in equity or at law).
     Section 4.4 No Conflicts
     The execution, delivery and performance of this Agreement and the other
Loan Documents by Borrower and Borrower Principal will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance (other than pursuant to the Loan Documents) upon any of the property
or assets of Borrower or Borrower Principal pursuant to the terms of any
agreement or instrument to which Borrower or Borrower Principal is a party or by
which any of Borrower’s or Borrower Principal’s property or assets is subject,
nor will such action result in any violation of the provisions of any statute or
any order, rule or regulation of any Governmental Authority having jurisdiction
over Borrower or Borrower Principal or any of Borrower’s or Borrower Principal’s
properties or assets, and any consent, approval, authorization, order,
registration or qualification of or with any Governmental Authority required for
the execution, delivery and performance by Borrower or Borrower Principal of
this Agreement or any of the other Loan Documents has been obtained and is in
full force and effect.
     Section 4.5 Litigation
     There are no actions, suits or proceedings at law or in equity by or before
any Governmental Authority or other agency now pending or, to Borrower’s or
Borrower Principal’s knowledge, threatened against or affecting Borrower,
Borrower Principal, Manager or the Property, which actions, suits or
proceedings, if determined against Borrower, Borrower Principal, Manager or the
Property, would materially adversely affect the condition (financial or
otherwise) or business of Borrower or Borrower Principal or the condition or
ownership of the Property.
     Section 4.6 Agreements
     Borrower is not a party to any agreement or instrument or subject to any
restriction which would materially and adversely affect Borrower or the
Property, or Borrower’s business, properties or assets, operations or condition,
financial or otherwise. Borrower is not in default in any material respect in
the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any agreement or instrument to which it is a party or
by which Borrower or the Property is bound. Borrower has no material financial
obligation under any agreement or instrument to which Borrower is a party or by
which Borrower or the Property is otherwise bound, other than (a) obligations
incurred in the ordinary course of the operation of the Property and (b)
obligations under the Loan Documents.

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     Section 4.7 Solvency
     Borrower and Borrower Principal have (a) not entered into the transaction
or executed the Note, this Agreement or any other Loan Documents with the actual
intent to hinder, delay or defraud any creditor and (b) received reasonably
equivalent value in exchange for their respective obligations under such Loan
Documents. Giving effect to the Loan, the fair saleable value of the assets of
Borrower and Borrower Principal exceeds and will, immediately following the
making of the Loan, exceed the total liabilities of Borrower and Borrower
Principal, including, without limitation, subordinated, unliquidated, disputed
and contingent liabilities. No petition in bankruptcy has been filed against
Borrower, Borrower Principal, any SPE Component Entity (if any) or Affiliated
Manager in the last ten (10) years, and neither Borrower nor Borrower Principal,
any SPE Component Entity (if any) or Affiliated Manager in the last ten
(10) years has made an assignment for the benefit of creditors or taken
advantage of any Creditors Rights Laws. Neither Borrower nor Borrower Principal,
any SPE Component Entity (if any) or Affiliated Manager is contemplating either
the filing of a petition by it under any Creditors Rights Laws or the
liquidation of all or a major portion of Borrower’s assets or property, and
Borrower has no knowledge of any Person contemplating the filing of any such
petition against Borrower or Borrower Principal, any SPE Component Entity (if
any) or Affiliated Manager.
     Section 4.8 Full and Accurate Disclosure
     No statement of fact made by or on behalf of Borrower or Borrower Principal
in this Agreement or in any of the other Loan Documents or in any other document
or certificate delivered by or (to Borrower’s or Borrower Principal’s, as
applicable, knowledge) on behalf of Borrower or Borrower Principal contains any
untrue statement of a material fact or omits to state any material fact
necessary to make statements contained herein or therein not misleading. There
is no material fact presently known to Borrower or Borrower Principal which has
not been disclosed to Lender which adversely affects, nor as far as Borrower or
Borrower Principal can reasonably foresee, might adversely affect, the Property
or the business, operations or condition (financial or otherwise) of Borrower or
Borrower Principal.
     Section 4.9 No Plan Assets
     Borrower is not an “employee benefit plan,” as defined in Section 3(3) of
ERISA, subject to Title I of ERISA, and none of the assets of Borrower
constitutes or will constitute “plan assets” of one or more such plans within
the meaning of 29 C.F.R. Section 2510.3-101. In addition, (a) Borrower is not a
“governmental plan” within the meaning of Section 3(32) of ERISA and (b)
transactions by or with Borrower are not subject to state statutes regulating
investment of, and fiduciary obligations with respect to, governmental plans
similar to the provisions of Section 406 of ERISA or Section 4975 of the
Internal Revenue Code currently in effect, which prohibit or otherwise restrict
the transactions contemplated by this Agreement.
     Section 4.10 Not a Foreign Person
     Neither Borrower nor Borrower Principal is a foreign corporation, foreign
partnership, foreign trust, foreign estate or nonresident alien or a disregarded
entity owned by any of them (as

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those terms are defined in the Internal Revenue Code of 1986), and if requested
by Lender, Borrower or Borrower Principal will so certify (or in the case of a
disregarded entity, its owner will certify) to a Lender or a person designated
by Lender under penalties of perjury to the accuracy of this representation, and
will provide in such certification such additional information as Lender may
reasonably request.
     Section 4.11 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 neither Borrower
nor Borrower Principal has asserted any right of rescission, set-off,
counterclaim or defense with respect thereto. No Default or Event of Default
exists under or with respect to any Loan Document.
     Section 4.12 Business Purposes
     The Loan is solely for the business purpose of Borrower, and is not for
personal, family, household, or agricultural purposes.
     Section 4.13 Compliance
     Borrower and, to Borrower’s knowledge, the Property, and the use and
operation thereof, comply in all material respects with all Legal Requirements,
including, without limitation, building and zoning ordinances and codes and the
Americans with Disabilities Act. To Borrower’s knowledge, Borrower is not in
default or violation of any order, writ, injunction, decree or demand of any
Governmental Authority and Borrower has received no written notice of any such
default or violation. There has not been committed by Borrower or, to Borrower’s
knowledge, any other Person in occupancy of or involved with the operation or
use of the Property any act or omission affording any Governmental Authority the
right of forfeiture as against the Property or any part thereof or any monies
paid in performance of Borrower’s obligations under any of the Loan Documents.
     Section 4.14 Financial Information
     All financial data, including, without limitation, the balance sheets,
statements of cash flow, statements of income and operating expense and rent
rolls, that have been delivered to Lender in respect of Borrower, any Borrower
Principal and/or the Property (a) are true, complete and correct in all material
respects, (b) accurately represent the financial condition of Borrower, Borrower
Principal or the Property, as applicable, as of the date of such reports, and
(c) to the extent prepared or audited by an independent certified public
accounting firm, to Borrower’s knowledge, have been prepared in accordance with
GAAP throughout the periods covered, except as disclosed therein. Borrower does
not have any contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments that are known to Borrower and reasonably likely to have a material
adverse effect on the Property or the current and/or intended operation thereof,
except as referred

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to or reflected in said financial statements. Since the date of such financial
statements, there has been no materially adverse change in the financial
condition, operations or business of Borrower or Borrower Principal from that
set forth in said financial statements.
     Section 4.15 Condemnation
     No Condemnation or other proceeding has been commenced or, to Borrower’s
knowledge, is threatened or contemplated with respect to all or any portion of
the Property or for the relocation of roadways providing access to the Property.
     Section 4.16 Utilities and Public Access; Parking
     The Property has adequate rights of access to public ways and is served by
water, sewer, sanitary sewer and storm drain facilities adequate to service the
Property for full utilization of the Property for its intended uses. All public
utilities necessary to the full use and enjoyment of the Property as currently
used and enjoyed are located either in the public right-of-way abutting the
Property (which are connected so as to serve the Property without passing over
other property) or in recorded easements serving the Property and such easements
are set forth in and insured by the Title Insurance Policy. All roads necessary
for the use of the Property for its current purposes have been completed and
dedicated to public use and accepted by all Governmental Authorities. To
Borrower’s knowledge, the Property has, or is served by, parking to the extent
required to comply with all Legal Requirements.
     Section 4.17 Separate Lots
     The Property is assessed for real estate tax purposes as one or more wholly
independent tax lot or lots, separate from any adjoining land or improvements
not constituting a part of such lot or lots, and no other land or improvements
is assessed and taxed together with the Property or any portion thereof.
     Section 4.18 Assessments
     To Borrower’s knowledge, there are no pending or proposed special or other
assessments for public improvements or otherwise affecting the Property, nor are
there any contemplated improvements to the Property that may result in such
special or other assessments.
     Section 4.19 Insurance
     Borrower has obtained and has delivered to Lender certified copies of all
Policies or, to the extent such Policies are not available as of the Closing
Date, certificates of insurance with respect to all such Policies reflecting the
insurance coverages, amounts and other requirements set forth in this Agreement.
To Borrower’s knowledge, no claims have been made under any of the Policies, and
to Borrower’s knowledge, no Person, including Borrower, has done, by act or
omission, anything which would impair the coverage of any of the Policies.

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     Section 4.20 Use of Property
     The Property is used exclusively for office and industrial purposes and
other appurtenant and related uses.
     Section 4.21 Certificate of Occupancy; Licenses
     To Borrower’s knowledge, all certifications, permits, licenses and
approvals, including, without limitation, certificates of completion or
occupancy and any applicable liquor license required for the legal use,
occupancy and operation of the Property for the purpose intended herein, have
been obtained and are valid and in full force and effect. Borrower shall keep
and maintain (or cause to be kept and maintained) all licenses necessary for the
operation of the Property for the purpose intended herein. The use being made of
the Property is in conformity with the certificate of occupancy (or compliance,
if applicable) and any other permits or licenses issued for the Property.
     Section 4.22 Flood Zone
     None of the Improvements on the Property are located in an area identified
by the Federal Emergency Management Agency as an area having special flood
hazards, or, if any portion of the Improvements is located within such area,
Borrower has obtained the insurance prescribed in Section 8.1(a)(i).
     Section 4.23 Physical Condition
     Except as set forth in the Property Condition Report, to Borrower’s
knowledge after due inquiry, the Property, including, without limitation, all
buildings, improvements, parking facilities, sidewalks, storm drainage systems,
roofs, plumbing systems, HVAC systems, fire protection systems, electrical
systems, equipment, elevators, exterior sidings and doors, landscaping,
irrigation systems and all structural components, are in good condition, order
and repair in all material respects. Except as set forth in the Property
Condition Report, to Borrower’s knowledge after due inquiry, there exists no
structural or other material defects or damages in the Property, as a result of
a Casualty or otherwise, and whether latent or otherwise. Borrower has not
received notice from any insurance company or bonding company of any defects or
inadequacies in the 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.
     Section 4.24 Boundaries
     (a) None of the Improvements which were included in determining the
appraised value of the Property lie outside the boundaries and building
restriction lines of the Property to any material extent, and (b) no
improvements on adjoining properties encroach upon the Property and no easements
or other encumbrances upon the Property encroach upon any of the Improvements so
as to materially affect the value or marketability of the Property.

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     Section 4.25 Leases and Rent Roll
     Borrower has delivered to Lender a true, correct and complete rent roll for
the Property (a “Rent Roll”) which includes all Leases affecting the Property
(including schedules for all executed Leases for Tenants not yet in occupancy or
under which the rent commencement date has not occurred). Except as set forth in
the Rent Roll (as same has been updated by written notice thereof to Lender) and
estoppel certificates delivered to Lender on or prior to the Closing Date:
(a) each Lease is in full force and effect; (b) the premises demised under the
Leases have been completed and the Tenants under the Leases have accepted
possession of and are in occupancy of all of their respective demised premises;
(c) the Tenants under the Leases have commenced the payment of rent under the
Leases, there are no offsets, claims or defenses to the enforcement thereof, and
Borrower has no monetary obligations to any Tenant under any Lease; (d) all
Rents due and payable under the Leases have been paid and no portion thereof has
been paid for any period more than thirty (30) days in advance; (e) the rent
payable under each Lease is the amount of fixed rent set forth in the Rent Roll,
and there is no claim or basis for a claim by the Tenant thereunder for an
offset or adjustment to the rent; (f) no Tenant has made any written claim of a
material default against the landlord under any Lease which remains outstanding
nor has Borrower or Manager received, by telephonic, in-person, e-mail or other
communication, any notice of a material default under any Lease; (g) to
Borrower’s knowledge there is no present material default by the Tenant under
any Lease; (h) all security deposits under the Leases have been collected by
Borrower; (i) Borrower is the sole owner of the entire landlord’s interest in
each Lease; (j) each Lease is the valid, binding and enforceable obligation of
Borrower and the applicable Tenant thereunder and there are no agreements with
the Tenants under the Leases other than as expressly set forth in the Leases;
(k) no Person has any possessory interest in, or right to occupy, the Property
or any portion thereof except under the terms of a Lease; (l) none of the Leases
contains any option or offer to purchase or right of first refusal to purchase
the Property or any part thereof; (m) neither the Leases nor the Rents have been
assigned, pledged or hypothecated except to Lender, and no other Person has any
interest therein except the Tenants thereunder; and (n) no conditions exist
which now give any Tenant or party the right to “go dark” pursuant to the
provision of its Lease and/or any applicable REA.
     Section 4.26 Filing and Recording Taxes
     All mortgage, mortgage recording, stamp, intangible or other similar tax
required to be paid by any Person under applicable Legal Requirements currently
in effect in connection with the execution, delivery, recordation, filing,
registration, perfection or enforcement of any of the Loan Documents, including,
without limitation, the Mortgage, have been paid or will be paid.
     Section 4.27 Management Agreement
     The Management Agreement is in full force and effect and there is no
default thereunder by any party thereto and, to Borrower’s knowledge, no event
has occurred that, with the passage of time and/or the giving of notice would
constitute a default thereunder. No management fees under the Management
Agreement are accrued and unpaid.

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     Section 4.28 Illegal Activity
     To Borrower’s knowledge, no portion of the Property has been or will be
purchased, improved, equipped or fixtured with proceeds of any illegal activity,
and no part of the proceeds of the Loan will be used in connection with any
illegal activity.
     Section 4.29 Construction Expenses
     All costs and expenses of any and all labor, materials, supplies and
equipment used in the construction maintenance or repair of the Improvements
have been paid in full. To Borrower’s knowledge after due inquiry, there are no
claims for payment for work, labor or materials affecting the Property which are
or may become a lien prior to, or of equal priority with, the Liens created by
the Loan Documents.
     Section 4.30 Personal Property
     Borrower has paid in full for, and is the owner of, all Personal Property
(other than tenants’ property) used in connection with the operation of the
Property, free and clear of any and all security interests, liens or
encumbrances, except for Permitted Encumbrances and the Lien and security
interest created by the Loan Documents.
     Section 4.31 Taxes
     Borrower and Borrower Principal have filed all federal, state, county,
municipal, and city income, personal property and other tax returns required to
have been filed by them and have paid all taxes and related liabilities which
have become due pursuant to such returns or pursuant to any assessments received
by them. Neither Borrower nor Borrower Principal knows of any basis for any
additional assessment in respect of any such taxes and related liabilities for
prior years.
     Section 4.32 Permitted Encumbrances
     None of the Permitted Encumbrances, individually or in the aggregate,
materially interferes with the benefits of the security intended to be provided
by the Loan Documents, materially and adversely affects the value of the
Property, impairs the use or the operation of the Property or impairs Borrower’s
ability to pay its obligations in a timely manner.
     Section 4.33 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
prohibited by the terms and conditions of this Agreement or the other Loan
Documents.

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     Section 4.34 Investment Company Act
     Borrower is not (a) an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended; (b) a “holding company” or a “subsidiary company” of a “holding
company” or an “affiliate” of either a “holding company” or a “subsidiary
company” within the meaning of the Public Utility Holding Company Act of 1935,
as amended; or (c) subject to any other federal or state law or regulation which
purports to restrict or regulate its ability to borrow money.
     Section 4.35 Reciprocal Easement Agreements
     (a) Neither Borrower, nor any other party is currently in default (nor has
any notice been given or received with respect to an alleged or current default)
under any of the terms and conditions of any applicable REA, and such REA
remains unmodified and in full force and effect;
     (b) All easements granted pursuant to any applicable REA which were to have
survived the site preparation and completion of construction (to the extent that
the same has been completed), remain in full force and effect and have not been
released, terminated, extinguished or discharged by agreement or otherwise;
     (c) All sums due and owing by Borrower to the other parties to any
applicable REA (or by the other parties to such REA to the Borrower) pursuant to
the terms of such REA, including without limitation, all sums, charges, fees,
assessments, costs, and expenses in connection with any taxes, site preparation
and construction, non-shareholder contributions, and common area and other
property management activities have been paid, are current, and no lien has
attached on the Property (or threat thereof been made) for failure to pay any of
the foregoing;
     (d) The terms, conditions, covenants, uses and restrictions contained in
any applicable REA do not conflict in any manner with any terms, conditions,
covenants, uses and restrictions contained in any Lease or in any agreement
between Borrower and occupant of any peripheral parcel, including without
limitation, conditions and restrictions with respect to kiosk placement, tenant
restrictions (type, location or exclusivity), sale of certain goods or services,
and/or other use restrictions; and
     (e) The terms, conditions, covenants, uses and restrictions contained in
each Lease do not conflict in any manner with any terms, conditions, covenants,
uses and restrictions contained in any applicable REA, any other Lease or in any
agreement between Borrower and occupant of any peripheral parcel, including
without limitation, conditions and restrictions with respect to kiosk placement,
tenant restrictions (type, location or exclusivity), sale of certain goods or
services, and/or other use restrictions.
     Section 4.36 No Change in Facts or Circumstances; Disclosure
     All information submitted by Borrower or its agents to Lender and in all
financial statements, rent rolls, reports, certificates and other documents
submitted in connection with the

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Loan or in satisfaction of the terms thereof and all statements of fact made by
Borrower in this Agreement or in any other Loan Document, are accurate, complete
and correct in all material respects. There has been no material adverse change
in any condition, fact, circumstance or event that would make any such
information inaccurate, incomplete or otherwise misleading in any material
respect or that otherwise materially and adversely affects or might materially
and adversely affect the Property or the business operations or the financial
condition of Borrower. Borrower has disclosed to Lender all material facts of
which Borrower is aware and has not failed to disclose any material fact that
could cause any representation or warranty made herein to be materially
misleading.
     Section 4.37 Intellectual Property
     All trademarks, trade names and service marks necessary to the business of
Borrower as presently conducted or as Borrower contemplates conducting its
business are in good standing and, to the extent of Borrower’s actual knowledge,
uncontested. Borrower has not infringed, is not infringing, and has not received
notice of infringement with respect to asserted trademarks, trade names and
service marks of others. To Borrower’s knowledge, there is no infringement by
others of trademarks, trade names and service marks of Borrower.
     Section 4.38 Compliance with Anti-Terrorism Laws
     None of Borrower, Borrower Principal or any Person who Controls Borrower or
Borrower Principal currently is identified by the Office of Foreign Assets
Control, Department of the Treasury (“OFAC”) or otherwise qualifies as a
Embargoed Person, and Borrower has implemented procedures to ensure that no
Person who now or hereafter owns a direct or indirect equity interest in
Borrower is an Embargoed Person or is Controlled by an Embargoed Person. None of
Borrower or Borrower Principal is in violation of any applicable law relating to
anti-money laundering or anti-terrorism, including, without limitation, those
related to transacting business with Embargoed Persons or the requirements of
the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, U.S. Public Law 107-56, and the
related regulations issued thereunder, including temporary regulations
(collectively, as the same may be amended from time to time, the “Patriot Act”).
To Borrower’s knowledge, no tenant at the Property is currently identified by
OFAC or otherwise qualifies as an Embargoed Person, or is owned or Controlled by
an Embargoed Person. Borrower has determined that Manager has implemented
procedures approved by Borrower to ensure that no tenant at the Property is
currently identified by OFAC or otherwise qualifies as an Embargoed Person, or
is owned or Controlled by an Embargoed Person.
     Section 4.39 Patriot Act
     Neither Borrower nor Borrower Principal shall (a) be or become subject at
any time to any law, regulation, or list of any government agency (including,
without limitation, the list maintained by OFAC and accessible through the OFAC
website) that prohibits or limits any lender from making any advance or
extension of credit to Borrower or from otherwise conducting business with
Borrower and Borrower Principal, or (b) fail to provide documentary and other
evidence of Borrower’s identity as may be requested by any lender at any time to

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enable any lender to verify Borrower’s identity or to comply with any applicable
law or regulation, including, without limitation, the Patriot Act. In addition,
Borrower hereby agrees to provide to Lender any additional information that
Lender deems necessary from time to time in order to ensure compliance with all
applicable laws concerning money laundering and similar activities.
     Section 4.40 Survival
     Borrower agrees that, unless expressly provided otherwise, all of the
representations and warranties of Borrower set forth in this Section 4.40 and
elsewhere in this Agreement and in the other Loan Documents shall survive for so
long as any portion of the Debt remains owing to Lender. All representations,
warranties, covenants and agreements made in this Agreement or in the other Loan
Documents by Borrower shall be deemed to have been relied upon by Lender
notwithstanding any investigation heretofore or hereafter made by Lender or on
its behalf.
ARTICLE 5
BORROWER COVENANTS
     From the date hereof and until repayment of the Debt in full and
performance in full of all obligations of Borrower under the Loan Documents or
the earlier release of the Lien of the Mortgage (and all related obligations) in
accordance with the terms of this Agreement and the other Loan Documents,
Borrower hereby covenants and agrees with Lender that:
     Section 5.1 Existence; Compliance with Requirements
     (a) 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
Property. Borrower hereby covenants and agrees not to commit, permit or suffer
to exist any act or omission affording any Governmental Authority the right of
forfeiture as against the Property or any part thereof or any monies paid in
performance of Borrower’s obligations under any of the Loan Documents. Borrower
shall at all times maintain, preserve and protect all franchises and trade names
used in connection with the operation of the Property.
     (b) After prior written notice to Lender, Borrower, at its own expense, may
contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the Legal Requirements affecting the
Property, provided that (i) no Default or Event of Default has occurred and is
continuing; (ii) such proceeding shall be permitted under and be conducted in
accordance with the provisions of any other instrument to which Borrower or the
Property is subject and shall not constitute a default thereunder; (iii) neither
the Property, any part thereof or interest therein, any of the tenants or
occupants thereof, nor Borrower shall be affected in any material adverse way as
a result of such proceeding; (iv) non-compliance with the Legal Requirements
shall not impose civil or criminal liability on Borrower or Lender; (v) Borrower
shall have furnished the security as may be required in the proceeding or by
Lender

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to ensure compliance by Borrower with the Legal Requirements; and (vi) Borrower
shall have furnished to Lender all other items reasonably requested by Lender.
     Section 5.2 Maintenance and Use of Property
     Borrower shall cause the Property to be maintained in a good and safe
condition and repair. The Improvements and the Personal Property shall not be
removed, demolished or other than in accordance with the provisions of
Section 5.21, materially altered (except for normal replacement of the Personal
Property) by, on behalf of or with the consent of Borrower without the consent
of Lender. If under applicable zoning provisions the use of all or any portion
of the Property is or shall become a nonconforming use, Borrower will not cause
or permit the nonconforming use to be discontinued or the nonconforming
Improvement to be abandoned without the express written consent of Lender.
     Section 5.3 Waste
     Borrower shall not commit or suffer any waste of the Property or make any
change in the use of the Property which will in any way materially increase the
risk of fire or other hazard arising out of the operation of the Property, or
take any action that might invalidate or give cause for cancellation of any
Policy, or do or permit to be done thereon anything that may in any way impair
the value of the Property or the security for the Loan. Borrower will not,
without the prior written consent of Lender, permit any drilling or exploration
for or extraction, removal, or production of any minerals from the surface or
the subsurface of the Property, regardless of the depth thereof or the method of
mining or extraction thereof.
     Section 5.4 Taxes and Other
     (a) Borrower shall pay or shall caused to be paid all Taxes and Other
Charges now or hereafter levied or assessed or imposed against the 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 complies with the terms and provisions of Section 9.6 hereof. Borrower
shall furnish to Lender receipts for the payment of the Taxes and the Other
Charges prior to the date the same shall become delinquent (provided, however,
that Borrower is not required to furnish such receipts for payment of Taxes in
the event that such Taxes have been paid by Lender pursuant to Section 9.6
hereof). Borrower shall not suffer and shall promptly cause to be paid and
discharged any Lien or charge whatsoever which may be or become a Lien or charge
against the Property, and shall promptly pay for all utility services provided
to the Property.
     (b) After prior written notice to Lender, Borrower, at its own expense, may
contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the amount or validity or application in
whole or in part of any Taxes or Other Charges, provided that (i) no Default or
Event of Default has occurred and remains uncured; (ii) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any other
instrument to which Borrower is subject and shall not constitute a default
thereunder and such proceeding shall be conducted in accordance with all
applicable Legal Requirements;

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(iii) neither the Property nor any part thereof or interest therein will be in
danger of being sold, forfeited, terminated, canceled or lost; (iv) Borrower
shall promptly upon final determination thereof pay the amount of any such Taxes
or Other Charges, together with all costs, interest and penalties which may be
payable in connection therewith; (v) such proceeding shall suspend the
collection of such contested Taxes or Other Charges from the Property; and (vi)
Borrower shall furnish such security as may be required in the proceeding, or
deliver to Lender such reserve deposits as may be requested by Lender, to insure
the payment of any such Taxes or Other Charges, together with all interest and
penalties thereon (unless Borrower has paid all of the Taxes or Other Charges
under protest). Lender may pay over any such cash deposit or part thereof held
by Lender to the claimant entitled thereto at any time when, in the judgment of
Lender, the entitlement of such claimant is established or the Property (or part
thereof or interest therein) shall be in danger of being sold, forfeited,
terminated, canceled or lost or there shall be any danger of the Lien of the
Mortgage being primed by any related Lien.
     Section 5.5 Litigation
     Borrower shall give prompt written notice to Lender of any litigation or
governmental proceedings pending or threatened in writing against Borrower which
might materially adversely affect Borrower’s condition (financial or otherwise)
or business or the Property.
     Section 5.6 Access to Property
     Subject to the rights of Tenants under Leases, Borrower shall permit
agents, representatives and employees of Lender to inspect the Property or any
part thereof at reasonable hours upon reasonable advance notice.
     Section 5.7 Notice of Default
     Borrower shall promptly advise Lender of any material adverse change in the
condition (financial or otherwise) of Borrower, Borrower Principal or the
Property or of the occurrence of any Default or Event of Default of which
Borrower has knowledge.
     Section 5.8 Cooperate in Legal Proceedings
     Borrower shall at Borrower’s expense cooperate fully with Lender with
respect to any proceedings before any court, board or other Governmental
Authority which may in any way affect the rights of Lender hereunder or any
rights obtained by Lender under any of the other Loan Documents and, in
connection therewith, permit Lender, at its election, to participate in any such
proceedings.
     Section 5.9 Performance by
     Borrower shall in a timely manner observe, perform and fulfill each and
every covenant, term and provision to be observed and performed by Borrower
under this Agreement and the other Loan Documents and any other agreement or
instrument affecting or pertaining to the Property and any amendments,
modifications or changes thereto.

