Exhibit 10.3

RECORDING REQUESTED BY

AND WHEN RECORDED MAIL TO:

WELLS FARGO BANK, NATIONAL ASSOCIATION

Real Estate Group (AU #2955)

2030 Main Street, Suite 800

Irvine, CA 92614

Attn: Jeri Gehrer

Loan No. 1002012

 

 

 

THIS MORTGAGE SECURES