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     Section 5.10 Awards; Insurance Proceeds
     Borrower shall cooperate with Lender in obtaining for Lender the benefits
of any Awards or Insurance Proceeds lawfully or equitably payable in connection
with the Property, and Lender shall be reimbursed for any expenses incurred in
connection therewith (including reasonable, actual attorneys’ fees and
disbursements, and the payment by Borrower of the expense of an appraisal on
behalf of Lender in case of a Casualty or Condemnation affecting the Property or
any part thereof) out of such Awards or Insurance Proceeds.
     Section 5.11 Financial Reporting
     (a) Borrower and Borrower Principal shall keep adequate books and records
of account in accordance with GAAP, or in accordance with other methods
acceptable to Lender in its sole discretion, consistently applied and shall
furnish to Lender:
      (i) quarterly and annual (and prior to a Securitization, if requested by
Lender, monthly) certified rent rolls signed and dated by Borrower, detailing
the names of all Tenants of the Improvements, the portion of Improvements (in
terms of square footage) occupied by each Tenant, the base rent, additional rent
and any other charges payable under each Lease (including annual store sales
required to be reported by Tenant under any Lease), and the term of each Lease,
including the commencement and expiration dates and any tenant extension,
expansion or renewal options, the extent to which any Tenant is in default under
any Lease, and any other information as is reasonably required by Lender, within
twenty (20) days after the end of each calendar month, thirty (30) days after
the end of each fiscal quarter or sixty (60) days after the close of each fiscal
year of Borrower, as applicable;
      (ii) quarterly and annual (and prior to a Securitization, if requested by
Lender, monthly) operating statements of the Property, prepared and certified by
Borrower in the form required by Lender (or if required by Lender following an
Event of Default, an audited annual operating statement prepared by an
independent certified public accountant acceptable to Lender), detailing the
revenues received, the expenses incurred and the net operating income before and
after debt service (principal and interest) and major capital improvements for
the period of calculation and containing appropriate year-to-date information,
within twenty (20) days after the end of each calendar month, thirty (30) days
after the end of each fiscal quarter or sixty (60) days after the close of each
fiscal year of Borrower, as applicable; and
      (iii) annual balance sheets, profit and loss statements, statements of
cash flows, and statements of change in financial position of Borrower and
Borrower Principal in the form required by Lender, prepared and certified by
Borrower and Borrower Principal (or if required by Lender following an Event of
Default, annual audited financial statements prepared by an independent
certified public accountant acceptable to Lender), within ninety (90) days after
the close of each fiscal year of Borrower and Borrower Principal, as the case
may be; and

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      (iv) during any Cash Management Period, an Annual Budget not later than
thirty (30) days prior to the commencement of each fiscal year of Borrower in
form reasonably satisfactory to Lender. In the event that Lender objects to a
proposed Annual Budget submitted by Borrower, 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 such 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, the most recent Annual Budget shall apply; provided that, such approved
Annual Budget shall be adjusted to reflect actual increases in Taxes, Insurance
Premiums, utilities expenses and expenses under the Management Agreement.
     (b) Upon request from Lender, Borrower shall promptly furnish to Lender:
      (i) a property management report for the Property, showing the number of
inquiries made and/or rental applications received from tenants or prospective
tenants and deposits received from tenants and any other information requested
by Lender, in reasonable detail and certified by Borrower under penalty of
perjury to be true and complete, but no more frequently than quarterly;
      (ii) an accounting of all security deposits held in connection with any
Lease of any part of the Property, including the name and identification number
of the accounts in which such security deposits are held, the name and address
of the financial institutions in which such security deposits are held and the
name of the Person to contact at such financial institution, along with any
authority or release necessary for Lender to obtain information regarding such
accounts directly from such financial institutions; and
      (iii) a report of all letters of credit provided by any Tenant in
connection with any Lease of any part of the Property, including the account
numbers of such letters of credit, the names and addresses of the financial
institutions that issued such letters of credit and the names of the Persons to
contact at such financial institutions, along with any authority or release
necessary for Lender to obtain information regarding such letters of credit
directly from such financial institutions.
     (c) Borrower and Borrower Principal shall furnish Lender with such other
additional financial or management information (including state and federal tax
returns) as may, from time to time, be reasonably required by Lender in form and
substance reasonably satisfactory to Lender (including, without limitation, any
financial reports required to be delivered by any Tenant or any guarantor of any
Lease pursuant to the terms of such Lease), and shall furnish to

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Lender and its agents convenient facilities for the examination and audit of any
such books and records.
     (d) All items requiring the certification of Borrower shall, except where
Borrower is an individual, require a certificate executed by the general
partner, managing member or chief executive officer of Borrower, as applicable
(and the same rules shall apply to any sole shareholder, general partner or
managing member which is not an individual).
     (e) Without limiting any other rights available to Lender under this Loan
Agreement or any of the other Loan Documents, in the event Borrower shall fail
to furnish Lender any financial document or statement in accordance with this
Section 5.11 on or before the applicable date specified herein, Borrower shall
promptly pay to Lender a non-refundable charge in the amount of $500 for each
such failure. The payment of such amount shall not be construed to relieve
Borrower of any Event of Default hereunder arising from such failure.
     Section 5.12 Estoppel Statement
     (a) After request by Lender, Borrower shall within ten (10) Business Days
furnish Lender with a statement, duly acknowledged and certified, setting forth
(i) the amount of the original principal amount of the Note, (ii) the rate of
interest on the Note, (iii) the unpaid principal amount of the Note, (iv) the
date installments of interest and/or principal were last paid, (v) any offsets
or defenses to the payment of the Debt, if any, and (vi) that the Note, this
Agreement, the Mortgage and the other Loan Documents are valid, legal and
binding obligations and have not been modified or if modified, giving
particulars of such modification.
     (b) Borrower shall use commercially reasonable efforts to deliver to
Lender, promptly upon request, duly executed estoppel certificates from any one
or more Tenants as required by Lender attesting to such facts regarding the
related Lease as Lender may require, including, but not limited to attestations
that each Lease covered thereby is in full force and effect with no defaults
thereunder on the part of any party, that none of the Rents have been paid more
than one month in advance, except as security, and that the Tenant claims no
defense or offset against the full and timely performance of its obligations
under the Lease.
     Section 5.13 Leasing Matters
     (a) Borrower may enter into a proposed Lease (including the renewal or
extension of an existing Lease (a “Renewal Lease”)) without the prior written
consent of Lender, provided such proposed Lease or Renewal Lease (i) provides
for rental rates and terms comparable to existing local market rates and terms
(taking into account the type and quality of the tenant) as of the date such
Lease is executed by Borrower (unless, in the case of a Renewal Lease, the rent
payable during such renewal, or a formula or other method to compute such rent,
is provided for in the original Lease), (ii) is an arm’s-length transaction with
a bona fide, independent third party tenant, (iii) does not have a materially
adverse effect on the value of the Property taken as a whole, (iv) is subject
and subordinate to the Mortgage and the Tenant thereunder agrees to attorn to
Lender, (v) does not contain any option, offer, right of first refusal, or other
similar right to acquire all or any portion of the Property, (vi) has a base
term of less than fifteen (15) years

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including options to renew, (vii) has no rent, credits, free rents or
concessions granted thereunder, and (viii) is written on Borrower’s standard
form of lease approved by Lender. All proposed Leases which do not satisfy the
requirements set forth in this subsection shall be subject to the prior approval
of Lender and its counsel (which approval shall not be unreasonably withheld,
conditioned or delayed), at Borrower’s expense. Borrower shall promptly deliver
to Lender copies of all Leases which are entered into pursuant to this
subsection together with Borrower’s certification that it has satisfied all of
the conditions of this Section.
     (b) Borrower (i) shall observe and perform all the obligations imposed upon
the landlord under the Leases and shall not do or permit to be done anything to
impair the value of any of the Leases as security for the Debt; (ii) shall
promptly send copies to Lender of all notices of default which Borrower shall
send or receive thereunder; (iii) shall enforce all of the material terms,
covenants and conditions contained in the Leases upon the part of the tenant
thereunder to be observed or performed; (iv) shall not collect any of the Rents
more than one (1) month in advance (except security deposits shall not be deemed
Rents collected in advance); (v) shall not execute any other assignment of the
landlord’s interest in any of the Leases or the Rents; and (vi) shall not
consent to any assignment of or subletting under any Leases not in accordance
with their terms, without the prior written consent of Lender.
     (c) Borrower may, without the prior written consent of Lender, amend,
modify or waive the provisions of any Lease or terminate, reduce Rents under,
accept a surrender of space under, or shorten the term of, any Lease (including
any guaranty, letter of credit or other credit support with respect thereto)
provided that such action (taking into account, in the case of a termination,
reduction in rent, surrender of space or shortening of term, the planned
alternative use of the affected space) does not have a materially adverse effect
on the value of the Property taken as a whole, and provided that such Lease, as
amended, modified or waived, is otherwise in compliance with the requirements of
this Agreement and any subordination agreement binding upon Lender with respect
to such Lease. A termination of a Lease with a tenant who is in default beyond
applicable notice and grace periods shall not be considered an action which has
a materially adverse effect on the value of the Property taken as a whole. Any
amendment, modification, waiver, termination, rent reduction, space surrender or
term shortening which does not satisfy the requirements set forth in this
subsection shall be subject to the prior approval of Lender and its counsel (in
each case not to be unreasonably withheld, conditioned or delayed), at
Borrower’s expense. Borrower shall promptly deliver to Lender copies of
amendments, modifications and waivers which are entered into pursuant to this
subsection together with Borrower’s certification that it has satisfied all of
the conditions of this subsection.
     (d) Notwithstanding anything contained herein to the contrary, Borrower
shall not, without the prior written consent of Lender, enter into, renew,
extend, amend, modify, waive any provisions of, terminate, reduce Rents under,
accept a surrender of space under, or shorten the term of any Major Lease.
     (e) Notwithstanding anything contained herein to the contrary, Borrower
shall not, without the prior written consent of Lender, enter into, renew,
extend, amend, modify, waive any provisions of, terminate, reduce Rents under,
accept a surrender of space under, or shorten the term of any Lease during a
Cash Management Period.

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     Section 5.14 Property Management
     (a) Borrower shall (i) promptly perform and observe all of the covenants
required to be performed and observed by it under the Management Agreement and
do all things necessary to preserve and to keep unimpaired its material rights
thereunder; (ii) promptly notify Lender of any default under the Management
Agreement of which it is aware; (iii) promptly deliver to Lender a copy of any
notice of default or other material notice received by Borrower under the
Management Agreement; (iv) promptly give notice to Lender of any notice or
information that Borrower receives which indicates that Manager is terminating
the Management Agreement or that Manager is otherwise discontinuing its
management of the Property; and (v) promptly enforce the performance and
observance of all of the covenants required to be performed and observed by
Manager under the Management Agreement.
     (b) If at any time, (i) Manager shall become insolvent or a debtor in a
bankruptcy proceeding; (ii) an Event of Default has occurred and is continuing;
or (iii) a default has occurred and is continuing under the Management
Agreement, Borrower shall, at the request of Lender terminate the Management
Agreement upon thirty (30) days prior notice to Manager and replace Manager with
a manager approved by Lender on terms and conditions satisfactory to Lender, it
being understood and agreed that the management fee for such replacement manager
shall not exceed then prevailing market rates.
     (c) In addition to the foregoing, in the event that Lender, in Lender’s
reasonable discretion, at any time prior to the termination of the Assignment of
Management Agreement, determines that the Property is not being managed in
accordance with generally accepted management practices for projects similarly
situated, Lender may deliver written notice thereof to Borrower and Manager,
which notice shall specify with particularity the grounds for Lender’s
determination. If Lender reasonably determines that the conditions specified in
Lender’s notice are not remedied to Lender’s reasonable satisfaction by Borrower
or Manager within thirty (30) days from the date of such notice or that Borrower
or Manager have failed to diligently undertake correcting such conditions within
such thirty (30) day period, Lender may direct Borrower to terminate the
Management Agreement and to replace Manager with a manager approved by Lender on
terms and conditions satisfactory to Lender, it being understood and agreed that
the management fee for such replacement manager shall not exceed then prevailing
market rates.
     (d) Borrower shall not, without the prior written consent of Lender (which
consent shall not be unreasonably withheld, conditioned or delayed):
(i) surrender, terminate or cancel the Management Agreement or otherwise replace
Manager or enter into any other management agreement with respect to the
Property; (ii) reduce or consent to the reduction of the term of the Management
Agreement; (iii) increase or consent to the increase of the amount of any
charges under the Management Agreement; or (iv) otherwise modify, change,
supplement, alter or amend, or waive or release any of its rights and remedies
under, the Management Agreement in any material respect.

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     Section 5.15 Liens
     Borrower shall not, without the prior written consent of Lender, create,
incur, assume or suffer to exist any Lien on any portion of the Property or
permit any such action to be taken, except Permitted Encumbrances.
     Section 5.16 Debt Cancellation
     Borrower shall not cancel or otherwise forgive or release any claim or debt
(other than termination of Leases in accordance herewith) owed to Borrower by
any Person, except for adequate consideration and in the ordinary course of
Borrower’s business.
     Section 5.17 Zoning
     Borrower shall not initiate or consent to any zoning reclassification of
any portion of the Property or seek any variance under any existing zoning
ordinance or use or permit the use of any portion of the 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.
     Section 5.18 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)
to be a non-exempt (under a statutory or administrative class exemption)
prohibited transaction under ERISA.
     (b) Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of the
Loan, as requested by Lender in its sole discretion, that (i) Borrower is not
and does not maintain an “employee benefit plan” as defined in Section 3(3) of
ERISA, which is subject to Title I of ERISA, or a “governmental plan” within the
meaning of Section 3(3) of ERISA; (ii) Borrower is not subject to state statutes
regulating investments and fiduciary obligations with respect to governmental
plans; and (iii) one or more of the following circumstances is true:
      (A) Equity interests in Borrower are publicly offered securities, within
the meaning of 29 C.F.R. §2510.3-101(b)(2);
      (B) Less than twenty-five percent (25%) of each outstanding class of
equity interests in Borrower are held by “benefit plan investors” within the
meaning of 29 C.F.R. §2510.3-101(f)(2); or
      (C) Borrower qualifies as an “operating company” or a “real estate
operating company” within the meaning of 29 C.F.R. §2510.3-101(c) or (e).

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     Section 5.19 No Joint Assessment
     Borrower shall not suffer, permit or initiate the joint assessment of the
Property with (a) any other real property constituting a tax lot separate from
the Property, or (b) any portion of the Property which may be deemed to
constitute personal property, or any other procedure whereby the Lien of any
taxes which may be levied against such personal property shall be assessed or
levied or charged to the Property.
     Section 5.20 Reciprocal Easement Agreements
     Borrower shall not enter into, terminate or modify any REA without Lender’s
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed. Borrower shall enforce, comply with, and cause each of
the parties to the REA to comply with all of the material economic terms and
conditions contained in the REA.
     Section 5.21 Alterations
     Lender’s prior approval shall be required in connection with any
alterations to any Improvements, exclusive of alterations to tenant spaces
required under any Lease, (a) that may have a material adverse effect on the
Property, (b) that are structural in nature or (c) that, together with any other
alterations undertaken at the same time (including any related alterations,
improvements or replacements), are reasonably anticipated to have a cost in
excess of the Alteration Threshold. 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 any of the following: (i) cash,
(ii) direct non-callable obligations of the United States of America or other
obligations which are “government securities” within the meaning of
Section 2(a)(16) of the Investment Company Act of 1940, to the extent acceptable
to the applicable Rating Agencies, (iii) other securities acceptable to Lender
and the Rating Agencies, or (iv) a completion bond, provided that such
completion bond is acceptable to the Lender and the Rating Agencies. Such
security shall be in an amount equal to the excess of the total unpaid amounts
incurred and to be incurred with respect to such alterations to the Improvements
over the Alteration Threshold.
     Section 5.22 Fire Extinguisher Inspection
     Borrower shall provide to Lender within sixty (60) calendar days of the
Closing Date evidence that the Little Arch Tenant has obtained inspection of its
fire extinguishers on the Little Arch Property and that the fire extinguishers
passed inspection.

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ARTICLE 6
ENTITY COVENANTS
     Section 6.1 Single Purpose Entity/Separateness
     Until the Debt has been paid in full, Borrower represents, warrants and
covenants as follows:
     (a) Borrower has not and will not:
      (i) engage in any business or activity other than the ownership, operation
and maintenance of the Property, and activities incidental thereto;
      (ii) acquire or own any assets other than (A) the Property, and (B) such
incidental Personal Property as may be necessary for the operation of the
Property;
      (iii) merge into or consolidate with any Person, or dissolve, terminate,
liquidate in whole or in part, transfer or otherwise dispose of all or
substantially all of its assets or change its legal structure;
      (iv) fail to observe all organizational formalities, or fail to preserve
its existence as an entity duly organized, validly existing and in good standing
(if applicable) under the applicable Legal Requirements of the jurisdiction of
its organization or formation, or amend, modify, terminate or fail to comply
with the provisions of its organizational documents;
      (v) own any subsidiary, or make any investment in, any Person;
      (vi) commingle its assets with the assets of any other Person, or permit
any Affiliate or constituent party independent access to its bank accounts;
      (vii) incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than (A) the Debt, (B) trade and
operational indebtedness incurred in the ordinary course of business with trade
creditors, provided such indebtedness is (1) unsecured, (2) not evidenced by a
note, (3) on commercially reasonable terms and conditions, and (4) due not more
than sixty (60) days past the date incurred and paid on or prior to such date,
and/or (C) financing leases and purchase money indebtedness incurred in the
ordinary course of business relating to Personal Property on commercially
reasonable terms and conditions; provided however, the aggregate amount of the
indebtedness described in (B) and (C) shall not exceed at any time three percent
(3%) of the outstanding principal amount of the Note;
      (viii) fail to maintain its records, books of account, bank accounts,
financial statements, accounting records and other entity documents separate and
apart from those of any other Person; except that Borrower’s financial position,
assets, liabilities, net

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worth and operating results may be included in the consolidated financial
statements of an Affiliate, provided that such consolidated financial statements
contain a footnote indicating that Borrower is a separate legal entity and that
it maintains separate books and records;
      (ix) enter into any contract or agreement with any general partner,
member, shareholder, principal, guarantor of the obligations of Borrower, or any
Affiliate of the foregoing, except upon terms and conditions that are
intrinsically fair, commercially reasonable and substantially similar to those
that would be available on an arm’s-length basis with unaffiliated third
parties;
      (x) maintain its assets in such a manner that it will be costly or
difficult to segregate, ascertain or identify its individual assets from those
of any other Person;
      (xi) assume or guaranty the debts of any other Person, hold itself out to
be responsible for the debts of any other Person, or otherwise pledge its assets
for the benefit of any other Person or hold out its credit as being available to
satisfy the obligations of any other Person;
      (xii) make any loans or advances to any Person;
      (xiii) fail to file its own tax returns or files a consolidated federal
income tax return with any Person (unless prohibited or required, as the case
may be, by applicable Legal Requirements);
      (xiv) fail either to hold itself out to the public as a legal entity
separate and distinct from any other Person or to conduct its business solely in
its own name or fail to correct any known misunderstanding regarding its
separate identity;
      (xv) fail to maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations;
      (xvi) if it is a partnership or limited liability company, without the
unanimous written consent of all of its partners or members, as applicable, and
the written consent of 100% of the managers of Borrower, (a) file or consent to
the filing of any petition, either voluntary or involuntary, to take advantage
of any Creditors Rights Laws, (b) seek or consent to the appointment of a
receiver, liquidator or any similar official, (c) take any action that might
cause such entity to become insolvent, or (d) make an assignment for the benefit
of creditors;
      (xvii) fail to allocate shared expenses (including, without limitation,
shared office space and services performed by an employee of an Affiliate) among
the Persons sharing such expenses and to use separate stationery, invoices and
checks;

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      (xviii) fail to remain solvent or pay its own liabilities (including,
without limitation, salaries of its own employees) only from its own funds,
provided that there are sufficient funds from the operation of the Property to
do so;
      (xix) acquire obligations or securities of its partners, members,
shareholders or other affiliates, as applicable;
      (xx) violate or cause to be violated the assumptions made with respect to
Borrower and its principals in any opinion letter pertaining to substantive
consolidation delivered to Lender in connection with the Loan; or
      (xxi) fail to maintain a sufficient number of employees in light of its
contemplated business operations.
     (b) If Borrower is a limited partnership or limited liability company
(other than a single-member Delaware limited liability company satisfying the
requirements of Section 6.1(c) below), each general partner in the case of a
limited partnership, or the managing member in the case of a limited liability
company (each an “SPE Component Entity”) of Borrower, as applicable, shall be a
corporation whose sole asset is its interest in Borrower. Each SPE Component
Entity (i) will at all times comply with each of the covenants, terms and
provisions contained in Section 6.1(a)(iii) — (vi) and (viii) — (xxi), as if
such representation, warranty or covenant was made directly by such SPE
Component Entity; (ii) will not engage in any business or activity other than
owning an interest in Borrower; (iii) will not acquire or own any assets other
than its partnership, membership, or other equity interest in Borrower;
(iv) will not incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation); and (v) will cause Borrower to comply
with the provisions of this Section 6.1. Prior to the withdrawal or the
disassociation of any SPE Component Entity from Borrower, Borrower shall
immediately appoint a new general partner or managing member whose articles of
incorporation are substantially similar to those of such SPE Component Entity
and, if an opinion letter pertaining to substantive consolidation was required
at closing, deliver a new opinion letter acceptable to Lender and the Rating
Agencies with respect to the new SPE Component Entity and its equity owners.
Notwithstanding the foregoing, to the extent Borrower is a single member
Delaware limited liability company, so long as Borrower maintains such formation
status, no SPE Component Entity shall be required and the following subsection
(c) shall apply.
     (c) In the event Borrower is a single-member Delaware limited liability
company, the limited liability company agreement of Borrower (the “LLC
Agreement”) shall provide that (i) upon the occurrence of any event that causes
the sole member of Borrower (“Member”) to cease to be the member of Borrower
(other than (A) upon an assignment by Member of all of its limited liability
company interest in Borrower and the admission of the transferee, or (B) the
resignation of Member and the admission of an additional member, in either case
in accordance with the terms of the Loan Documents and the LLC Agreement), the
person executing the LLC Agreement as a “Special Member” (as such term is
defined in the LLC Agreement) (“Special Member”) shall, without any action of
any other Person and simultaneously with the Member ceasing to be the member of
Borrower, automatically be admitted to Borrower and shall continue Borrower
without dissolution and (ii) Special Member may not resign from Borrower or
transfer

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its rights as Special Member unless a successor Special Member has been admitted
to Borrower as Special Member in accordance with requirements of Delaware law.
The LLC Agreement shall further provide that (i) Special Member shall
automatically cease to be a member of Borrower upon the admission to Borrower of
a substitute Member, (ii) Special Member shall be a member of Borrower that has
no interest in the profits, losses and capital of Borrower and has no right to
receive any distributions of Borrower assets, (iii) pursuant to Section 18-301
of the Delaware Limited Liability Company Act (the “Act”), Special Member shall
not be required to make any capital contributions to Borrower and shall not
receive a limited liability company interest in Borrower, (iv) Special Member,
in its capacity as Special Member, may not bind Borrower, and (v) except as
required by any mandatory provision of the Act, Special Member, in its capacity
as Special Member, shall have no right to vote on, approve or otherwise consent
to any action by, or matter relating to, Borrower, including, without
limitation, the merger, consolidation or conversion of Borrower. In order to
implement the admission to Borrower of Special Member, Special Member shall
execute a counterpart to the LLC Agreement. Prior to its admission to Borrower
as Special Member, Special Member shall not be a member of Borrower.
     (d) Upon the occurrence of any event that causes the Member to cease to be
a member of Borrower, to the fullest extent permitted by law, the personal
representative of Member shall, within ninety (90) days after the occurrence of
the event that terminated the continued membership of Member in Borrower, agree
in writing (i) to continue Borrower and (ii) to the admission of the personal
representative or its nominee or designee, as the case may be, as a substitute
member of Borrower, effective as of the occurrence of the event that terminated
the continued membership of Member of Borrower in Borrower. Any action initiated
by or brought against Member or Special Member under any Creditors Rights Laws
shall not cause Member or Special Member to cease to be a member of Borrower and
upon the occurrence of such an event, the business of Borrower shall continue
without dissolution. The LLC Agreement shall provided that each of Member and
Special Member waives any right it might have to agree in writing to dissolve
Borrower upon the occurrence of any action initiated by or brought against
Member or Special Member under any Creditors Rights Laws, or the occurrence of
an event that causes Member or Special Member to cease to be a member of
Borrower.
     Section 6.2 Change of Name, Identity or Structure
     Borrower shall not change or permit to be changed (a) Borrower’s name,
(b) Borrower’s identity (including its trade name or names), (c) Borrower’s
principal place of business set forth on the first page of this Agreement,
(d) the corporate, partnership or other organizational structure of Borrower,
each SPE Component Entity (if any), or Borrower Principal, (e) Borrower’s state
of organization, or (f) Borrower’s organizational identification number, without
in each case notifying Lender of such change in writing at least thirty
(30) days prior to the effective date of such change and, in the case of a
change in Borrower’s structure, without first obtaining the prior written
consent of Lender. In addition, Borrower shall not change or permit to be
changed any organizational documents of Borrower or any SPE Component Entity (if
any) if such change would adversely impact the covenants set forth in
Section 6.1 hereof. Borrower authorizes Lender to file any financing statement
or financing statement amendment required by Lender to establish or maintain the
validity, perfection and priority of the security interest granted herein. At
the request of Lender, Borrower shall execute a certificate in form

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satisfactory to Lender listing the trade names under which Borrower intends to
operate the Property, and representing and warranting that Borrower does
business under no other trade name with respect to the Property. If Borrower
does not now have an organizational identification number and later obtains one,
or if the organizational identification number assigned to Borrower subsequently
changes, Borrower shall promptly notify Lender of such organizational
identification number or change.
     Section 6.3 Business and Operations
     Borrower will qualify to do business and will remain in good standing under
the laws of the State as and to the extent the same are required for the
ownership, maintenance, management and operation of the Property.
ARTICLE 7
NO SALE OR ENCUMBRANCE
     Section 7.1 Transfer Definitions
     For purposes of this Article 7 an “Affiliated Manager” shall mean any
managing agent in which Borrower, Borrower Principal, any SPE Component Entity
(if any) or any affiliate of such entities has, directly or indirectly, any
legal, beneficial or economic interest; “Control” shall mean the power to direct
the management and policies of a Restricted Party, directly or indirectly,
whether through the ownership of voting securities or other beneficial
interests, by contract or otherwise; “Restricted Party” shall mean Borrower, any
Borrower Principal other than Gladstone Commercial Corporation or Gladstone
Commercial Limited Partnership, any SPE Component Entity (if any), any
Affiliated Manager, or any shareholder, partner, member or non-member manager,
or any direct or indirect legal or beneficial owner of Borrower, any Borrower
Principal other than Gladstone Commercial Corporation or Gladstone Commercial
Limited Partnership, any SPE Component Entity (if any), any Affiliated Manager
or any non-member manager; and a “Sale or Pledge” shall mean a voluntary or
involuntary sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, grant of any options with respect to, or any other transfer or
disposition of (directly or indirectly, voluntarily or involuntarily, by
operation of law or otherwise, and whether or not for consideration or of
record) of a legal or beneficial interest.
     Section 7.2 No Sale/Encumbrance
     (a) Borrower shall not cause or permit a Sale or Pledge of the Property or
any part thereof or any legal or beneficial interest therein nor permit a Sale
or Pledge of an interest in any Restricted Party (in each case, a “Prohibited
Transfer”), other than pursuant to Leases of space in the Improvements to
Tenants in accordance with the provisions of Section 5.13, without the prior
written consent of Lender.

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     (b) A Prohibited Transfer shall include, but not be limited to, (i) an
installment sales agreement wherein Borrower agrees to sell the Property or any
part thereof for a price to be paid in installments; (ii) an agreement by
Borrower leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower’s right, title and interest
in and to any Leases or any Rents; (iii) if a Restricted Party is a corporation,
any merger, consolidation or Sale or Pledge of such corporation’s stock or the
creation or issuance of new stock in one or a series of transactions; (iv) if a
Restricted Party is a limited or general partnership or joint venture, any
merger or consolidation or the change, removal, resignation or addition of a
general partner or the Sale or Pledge of the partnership interest of any general
or limited partner or any profits or proceeds relating to such partnership
interests or the creation or issuance of new partnership interests; (v) if a
Restricted Party is a limited liability company, any merger or consolidation or
the change, removal, resignation or addition of a managing member or non-member
manager (or if no managing member, any member) or the Sale or Pledge of the
membership interest of any member or any profits or proceeds relating to such
membership interest; (vi) if a Restricted Party is a trust or nominee trust, any
merger, consolidation or the Sale or Pledge of the legal or beneficial interest
in a Restricted Party or the creation or issuance of new legal or beneficial
interests; or (vii) the removal or the resignation of Manager (including,
without limitation, an Affiliated Manager) other than in accordance with
Section 5.14.
     Section 7.3 Permitted Transfers
     Notwithstanding the provisions of Section 7.2, the following transfers
shall not be deemed to be a Prohibited Transfer: (a) a transfer by devise or
descent or by operation of law upon the death of a member, partner or
shareholder of a Restricted Party; so long as Borrower delivers notice to Lender
as soon as practicable thereafter and that such Restricted Party is promptly
reconstituted, if applicable, following the death of such member, partner or
shareholder and there is no change in Control of such Restricted Party as a
result of such transfer; (b) transfers for estate planning purposes of an
individual’s interests in any Restricted Party to the spouse or any lineal
descendant of such individual, or to a trust for the benefit of any one or more
of such individual, spouse or lineal descendant, so long as such Restricted
Party is reconstituted, if required, following such transfer and there is no
change in Control of such Restricted Party as a result of such transfer; or
(c) the Sale or Pledge, in one or a series of transactions, of not more than
forty-nine percent (49%) of the stock, limited partnership interests or
non-managing membership interests (as the case may be) in a Restricted Party;
provided, however, no such transfers shall result in a change in Control in the
Restricted Party or change in control of the Property, and as a condition to
each such transfer, Lender shall receive not less than thirty (30) days prior
written notice of such proposed transfer; Notwithstanding anything to the
contrary contained in this Section 7.3, Gladstone Commercial Limited Partnership
(or its successor by merger or consolidation) shall continue to own, directly or
indirectly, at least a 51% ownership in and control Borrower.
     Section 7.4 Lender’s Rights
     Lender reserves the right to condition the consent to a Prohibited Transfer
requested hereunder upon (a) a modification of the terms hereof and an
assumption of the Note and the

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other Loan Documents as so modified by the proposed Prohibited Transfer,
(b) receipt of payment of a transfer fee equal to one percent (1%) of the
outstanding principal balance of the Loan and all of Lender’s expenses incurred
in connection with such Prohibited Transfer, (c) receipt of written confirmation
from the Rating Agencies that the Prohibited Transfer will not result in a
downgrade, withdrawal or qualification of the initial, or if higher, then
current ratings issued in connection with a Securitization, or if a
Securitization has not occurred, any ratings to be assigned in connection with a
Securitization, (d) the proposed transferee’s continued compliance with the
covenants set forth in this Agreement (including, without limitation, the
covenants in Article 6) and the other Loan Documents, (e) a new manager for the
Property and a new management agreement satisfactory to Lender, and (f) the
satisfaction of such other conditions and/or legal opinions as Lender shall
determine in its sole discretion to be in the interest of Lender. All expenses
incurred by Lender shall be payable by Borrower whether or not Lender consents
to the Prohibited Transfer. Lender shall not be required to demonstrate any
actual impairment of its security or any increased risk of default hereunder in
order to declare the Debt immediately due and payable upon a Prohibited Transfer
made without Lender’s consent. This provision shall apply to each and every
Prohibited Transfer, whether or not Lender has consented to any previous
Prohibited Transfer. In the event an opinion letter pertaining to substantive
consolidation was delivered to Lender and the Rating Agencies in connection with
the closing of the Loan, and if any Sale or Pledge permitted under this
Article 7 results in any Person and its Affiliates owning in excess of
forty-nine percent (49%) of the ownership interests in a Restricted Party,
Borrower shall, prior to such transfer, and in addition to any other requirement
for Lender consent contained herein, deliver a revised opinion letter pertaining
to substantive consolidation to Lender reflecting such Prohibited Transfer,
which opinion shall be in form, scope and substance acceptable in all respects
to Lender and the Rating Agencies.
     Section 7.5 Assumption
     Notwithstanding the foregoing provisions of this Article 7, following the
date which is six (6) months from the Closing Date, Lender shall not
unreasonably withhold consent to a transfer of the Property in its entirety to,
and the related assumption of the Loan by, any Person (a “Transferee”) provided
that each of the following terms and conditions are satisfied:
     (a) no Default or Event of Default has occurred;
     (b) Borrower shall have (i) delivered written notice to Lender of the terms
of such prospective transfer not less than sixty (60) days before the date on
which such transfer is scheduled to close and, concurrently therewith, all such
information concerning the proposed Transferee as Lender shall reasonably
require and (ii) paid to Lender a non-refundable processing fee in the amount of
$10,000. Lender shall have the right to approve or disapprove the proposed
transfer based on its then current underwriting and credit requirements for
similar loans secured by similar properties which loans are sold in the
secondary market, such approval not to be unreasonably withheld. In determining
whether to give or withhold its approval of the proposed transfer, Lender shall
consider the experience and track record of Transferee and its principals in
owning and operating facilities similar to the Property, the financial strength
of Transferee and its principals, the general business standing of Transferee
and its principals and Transferee’s and its principals’ relationships and
experience with contractors, vendors, tenants,

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lenders and other business entities; provided, however, that, notwithstanding
Lender’s agreement to consider the foregoing factors in determining whether to
give or withhold such approval, such approval shall be given or withheld based
on what Lender determines to be commercially reasonable and, if given, may be
given subject to such conditions as Lender may deem reasonably appropriate;
     (c) Borrower shall have paid to Lender, concurrently with the closing of
such transfer, (i) a non-refundable assumption fee in an amount equal to one
percent (1.0%) of the then outstanding principal balance of the Note, and
(ii) all out-of-pocket costs and expenses, including reasonable attorneys’ fees,
incurred by Lender in connection with the transfer;
     (d) (i) Transferee shall have assumed and agreed to pay the Debt as and
when due subject to the provisions of Article 15 hereof and, prior to or
concurrently with the closing of such transfer, Transferee and its constituent
partners, members or shareholders as Lender may require, shall have executed,
without any cost or expense to Lender, such documents and agreements as Lender
shall reasonably require to evidence and effectuate said assumption and (ii) if
required by Lender, a Person affiliated with Transferee and acceptable to Lender
shall have assumed the obligations of Borrower Principal under the Loan
Documents with respect to all acts and events occurring or arising after the
transfer of the Property pursuant to this Section 7.5;
     (e) Borrower and Transferee, without any cost to Lender, shall furnish any
information requested by Lender for the preparation of, and shall authorize
Lender to file, new financing statements and financing statement amendments and
other documents to the fullest extent permitted by applicable law, and shall
execute any additional documents reasonably requested by Lender;
     (f) Borrower shall have delivered to Lender, without any cost or expense to
Lender, such endorsements to Lender’s Title Insurance Policy insuring that fee
simple or leasehold title to the Property, as applicable, is vested in
Transferee (subject to Permitted Encumbrances), hazard insurance endorsements or
certificates and other similar materials as Lender may deem necessary at the
time of the transfer, all in form and substance satisfactory to Lender;
     (g) Transferee shall have furnished to Lender, if Transferee is a
corporation, partnership, limited liability company or other entity, all
appropriate papers evidencing Transferee’s organization and good standing, and
the qualification of the signers to execute the assumption of the Debt, which
papers shall include certified copies of all documents relating to the
organization and formation of Transferee and of the entities, if any, which are
partners or members of Transferee. Transferee and such constituent partners,
members or shareholders of Transferee (as the case may be), as Lender shall
require, shall comply with the covenants set forth in Article 6 hereof;
     (h) Transferee shall assume the obligations of Borrower under any
Management Agreement or provide a new management agreement with a new manager
which meets with the requirements of Section 5.14 hereof and assign to Lender as
additional security such new management agreement;

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     (i) Transferee shall furnish an opinion of counsel reasonably satisfactory
to Lender and its counsel (A) that Transferee’s formation documents provide for
the matters described in subparagraph (g) above, (B) that the assumption of the
Debt has been duly authorized, executed and delivered, and that the Note, the
Mortgage, this Agreement, the assumption agreement and the other Loan Documents
are valid, binding and enforceable against Transferee in accordance with their
terms, (C) that Transferee and any entity which is a controlling stockholder,
member or general partner of Transferee, have been duly organized, and are in
existence and good standing, and (E) with respect to such other matters as
Lender may reasonably request;
     (j) if required by Lender, Lender shall have received confirmation in
writing from the Rating Agencies that rate the Securities to the effect that the
transfer will not result in a qualification, downgrade or withdrawal of any
rating initially assigned or to be assigned to the Securities;
     (k) Borrower’s obligations under the contract of sale pursuant to which the
transfer is proposed to occur shall expressly be subject to the satisfaction of
the terms and conditions of this Section 7.5; and
     (l) in the event a substantive non-consolidation opinion was required in
connection with the closing of the Loan, Transferee shall, prior to such
transfer, deliver a substantive non-consolidation opinion to Lender, which
opinion shall be in form, scope and substance acceptable in all respects to
Lender and the Rating Agencies.
     In connection with and as a condition precedent to Lender’s approval of any
assumption and transfer of the Property, except to the extent the new Borrower
Principal in connection with any such assumption has a net worth and liquidity
equal to or better than the net worth and liquidity of Gladstone Commercial
Corporation as of the Closing Date, Lender reserves the right to require any
Transferee to post all cash deposits or letters of credit required or which,
upon the occurrence of certain events or conditions, could subsequently be
required or which are otherwise contemplated by the terms of any provision of
this Agreement, irrespective of whether such events or conditions have occurred
such that the then current Borrower would be required to post such deposits or
letters of credit. Without limiting the foregoing, all letters of credit shall
satisfy the Letter of Credit Requirements.
     A consent by Lender with respect to a transfer of the Property in its
entirety to, and the related assumption of the Loan by, a Transferee pursuant to
this Section 7.5 shall not be construed to be a waiver of the right of Lender to
consent to any subsequent Sale or Pledge of the Property. Upon the transfer of
the Property pursuant to this Section 7.5, Borrower and Borrower Principal shall
be relieved of all liability under the Loan Documents for acts, events,
conditions, or circumstances occurring or arising after the date of such
transfer, except to the extent that such acts, events, conditions, or
circumstances are the proximate result of acts, events, conditions, or
circumstances that existed prior to the date of such transfer, whether or not
discovered prior or subsequent to the date of such transfer.

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ARTICLE 8
INSURANCE; CASUALTY; CONDEMNATION; RESTORATION
     Section 8.1 Insurance
     (a) Borrower shall obtain and maintain, or cause to be maintained, at all
times insurance for Borrower and the Property providing at least the following
coverages:
      (i) comprehensive “special causes of loss” form of insurance (or its
equivalent) on the Improvements and the Personal Property (A) in an amount equal
to not less than 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); (B) written on a replacement cost basis and containing either an
agreed amount endorsement with respect to the Improvements and Personal Property
or a waiver of all co-insurance provisions; (C) providing for no deductible in
excess of $25,000 with respect to the Little Arch Property and $100,000 with
respect to the AFL Property for all such insurance coverage; (D) at all times
insuring against at least those hazards that are commonly insured against under
a “special causes of loss” form of policy, as the same shall exist on the date
hereof, and together with any increase in the scope of coverage provided under
such form after the date hereof; and (E) if any of the Improvements or the use
of the Property shall at any time constitute legal non-conforming structures or
uses, providing coverage for contingent liability from Operation of Building
Laws, Demolition Costs and Increased Cost of Construction Endorsements and
containing an “Ordinance or Law Coverage” or “Enforcement” endorsement. In
addition, Borrower shall obtain: (y) if any portion of the Improvements is
currently or at any time in the future located in a “special flood hazard area”
designated by the Federal Emergency Management Agency, flood hazard insurance in
an amount equal to the maximum amount of such insurance available under the
National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973
or the National Flood Insurance Reform Act of 1994, as each may be amended; and
(z) earthquake insurance in amounts and in form and substance reasonably
satisfactory to Lender in the event the Property is located in an area with a
high degree of seismic risk, provided that the insurance pursuant to clauses
(y) and (z) hereof shall be on terms consistent with the special causes of loss
form 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 the
Property, with such insurance (A) to be on the so-called “occurrence” form with
a general aggregate limit of not less than $2,000,000 and a per occurrence limit
of not less than $1,000,000; (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; (3) independent contractors; and (4) contractual liability;

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      (iii) loss of rents insurance or business income insurance, as applicable,
(A) with loss payable to Lender; (B) covering all risks required to be covered
by the insurance provided for in subsection (i) above; and (C) which provides
that after the physical loss to the Improvements and Personal Property occurs,
the loss of rents or income, as applicable, will be insured until completion of
Restoration, or the expiration of eighteen (18) months, whichever first occurs,
and notwithstanding that the policy may expire prior to the end of such period;
and (D) which contains 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 will be insured until such
income either returns to the same level it was at prior to the loss, or the
expiration of six (6) months from the date that the 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. For hotels, motels,
health care, and other property types without a standard rent roll, the amount
of business income insurance required shall be not less than twenty-four
(24) months of debt service, taxes, insurance, and other fixed expenses. The
amount of such loss of rents or business income insurance, as applicable, shall
be determined prior to the date hereof and at least once each year thereafter
based on Borrower’s reasonable estimate of the gross income from the Property
for the succeeding period of coverage as required above. 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, this Agreement and the other Loan Documents except to
the extent such amounts are actually paid out of the proceeds of such loss of
rents or business income insurance, as applicable;
      (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 “special causes of loss” insured against pursuant to subsection
(i) above, (3) including permission to occupy the Property, and (4) with an
agreed amount endorsement waiving co-insurance provisions;
      (v) workers’ compensation, subject to the statutory limits of the State,
and employer’s liability insurance in respect of any work or operations on or
about the Property, or in connection with the Property or its operation (if
applicable);
      (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;

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      (vii) excess liability insurance in an amount not less than $10,000,000
per occurrence on terms consistent with the commercial general liability
insurance required under subsection (ii) above; and
      (viii) upon sixty (60) days’ written notice, such other reasonable
insurance and in such reasonable amounts as Lender from time to time may
reasonably request against such other insurable hazards which at the time are
commonly insured against for property similar to the Property located in or
around the region in which the Property is located.
     (b) All insurance provided for in Section 8.1(a) shall be obtained under
valid and enforceable policies (collectively, the “Policies” or in the singular,
the “Policy”), and shall be subject to the approval of Lender as to insurance
companies, amounts, deductibles, loss payees and insureds. The Policies shall be
issued by financially sound and responsible insurance companies authorized to do
business in the State and having a claims paying ability rating of “BBB” or
better by S&P and “Baa2” by Moody’s (or such other ratings promulgated from time
to time by S&P and Moody’s for properties and transactions similar in type and
size to the Property and the Loan) and/or a general policy rating of “A” or
better and a financial class of VIII or better by A.M. Best Company, Inc. The
Policies described in Section 8.1(a) shall designate Lender and its successors
and assigns as additional insureds, mortgagees and/or loss payee as deemed
appropriate by Lender. To the extent such Policies are not available as of the
Closing Date, Borrower shall deliver to Lender prior to the Closing Date an
Acord 28 or similar certificate of insurance evidencing the coverages and
amounts required hereunder and, upon request of Lender as soon as available
after the Closing Date, certified copies of all Policies. Not less than ten
(10) days prior to the expiration dates of any insurance coverage in place with
respect to the Property, Borrower shall deliver to Lender an Acord 28 or similar
certificate, accompanied by evidence satisfactory to Lender of payment of the
premiums due in connection therewith (the “Insurance Premiums”) and, as soon as
available thereafter, certified copies of all renewal Policies.
     (c) Any blanket insurance Policy shall specifically allocate to the
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 Property in compliance with the provisions of Section 8.1(a).
     (d) All Policies provided for or contemplated by Section 8.1(a), except for
the Policy referenced in Section 8.1(a)(v), shall name Borrower as the insured
and Lender as the additional insured, as its interests may appear, and in the
case of property damage, boiler and machinery, flood and earthquake insurance,
shall contain a so-called New York standard non-contributing mortgagee clause in
favor of Lender providing that the loss thereunder shall be payable to Lender.
     (e) All Policies provided for in Section 8.1(a) shall contain clauses or
endorsements to the effect that:
      (i) no act or negligence of Borrower, or anyone acting for Borrower, or of
any Tenant or other occupant, or failure to comply with the provisions of any
Policy,

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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 Policies shall not be materially changed (other than to increase
the coverage provided thereby) or canceled by the insurer without at least
thirty (30) days’ (ten (10) days’ in the case of non-payment of premium) prior
written notice to Lender and any other party named therein as an additional
insured;
      (iii) the issuers thereof shall give written notice to Lender if the
Policies have not been renewed thirty (30) days prior to its expiration;
      (iv) Lender shall not be liable for any Insurance Premiums thereon or
subject to any assessments thereunder; and
      (v) the Policies do not contain an exclusion for acts of terrorism or,
solely with respect to the AFL Property, certified acts of terrorism.
     (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 Property, including, without limitation,
obtaining such insurance coverage as Lender in its sole discretion deems
appropriate. 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.
     Section 8.2 Casualty
     If the Property shall be damaged or destroyed, in whole or in part, by fire
or other casualty (a “Casualty”), Borrower shall give prompt notice of such
damage to Lender and shall promptly commence and diligently prosecute the
Restoration of the Property in accordance with Section 8.4, to the extent Net
Proceeds are made available by Lender or if Borrower is required to do so
pursuant to the terms of any Lease. Borrower shall pay all costs of such
Restoration whether or not such costs are covered by insurance. Lender may, but
shall not be obligated to make proof of loss if not made promptly by Borrower.
Borrower shall adjust all claims for Insurance Proceeds in consultation with,
and approval of, Lender; provided, however, if an Event of Default has occurred
and is continuing, Lender shall have the exclusive right to participate in the
adjustment of all claims for Insurance Proceeds.
     Section 8.3 Condemnation
     Borrower shall promptly give Lender notice of the actual or threatened
commencement of any proceeding for the Condemnation of the Property of which
Borrower has knowledge and shall deliver to Lender copies of any and all papers
served in connection with such proceedings. Lender may participate in any such
proceedings, and Borrower shall from time to time deliver to

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Lender all instruments requested by it to permit such participation. Borrower
shall, at its expense, diligently prosecute any such proceedings, and shall
consult with Lender, its attorneys and experts, and cooperate with them in the
carrying on or defense of any such proceedings. Notwithstanding any taking by
any public or quasi-public authority through Condemnation or otherwise
(including but not limited to any transfer made in lieu of or in anticipation of
the exercise of such taking), Borrower shall continue to pay the Debt at the
time and in the manner provided for its payment in the Note and in this
Agreement and the Debt shall not be reduced until any Award shall have been
actually received and applied by Lender, after the deduction of expenses of
collection, to the reduction or discharge of the Debt. Lender shall not be
limited to the interest paid on the Award by the condemning authority but shall
be entitled to receive out of the Award interest at the rate or rates provided
herein or in the Note. If the Property or any portion thereof is taken by a
condemning authority, Borrower shall promptly commence and diligently prosecute
the Restoration of the Property and otherwise comply with the provisions of
Section 8.4, whether or not Lender makes any Net Proceeds available pursuant to
Section 8.4. If the 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.
     Section 8.4 Restoration
     The following provisions shall apply in connection with the Restoration of
the Property:
     (a) If the Net Proceeds shall be less than $50,000 and the costs of
completing the Restoration shall be less than $50,000, the Net Proceeds will be
disbursed by Lender to Borrower upon receipt, provided that all of the
conditions set forth in Section 8.4(b)(i) are met and Borrower delivers to
Lender a written undertaking to expeditiously commence and to satisfactorily
complete with due diligence the Restoration in accordance with the terms of this
Agreement.
     (b) If the Net Proceeds are equal to or greater than $50,000 or the costs
of completing the Restoration are equal to or greater than $50,000, Lender shall
make the Net Proceeds available for the Restoration in accordance with the
provisions of this Section 8.4. The term “Net Proceeds” for purposes of this
Section 8.4 shall mean: (i) the net amount of all insurance proceeds received by
Lender pursuant to Section 8.1(a)(i), (iv), (vi) and (viii) as a result of a
Casualty, after deduction of its reasonable costs and expenses (including, but
not limited to, reasonable counsel fees), if any, in collecting the same
(“Insurance Proceeds”), or (ii) the net amount of the Award as a result of a
Condemnation, after deduction of its reasonable costs and expenses (including,
but not limited to, reasonable counsel fees), if any, in collecting the same
(“Condemnation Proceeds”), whichever the case may be.
      (i) The Net Proceeds shall be made available to Borrower for Restoration
provided that each of the following conditions are met:
      (A) no Event of Default shall have occurred and be continuing;

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      (B) (1) in the event the Net Proceeds are Insurance Proceeds, less than
thirty percent (30%) of the total floor area of the Improvements on the Property
has been damaged, destroyed or rendered unusable as a result of a Casualty and
the amount of damage does not exceed thirty percent (30%) of the Property’s fair
market value immediately prior to the occurrence of such Casualty, or (2) in the
event the Net Proceeds are Condemnation Proceeds, less than fifteen percent
(15%) of the land constituting the Property is taken, such land is located along
the perimeter or periphery of the Property, and less than fifteen percent (15%)
of the aggregate floor area of the Improvements is taken and the taking does not
exceed fifteen percent (15%) of the Property’s fair market value immediately
prior to the occurrence of such taking;
      (C) Leases covering in the aggregate at least seventy-five percent (75%)
of the total rentable space in the Property which has been demised under
executed and delivered Leases in effect as of the date of the occurrence of such
Casualty or Condemnation, whichever the case may be, and each Major Lease in
effect as of such date 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;
      (D) Borrower shall commence the Restoration as soon as reasonably
practicable (but in no event later than sixty (60) days after such Casualty or
Condemnation, whichever the case may be, occurs) and shall diligently pursue the
same to satisfactory completion;
      (E) Lender shall be satisfied that any operating deficits, including all
scheduled payments of principal and interest under the Note, which will be
incurred with respect to the Property as a result of the occurrence of any such
Casualty or Condemnation, whichever the case may be, will be covered out of the
insurance coverage referred to in Section 8.1(a)(iii) above;
      (F) Lender shall be satisfied that the Restoration will be completed on or
before the earliest to occur of (1) six (6) months prior to the Maturity Date,
(2) the earliest date required for such completion under the terms of any Leases
or material agreements affecting the Property, (3) such time as may be required
under applicable zoning law, ordinance, rule or regulation, or (4) the
expiration of the insurance coverage referred to in Section 8.1(a)(iii);
      (G) the Property and the use thereof after the Restoration will be in
compliance with and permitted under all Legal Requirements;
      (H) the Restoration shall be done and completed by Borrower in an
expeditious and diligent fashion and in compliance with all applicable Legal
Requirements;

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      (I) such Casualty or Condemnation, as applicable, does not result in the
loss of access to the Property or the Improvements;
      (J) Borrower shall deliver, or cause to be delivered, to Lender a signed
detailed budget approved in writing by Borrower’s architect or engineer stating
the entire cost of completing the Restoration, which budget shall be reasonably
acceptable to Lender; and
      (K) the Net Proceeds together with any cash or cash equivalent deposited
by Borrower with Lender are sufficient in Lender’s reasonable judgment to cover
the cost of the Restoration.
      (ii) The Net Proceeds shall be held by Lender until disbursements
commence, and, until disbursed in accordance with the provisions of this
Section 8.4(b), shall constitute additional security for the Debt and other
obligations under the Loan Documents. The Net Proceeds shall be disbursed by
Lender to, or as directed by, Borrower from time to time during the course of
the Restoration, upon receipt of evidence satisfactory to Lender that (A) all
the conditions precedent to such advance, including those set forth in Section
8.4(b)(i), 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 related Restoration item 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 Property which have
not either been fully bonded to the satisfaction of Lender and discharged of
record or in the alternative fully insured to the satisfaction of Lender by the
title company issuing the Title Insurance Policy. Notwithstanding the foregoing,
Insurance Proceeds from the Policies required to be maintained by Borrower
pursuant to Section 8.1(a)(iii) shall be controlled by Lender at all times,
shall not be subject to the provisions of this Section 8.4 and shall be used
solely for the payment of the obligations under the Loan Documents and Operating
Expenses.
      (iii) All plans and specifications required in connection with the
Restoration shall be subject to prior review and acceptance in all respects by
Lender and by an independent consulting engineer selected by Lender (in each
case, such acceptance not to be unreasonably withheld, conditioned or delayed)
(the “Restoration Consultant”). Lender shall have the use of the plans and
specifications and all permits, licenses and approvals required or obtained in
connection with the Restoration. The identity of the contractors, subcontractors
and materialmen engaged in the Restoration, as well as the contracts in excess
of $50,000 under which they have been engaged, shall be subject to prior review
and acceptance by Lender and the Restoration Consultant (in each case, such
acceptance not to be unreasonably withheld, conditioned or delayed). All costs
and expenses incurred by Lender in connection with making the Net Proceeds
available for the Restoration, including, without limitation, reasonable counsel
fees and disbursements and the Restoration Consultant’s fees, shall be paid by
Borrower.

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      (iv) In no event shall Lender be obligated to make disbursements of the
Net Proceeds in excess of an amount equal to the costs actually incurred from
time to time for work in place as part of the Restoration, as certified by the
Restoration Consultant, minus the Restoration Retainage. The term “Restoration
Retainage” shall mean 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
Restoration Consultant, until the Restoration has been completed. The
Restoration Retainage shall be reduced to five percent (5%) of the costs
incurred upon receipt by Lender of satisfactory evidence that fifty percent
(50%) of the Restoration has been completed. The Restoration Retainage shall in
no event, and notwithstanding anything to the contrary set forth above in this
Section 8.4(b), be less than the amount actually held back by Borrower from
contractors, subcontractors and materialmen engaged in the Restoration. The
Restoration Retainage shall not be released until the Restoration Consultant
certifies to Lender that the Restoration has been completed in accordance with
the provisions of this Section 8.4(b) and that all approvals necessary for the
re-occupancy and use of the Property have been obtained from all appropriate
Governmental Authorities, and Lender receives evidence satisfactory to Lender
that the costs of the Restoration have been paid in full or will be paid in full
out of the Restoration Retainage; provided, however, that Lender will release
the portion of the Restoration Retainage being held with respect to any
contractor, subcontractor or materialman engaged in the Restoration as of the
date upon which the Restoration 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 Mortgage and evidence
of payment of any premium payable for such endorsement. If required by Lender,
the release of any such portion of the Restoration Retainage shall be approved
by the surety company, if any, which has issued a payment or performance bond
with respect to the contractor, subcontractor or materialman.
      (v) Lender shall not be obligated to make disbursements of the Net
Proceeds more frequently than once every calendar month.
      (vi) If at any time the Net Proceeds or the undisbursed balance thereof
shall not, in the reasonable opinion of Lender in consultation with the
Restoration Consultant, be sufficient to pay in full the balance of the costs
which are estimated by the Restoration 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 0
shall

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constitute additional security for the Debt and other obligations under the Loan
Documents.
      (vii) The excess, if any, of the Net Proceeds and the remaining balance,
if any, of the Net Proceeds Deficiency deposited with Lender after the
Restoration Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Section 8.4(b), 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 the Note, this Agreement or any of the other Loan Documents.
     (c) All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant
to Section 8.4(b)(vii) may (x) be retained and applied by Lender toward the
payment of the Debt whether or not then due and payable in such order, priority
and proportions as Lender in its sole discretion shall deem proper, or, (y) at
the sole discretion of Lender, the same may be paid, either in whole or in part,
to Borrower for such purposes and upon such conditions as Lender shall
designate. If, pursuant to this Section 8.4, Lender shall receive and retain Net
Proceeds, (i) the lien of the Mortgage shall be reduced only by the amount
thereof received and retained by Lender and actually applied by Lender in
reduction of the Debt; and (ii) notwithstanding any other provisions hereof,
Borrower shall not be required to repair or restore the portion of the Property
affected by such Casualty or Condemnation to the condition or character the
Property was in immediately prior to such Casualty or Condemnation so long as no
Event of Default exists, but Borrower shall be required to remove all debris
with respect to the portion of the Property not required to be restored in a
manner that is safe and is not dangerous to health or other property and is in
compliance with all applicable laws.
     (d) In the event of foreclosure of the Mortgage, or other transfer of title
to the Property in extinguishment in whole or in part of the Debt, all right,
title and interest of Borrower in and to the Policies then in force concerning
the Property and all proceeds payable thereunder shall thereupon vest in the
purchaser at such foreclosure, Lender or other transferee in the event of such
other transfer of title.
ARTICLE 9
RESERVE FUNDS
     Section 9.1 Required Repairs
     (a) Borrower shall make the repairs and improvements to the Property set
forth on Schedule I and as more particularly described in the Property Condition
Report prepared in connection with the closing of the Loan (such repairs
hereinafter referred to as “Required Repairs”). Borrower shall complete the
Required Repairs in a good and workmanlike manner

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on or before the date that is twelve (12) months from the date hereof or within
such other time frame for completion specifically set forth on Schedule I.
     (b) Borrower shall establish on the date hereof an Eligible Account with
Lender or Lender’s agent to fund the Required Repairs (the “Required Repair
Account”) into which Borrower shall deposit on the date hereof the amount of
$0.00. Amounts so deposited shall hereinafter be referred to as the “Required
Repair Funds.”
     Section 9.2 Replacements
     (a) On an ongoing basis throughout the term of the Loan, Borrower shall
make capital repairs, replacements and improvements necessary to keep the
Property in good order and repair and in a good marketable condition or prevent
deterioration of the Property, including, but not limited to, those repairs,
replacements and improvements more particularly described in the Property
Condition Report prepared in connection with the closing of the Loan
(collectively, the “Replacements”). Borrower shall complete all Replacements in
a good and workmanlike manner as soon as commercially reasonable after
commencing to make each such Replacement.
     (b) Borrower shall establish on the date hereof a sub-account of the Cash
Management Account with Lender or Lender’s agent to fund the Replacements (the
“Replacement Reserve Account”) into which Borrower shall deposit on the date
hereof $400,000.00 or, in lieu of such deposit, a letter of credit satisfying
the Letter of Credit Requirements and is otherwise acceptable to Lender. In
addition, Borrower shall deposit $4,852.33 per month for the term of the Loan
(the “Replacement Reserve Monthly Deposit”) into the Replacement Reserve Account
on each Scheduled Payment Date. In addition to the Replacement Reserve Monthly
Deposits, on or before the thirty-seventh (37th) Scheduled Payment Date,
Borrower shall provide the Lender with a letter of credit from an acceptable
lender in the amount of $400,000.00 that satisfies the Letter of Credit
Requirements and is otherwise reasonably acceptable to Lender. In the event the
letter of credit is not provided to Lender as and when required, the Lender
shall, notwithstanding anything contained in the Loan Documents to the contrary,
retain and not release any funds from the Lockbox Account, the Cash Management
Account or any Reserve Account to the Borrower until the $400,000.00 has been
collected. Lender reserves the right to require a future Borrower (if any) to
post the $400,000.00 in cash or in the form of a letter of credit satisfying the
Letter of Credit Requirements at the time of and as an additional requirement
for the Loan assumption. Amounts so deposited shall hereinafter be referred to
as “Replacement Reserve Funds.” Lender may, in its reasonable discretion, adjust
the Replacement Reserve Monthly Deposit from time to time to an amount
sufficient to maintain the proper maintenance and operation of the Property. In
the event Lender shall at any time increase the Replacement Reserve Monthly
Deposit, Borrower may, at its election, request that Lender obtain, at the sole
cost and expense of Borrower, a Property Condition Report prepared by an
engineer selected by Lender in its reasonable discretion, in which case the
Replacement Reserve Monthly Deposit shall be adjusted by Lender based on the
results of such report, provided that in no event shall such amounts be reduced
below the initial amount of the Replacement Reserve Monthly Deposit set forth in
herein. If the Borrower fails to complete any Replacement in a timely and proper
manner or there is an Event of Default, the Lender may draw on any letters of
credit provided under this Section 9.2. Provided there is no

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Event of Default and Borrower has completed all required Replacements in
accordance with the terms of the Loan Documents, the Lender shall release any
letter of credit provided by the Borrower under this Section 9.2.
     Section 9.3 Tenant Improvements and Leasing Commissions
     (a) Borrower hereby agrees to (a) perform, or cause to be performed, tenant
improvements required under any Lease entered into in accordance with the
provisions of Section 5.13 of this Agreement (collectively, the “Tenant
Improvements”), and (b) pay the costs of leasing commissions incurred by
Borrower in connection with the leasing of the Property or a portion thereof
(collectively, “Leasing Commissions”).
     (b) Borrower shall establish on the date hereof a sub-account of the Cash
Management Account with Lender or Lender’s agent to fund Tenant Improvements and
Leasing Commissions (the “Leasing Reserve Account”) into which Borrower shall
deposit on the date hereof $0.00. The Borrower shall also establish a
sub-account of the Leasing Reserve Account for the AFL Property (the “AFL
Leasing Reserve Account”) and a sub-account for the Little Arch Property (the
“Little Arch Leasing Reserve Account”). In addition, Borrower shall deposit with
Lender (i) into the AFL Leasing Reserve Account any sums required to be
deposited pursuant to the terms of Sections 10.2(c) and 10.3(c), (ii) into the
AFL Leasing Reserve Account or Little Arch Leasing Reserve Account, as
appropriate, any sum or termination fee payable to Borrower in connection with
any Tenant’s election to exercise any early termination option contained in its
respective lease of space at the Property (the “Termination Fee Deposit”) on the
date of Borrower’s receipt thereof and (iii) into the Little Arch Leasing
Reserve Account any amounts received from the Tenant Letter of Credit. Amounts
so deposited into the Leasing Reserve Account or any sub-account and all other
funds deposited therein pursuant to Article 10 shall hereinafter be referred to
as the “Leasing Reserve Funds.”
     (c) The AFL Leasing Reserve Account shall be an interest-bearing escrow
deposit account for the reimbursement of approved market rate leasing
commissions and tenant improvement costs for the AFL Space at the Property.
Provided that no Event of Default exists, amounts on deposit in the AFL Leasing
Reserve Account shall be released to Borrower not more than once per month for
the reimbursement of approved market rate tenant improvement and leasing
commission expenses incurred by Borrower in connection with the AFL Space at the
Property leased by Borrower to an AFL Acceptable Replacement Tenant (defined
below) upon delivery by Borrower to Lender of evidence, satisfactory to Lender,
that the AFL Space at the Property has been partially or fully leased by a
tenant or tenants acceptable to Lender in its sole reasonable discretion (which
shall include an acceptable renewal of the current AFL Tenant) under a fully
executed lease containing terms and conditions that are acceptable to Lender, in
its sole reasonable discretion, with market lease terms and a lease term of not
less than five (5) years at a rent equal or greater than $6.00 per square foot
(the “AFL Acceptable Replacement Tenant”), and Lender shall have received and
approved the following for the applicable AFL Acceptable Replacement Tenant
space, (i) copies of paid invoices and lien waivers, satisfactory to Lender in
its sole discretion, from all contractors performing the tenant improvements to
the space at the Property leased by such AFL Acceptable Replacement Tenant,
(ii) the receipt of an

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acceptable estoppel confirming the terms of such lease and the occupancy of the
AFL Acceptable Replacement Tenant, (iii) if required by the Lender, receipt of a
Subordination, Non-disturbance and Attornment Agreement in form and substance
satisfactory to Lender executed by the AFL Acceptable Replacement Tenant,
(iv) delivery of evidence to Lender that such tenant has commenced the payment
of the first full month’s rent under such lease, (v) a final certificate of
occupancy for the tenant’s space and (vi) delivery of such other documents as
Lender may reasonably require (the items set forth in clauses (i) through
(vi) are collectively referred to as the “AFL Acceptable Replacement Tenant
Requirements”). Notwithstanding the above, and provided that no Event of Default
exists, amounts on deposit in the AFL Leasing Reserve Account shall be released
to the Borrower not more than once per month in amounts not less than $50,000.00
per request for the reimbursement of ninety percent (90%) of the market rate
tenant improvement and leasing commission expenses incurred by Borrower in
connection with AFL Space at the Property leased by Borrower to a single AFL
Acceptable Replacement Tenant, and Lender shall have received and approved the
following for the applicable AFL Acceptable Replacement Tenant space: (a) copies
of paid invoices and lien waivers, satisfactory to Lender in its sole
discretion, from all contractors performing the tenant improvements to the space
at the Property leased by such AFL Acceptable Replacement Tenant and (b)
evidence, satisfactory to Lender in its sole discretion, that the contract for
the tenant improvements and the leasing commission agreement incurred by
Borrower with respect to such single AFL Acceptable Replacement Tenant exceeds
$50,000.00 (the conditions in clauses (a) and (b) above are collectively
referred to as the “AFL Partial Release Provisions”). The funds for the
reimbursement of approved market rate tenant improvement and leasing commission
expenses for AFL Space incurred by Borrower for an AFL Acceptable Replacement
Tenant that are not released under the AFL Partial Release Provisions for the
AFL Space will not be released until Borrower complies with the AFL Acceptable
Replacement Tenant Requirements above. Provided that no Event of Default exists,
upon the occupancy of 100% of the AFL Space by AFL Acceptable Replacement
Tenants in compliance with the AFL Acceptable Replacement Tenant Requirements,
or the current AFL Tenant’s extension of the AFL Lease in accordance with the
terms of the AFL Lease for a period no less than five (5) years beyond the
current expiration date, all amounts remaining on deposit in the AFL Leasing
Reserve Account shall be released to Borrower.
     (d) The Little Arch Leasing Reserve Account shall be an interest-bearing
escrow deposit account for the reimbursement of approved market rate leasing
commissions and tenant improvement costs for the Little Arch Space at the
Property. Provided that no Event of Default exists, amounts on deposit in the
Little Arch Leasing Reserve Account shall be released to Borrower not more than
once per month for the reimbursement of approved market rate tenant improvement
and leasing commission expenses incurred by Borrower in connection with the
Little Arch Space at the Property leased by Borrower to a Little Arch Acceptable
Replacement Tenant (defined below) upon delivery by Borrower to Lender of
evidence, satisfactory to Lender, that the Little Arch Space at the Property has
been partially or fully leased by a tenant or tenants acceptable to Lender in
its sole reasonable discretion under a fully executed lease containing terms and
conditions that are acceptable to the Lender, in its sole but reasonable
discretion, with market lease terms and a lease term of not less than five
(5) years at a rent equal to or greater than the rent last paid by the current
Little Arch Tenant (the “Little Arch Acceptable Replacement Tenant”), and Lender
shall have received and approved the following for the

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applicable Little Arch Acceptable Replacement Tenant space, (i) copies of paid
invoices and lien waivers, satisfactory to Lender in its sole discretion, from
all contractors performing the tenant improvements to the space at the Property
leased by such Little Arch Acceptable Replacement Tenant, (ii) the receipt of an
acceptable estoppel confirming the terms of such lease and the occupancy of the
Little Arch Acceptable Replacement Tenant, (iii) if required by the Lender,
receipt of a Subordination, Non-disturbance and Attornment Agreement in form and
substance satisfactory to Lender executed by the Little Arch Acceptable
Replacement Tenant, (iv) delivery of evidence to Lender that such tenant has
commenced the payment of the first full month’s rent under such lease, (v) a
final certificate of occupancy for the tenant’s space and (vi) delivery of such
other documents as Lender may reasonably require (the items set forth in clauses
(i) through (vi) are collectively referred to as the “Little Arch Acceptable
Replacement Tenant Requirements”). Notwithstanding the above, and provided that
no Event of Default exists, amounts on deposit in the Little Arch Leasing
Reserve Account shall be released to the Borrower not more than once per month
in amounts not less than $50,000.00 per request for the reimbursement of ninety
percent (90%) of the market rate tenant improvement and leasing commission
expenses incurred by Borrower in connection with Little Arch Space at the
Property leased by Borrower to a single Little Arch Acceptable Replacement
Tenant, and Lender shall have received and approved the following for the
applicable Little Arch Acceptable Replacement Tenant space: (a) copies of paid
invoices and lien waivers, satisfactory to Lender in its sole discretion, from
all contractors performing the tenant improvements to the space at the Property
leased by such Little Arch Acceptable Replacement Tenant and (b) evidence,
satisfactory to Lender in its sole discretion, that the contract for the tenant
improvements and the leasing commission agreement incurred by Borrower with
respect to such single Little Arch Acceptable Replacement Tenant exceeds
$50,000.00 (the conditions in clauses (a) and (b) above are collectively
referred to as the “Little Arch Partial Release Provisions”). The funds for the
reimbursement of approved market rate tenant improvement and leasing commission
expenses for Little Arch Space incurred by Borrower for a Little Arch Acceptable
Replacement Tenant that are not released under the Little Arch Partial Release
Provisions for the Little Arch Space will not be released until Borrower
complies with the Little Arch Acceptable Replacement Tenant Requirements above.
Provided that no Event of Default exists, upon the occupancy of 100% of the
Little Arch Space by Little Arch Acceptable Replacement Tenants in compliance
with the Little Arch Acceptable Replacement Tenant Requirements, all amounts
remaining on deposit in the Little Arch Leasing Reserve Account shall be
released to Borrower.
     (e) In the event the Little Arch Property is defeased and the lien of the
Mortgage is released against the Little Arch Property in accordance with
Section 5.1(b) of the Note, then Borrower shall deliver to Lender a letter of
credit from an acceptable lender in the amount of $650,000.00 that satisfies the
Letter of Credit Requirements and is otherwise reasonably acceptable to Lender
(i) within five (5) days after the occurrence and during the continuance of a
Cash Management Period or (ii) provided no Cash Management Period is then in
effect, twelve (12) months prior to the Maturity Date if the AFL Property is not
fully leased by AFL Acceptable Replacement Tenants under Leases extending not
less than five (5) years after the Maturity Date. Such letter of credit shall be
in addition to and released, drawn on and disbursed in the same manner and to
the same extent as funds in the AFL Leasing Reserve Account.

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     Section 9.4 Required Work
     Borrower shall diligently pursue all Required Repairs and Replacements and
Tenant Improvements (collectively, the “Required Work”) to completion in
accordance with the following requirements:
     (a) Lender reserves the right, at its option, to approve all contracts or
work orders with materialmen, mechanics, suppliers, subcontractors, contractors
or other parties providing labor or materials in connection with the Required
Work to the extent such contracts or work orders exceed $50,000. Upon Lender’s
request, Borrower shall assign any contract or subcontract to Lender.
     (b) In the event Lender determines in its reasonable discretion that any
Required Work is not being or has not been performed in a workmanlike or timely
manner, Lender shall have the option to withhold disbursement for such
unsatisfactory Required Work and to proceed under existing contracts or to
contract with third parties to complete such Required Work and to apply the
Required Repair Funds or the Replacement Reserve Funds, as applicable, toward
the labor and materials necessary to complete such Required Work, without
providing any prior notice to Borrower and to exercise any and all other
remedies available to Lender upon an Event of Default hereunder.
     (c) In order to facilitate Lender’s completion of the Required Work,
Borrower grants Lender the right to enter onto the Property and perform any and
all work and labor necessary to complete the Required Work and/or employ
watchmen to protect the Property from damage. All sums so expended by Lender, to
the extent not from the Reserve Funds, shall be deemed to have been advanced
under the Loan to Borrower and secured by the Mortgage. For this purpose
Borrower constitutes and appoints Lender its true and lawful attorney-in-fact
with full power of substitution to complete or undertake the Required Work in
the name of Borrower upon Borrower’s failure to do so in a workmanlike and
timely manner. Such power of attorney shall be deemed to be a power coupled with
an interest and cannot be revoked. Borrower empowers said attorney-in-fact as
follows: (i) to use any of the Reserve Funds for the purpose of making or
completing the Required Work; (ii) to make such additions, changes and
corrections to the Required Work as shall be necessary or desirable to complete
the Required Work; (iii) to employ such contractors, subcontractors, agents,
architects and inspectors as shall be required for such purposes; (iv) to pay,
settle or compromise all existing bills and claims which are or may become Liens
against the Property, or as may be necessary or desirable for the completion of
the Required Work, or for clearance of title; (v) to execute all applications
and certificates in the name of Borrower which may be required by any of the
contract documents; (vi) to prosecute and defend all actions or proceedings in
connection with the Property or the rehabilitation and repair of the Property;
and (vii) to do any and every act which Borrower might do on its own behalf to
fulfill the terms of this Agreement.
     (d) Nothing in this Section 9.4 shall: (i) make Lender responsible for
making or completing the Required Work; (ii) require Lender to expend funds in
addition to the Reserve Funds to make or complete any Required Work;
(iii) obligate Lender to proceed with the

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Required Work; or (iv) obligate Lender to demand from Borrower additional sums
to make or complete any Required Work.
     (e) Borrower shall permit Lender and Lender’s agents and representatives
(including, without limitation, Lender’s engineer, architect, or inspector) or
third parties performing Required Work pursuant to this Section 9.4 to enter
onto the Property during normal business hours (subject to the rights of tenants
under their Leases) to inspect the progress of any Required Work and all
materials being used in connection therewith, to examine all plans and shop
drawings relating to such Required Work which are or may be kept at the
Property, and to complete any Required Work made pursuant to this Section 9.4.
Borrower shall cause all contractors and subcontractors to cooperate with Lender
and Lender’s representatives or such other persons described above in connection
with inspections described in this Section 9.4 or the completion of Required
Work pursuant to this Section 9.4.
     (f) Lender may, to the extent any Required Work would reasonably require an
inspection of the Property, inspect the Property at Borrower’s expense prior to
making a disbursement of the Reserve Funds in order to verify completion of the
Required Work for which reimbursement is sought. Borrower shall pay Lender a
reasonable inspection fee not exceeding $1,000 for each such inspection. Lender
may require that such inspection be conducted by an appropriate independent
qualified professional selected by Lender and/or may require a copy of a
certificate of completion by an independent qualified professional acceptable to
Lender prior to the disbursement of the Reserve 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.
     (g) The Required Work and all materials, equipment, fixtures, or any other
item comprising a part of any Required Work shall be constructed, installed or
completed, as applicable, free and clear of all mechanic’s, materialman’s or
other Liens (except for Permitted Encumbrances).
     (h) Before each disbursement of the Reserve Funds, Lender may require
Borrower to provide Lender with a search of title to the Property effective to
the date of the disbursement, which search shows that no mechanic’s or
materialmen’s or other Liens of any nature have been placed against the Property
since the date of recordation of the Mortgage and that title to the Property is
free and clear of all Liens (except for Permitted Encumbrances).
     (i) All Required Work shall comply with all Legal Requirements and
applicable insurance requirements including, without limitation, applicable
building codes, special use permits, environmental regulations, and requirements
of insurance underwriters.
     (j) Borrower hereby assigns to Lender all rights and claims Borrower may
have against all Persons supplying labor or materials in connection with the
Required Work; provided, however, that Lender may not pursue any such rights or
claims unless an Event of Default has occurred and remains uncured.
     Section 9.5 Release of Reserve Funds

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     (a) Upon written request from Borrower and satisfaction of the requirements
set forth in this Section 9.5, Lender shall disburse to Borrower amounts from
(i) the Required Repair Account to the extent necessary to pay for or reimburse
Borrower for the actual costs of each Required Repair (but not exceeding 125% of
the original estimated cost of such Required Repair as set forth on Schedule I,
unless Lender has agreed to reimburse Borrower for such excess cost pursuant to
Section 9.5(f)) or (ii) the Replacement Reserve Account to the extent necessary
to reimburse Borrower for the actual costs of any approved Replacements.
Notwithstanding the preceding sentence, in no event shall Lender be required to
(x) disburse any amounts which would cause the amount of funds remaining in the
Required Repair Account after any disbursement (other than with respect to the
final disbursement) to be less than 125% of the then current estimated cost of
completing all remaining Required Repairs for the Property, (y) disburse funds
from any of the Reserve Accounts if an Event of Default exists, or (z) disburse
funds from the Replacement Reserve Account to reimburse Borrower for the costs
of routine repairs or maintenance to the Property or for costs which are to be
reimbursed from funds held in the Required Repair or for Tenant Improvements and
Leasing Commissions.
     (b) With each request for disbursement, Borrower shall certify in writing
to Lender that all Required Work has been performed in accordance with all Legal
Requirements and that all such Required Work has been completed lien free and
paid for in full or will be paid for in full upon disbursement of the requested
funds. In addition, each request for disbursement in excess of $25,000 shall be
on a form provided or approved by Lender and shall (i) include copies of
invoices for all items or materials purchased and all labor or services
provided, (ii) specify (A) the Required Work for which the disbursement is
requested, (B) the quantity and price of each item purchased, if the Required
Work includes the purchase or replacement of specific items, (C) the price of
all materials (grouped by type or category) used in any Required Work other than
the purchase or replacement of specific items, and (D) the cost of all
contracted labor or other services applicable to each Required Work for which
such request for disbursement is made, and (iii) if requested by Lender,
conditional lien waivers from each contractor, supplier, materialman, mechanic
or subcontractor with respect to the completion of its work or delivery of its
materials. Except as provided in Section 9.5(d), each request for disbursement
shall be made only after completion of the Required Repair or Replacement (or
the portion thereof completed in accordance with Section 9.5(d)), as applicable,
for which disbursement is requested. Borrower shall provide Lender evidence
satisfactory to Lender in its reasonable judgment of such completion or
performance.
     (c) Any lien waiver delivered hereunder shall conform to all Legal
Requirements and shall cover all work performed and materials supplied
(including equipment and fixtures) for the Property by that contractor,
supplier, subcontractor, mechanic or materialman through the date covered by the
current disbursement request.
     (d) If (i) the cost of any item of Required Work exceeds $100,000, (ii) the
contractor performing such Required Work requires periodic payments pursuant to
terms of a written contract, and (iii) Lender has approved in writing in advance
such periodic payments, a request for disbursement from the Reserve Accounts may
be made after completion of a portion of the work under such contract, provided
(A) such contract requires payment upon completion of such

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portion of work, (B) the materials for which the request is made are on site at
the Property and are properly secured or have been installed in the Property,
(C) all other conditions in this Agreement for disbursement have been satisfied,
and (D) in the case of a Replacement, funds remaining in the Replacement Reserve
Account are, in Lender’s judgment, sufficient to complete such Replacement and
other Replacements when required.
     (e) Borrower shall not make a request for, nor shall Lender have any
obligation to make, any disbursement from any Reserve Account more frequently
than once in any calendar month and (except in connection with the final
disbursement) in any amount less than the lesser of (i) $10,000 or (ii) the
total cost of the Required Work for which the disbursement is requested.
     (f) In the event any Borrower requests a disbursement from the Required
Repair Account to pay for or to reimburse Borrower for the actual cost of labor
or materials used in connection with repairs or improvements other than the
Required Repairs specified on Schedule I, or for a Required Repair to the extent
the cost of such Required Repair exceeds 125% of the estimated cost of such
Required Repair as set forth on Schedule I (in either case, an “Additional
Required Repair”), Borrower shall disclose in writing to Lender the reason why
funds in the Required Repair Account should be used to pay for such Additional
Required Repair. If Lender determines that (i) such Additional Required Repair
is of the type intended to be covered by the Required Repair Account, (ii) such
Additional Required Repair is not covered or is not of the type intended to be
covered by the Replacement Reserve Account, (iii) costs for such Additional
Required Repair are reasonable, (iv) the funds in the Required Repair Account
are sufficient to pay for such Additional Required Repair and all other Required
Repairs for the Property specified on Schedule I, and (v) all other conditions
for disbursement under this Agreement have been met, Lender may disburse funds
from the Required Repair Account.
     (g) In the event any Borrower requests a disbursement from the Replacement
Reserve Account to pay for or to reimburse Borrower for the actual cost of labor
or materials used in connection with repairs or improvements other than the
Replacements specified in the Property Condition Report prepared in connection
with the closing of the Loan (an “Additional Replacement”), Borrower shall
disclose in writing to Lender the reason why funds in the Replacement Reserve
Account should be used to pay for such Additional Replacement. If Lender
determines that (i) such Additional Replacement is of the type intended to be
covered by the Replacement Reserve Account, (ii) such Additional Replacement is
not covered or is not of the type intended to be covered by the Required Repair
Account, (iii) costs for such Additional Replacement are reasonable, (iv) the
funds in the Replacement Reserve Account are sufficient to pay for such
Additional Replacement and all other Replacements for the Property specified in
the Property Condition Report, and (v) all other conditions for disbursement
under this Agreement have been met, Lender may disburse funds from the
Replacement Reserve Account.
     (h) Lender’s disbursement of any Reserve Funds or other acknowledgment of
completion of any Required Work in a manner satisfactory to Lender shall not be
deemed a certification or warranty by Lender to any Person that the Required
Work has been completed in accordance with Legal Requirements.

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     (i) If the funds in any Reserve Account should exceed the amount of
payments actually applied by Lender for the purposes of the account, Lender in
its sole discretion shall either return any excess to Borrower or credit such
excess against future payments to be made to that Reserve Account. If at any
time Lender reasonably determines that the Reserve Funds are not or will not be
sufficient to make the required payments, Lender shall notify Borrower of such
determination and Borrower shall pay to Lender any amount necessary to make up
the deficiency within ten (10) days after notice from Lender to Borrower
requesting payment thereof.
     (j) The insufficiency of any balance in any of the Reserve Accounts shall
not relieve Borrower from its obligation to fulfill all preservation and
maintenance covenants in the Loan Documents.
     (k) Upon the earlier to occur of (i) the timely completion of all Required
Repairs and any Additional Required Repairs, if any, in accordance with the
requirements of this Agreement, as verified by Lender in its reasonable
discretion, or (ii) the payment in full of the Debt, all amounts remaining on
deposit, if any, in the Required Repair Account shall be returned to Borrower or
the Person shown on Lender’s records as being the owner of the Property and no
other party shall have any right or claim thereto.
     (l) Upon payment in full of the Debt, all amounts remaining on deposit, if
any, in the Replacement Reserve Account and any letters of credit required
pursuant to Section 9.2(b) hereof shall be returned to Borrower or the Person
shown on Lender’s records as being the owner of the Property and no other party
shall have any right or claim thereto.
     (m) Upon the earlier to occur of (i) the completion of all Tenant
Improvements and the full performance by the leasing agent of its obligations
with respect to any Leasing Commissions, as verified by Lender in its reasonable
discretion, or (ii) the payment in full of the Debt, all amounts remaining on
deposit, if any, in the Leasing Reserve Account shall be returned to Borrower or
the Person shown on Lender’s records as being the owner of the Property and no
other party shall have any right or claim thereto.
     (n) Notwithstanding anything contained herein to the contrary, funds in the
Leasing Reserve Account shall be disbursed in accordance with Section 9.3.
     Section 9.6 Tax and Insurance Reserve Funds
     (a) Borrower shall establish on the date hereof a sub-account of the Cash
Management Account with Lender or Lender’s agent sufficient to discharge
Borrower’s obligations for the payment of Taxes and Insurance Premiums pursuant
to Section 5.4 and Section 8.1 hereof (the “Tax and Insurance Reserve Account”)
into which Borrower shall deposit on the date hereof $81,640.00 (which amount is
equal to the current annual Taxes and Insurance Premiums applicable to the
Little Arch Property). Except to the as provided in subsection (b) below,
Borrower shall deposit into the Tax and Insurance Reserve Account on each
Scheduled Payment Date (a) one-twelfth of the Taxes that Lender estimates will
be payable during the next ensuing twelve (12) months or such higher amount
necessary to accumulate with Lender sufficient funds to pay all such Taxes at
least thirty (30) days prior to the earlier of (i) the

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date that the same will become delinquent and (ii) the date that additional
charges or interest will accrue due to the non-payment thereof, and (b) except
to the extent Lender has waived the insurance escrow because the insurance
required hereunder is maintained under a blanket insurance Policy acceptable to
Lender in accordance with Section 8.1(c), one-twelfth of the Insurance Premiums
that Lender estimates will be payable during the next ensuing twelve (12) months
for the renewal of the coverage afforded by the Policies upon the expiration
thereof or such higher amount necessary to accumulate with Lender sufficient
funds to pay all such Insurance Premiums at least thirty (30) days prior to the
expiration of the Policies (said amounts in (a) and (b) above hereinafter called
the “Tax and Insurance Reserve Funds”). Except to the extent Borrower is in
compliance with subsection (b) below, Lender will apply the Tax and Insurance
Reserve Funds to payments of Taxes and Insurance Premiums required to be made by
Borrower pursuant to Section 5.4 and Section 8.1 hereof. In making any
disbursement from the Tax and Insurance Reserve Account, Lender may do so
according to any bill, statement or estimate procured from the appropriate
public office or tax lien service (with respect to Taxes) or insurer or agent
(with respect to Insurance Premiums), 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 and
Insurance Reserve Funds shall exceed the amounts due for Taxes and Insurance
Premiums pursuant to Section 5.4 and Section 8.1 hereof, Lender shall, in its
sole discretion, return any excess to Borrower or credit such excess against
future payments to be made to the Tax and Insurance Reserve Account. In
allocating any such excess, Lender may deal with the person shown on Lender’s
records as being the owner of the Property. Any amount remaining in the Tax and
Insurance Reserve Account after the Debt has been paid in full shall be returned
to Borrower or the person shown on Lender’s records as being the owner of the
Property and no other party shall have any right or claim thereto. If at any
time Lender reasonably determines that the Tax and Insurance Reserve Funds are
not or will not be sufficient to pay Taxes and Insurance Premiums by the dates
set forth in (a) and (b) above, Lender shall notify Borrower of such
determination and Borrower shall pay to Lender any amount necessary to make up
the deficiency within ten (10) days after notice from Lender to Borrower
requesting payment thereof.
     (b) Notwithstanding anything contained in Section 9.6(a) to the contrary,
(i) so long as (a) the AFL Tenant directly pays the real estate taxes due on the
AFL Property, (b) there exists no Event of Default under the Loan Documents,
(c) the Borrower provides the Lender with evidence that the AFL Tenant has paid
the real estate taxes due on the AFL Property before they become delinquent and
(d) the AFL Tenant or its lease guarantors or the parent of AFL Tenant or its
lease guarantors maintains a Moody’s rating equal to or greater than Baa2, the
Borrower shall not be required to make monthly deposits into the Tax and
Insurance Reserve Account for Taxes applicable to the AFL Property; provided,
however, in the event that at any time the foregoing requirements are not
satisfied, as determined by Lender in its discretion, the Borrower shall
immediately commence making monthly deposits into the Tax and Insurance Reserve
Account for Taxes on the AFL Property in amounts determined by Lender in its
discretion;
(ii) so long as (a) there exists no Event of Default under the Loan Documents,
and (b) the Borrower provides the Lender with evidence that Borrower has paid or
caused to

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be paid the real estate taxes due on the Little Arch Property before they become
delinquent, the Borrower shall not be required to make monthly deposits into the
Tax and Insurance Reserve Account for Taxes applicable to the Little Arch
Property; provided, however, in the event that at any time the foregoing
requirements are not satisfied, as determined by Lender in its discretion, the
Borrower shall immediately commence making monthly deposits into the Tax and
Insurance Reserve Account for Taxes on the Little Arch Property in amounts
determined by Lender in its discretion;
(iii) so long as (a) the Borrower is maintaining the insurance required under
the Loan Documents through a blanket insurance policy acceptable to the Lender,
(b) there exists no Event of Default under the Loan Documents, and (c) the
Borrower provides the Lender with evidence of its annual renewal of such blanket
insurance policy thirty (30) days prior to its scheduled expiration, the
Borrower shall not be required to make monthly deposits into the Tax and
Insurance Reserve Account for Insurance Premiums; provided, however, in the
event that at any time a blanket insurance policy approved by the Lender is not
in effect, the Borrower shall immediately provide for either (a) an individual
policy for each Property complying with the terms and conditions set forth in
the Loan Documents and shall immediately commence making monthly deposits into
the Tax and Insurance Reserve Account for Insurance Premiums in amounts
determined by the Lender in its discretion or (b) a replacement blanket
insurance policy complying with the terms and conditions set forth in the Loan
Documents;
(iv) so long as (a) the AFL Tenant is maintaining the insurance required through
an insurance policy satisfying the requirements contained in the Loan Documents
and such insurance is otherwise acceptable to the Lender, (b) there exists no
Event of Default under the Loan Documents, (c) the Borrower provides the Lender
with evidence of the AFL Tenant’s annual renewal of such insurance policy thirty
(30) days prior to its scheduled expiration and (d) the AFL Tenant or its lease
guarantors or the parent of AFL Tenant or its lease guarantors maintains a
Moody’s rating equal to or greater than Baa2, the Borrower shall not be required
to make monthly deposits into the Tax and Insurance Reserve Account for
Insurance Premiums applicable to the AFL Property; provided, however, in the
event that at any time an insurance policy approved by the Lender is not in
effect, Borrower shall immediately provide for either (a) an individual policy
for the AFL Property complying with the terms and conditions set forth in the
Loan Documents and shall immediately commence making monthly deposits into the
Tax and Insurance Reserve Account for Insurance Premiums in amounts determined
by the Lender in its discretion or (b) a replacement blanket insurance policy
complying with the terms and conditions set forth in the Loan Documents; and
(v) so long as (a) the Borrower is maintaining the insurance required through an
insurance policy satisfying the requirements contained in the Loan Documents and
such insurance is otherwise acceptable to the Lender, (b) there exists no Event
of Default under the Loan Documents, and (c) the Borrower provides the Lender
with evidence of the annual renewal of such insurance policy thirty (30) days
prior to its scheduled expiration, the Borrower shall not be required to make
monthly deposits into the Tax and Insurance Reserve Account for Insurance
Premiums applicable to the Little Arch Property; provided, however, in the event
that at any time an insurance policy approved

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by the Lender is not in effect, Borrower shall immediately provide for either
(a) an individual policy for the Little Arch Property complying with the terms
and conditions set forth in the Loan Documents and shall immediately commence
making monthly deposits into the Tax and Insurance Reserve Account for Insurance
Premiums in amounts determined by the Lender in its discretion or (b) a
replacement blanket insurance policy complying with the terms and conditions set
forth in the Loan Documents.
     Section 9.7 Excess Cash.
     Borrower shall establish on the date hereof a sub-account of the Cash
Management Account into which Borrower shall deposit all Excess Cash on each
Scheduled Payment Date during any Cash Management Period (the “Excess Cash
Reserve Account”). Amounts so deposited shall hereinafter be referred to as the
“Excess Cash Reserve Funds.” Provided no Event of Default has occurred and is
continuing, sums from the Excess Cash Reserve Account shall be disbursed to
Borrower’s Account upon the earlier to occur of (a) payment in full of the Debt
or (b) the discontinuation of a Cash Management Period. In the event a Cash
Management Period occurs twice during the term of the Loan, Borrower shall not
be entitled to any disbursement of the amounts in the Excess Cash Reserve
Account during the remaining term of the Loan, the Cash Management Period shall
continue, and Borrower shall continue to be obligated to pay Excess Cash to
Lender on each Scheduled Payment Date until the Debt is paid in full.
     Section 9.8 Operating Expenses; Extraordinary Expenses.
     (a) Borrower shall establish on the date hereof a sub-account of the Cash
Management Account into which Borrower shall deposit, on each Scheduled Payment
Date during any Cash Management Period, funds sufficient to pay all Operating
Expenses to be incurred for the following month in accordance with the Annual
Budget approved by Lender (the “Operating Expense Reserve Account.” Amounts so
deposited shall hereinafter be referred to as the “Operating Expense Reserve
Funds.” Provided no Event of Default has occurred and is continuing, sums from
the Operating Expense Reserve Account shall be disbursed by Lender to Borrower
following receipt and approval of Borrower’s written request for the payment of
such Operating Expenses.
     (b) Borrower shall establish on the date hereof a sub-account of the Cash
Management Account with Lender or Lender’s agent into which Borrower shall
deposit, on each Scheduled Payment Date during any Cash Management Period, funds
sufficient to pay any Extraordinary Expenses for the following month which have
been approved by Lender (the “Extraordinary Expense Reserve Account.”) Amounts
so deposited shall hereinafter be referred to as the “Extraordinary Expense
Reserve Funds.” Provided no Event of Default has occurred and is continuing,
sums from the Extraordinary Expense Reserve Account shall be disbursed by Lender
to Borrower following receipt and approval of Borrower’s written request for the
payment of such Extraordinary Expenses.
     Section 9.9 Reserve Funds Generally

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(a) (i) Except for the Interest Bearing Reserve Accounts, no earnings or
interest on the Reserve Accounts shall be payable to Borrower. Neither Lender
nor any loan servicer that at any time holds or maintains such
non-interest-bearing Reserve Accounts shall have any obligation to keep or
maintain such Reserve Accounts or any funds deposited therein in
interest-bearing accounts. If Lender or any such loan servicer elects in its
sole and absolute discretion to keep or maintain any non-interest-bearing
Reserve Account or any funds deposited therein in an interest-bearing account,
the account shall be an Eligible Account and (A) such funds shall not be
invested except in Permitted Investments, and (B) all interest earned or accrued
thereon shall be for the account of and retained by Lender or such loan
servicer.
      (ii) Funds deposited in the Interest Bearing Reserve Accounts shall be
held in an interest-bearing business savings account and interest shall be
credited to Borrower. In no event shall Lender or any loan servicer that at any
time holds or maintains the Interest Bearing Reserve Accounts be required to
select any particular interest-bearing account or the account that yields the
highest rate of interest, provided that selection of the account shall be
consistent with the general standards at the time being utilized by Lender or
the loan servicer, as applicable, in establishing similar accounts for loans of
comparable type. All such interest shall be and become part of the applicable
Interest Bearing Reserve Account and shall be disbursed in accordance with
Section 9.5 above; provided, however, that Lender may, at its election, retain
any such interest for its own account during the occurrence and continuance of
an Event of Default. Borrower agrees that it shall include all interest on
Reserve Funds attributable to the Interest Bearing Reserve Accounts as the
income of Borrower (and, if Borrower is a partnership or other pass-through
entity, the partners, members or beneficiaries of Borrower, as the case may be),
and shall be the owner of such Reserve Funds for federal and applicable state
and local tax purposes, except to the extent that Lender retains any interest
for its own account during the occurrence and continuance of an Event of Default
as provided herein.
     (b) Borrower grants to Lender a first-priority perfected security interest
in, and assigns and pledges to Lender, each of the Reserve Accounts and any and
all Reserve Funds now or hereafter deposited in the Reserve Accounts as
additional security for payment of the Debt. Until expended or applied in
accordance herewith, the Reserve Accounts and the Reserve Funds shall constitute
additional security for the Debt. The provisions of this Section 9.9 are
intended to give Lender or any subsequent holder of the Loan “control” of the
Reserve Accounts within the meaning of the UCC.
     (c) The Reserve Accounts and any and all Reserve Funds now or hereafter
deposited in the Reserve Accounts shall be subject to the exclusive dominion and
control of Lender, which shall hold the Reserve Accounts and any or all Reserve
Funds now or hereafter deposited in the Reserve Accounts subject to the terms
and conditions of this Agreement. Borrower shall have no right of withdrawal
from the Reserve Accounts or any other right or power with respect to the
Reserve Accounts or any or all of the Reserve Funds now or hereafter deposited
in the Reserve Accounts, except as expressly provided in this Agreement.

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     (d) Lender shall furnish or cause to be furnished to Borrower, without
charge, an annual accounting of each Reserve Account in the normal format of
Lender or its loan servicer, showing credits and debits to such Reserve Account
and the purpose for which each debit to each Reserve Account was made.
     (e) As long as no Event of Default has occurred, Lender shall make
disbursements from the Reserve Accounts in accordance with this Agreement. All
such disbursements shall be deemed to have been expressly pre-authorized by
Borrower, and shall not be deemed to constitute the exercise by Lender of any
remedies against Borrower unless an Event of Default has occurred and is
continuing and Lender has expressly stated in writing its intent to proceed to
exercise its remedies as a secured party, pledgee or lienholder with respect to
the Reserve Accounts.
     (f) If any Event of Default occurs, Borrower shall immediately lose all of
its rights to receive disbursements from the Reserve Accounts until the earlier
to occur of (i) the date on which such Event of Default is cured to Lender’s
satisfaction, or (ii) the payment in full of the Debt. In addition, at Lender’s
election, Borrower shall lose all of its rights to receive interest on the
Interest Bearing Reserve Accounts during the occurrence and continuance of an
Event of Default. Upon the occurrence of any Event of Default, Lender may
exercise any or all of its rights and remedies as a secured party, pledgee and
lienholder with respect to the Reserve Accounts. Without limitation of the
foregoing, upon any Event of Default, Lender may use and disburse the Reserve
Funds (or any portion thereof) for any of the following purposes: (A) repayment
of the Debt, including, but not limited to, principal prepayments and the
prepayment premium applicable to such full or partial prepayment (as
applicable); (B) reimbursement of Lender for all losses, fees, costs and
expenses (including, without limitation, reasonable legal fees) suffered or
incurred by Lender as a result of such Event of Default; (C) payment of any
amount reasonably expended in exercising any or all rights and remedies
available to Lender at law or in equity or under this Agreement or under any of
the other Loan Documents; (D) payment of any item from any of the Reserve
Accounts as required or permitted under this Agreement; or (E) any other purpose
permitted by applicable law; provided, however, that any such application of
funds shall not cure or be deemed to cure any Event of Default. Without limiting
any other provisions hereof, each of the remedial actions described in the
immediately preceding sentence shall be deemed to be a commercially reasonable
exercise of Lender’s rights and remedies as a secured party with respect to the
Reserve Funds and shall not in any event be deemed to constitute a setoff or a
foreclosure of a statutory banker’s lien. Nothing in this Agreement shall
obligate Lender to apply all or any portion of the Reserve Funds to effect a
cure of any Event of Default, or to pay the Debt, or in any specific order of
priority. The exercise of any or all of Lender’s rights and remedies under this
Agreement or under any of the other Loan Documents shall not in any way
prejudice or affect Lender’s right to initiate and complete a foreclosure under
the Mortgage.
     (g) The Reserve Funds shall not constitute escrow or trust funds and may be
commingled with other monies held by Lender. Notwithstanding anything else
herein to the contrary, Lender may commingle in one or more Eligible Accounts
(i) any and all funds controlled by Lender, including, without limitation, funds
pledged in favor of Lender by other borrowers, whether for the same purposes as
the Reserve Accounts or otherwise. Without

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limiting any other provisions of this Agreement or any other Loan Document, the
Reserve Accounts may be established and held in such name or names as Lender or
its loan servicer, as agent for Lender, shall deem appropriate, including,
without limitation, in the name of Lender or such loan servicer as agent for
Lender. In the case of any Reserve Account which is held in a commingled
account, Lender or its loan servicer, as applicable, shall maintain records
sufficient to enable it to determine at all times which portion of such account
is related to the Loan. The Reserve Accounts are solely for the protection of
Lender. With respect to the Reserve Accounts, Lender shall have no
responsibility beyond the allowance of due credit for the sums actually received
by Lender or beyond the reimbursement or payment of the costs and expenses for
which such accounts were established in accordance with their terms. Upon
assignment of the Loan by Lender, any Reserve Funds shall be turned over to the
assignee and, provided such assignee assumes all obligations in connection
therewith, any responsibility of Lender as assignor shall terminate. The
requirements of this Agreement concerning the Reserve Accounts in no way
supersede, limit or waive any other rights or obligations of the parties under
any of the Loan Documents or under applicable law.
     (h) Borrower shall not, without obtaining the prior written consent of
Lender, further pledge, assign or grant any security interest in the Reserve
Accounts or the Reserve Funds deposited therein or permit any Lien to attach
thereto, except for the security interest granted in this Section 9.9, or any
levy to be made thereon, or any UCC Financing Statements, except those naming
Lender as the secured party, to be filed with respect thereto.
     (i) Borrower will maintain the security interest created by this
Section 9.9 as a first priority perfected security interest and will defend the
right, title and interest of Lender in and to the Reserve Accounts and the
Reserve Funds against the claims and demands of all Persons whomsoever. At any
time and from time to time, upon the written request of Lender, and at the sole
expense of Borrower, Borrower will promptly and duly execute and deliver such
further instruments and documents and will take such further actions as Lender
reasonably may request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted.
     (j) Lender shall be protected in acting upon any notice, resolution,
request, consent, order, certificate, report, opinion, bond or other paper,
document or signature believed by Lender to be genuine, and it may be assumed
conclusively that any Person purporting to give any of the foregoing in
connection with the Reserve Account’s has been duly authorized to do so. Lender
may consult with counsel, and the opinion of such counsel shall be full and
complete authorization and protection in respect of any action taken or suffered
by them hereunder and in good faith in accordance therewith. Lender shall not be
liable to Borrower for any act or omission done or omitted to be done by Lender
in reliance upon any instruction, direction or certification received by Lender
and without gross negligence or willful misconduct.
     (k) Beyond the exercise of reasonable care in the custody thereof, Lender
shall not have any duty as to any Reserve Funds in its possession or control as
agent therefor or bailee thereof or any income thereon or the preservation of
rights against any person or otherwise with respect thereto. In no event shall
Lender or its Affiliates, agents, employees or bailees, be liable or responsible
for any loss or damage to any of the Reserve Funds, or for any diminution in
value

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thereof, by reason of the act or omission of Lender, except to the extent that
such loss or damage results from Lender’s gross negligence or willful misconduct
or intentional nonperformance by Lender of its obligations under this Agreement.
     Section 9.10 Tenant Letter of Credit
     (a) Pursuant to the terms of the Little Arch Lease, the Little Arch Tenant
has provided Borrower with a Standby Letter of Credit No. L055074 in the amount
of $950,000.00 issued by Regions Bank (together with all modifications,
renewals, replacements and substitutions therefor, the “Tenant Letter of
Credit”) for the benefit of Little Arch. Borrower shall enforce and comply with
the Letter of Credit and all provisions of the Little Arch Lease relating to the
Tenant Letter of Credit.
     (b) Upon the occurrence of any event or circumstance permitting Borrower to
draw on the Tenant Letter of Credit in accordance with the terms of the Little
Arch Lease, Borrower shall promptly draw on the Tenant Letter of Credit and
deposit all proceeds thereof directly into the Little Arch Leasing Reserve
Account to be disbursed in accordance with the terms thereof.
     (c) As additional collateral for the Loan, Borrower hereby assigns to
Lender and grants Lender a security interest in all right, title and interest of
Borrower in and to the Tenant Letter of Credit and all proceeds thereof and all
accounts into which any proceeds of the Tenant Letter of Credit are from time to
time deposited, including, without limitation, the Little Arch Leasing Reserve
Account. Borrower shall notify the issuer of the Tenant Letter of Credit of such
collateral assignment and security interest and direct such issuer to make
payment directly to the Little Arch Leasing Reserve Account in the event any
draw is made on the Tenant Letter of Credit. Borrower shall use commercially
reasonable efforts to obtain the consent and acknowledgment of such issuer with
respect to the rights of Lender under this subsection and the agreement of such
issuer to make such payments directly to the Little Arch Leasing Reserve Account
pursuant to the instructions of the Lender.
     (d) In no event shall Lender by virtue of the provisions of this Section be
deemed in any manner to have assumed any obligations with respect to the Tenant
Letter of Credit or the Little Arch Lease, nor shall Lender be liable to
Borrower, the tenant under the Little Arch Lease or the issuer of the Tenant
Letter of Credit. Borrower agrees to indemnify and hold Lender harmless from and
against any liability, loss or damage which Lender, its directors, officers,
agents and other representatives may from time to time incur as a result of any
claims or demands arising out of or in any way connected with the matters
contemplated by this Section 9.10.
ARTICLE 10
CASH MANAGEMENT
     Section 10.1 Lockbox Account and Cash Management Account

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     (a) After a Lockbox Event, Borrower shall promptly deliver to the Lender a
fully executed Lockbox Agreement and, pursuant to the Lockbox Agreement, shall
maintain a non-interest bearing Eligible Account into which Borrower shall, and
shall cause Manager to, deposit or cause to be deposited, all Rents and other
revenue from the Property (such account, all funds at any time on deposit
therein and any proceeds, replacements or substitutions of such account or funds
therein, are referred to herein as the “Lockbox Account”). Borrower acknowledges
and confirms that Borrower has established, and Borrower covenants that it shall
maintain, an interest bearing Eligible Account into which Rents, or, after a
Lockbox Event, funds in the Lockbox Account, shall be transferred pursuant to
the terms of Section 10.2 or 10.3, as applicable (such account, the sub-accounts
thereof, all funds at any time on deposit therein and any proceeds, replacements
or substitutions of such account or funds therein, are referred to herein as the
“Cash Management Account”).
     (b) The Lockbox Account and Cash Management Account shall each be in the
name of Borrower for the benefit of Lender, provided that Borrower shall be the
owner of all funds on deposit in such accounts for federal and applicable state
and local tax purposes (except to the extent Lender retains any interest earned
on the Cash Management Account for its own account following the occurrence and
during the continuance of an Event of Default). Sums on deposit in the Cash
Management Account shall not be invested except in such Permitted Investments as
determined and directed by Lender and all income earned thereon shall be the
income of Borrower and be applied to and become part of the Cash Management
Account, to be disbursed in accordance with this Article 10. Neither Lockbox
Bank nor Lender shall have any liability for any loss resulting from the
investment of funds in Permitted Investments in accordance with the terms and
conditions of this Agreement.
     (c) The Lockbox Account and Cash Management Account shall be subject to the
exclusive dominion and control of Lender and, except as otherwise expressly
provided herein, neither Borrower, Manager nor any other party claiming on
behalf of, or through, Borrower or Manager, shall have any right of withdrawal
therefrom or any other right or power with respect thereto.
     (d) Borrower agrees to pay the customary fees and expenses of Deposit Bank
(incurred in connection with maintaining the Lockbox Account) and Lender
(incurred in connection with maintaining the Lockbox Account) and any successors
thereto in connection therewith, as separately agreed by them from time to time.
     (e) Lender shall be responsible for the performance only of such duties
with respect to the Cash Management Account as are specifically set forth
herein, and no duty shall be implied from any provision hereof. Lender shall not
be under any obligation or duty to perform any act which would involve it in
expense or liability or to institute or defend any suit in respect hereof, or to
advance any of its own monies. Borrower shall indemnify and hold Lender and its
directors, employees, officers and agents harmless from and against any loss,
cost or damage (including, without limitation, reasonable attorneys’ fees and
disbursements) incurred by such parties in connection with the Cash Management
Account other than such as result from the gross negligence or willful
misconduct of Lender or intentional nonperformance by Lender of its obligations
under this Agreement.

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     Section 10.2 Deposits and Withdrawals
     (a) Prior to a Lockbox Event, Borrower represents, warrants and covenants
that:
      (i) Concurrently with the execution of this Agreement, Borrower shall
notify and advise each Tenant under each Lease (whether such Lease is presently
effective or executed after the date hereof) to send directly to the Cash
Management Account all payments of Rents or any other item payable under such
Leases pursuant to an instruction letter in the form of Exhibit B attached
hereto (a “Tenant Direction Letter”). If Borrower fails to provide any such
notice (and without prejudice to Lender’s rights with respect to such default),
Lender shall have the right, and Borrower hereby grants to Lender a power of
attorney (which power of attorney shall be coupled with an interest and
irrevocable so long as any portion of the Debt remains outstanding), to sign and
deliver a Tenant Direction Letter;
      (ii) Borrower shall, and shall cause Manager to, instruct all Persons that
maintain open accounts with Borrower or Manager with respect to the Property or
with whom Borrower or Manager does business on an “accounts receivable” basis
with respect to the Property to deliver all payments due under such accounts to
the Cash Management Account. Neither Borrower nor Manager shall direct any such
Person to make payments due under such accounts in any other manner;
      (iii) All Rents or other income from the Property shall (A) be deemed
additional security for payment of the Debt and shall be held in trust for the
benefit, and as the property, of Lender, (B) not be commingled with any other
funds or property of Borrower or Manager, and (C) if received by Borrower or
Manager notwithstanding the delivery of a Tenant Direction Letter, be deposited
in the Lockbox Account within one (1) Business Day of receipt;
      (iv) Without the prior written consent of Lender, so long as any portion
of the Debt remains outstanding, except as provided in Section 10.3 hereof,
neither Borrower nor Manager shall terminate, amend, revoke or modify any Tenant
Direction Letter in any manner whatsoever or direct or cause any Tenant to pay
any amount in any manner other than as provided in the related Tenant Direction
Letter; and
      (v) So long as any portion of the Debt remains outstanding, neither
Borrower, Manager nor any other Person shall open or maintain any accounts other
than the Cash Management Account into which revenues from the ownership and
operation of the Property are deposited. The foregoing shall not prohibit
Borrower from utilizing one or more separate accounts for the disbursement or
retention of funds that have been transferred to Borrower pursuant to the
express terms of this Agreement.
     (b) Provided no Event of Default has occurred, and provided Borrower has
provided the letter of credit required by Section 9.2, at all times other than
during a Cash Management Period, Borrower shall have the sole right to withdraw
funds on deposit in the Cash Management

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Account and may do so on a monthly basis. Upon the commencement of a Cash
Management Period, the occurrence of an Event of Default or the Borrower’s
failure to provide the letter of credit required by Section 9.2, (i) all rights
of Borrower to the withdrawal of funds from the Cash Management Account shall
immediately cease and be automatically vested with Lender, and (ii) all
collected and available balances in the Cash Management Account shall be held
until disbursed by Lender pursuant to Section 10.2(c).
     (c) On each Scheduled Payment Date (and if such day is not a Business Day,
then the immediately preceding day which is a Business Day) commencing the month
immediately following the month during which the Borrower no longer has a right
to withdraw funds from the Cash Management Account, Borrower hereby irrevocably
authorizes Lender to withdraw or allocate to the sub-accounts of the Cash
Management Account, as the case may be, amounts received in the Cash Management
Account, in each case to the extent that sufficient funds remain therefor:
      (i) funds sufficient to pay the monthly deposits to the Tax and Insurance
Reserve Account shall be allocated to the Tax and Insurance Reserve Account to
be held and disbursed in accordance with Section 9.6;
      (ii) funds sufficient to pay the Monthly Payment Amount shall be withdrawn
and paid to Lender;
      (iii) funds sufficient to pay the Replacement Reserve Monthly Deposit and
the amounts necessary to replace the letter of credit to the extent the Borrower
failed to provide the letter of credit required by Section 9.2 shall be
allocated to the Replacement Reserve Account to be held and disbursed in
accordance with Section 9.5;
      (iv) Termination Fee Deposits shall be allocated to the Leasing Reserve
Account to be held and disbursed in accordance with Section 9.3;
      (v) funds sufficient to pay any interest accruing at the Default Rate,
late payment charges, if any, and any other sums due and payable to Lender under
any of the Loan Documents, shall be withdrawn and paid to Lender and applied
against such items;
      (vi) funds sufficient to pay Operating Expenses (to the extent actually
incurred) for the following month in accordance with the related Annual Budget
shall be allocated to the Operating Expense Reserve Account to be held in
accordance with Section 9.8;
      (vii) funds sufficient to pay any Extraordinary Expenses for the following
month which have been approved by Lender shall be allocated to the Extraordinary
Expense Account to be held and disbursed in accordance with Section 9.8; and

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      (viii) funds in an amount equal to the balance (if any) remaining on
deposit in the Cash Management Account after the foregoing withdrawals and
allocations shall be transferred to (A) during the Cash Management Period, the
AFL Leasing Reserve Account and (B) after the end of the Cash Management Period,
and provided there is no Event of Default, such funds shall be transferred to
the Borrower’s Account.
     (d) Notwithstanding anything to the contrary herein, Borrower acknowledges
that Borrower is responsible for monitoring the sufficiency of funds deposited
in the Cash Management Account and that Borrower is liable for any deficiency in
available funds, irrespective of whether Borrower has received any account
statement, notice or demand from Lender or Lender’s servicer. If the amount on
deposit in the Cash Management Account is insufficient to make all of the
withdrawals and allocations described in Section 10.2(c)(i) through (vi) above,
Borrower shall deposit such deficiency into the Cash Management Account within
five (5) days (provided that such five day period shall not constitute a grace
period for any default or Event of Default under this Agreement or any other
Loan Document based on a failure to satisfy any monetary obligation provided in
any Loan Document).
     (e) If an Event of Default shall have occurred and be continuing, Borrower
hereby irrevocably authorizes Lender to make any and all withdrawals from the
Cash Management Account and transfers between any of the Reserve Accounts as
Lender shall determine in Lender’s sole and absolute discretion and Lender may
use all funds contained in any such accounts for any purpose, including but not
limited to repayment of the Debt in such order, proportion and priority as
Lender may determine in its sole and absolute discretion. Lender’s right to
withdraw and apply funds as stated herein shall be in addition to all other
rights and remedies provided to Lender under this Agreement, the Note, the
Mortgage and the other Loan Documents.
     Section 10.3 Deposits and Withdrawals After a Lockbox Event
     (a) After a Lockbox Event, Borrower represents, warrants and covenants
that:
      (i) Concurrently with the occurrence of a Lockbox Event, Borrower shall
notify and advise each Tenant under each Lease (whether such Lease is presently
effective or executed after the date hereof) to send directly to the Lockbox all
payments of Rents or any other item payable under such Leases pursuant to a
Tenant Direction Letter. If Borrower fails to provide any such notice (and
without prejudice to Lender’s rights with respect to such default), Lender shall
have the right, and Borrower hereby grants to Lender a power of attorney (which
power of attorney shall be coupled with an interest and irrevocable so long as
any portion of the Debt remains outstanding), to sign and deliver a Tenant
Direction Letter;
      (ii) Borrower shall, and shall cause Manager to, instruct all Persons that
maintain open accounts with Borrower or Manager with respect to the Property or
with whom Borrower or Manager does business on an “accounts receivable” basis
with respect to the Property to deliver all payments due under such accounts to
the Lockbox Account.

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Neither Borrower nor Manager shall direct any such Person to make payments due
under such accounts in any other manner;
      (iii) All Rents or other income from the Property shall (A) be deemed
additional security for payment of the Debt and shall be held in trust for the
benefit, and as the property, of Lender, (B) not be commingled with any other
funds or property of Borrower or Manager, and (C) if received by Borrower or
Manager notwithstanding the delivery of a Tenant Direction Letter, be deposited
in the Lockbox Account within one (1) day of receipt;
      (iv) Without the prior written consent of Lender, so long as any portion
of the Debt remains outstanding, neither Borrower nor Manager shall terminate,
amend, revoke or modify any Tenant Direction Letter in any manner whatsoever or
direct or cause any Tenant to pay any amount in any manner other than as
provided in the related Tenant Direction Letter; and
      (v) So long as any portion of the Debt remains outstanding, neither
Borrower, Manager nor any other Person shall open or maintain any accounts other
than the Lockbox Account into which revenues from the ownership and operation of
the Property are deposited. The foregoing shall not prohibit Borrower from
utilizing one or more separate accounts for the disbursement or retention of
funds that have been transferred to Borrower pursuant to the express terms of
this Agreement.
     (b) Provided no Event of Default has occurred, and provided Borrower has
provided the letter of credit required by Section 9.2, at all times Borrower
shall have the sole right to withdraw funds on deposit in the Lockbox Account
and may do so from time to time. Upon receipt of notice pursuant to the Lockbox
Agreement by Lockbox Bank of the occurrence of an Event of Default or the
Borrower’s failure to provide the letter of credit required by Section 9.2,
(i) all rights of Borrower to the withdrawal of funds from the Lockbox Account
shall immediately cease and be automatically vested with Lender, and (ii) Lender
shall have the right to transfer, or cause to be transferred, and Borrower
hereby irrevocably authorizes Lender to transfer, or cause to be transferred,
and Lender shall transfer, on each Business Day by wire transfer or other method
of transfer mutually agreeable to Lockbox Bank and Lender of immediately
available funds, all collected and available balances in the Lockbox Account to
the Cash Management Account to be held until disbursed by Lender pursuant to
Section 10.3(c). Provided no Event of Default has occurred and is continuing,
all rights of Lender to the withdrawal of funds from the Lockbox Account shall
immediately cease and be automatically vested with Borrower upon the earlier to
occur of payment in full of the Debt or the satisfaction of Section 9.2.
     (c) On each Scheduled Payment Date (and if such day is not a Business Day,
then the immediately preceding day which is a Business Day) commencing the month
immediately following the month during which the Borrower no longer has a right
to withdraw funds from the Lockbox Account, Borrower hereby irrevocably
authorizes Lender to withdraw or allocate to the sub-accounts of the Cash
Management Account, as the case may be, amounts received in the Cash Management
Account, in each case to the extent that sufficient funds remain therefor:

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      (i) funds sufficient to pay the monthly deposits to the Tax and Insurance
Reserve Account shall be allocated to the Tax and Insurance Reserve Account to
be held and disbursed in accordance with Section 9.6;
      (ii) funds sufficient to pay the Monthly Payment Amount shall be withdrawn
and paid to Lender;
      (iii) funds sufficient to pay the Replacement Reserve Monthly Deposit and
the amounts necessary to replace the letter of credit to the extent the Borrower
failed to provide the letter of credit required by Section 9.2 shall be
allocated to the Replacement Reserve Account to be held and disbursed in
accordance with Section 9.5;
      (iv) Termination Fee Deposits shall be allocated to the Leasing Reserve
Account to be held and disbursed in accordance with Section 9.3;
      (v) funds sufficient to pay any interest accruing at the Default Rate,
late payment charges, if any, and any other sums due and payable to Lender under
any of the Loan Documents, shall be withdrawn and paid to Lender and applied
against such items;
      (vi) funds sufficient to pay Lockbox Bank for all costs and expenses
incurred by Lockbox Bank in connection with the maintenance and administration
of the Lockbox Account;
      (vii) funds sufficient to pay Operating Expenses (to the extent actually
incurred) for the following month incurred in accordance with the related Annual
Budget shall be allocated to the Operating Expense Reserve Account to be held
and disbursed in accordance with Section 9.8;
      (viii) funds sufficient to pay any Extraordinary Expenses for the
following month which have been approved by Lender shall be allocated to the
Extraordinary Expense Account to be held and disbursed in accordance with
Section 9.8; and
      (ix) funds in an amount equal to the balance (if any) remaining on deposit
in the Cash Management Account after the foregoing withdrawals and allocations
shall be transferred to (A) during the Cash Management Period, the AFL Leasing
Reserve Account and (B) after the end of the Cash Management Period, and
provided there is no Event of Default, such funds shall be transferred to
Borrower’s Account.
     (d) Notwithstanding anything to the contrary herein, Borrower acknowledges
that Borrower is responsible for monitoring the sufficiency of funds deposited
in the Cash Management Account and that Borrower is liable for any deficiency in
available funds,

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irrespective of whether Borrower has received any account statement, notice or
demand from Lender or Lender’s servicer. If the amount on deposit in the Cash
Management Account is insufficient to make all of the withdrawals and
allocations described in Section 10.3(c)(i) through (vi) above, Borrower shall
deposit such deficiency into the Cash Management Account within five (5) days
(provided that such five day period shall not constitute a grace period for any
default or Event of Default under this Agreement or any other Loan Document
based on a failure to satisfy any monetary obligation provided in any Loan
Document).
     (e) If an Event of Default shall have occurred and be continuing, Borrower
hereby irrevocably authorizes Lender to make any and all withdrawals from the
Lockbox Account and Cash Management Account and transfers between any of the
Reserve Accounts as Lender shall determine in Lender’s sole and absolute
discretion and Lender may use all funds contained in any such accounts for any
purpose, including but not limited to repayment of the Debt in such order,
proportion and priority as Lender may determine in its sole and absolute
discretion. Lender’s right to withdraw and apply funds as stated herein shall be
in addition to all other rights and remedies provided to Lender under this
Agreement, the Note, the Mortgage and the other Loan Documents.
     Section 10.4 Security Interest
     (a) To secure the full and punctual payment of the Debt and performance of
all obligations of Borrower now or hereafter existing under this Agreement and
the other Loan Documents, Borrower hereby grants to Lender a first-priority
perfected security interest in the Lockbox Account and Cash Management Account,
all interest, cash, checks, drafts, certificates and instruments, if any, from
time to time deposited or held therein, any and all amounts invested in
Permitted Investments, and all “proceeds” (as defined in the UCC as in effect in
the state in which the Lockbox Account and Cash Management Account are located
or maintained) of any or all of the foregoing. Furthermore, Borrower shall not,
without obtaining the prior written consent of Lender, further pledge, assign or
grant any security interest in any of the foregoing or permit any Lien to attach
thereto or any levy to be made thereon or any UCC Financing Statements to be
filed with respect thereto. Borrower will maintain the security interest created
by this Section 10.4(a) as a first priority perfected security interest and will
defend the right, title and interest of Lender in and to the Lockbox Account and
Cash Management Account against the claims and demands of all Persons
whomsoever.
     (b) Borrower authorizes Lender to file any financing statement or
statements required by Lender to establish or maintain the validity, perfection
and priority of the security interest granted herein in connection with the
Lockbox Account and Cash Management Account. Borrower agrees that at any time
and from time to time, at the expense of Borrower, Borrower will promptly and
duly execute and deliver all further instruments and documents, and take all
further action, that may be necessary or desirable, or that Lender may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby (including, without limitation, any
security interest in and to any Permitted Investments) or to enable Lender to
exercise and enforce its rights and remedies hereunder.

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     (c) Upon the occurrence of an Event of Default, Lender may exercise any or
all of its rights and remedies as a secured party, pledgee and lienholder with
respect to the Lockbox Account and Cash Management Account. Without limitation
of the foregoing, upon any Event of Default, Lender may use the Lockbox Account
and Cash Management Account for any of the following purposes: (A) repayment of
the Debt, including, but not limited to, principal prepayments and the
prepayment premium applicable to such full or partial prepayment (as
applicable); (B) reimbursement of Lender for all losses, fees, costs and
expenses (including, without limitation, reasonable legal fees) suffered or
incurred by Lender as a result of such Event of Default; (C) payment of any
amount expended in exercising any or all rights and remedies available to Lender
at law or in equity or under this Agreement or under any of the other Loan
Documents; (D) payment of any item as required or permitted under this
Agreement; or (E) any other purpose permitted by applicable law; provided,
however, that any such application of funds shall not cure or be deemed to cure
any Event of Default. Without limiting any other provisions hereof, each of the
remedial actions described in the immediately preceding sentence shall be deemed
to be a commercially reasonable exercise of Lender’s rights and remedies as a
secured party with respect to the Lockbox Account and Cash Management Account
and shall not in any event be deemed to constitute a setoff or a foreclosure of
a statutory banker’s lien. Nothing in this Agreement shall obligate Lender to
apply all or any portion of the Lockbox Account or Cash Management Account to
effect a cure of any Event of Default, or to pay the Debt, or in any specific
order of priority. The exercise of any or all of Lender’s rights and remedies
under this Agreement or under any of the other Loan Documents shall not in any
way prejudice or affect Lender’s right to initiate and complete a foreclosure
under the Mortgage.
     (d) Definitions. Notwithstanding anything to the contrary contained herein,
For purposes of this Article 10 only, Business Day shall mean a day on which
Lender and Lockbox Bank are both open for the conduct of substantially all of
their respective banking business at the office in the city in which the Note is
payable, with respect to Lender and at the office in the city where the Lockbox
Account is maintained, with respect to Lockbox Bank (in both instances,
excluding Saturdays and Sundays).
ARTICLE 11
EVENTS OF DEFAULT; REMEDIES
     Section 11.1 Event of Default
     The occurrence of any one or more of the following events shall constitute
an “Event of Default”:
     (a) if any portion of the Debt is not paid prior to the fifth (5th) day
following the date the same is due or if the entire Debt is not paid on or
before the Maturity Date;
     (b) except as otherwise expressly provided in the Loan Documents, if any of
the Taxes or Other Charges are not paid when the same are due and payable,
unless there is sufficient money in the Tax and Insurance Reserve Account for
payment of amounts then due

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and payable and Lender’s access to such money has not been constrained or
restricted in any manner;
     (c) if (i) the Policies are not kept in full force and effect, (ii) the
Acord 28 (or similar) certificate is not delivered to Lender in accordance with
Section 8.1 or (iii) if certified copies of the Policies are not delivered to
Lender upon request, provided such copies are available;
     (d) if Borrower breaches any covenant with respect to itself or any SPE
Component Entity (if any) contained in Article 6 or any covenant contained in
Article 7 hereof;
     (e) if any representation or warranty of, or with respect to, Borrower,
Borrower Principal, any SPE Component Entity, or any member, general partner,
principal or beneficial owner of any of the foregoing, made herein, in any other
Loan Document, or in any certificate, report, financial statement or other
instrument or document furnished to Lender at the time of the closing of the
Loan or during the term of the Loan shall have been false or misleading in any
material respect when made;
     (f) if (i) Borrower, or any managing member or general partner of Borrower,
Borrower Principal, or any SPE Component Entity (if any) shall commence any
case, proceeding or other action (A) under any Creditors Rights Laws, seeking to
have an order for relief entered with respect to it, or seeking to adjudicate it
a bankrupt or insolvent, or seeking reorganization, or (B) seeking appointment
of a receiver, trustee, custodian, conservator or other similar official for it
or for all or any substantial part of its assets, or Borrower, any managing
member or general partner of Borrower, Borrower Principal, or any SPE Component
Entity (if any) shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against Borrower, any managing
member or general partner of Borrower, Borrower Principal, or any SPE Component
Entity (if any) any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of sixty (60) days; or (iii) there shall be commenced
against Borrower, any managing member or general partner of Borrower, Borrower
Principal, or any SPE Component Entity (if any) any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which results
in the entry of any order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within sixty (60) days from the
entry thereof; or (iv) Borrower, any managing member or general partner of
Borrower, Borrower Principal, or any SPE Component Entity (if any) shall take
any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above;
or (v) Borrower, any managing member or general partner of Borrower, Borrower
Principal, or any SPE Component Entity (if any) shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due;
     (g) if Borrower shall be in default beyond applicable notice and grace
periods under any other mortgage, deed of trust, deed to secure debt or other
security agreement covering any part of the Property, whether it be superior or
junior in lien to the Mortgage;

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     (h) if the Property becomes subject to any mechanic’s, materialman’s or
other Lien other than a Lien for any Taxes or Other Charges not then due and
payable and the Lien shall remain undischarged of record (by payment, bonding or
otherwise) for a period of thirty (30) days;
     (i) if any federal tax lien is filed against Borrower, any member or
general partner of Borrower, Borrower Principal, or any SPE Component Entity (if
any) or the Property and same is not discharged of record within thirty
(30) days after same is filed;
     (j) if a judgment is filed against the Borrower in excess of $10,000 which
is not vacated or discharged within 30 days;
     (k) if any default occurs under any guaranty or indemnity executed in
connection herewith and such default continues after the expiration of
applicable grace periods, if any;
     (l) if Borrower shall permit any event within its control to occur that
would cause any REA to terminate without notice or action by any party thereto
or would entitle any party to terminate any REA and the term thereof by giving
notice to Borrower; or any REA shall be surrendered, terminated or canceled for
any reason or under any circumstance whatsoever except as provided for in such
REA; or any term of any REA shall be modified or supplemented without Lender’s
consent; or Borrower shall fail, within ten (10) Business Days after demand by
Lender, to exercise its option to renew or extend the term of any REA or shall
fail or neglect to pursue diligently all actions necessary to exercise such
renewal rights pursuant to such REA except as provided for in such REA;
     (m) if Borrower shall continue to be in default under any other term,
covenant or condition of this Agreement or any of the Loan Documents for more
than ten (10) days after notice from Lender in the case of any default which can
be cured by the payment of a sum of money or for thirty (30) days after notice
from Lender in the case of any other default, provided that if such default
cannot reasonably be cured within such thirty (30) day period and Borrower shall
have commenced to cure such default within such thirty (30) day period and
thereafter diligently and expeditiously proceeds to cure the same, such thirty
(30) day period shall be extended for so long as it shall require Borrower in
the exercise of due diligence to cure such default, it being agreed that no such
extension shall be for a period in excess of sixty (60) days;
     (n) if Borrower fails to protect or enforce its rights under the Tenant
Letter of Credit or to deliver to the Lender the proceeds from or any payments
on the Tenant Letter of Credit in accordance with Section 9.10 hereof;
     (o) if Borrower fails to provide the Lender with an acceptable letter of
credit in the amount of $400,000.00 that satisfies the Lender’s Letter of Credit
Requirements or cash in the amount of $400,000.00 as required by Section 9.2;
     (p) if Borrower fails to provide the Lender with an acceptable letter of
credit in the amount of $650,000.00 that satisfies the Lender’s Letter of Credit
Requirements in the amount of $650,000.00 to the extent and as required by
Section 9.3(e); or

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     (q) if the balance of the AFL Leasing Reserve Account is not at least
$650,000.00 by the expiration or early termination of the AFL Lease.
     Section 11.2 Remedies
     (a) Upon the occurrence of an Event of Default (other than an Event of
Default described in Section 11.1(f) 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 at law or in equity, take such
action, without notice or demand (except as expressly provided otherwise
herein), that Lender deems advisable to protect and enforce its rights against
Borrower and in the 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
the Property, including, without limitation, all rights or remedies available at
law or in equity; and upon any Event of Default described in Section 11.1(f)
above, the Debt and all other obligations of Borrower hereunder and under the
other Loan Documents shall immediately and automatically become due and payable,
without notice or demand, and Borrower hereby expressly waives any such notice
or demand, anything contained herein or in any other Loan Document to the
contrary notwithstanding.
     (b) 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 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 with respect to the
Property. Any such actions taken by Lender shall be cumulative and concurrent
and may be pursued independently, singularly, successively, together or
otherwise, at such time and in such order as Lender may determine in its sole
discretion, to the fullest extent permitted by law, without impairing or
otherwise affecting the other rights and remedies of Lender permitted by law,
equity or contract or as set forth herein or in the other Loan Documents.
ARTICLE 12
ENVIRONMENTAL PROVISIONS
     Section 12.1 Environmental Representations and Warranties
     Borrower represents and warrants, based upon an Environmental Report of the
Property and information that Borrower knows or should reasonably have known,
that: (a) there are no Hazardous Materials or underground storage tanks in, on,
or under the Property, except those that are both (i) in compliance with
Environmental Laws and with permits issued pursuant thereto (if such permits are
required), if any, and (ii) either (A) in the case of Hazardous

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Materials, in amounts not in excess of that necessary to operate the Property
for the purposes set forth herein or (B) fully disclosed to and approved by
Lender in writing pursuant to an Environmental Report; (b) there are no past,
present or threatened Releases of Hazardous Materials in violation of any
Environmental Law or which would require remediation by a Governmental Authority
in, on, under or from the Property except as described in the Environmental
Report; (c) there is no threat of any Release of Hazardous Materials migrating
to the Property except as described in the Environmental Report; (d) there is no
past or present non-compliance with Environmental Laws, or with permits issued
pursuant thereto, in connection with the Property except as described in the
Environmental Report; (e) Borrower does not know of, and has not received, any
written or oral notice or other communication from any Person relating to
Hazardous Materials in, on, under or from the Property; (f) the Property is free
of Mold; and (g) Borrower has truthfully and fully provided to Lender, in
writing, any and all information relating to environmental conditions in, on,
under or from the Property known to Borrower or contained in Borrower’s files
and records, including but not limited to any reports relating to Hazardous
Materials in, on, under or migrating to or from the Property and/or to the
environmental condition of or the presence of Mold at the Property.
     Section 12.2 Environmental Covenants
     Borrower covenants and agrees that so long as Borrower owns, manages, is in
possession of, or otherwise controls the operation of the Property: (a) all uses
and operations on or of the Property, whether by Borrower or any other Person,
shall be in compliance with all Environmental Laws and permits issued pursuant
thereto; (b) there shall be no Releases of Hazardous Materials in, on, under or
from the Property; (c) there shall be no Hazardous Materials in, on, or under
the Property, except those that are both (i) in compliance with all
Environmental Laws and with permits issued pursuant thereto, if and to the
extent required, and (ii) (A) in amounts not in excess of that necessary to
operate the Property for the purposes set forth herein or (B) fully disclosed to
and approved by Lender in writing; or (C) with respect to Mold, not in a
condition, location, or of a type which may pose a risk to human health or
safety or the environment or which may result in damage to or would adversely
affect or impair the value or marketability of the Property; (d) Borrower shall
keep the Property free and clear of all Environmental Liens; (e) Borrower shall,
at its sole cost and expense, fully and expeditiously cooperate in all
activities pursuant to Section 12.4 below, including but not limited to
providing all relevant information and making knowledgeable persons available
for interviews; (f) Borrower shall, at its sole cost and expense, perform any
environmental site assessment or other investigation of environmental conditions
in connection with the Property, pursuant to any reasonable written request of
Lender, upon Lender’s reasonable belief that the Property is not in full
compliance with all Environmental Laws, and share with Lender the reports and
other results thereof, and Lender and other Indemnified Parties shall be
entitled to rely on such reports and other results thereof; (g) Borrower shall
keep the Property free of Mold; (h) Borrower shall, at its sole cost and
expense, comply with all reasonable written requests of Lender to (i) reasonably
effectuate remediation of any Hazardous Materials in, on, under or from the
Property; and (ii) comply with any Environmental Law; (i) Borrower shall not
allow any tenant or other user of the Property to violate any Environmental Law;
and (j) Borrower shall immediately notify Lender in writing after it has become
aware of (A) any presence or Release or threatened Release of Hazardous
Materials in, on, under, from or migrating towards the Property; (B) any

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non-compliance with any Environmental Laws related in any way to the Property;
(C) any actual or potential Environmental Lien against the Property; (D) any
required or proposed remediation of environmental conditions relating to the
Property; and (E) any written or oral notice or other communication of which
Borrower becomes aware from any source whatsoever (including but not limited to
a Governmental Authority) relating in any way to Hazardous Materials. Any
failure of Borrower to perform its obligations pursuant to this Section 12.2
shall constitute bad faith waste with respect to the Property.
     Section 12.3 Lender’s Rights
     Lender and any other Person designated by Lender, including but not limited
to any representative of a Governmental Authority, and any environmental
consultant, and any receiver appointed by any court of competent jurisdiction,
shall have the right, but not the obligation, to enter upon the Property at all
reasonable times to assess any and all aspects of the environmental condition of
the Property and its use, including but not limited to conducting any
environmental assessment or audit (the scope of which shall be determined in
Lender’s sole discretion) and taking samples of soil, groundwater or other
water, air, or building materials, and conducting other invasive testing.
Borrower shall cooperate with and provide access to Lender and any such person
or entity designated by Lender.
     Section 12.4 Operations and Maintenance
     If recommended by the Environmental Report or any other environmental
assessment or audit of the Property, Borrower shall establish and comply with an
operations and maintenance program with respect to the Property, in form and
substance reasonably acceptable to Lender, prepared by an environmental
consultant reasonably acceptable to Lender, which program shall address any
asbestos-containing material or lead based paint or Mold that may now or in the
future be detected at or on the Property. Without limiting the generality of the
preceding sentence, Lender may require (a) periodic notices or reports to Lender
in form, substance and at such intervals as Lender may specify, (b) an amendment
to such operations and maintenance program to address changing circumstances,
laws or other matters, (c) at Borrower’s sole expense, supplemental examination
of the Property by consultants specified by Lender, (d) access to the Property
by Lender, its agents or servicer, to review and assess the environmental
condition of the Property and Borrower’s compliance with any operations and
maintenance program, and (e) variation of the operations and maintenance program
in response to the reports provided by any such consultants.
     Section 12.5 Environmental Definitions
     “Environmental Law” means any present and future federal, state and local
laws, statutes, ordinances, rules, regulations, standards, policies and other
government directives or requirements, as well as common law, including but not
limited to the Comprehensive Environmental Response, Compensation and Liability
Act and the Resource Conservation and Recovery Act, that apply to Borrower or
the Property and relate to Hazardous Materials or protection of human health or
the environment. “Environmental Liens” means all Liens and other encumbrances
imposed pursuant to any Environmental Law, whether due to any act or

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omission of Borrower or any other Person. “Environmental Report” means the
written reports resulting from the environmental site assessments of the
Property delivered to Lender in connection with the Loan. “Hazardous Materials”
shall mean petroleum and petroleum products and compounds containing them,
including gasoline, diesel fuel and oil; explosives, flammable materials;
radioactive materials; polychlorinated biphenyls and compounds containing them;
lead and lead-based paint; asbestos or asbestos-containing materials in any form
that is or could become friable; underground or above-ground storage tanks,
whether empty or containing any substance; any substance the presence of which
on the Property is prohibited by any federal, state or local authority; any
substance that requires special handling; and any other material or substance
now or in the future defined as a “hazardous substance,” “hazardous material”,
“hazardous waste”, “toxic substance”, “toxic pollutant”, “contaminant”, or
“pollutant” within the meaning of any Environmental Law. “Mold” shall mean any
mold, fungi, bacterial or microbial matter present at or in the Property,
including, without limitation, building materials which is in a condition,
location or a type which may pose a risk to human health or safety or the
environment, may result in damage to or would adversely affect or impair the
value or marketability of the Property. “Release” of any Hazardous Materials
includes but is not limited to any release, deposit, discharge, emission,
leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying,
escaping, dumping, disposing or other movement of Hazardous Materials.
     Section 12.6 Indemnification
     (a) Borrower and Borrower Principal covenant and agree at their sole cost
and expense, to protect, defend, indemnify, release and hold Indemnified Parties
harmless from and against any and all Losses imposed upon or incurred by or
asserted against any Indemnified Parties and directly or indirectly arising out
of or in any way relating to any one or more of the following: (i) any presence
of any Hazardous Materials in, on, above, or under the Property; (ii) any past,
present or threatened Release of Hazardous Materials in, on, above, under or
from the Property; (iii) any activity by Borrower, any Person affiliated with
Borrower, and any Tenant or other user of the Property in connection with any
actual, proposed or threatened use, treatment, storage, holding, existence,
disposition or other Release, generation, production, manufacturing, processing,
refining, control, management, abatement, removal, handling, transfer or
transportation to or from the Property of any Hazardous Materials at any time
located in, under, on or above the Property or any actual or proposed
remediation of any Hazardous Materials at any time located in, under, on or
above the Property, whether or not such remediation is voluntary or pursuant to
court or administrative order, including but not limited to any removal,
remedial or corrective action; (iv) any past, present or threatened
non-compliance or violations of any Environmental Laws (or permits issued
pursuant to any Environmental Law) in connection with the Property or operations
thereon, including but not limited to any failure by Borrower, any person or
entity affiliated with Borrower, and any tenant or other user of the Property to
comply with any order of any Governmental Authority in connection with any
Environmental Laws; (v) the imposition, recording or filing or the threatened
imposition, recording or filing of any Environmental Lien encumbering the
Property; (vi) any acts of Borrower, any person or entity affiliated with
Borrower, and any tenant or other user of the Property in (A) arranging for
disposal or treatment, or arranging with a transporter for transport for
disposal or treatment, of Hazardous Materials at any facility or incineration
vessel containing

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such or similar Hazardous Materials or (B) accepting any Hazardous Materials for
transport to disposal or treatment facilities, incineration vessels or sites
from which there is a Release, or a threatened Release of any Hazardous
Substance which causes the incurrence of costs for remediation; and (vii) any
misrepresentation or inaccuracy in any representation or warranty or material
breach or failure to perform any covenants or other obligations pursuant to this
Agreement relating to environmental matters.
     (b) Upon written request by any Indemnified Party, Borrower and Borrower
Principal shall defend same (if requested by any Indemnified Party, in the name
of the Indemnified Party) by attorneys and other professionals reasonably
approved by the Indemnified Parties. Notwithstanding the foregoing, any
Indemnified Parties may, in their sole discretion, engage their own attorneys
and other professionals to defend or assist them, and, at the option of
Indemnified Parties, their attorneys shall control the resolution of any claim
or proceeding. Upon demand, Borrower and Borrower Principal shall pay or, in the
sole discretion of the Indemnified Parties, reimburse, the Indemnified Parties
for the payment of reasonable fees and disbursements of attorneys, engineers,
environmental consultants, laboratories and other professionals in connection
therewith.
     (c) Notwithstanding the foregoing, neither Borrower nor Borrower Principal
shall have any liability for any Losses imposed upon or incurred by or asserted
against any Indemnified Parties and described in subsection (a) above to the
extent that Borrower and/or Borrower Principal can conclusively prove both that
such Losses were caused solely by actions, conditions or events that occurred
after the date that Lender (or any purchaser at a foreclosure sale) actually
acquired title to the Property and that such Losses were not caused by the
direct or indirect actions of Borrower, Borrower Principal, or any partner,
member, principal, officer, director, trustee or manager of Borrower or Borrower
Principal or any employee, agent, contractor or Affiliate of Borrower or
Borrower Principal. The obligations and liabilities of Borrower and Borrower
Principal under this Section 12.6 shall fully survive indefinitely
notwithstanding any termination, satisfaction, assignment, entry of a judgment
of foreclosure, exercise of any power of sale, or delivery of a deed in lieu of
foreclosure of the Mortgage, except that, upon payment of full of the Loan,
Borrower and Borrower Principal shall be released from liability under this
Section 12.6 upon delivery to the Lender of an environmental report in form and
substance and from an engineer acceptable to Lender and dated no earlier than
the date on which the Loan is paid in full.
ARTICLE 13
SECONDARY MARKET
     Section 13.1 Transfer of Loan
     Lender may, at any time, sell, transfer or assign the Loan Documents, or
grant participations therein (“Participations”) or syndicate the Loan
(“Syndication”) or issue mortgage pass-through certificates or other securities
evidencing a beneficial interest in a rated

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or unrated public offering or private placement (“Securities”) (a Syndication or
the issuance of Participations and/or Securities, a “Securitization”).
     Section 13.2 Delegation of Servicing
     At the option of Lender, the Loan may be serviced by a servicer/trustee
selected by Lender and Lender may delegate all or any portion of its
responsibilities under this Agreement and the other Loan Documents to such
servicer/trustee pursuant to a servicing agreement between Lender and such
servicer/trustee.
     Section 13.3 Dissemination of Information
     Lender may forward to each purchaser, transferee, assignee, or servicer of,
and each participant, or investor in, the Loan, or any Participations and/or
Securities or any of their respective successors (collectively, the “Investor”)
or any Rating Agency rating the Loan, or any Participations and/or Securities,
each prospective Investor, and any organization maintaining databases on the
underwriting and performance of commercial mortgage loans, all documents and
information which Lender now has or may hereafter acquire relating to the Debt
and to Borrower, any managing member or general partner thereof, Borrower
Principal, any SPE Component Entity (if any) and the Property, including
financial statements, whether furnished by Borrower or otherwise, as Lender
determines necessary or desirable.
     Section 13.4 Cooperation
     Borrower and Borrower Principal agree to cooperate with Lender in
connection with any sale or transfer of the Loan or any Participation and/or
Securities created pursuant to this Article 13, including, without limitation,
(a) the delivery of an estoppel certificate required in accordance with
Section 5.12(a) and such other documents as may be reasonably requested by
Lender, (b) the execution of such amendments to the Loan Documents as may be
requested by the holder of the Note or the Rating Agencies or otherwise to
effect the Securitization including, without limitation, bifurcation of the Loan
into two or more separate notes; provided, however, that Borrower shall not be
required to modify or amend any Loan Document if such modification or amendment
would (i) change the interest rate, the stated maturity or the amortization of
principal set forth in the Note, except in connection with a bifurcation of the
Loan which may result in varying fixed interest rates and amortization
schedules, but which shall have the same initial weighted average coupon of the
original Note, or (ii) in the reasonable judgment of Borrower, modify or amend
any other material economic term of the Loan, or (iii) in the reasonable
judgment of Borrower, materially increase Borrower’s obligations and liabilities
under the Loan Documents, and (c) make changes to the organizational documents
of Borrower and its principals and/or use its best efforts to cause changes to
the legal opinions delivered by Borrower in connection with the Loan, provided,
that such changes shall not result in a material adverse economic effect to
Borrower. Borrower shall also furnish and Borrower and Borrower Principal
consent to Lender furnishing to such Investors or such prospective Investors or
such Rating Agency any and all information concerning the Property, the Leases,
the financial condition of Borrower or Borrower Principal as may be requested by
Lender, any Investor, any

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prospective Investor or any Rating Agency in connection with any sale or
transfer of the Loan or any Participations or Securities.
ARTICLE 14
INDEMNIFICATIONS
     Section 14.1 General Indemnification
     Borrower shall indemnify, defend and hold harmless the Indemnified Parties
from and against any and all Losses imposed upon or incurred by or asserted
against any Indemnified Parties and directly or indirectly arising out of or in
any way relating to any one or more of the following: (a) any accident, injury
to or death of persons or loss of or damage to property occurring in, on or
about the Property or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (b) any use,
nonuse or condition in, on or about the Property or any part thereof or on the
adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets
or ways; (c) performance of any labor or services or the furnishing of any
materials or other property in respect of the Property or any part thereof;
(d) any failure of the Property to be in compliance with any applicable Legal
Requirements; (e) any and all claims and demands whatsoever which may be
asserted against Lender by reason of any alleged obligations or undertakings on
its part to perform or discharge any of the terms, covenants, or agreements
contained in any Lease; (f) the holding or investing of the Reserve Accounts or
the performance of the Required Work, Additional Required Repairs or Additional
Replacements, or (g) the payment of any commission, charge or brokerage fee to
anyone which may be payable in connection with the funding of the Loan
(collectively, the “Indemnified Liabilities”); provided, however, that Borrower
shall not have any obligation to Lender hereunder to the extent that such
Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or
willful misconduct of Lender. 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
Lender.
     Section 14.2 Mortgage and Intangible Tax Indemnification
     Borrower shall, at its sole cost and expense, protect, defend, indemnify,
release and hold harmless the Indemnified Parties from and against any and all
Losses imposed upon or incurred by or asserted against any Indemnified Parties
and directly or indirectly arising out of or in any way relating to any tax on
the making and/or recording of the Mortgage, the Note or any of the other Loan
Documents, but excluding any income, franchise or other similar taxes.
     Section 14.3 ERISA Indemnification
     Borrower shall, at its sole cost and expense, protect, defend, indemnify,
release and hold harmless the Indemnified Parties from and against any and all
Losses (including, without

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limitation, reasonable attorneys’ fees and costs incurred in the investigation,
defense, and settlement of Losses incurred in correcting any prohibited
transaction or in the sale of a prohibited loan, and in obtaining any individual
prohibited transaction exemption under ERISA that may be required, in Lender’s
sole discretion) that Lender may incur, directly or indirectly, as a result of a
default under Section 4.9 or Section 5.18 of this Agreement.
     Section 14.4 Survival
     The obligations and liabilities of Borrower and Borrower Principal under
this Article 14 shall fully survive for a period of two (2) years after payment
of the Debt in full, notwithstanding any termination, satisfaction, assignment,
entry of a judgment of foreclosure, exercise of any power of sale, or delivery
of a deed in lieu of foreclosure of the Mortgage; provided that, notwithstanding
the foregoing, the indemnification obligations under Section 12.6 hereof shall
survive indefinitely.
ARTICLE 15
EXCULPATION
     Section 15.1 Exculpation
     (a) Except as otherwise provided herein or in the other Loan Documents,
Lender shall not enforce the liability and obligation of Borrower or Borrower
Principal, as applicable, to perform and observe the obligations contained
herein or in the other Loan Documents by any action or proceeding wherein a
money judgment shall be sought against Borrower or Borrower Principal, except
that Lender may bring a foreclosure action, action for specific performance or
other appropriate action or proceeding to enable Lender to enforce and realize
upon this Agreement, the Note, the Mortgage and the other Loan Documents, and
the interest in the Property, the Rents and any other collateral given to Lender
created by this Agreement, the Note, the Mortgage and the other Loan Documents;
provided, however, that any judgment in any such action or proceeding shall be
enforceable against Borrower or Borrower Principal, as applicable, only to the
extent of Borrower’s or Borrower Principal’s interest in the Property, in the
Rents and in any other collateral given to Lender. Lender, by accepting this
Agreement, the Note, the Mortgage and the other Loan Documents, agrees that it
shall not, except as otherwise provided in this Section 15.1, sue for, seek or
demand any deficiency judgment against Borrower or Borrower Principal in any
such action or proceeding, under or by reason of or under or in connection with
this Agreement, the Note, the Mortgage or the other Loan Documents. The
provisions of this Section 15.1 shall not, however, (i) constitute a waiver,
release or impairment of any obligation evidenced or secured by this Agreement,
the Note, the Mortgage or the other Loan Documents; (ii) impair the right of
Lender to name Borrower or Borrower Principal as a party defendant in any action
or suit for judicial foreclosure and sale under this Agreement and the Mortgage;
(iii) affect the validity or enforceability of any indemnity (subject to the
limitations set forth herein) (including, without limitation, those contained in
Section 12.6 and Article 14 of this Agreement), guaranty, master lease or
similar instrument made in connection with this Agreement, the Note, the
Mortgage and the other Loan Documents; (iv) impair the right

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of Lender to obtain the appointment of a receiver; (v) impair the enforcement of
the assignment of leases provisions contained in the Mortgage; or (vi) impair
the right of Lender to obtain a deficiency judgment or other judgment on the
Note against Borrower or Borrower Principal if necessary to obtain any Insurance
Proceeds or Awards to which Lender would otherwise be entitled under this
Agreement; provided however, Lender shall only enforce such judgment to the
extent of the Insurance Proceeds and/or Awards.
     (b) Notwithstanding the provisions of this Section 15.1 to the contrary,
Borrower and Borrower Principal shall be personally liable to Lender on a joint
and several basis for Losses due to:
      (i) fraud or intentional misrepresentation by Borrower, Borrower Principal
or any other Affiliate of Borrower or Borrower Principal in connection with the
execution and the delivery of this Agreement, the Note, the Mortgage, any of the
other Loan Documents, or any certificate, report, financial statement or other
instrument or document furnished to Lender at the time of the closing of the
Loan or during the term of the Loan;
      (ii) Borrower’s misapplication or misappropriation of Rents received by
Borrower after the occurrence of an Event of Default;
      (iii) Borrower’s misapplication or misappropriation of tenant security
deposits or Rents collected in advance;
      (iv) the misapplication or the misappropriation of Insurance Proceeds or
Awards by Borrower or Borrower Principal or any principal, Affiliate, member or
general partner thereof;
      (v) Borrower’s failure to pay Taxes, Other Charges (except to the extent
that (A) sums sufficient to pay such amounts have been deposited in escrow with
Lender pursuant to the terms hereof and there exists no impediment to Lender’s
utilization thereof or (B) there is insufficient cash flow from the operation of
the Property), charges for labor or materials or other charges that can create
liens on the Property beyond any applicable notice and cure periods specified
herein;
      (vi) Borrower’s failure to return or to reimburse Lender for all Personal
Property taken from the Property by or on behalf of Borrower and not replaced
with Personal Property of the same utility and of the same or greater value;
      (vii) any act of actual waste or arson by Borrower, any principal,
Affiliate, member or general partner thereof or by Borrower Principal, any
principal, Affiliate, member or general partner thereof;
      (viii) Borrower’s failure following any Event of Default to deliver to
Lender upon demand all Rents and books and records relating to the Property;
      (ix) Borrower’s gross negligence or willful misconduct;

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      (x) Borrower’s failure to protect or enforce its rights under the Tenant
Letter of Credit or to deliver to the Lender the proceeds from or any payments
on the Tenant Letter of Credit in accordance with Section 9.10 hereof;
      (xi) Borrower’s failure to provide the Lender with an acceptable letter of
credit in the amount of $400,000.00 that satisfies the Lender’s Letter of Credit
Requirements or cash in the amount of $400,000.00 as required by Section 9.2;
      (xii) Borrower’s failure to provide the Lender with an acceptable letter
of credit in the amount of $650,000.00 that satisfies the Lender’s Letter of
Credit Requirements in the amount of $650,000.00 to the extent and as required
by Section 9.3(e); or
      (xiii) the failure of the balance of the AFL Leasing Reserve Account to be
at least $650,000.00 by the expiration or early termination of the AFL Lease.
     (c) Notwithstanding the foregoing, the agreement of Lender not to pursue
recourse liability as set forth in subsection (a) above SHALL BECOME NULL AND
VOID and shall be of no further force and effect and the Debt shall be fully
recourse to Borrower and Borrower Principal on a joint and several basis in the
event (i) of a breach by Borrower, Borrower Principal or any SPE Component
Entity (if any) of any of the covenants set forth in Article 6 hereof, to the
extent that such breach is (A) material and (B) is not cured within fifteen
(15) days of the earlier to occur of notice from Lender or Borrower’s knowledge
of such breach, (ii) of a breach of any of the covenants set forth in Article 7
hereof, (iii) the Property or any part thereof shall become an asset in a
voluntary bankruptcy or insolvency proceeding of Borrower; (iv) Borrower,
Borrower Principal or any Affiliate, officer, director, or representative which
controls, directly or indirectly, Borrower or Borrower Principal files, or joins
in the filing of, an involuntary petition against Borrower under any Creditors
Rights Laws, 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 any Creditors Rights Laws,
or solicits or causes to be solicited petitioning creditors for any involuntary
petition from any Person; or (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.
     (d) Nothing herein shall be deemed to be a waiver of any right which Lender
may have under Section 506(a), 506(b), 1111(b) or any other provision of the
U.S. Bankruptcy Code to file a claim for the full amount of the indebtedness
secured by the Mortgage or to require that all collateral shall continue to
secure all of the indebtedness owing to Lender in accordance with this
Agreement, the Note, the Mortgage or the other Loan Documents.
     (e) Subject to the terms of Section 12.6, upon payment in full of the Loan,
Borrower Principal shall be relieved of its obligations under this Article 15.

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ARTICLE 16
NOTICES
     Section 16.1 Notices
     All notices, consents, approvals and requests required or permitted
hereunder or under any other Loan Document shall be given in writing and shall
be effective for all purposes if hand delivered or sent by (a) certified or
registered United States mail, postage prepaid, return receipt requested,
(b) expedited prepaid overnight delivery service, either commercial or United
States Postal Service, with proof of attempted delivery, or by (c) telecopier
(with answer back acknowledged provided an additional notice is given pursuant
to subsection (b) above), addressed as follows (or at such other address and
Person as shall be designated from time to time by any party hereto, as the case
may be, in a written notice to the other parties hereto in the manner provided
for in this Section):

     
If to Lender:
  Bank of America, N.A.
 
  c/o LJ Melody and Company
 
  GEMSA Loan Services, LP
 
  1500 City West Blvd., Suite 200
 
  Houston, TX 77042
 
  Telephone No.: (800) 456-1443
 
  Facsimile No.: (713) 458-7502
 
   
With a copy to:
  Moore & Van Allen PLLC
 
  100 North Tryon Street, 47th Floor
 
  Charlotte, NC 28202
 
  Attention: Edward K. Oden, Esq.
 
  Telephone No.: (704) 331-1000
 
  Facsimile No.: (704) 331-1159
 
   
If to Borrower:
  AFL05 Duncan SC LLC
 
  c/o Gladstone Commercial Corporation
 
  1521 Westbranch Drive, Suite 200
 
  McLean, VA 22102
 
  Attention: Mr. Matthew Tucker
 
  Telephone No.: (703) 287-5830
 
  Facsimile No.: (703) 287-5801
 
   
With a copy to:
  Winston & Strawn LLP
 
  1700 K Street, N.W.
 
  Washington, D.C. 20006
 
  Attention: Richard F. Williamson, Esquire
 
  Telephone No.: (202) 282-5000
 
  Facsimile No.: (202) 282-5100

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If to Borrower:
  Little Arch Charlotte NC LLC
 
  c/o Gladstone Commercial Corporation
 
  1521 Westbranch Drive, Suite 200
 
  McLean, VA 22102
 
  Attention: Mr. Matthew Tucker
 
  Telephone No.: (703) 287-5830
 
  Facsimile No.: (703) 287-5801
 
   
With a copy to:
  Winston & Strawn LLP
 
  1700 K Street, N.W.
 
  Washington, D.C. 20006
 
  Attention: Richard F. Williamson, Esquire
 
  Telephone No.: (202) 282-5000
 
  Facsimile No.: (202) 282-5100
 
   
If to Borrower
   
Principal:
  Gladstone Commercial Corporation
 
  1521 Westbranch Drive, Suite 200
 
  McLean, VA 22102
 
  Attention: Mr. Matthew Tucker
 
  Telephone No.: (703) 287-5830
 
  Facsimile No.: (703) 287-5801
 
   
With a copy to:
  Winston & Strawn LLP
 
  1700 K Street, N.W.
 
  Washington, D.C. 20006
 
  Attention: Richard F. Williamson, Esquire
 
  Telephone No.: (202) 282-5000
 
  Facsimile No.: (202) 282-5100

A notice shall be deemed to have been given: in the case of hand delivery, at
the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery and telecopy, upon the first attempted delivery on a
Business Day.
ARTICLE 17
FURTHER ASSURANCES
     Section 17.1 Replacement Documents
     Upon receipt of an affidavit of an officer of Lender as to the loss, theft,
destruction or mutilation of the Note or any other Loan Document which is not of
public record: (i) with respect to any Loan Document other than the Note,
Borrower will issue, in lieu thereof, a replacement of such other Loan Document,
dated the date of such lost, stolen, destroyed or

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mutilated Loan Document in the same principal amount thereof and otherwise of
like tenor and (ii) with respect to the Note, (a) Borrower will execute a
reaffirmation of the Debt as evidenced by such Note acknowledging that Lender
has informed Borrower that the Note was lost, stolen destroyed or mutilated and
that such Debt continues to be an obligation and liability of the Borrower as
set forth in the Note, a copy of which shall be attached to such reaffirmation
and (b) if requested by Lender, Borrower will execute a replacement note and
Lender or Lender’s custodian (at Lender’s option) shall provide to Borrower
Lender’s (or Lender’s custodian’s) then standard form of lost note affidavit and
indemnity, which such form shall be reasonably acceptable to Borrower.
     Section 17.2 Recording of Mortgage, etc
     Borrower forthwith upon the execution and delivery of the Mortgage and
thereafter, from time to time, will cause the Mortgage and any of the other Loan
Documents creating a lien or security interest or evidencing the lien hereof
upon the Property and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect and
perfect the lien or security interest hereof upon, and the interest of Lender
in, the Property. Borrower will pay all taxes, filing, registration or recording
fees, and all expenses incident to the preparation, execution, acknowledgment
and/or recording of the Note, the Mortgage, the other Loan Documents, any note,
deed of trust or mortgage supplemental hereto, any security instrument with
respect to the Property and any instrument of further assurance, and any
modification or amendment of the foregoing documents, and all federal, state,
county and municipal taxes, duties, imposts, assessments and charges arising out
of or in connection with the execution and delivery of the Mortgage, any deed of
trust or mortgage supplemental hereto, any security instrument with respect to
the Property or any instrument of further assurance, and any modification or
amendment of the foregoing documents, except where prohibited by law so to do.
     Section 17.3 Further Acts, etc
     Borrower will, at the cost of Borrower, and without expense to Lender, do,
execute, acknowledge and deliver all and every further acts, deeds, conveyances,
deeds of trust, mortgages, assignments, security agreements, control agreements,
notices of assignments, transfers and assurances as Lender shall, from time to
time, reasonably require, for the better assuring, conveying, assigning,
transferring, and confirming unto Lender the property and rights hereby
mortgaged, deeded, granted, bargained, sold, conveyed, confirmed, pledged,
assigned, warranted and transferred or intended now or hereafter so to be, or
which Borrower may be or may hereafter become bound to convey or assign to
Lender, or for carrying out the intention or facilitating the performance of the
terms of this Agreement or for filing, registering or recording the Mortgage, or
for complying with all Legal Requirements. Borrower, on demand, will execute and
deliver, and in the event it shall fail to so execute and deliver, hereby
authorizes Lender to execute in the name of Borrower or without the signature of
Borrower to the extent Lender may lawfully do so, one or more financing
statements and financing statement amendments to evidence more effectively,
perfect and maintain the priority of the security interest of Lender in the
Property. Borrower grants to Lender an irrevocable power of attorney

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coupled with an interest for the purpose of exercising and perfecting any and
all rights and remedies available to Lender at law and in equity, including
without limitation, such rights and remedies available to Lender pursuant to
this Section 17.3.
     Section 17.4 Changes in Tax, Debt, Credit and Documentary Stamp Laws
     (a) If any law is enacted or adopted or amended after the date of this
Agreement which deducts the Debt from the value of the Property for the purpose
of taxation or which imposes a tax, either directly or indirectly, on the Debt
or Lender’s interest in the Property, Borrower will pay the tax, with interest
and penalties thereon, if any. If Lender is advised by counsel chosen by it that
the payment of tax by Borrower would be unlawful or taxable to Lender or
unenforceable or provide the basis for a defense of usury then Lender shall have
the option by written notice of not less than one hundred twenty (120) days to
declare the Debt immediately due and payable.
     (b) Borrower will not claim or demand or be entitled to any credit or
credits on account of the Debt for any part of the Taxes or Other Charges
assessed against the Property, or any part thereof, and no deduction shall
otherwise be made or claimed from the assessed value of the Property, or any
part thereof, for real estate tax purposes by reason of the Mortgage or the
Debt. If such claim, credit or deduction shall be required by law, Lender shall
have the option, by written notice of not less than one hundred twenty
(120) days, to declare the Debt immediately due and payable.
     If at any time the United States of America, any State thereof or any
subdivision of any such State shall require revenue or other stamps to be
affixed to the Note, the Mortgage, or any of the other Loan Documents or impose
any other tax or charge on the same, Borrower will pay for the same, with
interest and penalties thereon, if any.
     Section 17.5 Expenses
     Borrower covenants and agrees to pay or, if Borrower fails to pay, to
reimburse, Lender upon receipt of written notice from Lender for all reasonable
costs and expenses (including reasonable, actual attorneys’ fees and
disbursements and the allocated costs of internal legal services and all actual
disbursements of internal counsel) reasonably incurred by Lender in accordance
with this Agreement in connection with (a) the preparation, negotiation,
execution and delivery of this Agreement and the other Loan Documents and the
consummation of the transactions contemplated hereby and thereby and all the
costs of furnishing all opinions by counsel for Borrower (including without
limitation any opinions requested by Lender as to any legal matters arising
under this Agreement or the other Loan Documents with respect to the Property);
(b) Borrower’s ongoing performance of and compliance with Borrower’s respective
agreements and covenants contained in this Agreement and the other Loan
Documents on its part to be performed or complied with after the Closing Date,
including, without limitation, confirming compliance with environmental and
insurance requirements; (c) following a request by Borrower, Lender’s ongoing
performance and compliance with all agreements and conditions contained in this
Agreement and the other Loan Documents on its part to be performed or complied
with after the Closing Date; (d) the negotiation, preparation, execution,
delivery and

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administration of any consents, amendments, waivers or other modifications to
this Agreement and the other Loan Documents and any other documents or matters
requested by Lender; (e) securing Borrower’s compliance with any requests made
pursuant to the provisions of this Agreement; (f) the filing and recording fees
and expenses, title insurance and reasonable fees and expenses of counsel for
providing to Lender all required legal opinions, and other similar expenses
incurred in creating and perfecting the Lien in favor of Lender pursuant to this
Agreement and the other Loan Documents; (g) enforcing or preserving any rights,
in response to third party claims or the prosecuting or defending of any action
or proceeding or other litigation, in each case against, under or affecting
Borrower, this Agreement, the other Loan Documents, the Property, or any other
security given for the Loan; and (h) enforcing any obligations of or collecting
any payments due from Borrower under this Agreement, the other Loan Documents or
with respect to the 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.
     Section 17.6 Cost of Enforcement
     In the event (a) that the Mortgage is foreclosed in whole or in part,
(b) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in
respect of Borrower or any of its constituent Persons or an assignment by
Borrower or any of its constituent Persons for the benefit of its creditors, or
(c) Lender exercises any of its other remedies under this Agreement or any of
the other Loan Documents, Borrower shall be chargeable with and agrees to pay
all costs of collection and defense, including attorneys’ fees and costs,
incurred by Lender or Borrower in connection therewith and in connection with
any appellate proceeding or post-judgment action involved therein, together with
all required service or use taxes.
ARTICLE 18
WAIVERS
     Section 18.1 Remedies Cumulative; Waivers
     The rights, powers and remedies of Lender under this Agreement shall be
cumulative and not exclusive of any other right, power or remedy which Lender
may have against Borrower or Borrower Principal pursuant to this Agreement or
the other Loan Documents, or existing at law or in equity or otherwise. Lender’s
rights, powers and remedies may be pursued singularly, concurrently or
otherwise, at such time and in such order as Lender may determine in Lender’s
sole discretion. No delay or omission to exercise any remedy, right or power
accruing upon an Event of Default shall impair any such remedy, right or power
or shall be construed as a waiver thereof, but any such remedy, right or power
may be exercised from time to time and as often as may be deemed expedient. A
waiver of one Default or Event of Default with respect to Borrower shall not be
construed to be a waiver of any subsequent Default or Event of Default by
Borrower or to impair any remedy, right or power consequent thereon.

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     Section 18.2 Modification, Waiver in Writing
     No modification, amendment, extension, discharge, termination or waiver of
any provision of this Agreement, or of the Note, or of any other Loan Document,
nor consent to any departure by Borrower therefrom, shall in any event be
effective unless the same shall be in a writing signed by the party against whom
enforcement is sought, and then such waiver or consent shall be effective only
in the specific instance, and for the purpose, for which given. Except as
otherwise expressly provided herein, no notice to, or demand on Borrower, shall
entitle Borrower to any other or future notice or demand in the same, similar or
other circumstances.
     Section 18.3 Delay Not a Waiver
     Neither any failure nor any delay on the part of Lender in insisting upon
strict performance of any term, condition, covenant or agreement, or exercising
any right, power, remedy or privilege hereunder, or under the Note or under any
other Loan Document, or any other instrument given as security therefor, shall
operate as or constitute a waiver thereof, nor shall a single or partial
exercise thereof preclude any other future exercise, or the exercise of any
other right, power, remedy or privilege. In particular, and not by way of
limitation, by accepting payment after the due date of any amount payable under
this Agreement, the Note or any other Loan Document, Lender shall not be deemed
to have waived any right either to require prompt payment when due of all other
amounts due under this Agreement, the Note or the other Loan Documents, or to
declare a default for failure to effect prompt payment of any such other amount.
     Section 18.4 Trial by Jury
     TO THE MAXIMUM EXTENT (IF ANY) PERMITTED BY APPLICABLE LAW, BORROWER,
BORROWER PRINCIPAL 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 BORROWER, BORROWER PRINCIPAL AND LENDER, AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH OF LENDER, BORROWER PRINCIPAL AND
BORROWER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING
AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER, BORROWER PRINCIPAL AND
LENDER.

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     Section 18.5 Waiver of Notice
     Borrower shall not be entitled to any notices of any nature whatsoever from
Lender except with respect to matters for which this Agreement or the other Loan
Documents specifically and expressly provide for the giving of notice by Lender
to Borrower and except with respect to matters for which Borrower is not,
pursuant to applicable Legal Requirements, permitted to waive the giving of
notice. Borrower hereby expressly waives the right to receive any notice from
Lender with respect to any matter for which this Agreement or the other Loan
Documents do not specifically and expressly provide for the giving of notice by
Lender to Borrower.
     Section 18.6 Remedies of Borrower
     In the event that a claim or adjudication is made that Lender or its agents
have acted unreasonably or unreasonably delayed acting in any case where by law
or under this Agreement or the other Loan Documents, Lender or such agent, as
the case may be, has an obligation to act reasonably or promptly, Borrower
agrees that neither Lender nor its agents shall be liable for any monetary
damages, and Borrower’s sole remedies shall be limited to commencing an action
seeking injunctive relief or declaratory judgment. The parties hereto agree that
any action or proceeding to determine whether Lender has acted reasonably shall
be determined by an action seeking declaratory judgment. Lender agrees that, in
such event, it shall cooperate in expediting any action seeking injunctive
relief or declaratory judgment.
     Section 18.7 Waiver of Marshalling of Assets
     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
Property, and agrees not to assert any right under any laws pertaining to the
marshalling of assets, the sale in inverse order of alienation, homestead
exemption, the administration of estates of decedents, or any other matters
whatsoever to defeat, reduce or affect the right of Lender under the Loan
Documents to a sale of the 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 Property in preference to
every other claimant whatsoever.
     Section 18.8 Waiver of Statute of Limitations
     Borrower hereby expressly waives and releases, to the fullest extent
permitted by law, the pleading of any statute of limitations as a defense to
payment of the Debt or performance of its Other Obligations.
     Section 18.9 Waiver of Counterclaim
     Borrower hereby waives the right to assert a counterclaim, other than a
compulsory counterclaim, in any action or proceeding brought against it by
Lender or its agents.

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ARTICLE 19
GOVERNING LAW
     Section 19.1 Choice of Law
     This Agreement shall be governed, construed, applied and enforced in
accordance with the laws of the State and applicable laws of the United States
of America, except that, with respect to the security interest in each of the
Reserve Accounts, the Lockbox Account and the Cash Management Account, the laws
of the state where each such account is located shall apply.
     Section 19.2 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 19.3 Preferences
     Lender shall have the continuing and exclusive right to apply or reverse
and reapply any and all payments by Borrower to any portion of the obligations
of Borrower hereunder. To the extent Borrower makes a payment or payments to
Lender, which payment or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party under any Creditors Rights
Laws, state or federal law, common law or equitable cause, then, to the extent
of such payment or proceeds received, the obligations hereunder or part thereof
intended to be satisfied shall be revived and continue in full force and effect,
as if such payment or proceeds had not been received by Lender.
ARTICLE 20
MISCELLANEOUS
     Section 20.1 Survival
     This Agreement and all covenants, agreements, representations and
warranties made herein and in the certificates delivered pursuant hereto shall
survive the making by Lender of the Loan and the execution and delivery to
Lender of the Note, and shall continue in full force and effect so long as all
or any of the Debt is outstanding and unpaid unless a longer period is expressly
set forth herein or in the other Loan Documents. Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the legal representatives, successors and assigns of such party. All covenants,
promises and agreements in

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this Agreement, by or on behalf of Borrower, shall inure to the benefit of the
legal representatives, successors and assigns of Lender.
     Section 20.2 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.
     Section 20.3 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 20.4 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 20.5 Offsets, Counterclaims and Defenses
     Any assignee of Lender’s interest in and to this Agreement, the Note and
the other Loan Documents shall take the same free and clear of all offsets,
counterclaims or defenses which are unrelated to such documents which Borrower
may otherwise have against any assignor of such documents, and no such unrelated
counterclaim or defense shall be interposed or asserted by Borrower in any
action or proceeding 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 20.6 No Joint Venture or Partnership; No Third Party Beneficiaries
     (a) Borrower and Lender intend that the relationships created hereunder and
under the other Loan Documents be solely that of borrower and lender. Nothing
herein or therein is intended to create a joint venture, partnership,
tenancy-in-common, or joint tenancy relationship between Borrower and Lender nor
to grant Lender any interest in the Property other than that of mortgagee,
beneficiary or lender.
     (b) This Agreement and the other Loan Documents are solely for the benefit
of Lender and Borrower and nothing contained in this Agreement or the other Loan
Documents shall be deemed to confer upon anyone other than Lender and Borrower
any right to insist upon or to enforce the performance or observance of any of
the obligations contained herein or therein. All conditions to the obligations
of Lender to make the Loan hereunder are imposed solely and exclusively for the
benefit of Lender and no other Person shall have standing to require

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satisfaction of such conditions in accordance with their terms or be entitled to
assume that Lender will refuse to make the Loan in the absence of strict
compliance with any or all thereof and no other Person shall under any
circumstances be deemed to be a beneficiary of such conditions, any or all of
which may be freely waived in whole or in part by Lender if, in Lender’s sole
discretion, Lender deems it advisable or desirable to do so.
     (c) The general partners, members, principals and (if Borrower is a trust)
beneficial owners of Borrower are experienced in the ownership and operation of
properties similar to the Property, and Borrower and Lender are relying solely
upon such expertise and business plan in connection with the ownership and
operation of the Property. Borrower is not relying on Lender’s expertise,
business acumen or advice in connection with the Property.
     (d) Notwithstanding anything to the contrary contained herein, Lender is
not undertaking the performance of (i) any obligations under the Leases; or
(ii) any obligations with respect to such agreements, contracts, certificates,
instruments, franchises, permits, trademarks, licenses and other documents.
     (e) By accepting or approving anything required to be observed, performed
or fulfilled or to be given to Lender pursuant to this Agreement, the Mortgage,
the Note or the other Loan Documents, including, without limitation, any
officer’s certificate, balance sheet, statement of profit and loss or other
financial statement, survey, appraisal, or insurance policy, Lender shall not be
deemed to have warranted, consented to, or affirmed the sufficiency, the
legality or effectiveness of same, and such acceptance or approval thereof shall
not constitute any warranty or affirmation with respect thereto by Lender.
     (f) Borrower recognizes and acknowledges that in accepting this Agreement,
the Note, the Mortgage and the other Loan Documents, Lender is expressly and
primarily relying on the truth and accuracy of the representations and
warranties set forth in 0 of this Agreement without any obligation to
investigate the Property and notwithstanding any investigation of the Property
by Lender; that such reliance existed on the part of Lender prior to the date
hereof, that the warranties and representations are a material inducement to
Lender in making the Loan; and that Lender would not be willing to make the Loan
and accept this Agreement, the Note, the Mortgage and the other Loan Documents
in the absence of the warranties and representations as set forth in Article 4
of this Agreement.
     Section 20.7 Publicity
     All news releases, publicity or advertising by Borrower or its Affiliates
through any media intended to reach the general public which refers to the Loan,
Lender, Banc of America Securities LLC, or any of their Affiliates shall be
subject to the prior written approval of Lender, not to be unreasonably
withheld. Lender shall be permitted to make any news, releases, publicity or
advertising by Lender or its Affiliates through any media intended to reach the
general public which refers to the Loan, the Property, Borrower, Borrower
Principal and their respective Affiliates without the approval of Borrower or
any such Persons. Borrower also agrees that Lender may share any information
pertaining to the Loan with Bank of America Corporation, including its bank
subsidiaries, Banc of America Securities LLC and any other Affiliates of the

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foregoing, in connection with the sale or transfer of the Loan or any
Participations and/or Securities created.
     Section 20.8 Conflict; Construction of Documents; Reliance
     In the event of any conflict between the provisions of this Agreement and
any of the other Loan Documents, the provisions of this Agreement shall control.
The parties hereto acknowledge that they were represented by competent counsel
in connection with the negotiation, drafting and execution of the Loan Documents
and that such Loan Documents shall not be subject to the principle of construing
their meaning against the party which drafted same. Borrower acknowledges that,
with respect to the Loan, Borrower shall rely solely on its own judgment and
advisors in entering into the Loan without relying in any manner on any
statements, representations or recommendations of Lender or any parent,
subsidiary or Affiliate of Lender. Lender shall not be subject to any limitation
whatsoever in the exercise of any rights or remedies available to it under any
of the Loan Documents or any other agreements or instruments which govern the
Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate of
Lender of any equity interest any of them may acquire in Borrower, and Borrower
hereby irrevocably waives the right to raise any defense or take any action on
the basis of the foregoing with respect to Lender’s exercise of any such rights
or remedies. Borrower acknowledges that Lender engages in the business of real
estate financings and other real estate transactions and investments which may
be viewed as adverse to or competitive with the business of Borrower or its
Affiliates.
     Section 20.9 Entire Agreement
     This Agreement and the other Loan Documents contain the entire agreement of
the parties hereto and thereto in respect of the transactions contemplated
hereby and thereby, and all prior agreements among or between such parties,
whether oral or written between Borrower and Lender are superseded by the terms
of this Agreement and the other Loan Documents.
     Section 20.10 Joint and Several Liability
     Each Borrower shall be jointly and severally liable for all obligations
under the Loan and the Loan Documents, and the joint and several obligations of
the Borrower (a) (i) shall be absolute and unconditional and shall remain in
full force and effect (or be reinstated) until all the Loan shall have been paid
in full and the expiration of any applicable preference or similar period
pursuant to any bankruptcy, insolvency, reorganization, moratorium or similar
law, or at law or equity, without any claim having been made before the
expiration of such period asserting an interest in all or any part of any
payment(s) received by the Lender, and, (ii) until such payment has been made,
shall not be discharged, affected, modified or impaired on the happening from
time to time of any event, including, without limitation, any of the following,
whether or not with notice to or the consent of any Borrower, (A) the waiver,
compromise, settlement, release, termination or amendment (including, without
limitation, any extension or postponement of the time for payment or performance
or renewal or refinancing) of any or all of the obligations or agreements of any
Borrower under any Loan Document, (B) the failure to give notice to any or all
of the Borrower of the occurrence of an Event of Default under any of the Loan
Documents, (C) the release,

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substitution or exchange by the Lender of any of the Properties or other
collateral (whether with or without consideration) or the acceptance by the
Lender of any additional collateral or the availability or claimed availability
of any other collateral or source or repayment or any nonperfection or other
impairment of collateral, (D) the release of any Person primarily or secondarily
liable for all or any part of the Loan, whether by the Lender or in connection
with any voluntary or involuntary liquidation, dissolution, receivership,
insolvency, bankruptcy, assignment for the benefit of creditors or similar event
or proceeding affecting any or all of the Borrowers or any other Person who, or
any of whose property, shall at the time in question be obligated in respect of
the Loan or any part thereof, or (E) to the extent permitted by applicable law,
any other event, occurrence, action or circumstance that would, in the absence
of this Section, result in the release or discharge of any or all of the
Borrowers from the performance or observance of any obligation, covenant or
agreement contained in any of the Loan Documents; (b) the Borrowers expressly
agree that the Lender shall not be required first to initiate any suit or to
exhaust its remedies against any Borrower or any other Person to become liable
or against any of the Property or other collateral in order to enforce the Loan
Documents and expressly agree that, notwithstanding the occurrence of any of the
foregoing, the Borrowers shall be and remain directly and primarily liable for
all sums due under the Loan Documents; and (c) on disposition by the Lender of
any Property or other collateral, the Borrowers shall, subject to the other
terms of this Agreement, be and shall remain jointly and severally liable for
any deficiency.

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

                              AFL05 DUNCAN SC LLC, a Delaware limited liability
company
 
                            By:   AFL05 Duncan SC Member LLC, a Delaware limited
        liability company, its sole and managing member
 
                                By:   Gladstone Commercial Limited Partnership,
a             Delaware limited partnership, its sole and             managing
member
 
                                    By:   Gladstone Commercial Partners, LLC, a
                Delaware limited liability company, its                 general
partner
 
                       
 
              By:   Gladstone Commercial Corporation, a    
 
                  Maryland corporation, its managing    
 
                  member    

             
 
  By:                       Name:    
 
                Title:    
 
           

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                              LITTLE ARCH CHARLOTTE NC LLC, a Delaware    
limited liability company
 
                            By:   LittleArch04 Charlotte NC Member LLC, a
Delaware         limited liability company, its sole and managing         member
 
                                By:   Gladstone Commercial Limited Partnership,
a             Delaware limited partnership, its sole and             managing
member
 
                                    By:   Gladstone Commercial Partners, LLC, a
                Delaware limited liability company, its                 general
partner
 
                       
 
              By:   Gladstone Commercial Corporation,    
 
                  a Maryland corporation, its    
 
                  managing member    

             
 
  By:                       Name:
 
                Title:
 
           

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  BORROWER PRINCIPAL:
 
   
 
  Acknowledged and agreed to with respect to its obligations set forth in
Article 4, Section 12.6, Article 15 and Article 18 hereof:
 
   
 
  GLADSTONE COMMERCIAL CORPORATION,
 
  a Maryland corporation

             
 
  By:                       Name:
 
                Title:
 
           

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                  LENDER:     BANK OF AMERICA, N.A., a national banking
association
 
  By:                       Name:
 
                Title:
 
           

 

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EXHIBIT A
Borrower Equity Ownership Structure
AFL is 100% owned by AFL05 Duncan SC Member LLC.
Little Arch is 100% owned by LittleArch04 Charlotte NC Member LLC.

 

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EXHIBIT B
Form of Tenant Direction Letter
[BORROWER LETTERHEAD]
                     ___, 20__
[TENANTS UNDER LEASES]

     
Re:
  Lease dated ___between                     ,
 
  as Landlord, and                     , as Tenant,
 
  concerning premises known as                     

Gentlemen:
        This letter shall constitute notice to you that the undersigned has
granted a security interest in the captioned lease and all rents, additional
rent and all other monetary obligations to landlord thereunder (collectively,
“Rent”) in favor of Bank of America, N.A., as lender (“Lender”), to secure
certain of the undersigned’s obligations to Lender. The undersigned hereby
irrevocably instructs and authorizes you to disregard any and all previous
notices sent to you in connection with Rent and hereafter to deliver all Rent to
the following address:
                                                            
                                                            
                                                            
        The instructions set forth herein are irrevocable and are not subject to
modification in any manner, except that Lender, or any successor lender so
identified by Lender, may by written notice to you rescind the instructions
contained herein.
Sincerely,
[BORROWER]
ACKNOWLEDGMENT AND AGREEMENT
The undersigned acknowledges notice of the security interest of Lender and
hereby confirms that the undersigned has received no notice of any other pledge
or assignment of the Rent and will honor the above instructions.
[Tenant]

         
By:
       
 
 
 
Name:    
 
  Its:    

Dated as of:                      ___, 20__

 

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SCHEDULE I
REQUIRED REPAIRS

              REPAIR       RESERVE AMOUNT  
1.
  Install one ADA handicapped accessible parking space   $ 0  
 
           
2.
  Install and modify pole mounted ADA compliant parking space signs   $ 0  
 
           
3.
  Completion of roof repairs to extend useful life of roof   $ 0  

 

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SCHEDULE II
LETTER OF CREDIT REQUIREMENTS
Banks of America’s requirements for a Letter of Credit are as follows:

  •   Not Bank of America issued,     •   A provider with a credit rating of not
less than “A”,     •   Irrevocable & non-cancelable,     •   Unconditional,    
•   Transferable,     •   Automatically annually renewable,     •   Can be
partially drawn upon, and     •   Otherwise in form and substance acceptable to
Lender upon review.

“Letter of Credit” shall mean an irrevocable, unconditional, transferable, clean
sight draft (there are no other conditions for drawing or documentation
requirements for drawings permitted other than just presenting the letter of
credit) standby letter of credit in favor of Lender issued by an Eligible
Institution, in form and substance acceptable to Lender in its sole discretion,
that also provides for, but not limited to, the following:
          (a) the expiration date of the letter of credit shall exceed the
Maturity Date by at least ninety (90) days (either pursuant to the initial term
or pursuant to automatic renewals which require no action by Lender or the
beneficiary) —
          (b) entitling Lender to draw thereon in a location to be determined by
Lender (probably Charlotte, Los Angeles or New York).
“Eligible Institution” shall mean a 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 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).
The Letter of Credit should be addressed to:
Bank of America, NA. its Successors and/or Assigns ATIMA

     
c/o:
  LJ Melody and Company
 
  GEMSA Loan Services, LP
 
  1500 City West Blvd., Suite 200
 
  Houston, TX 77042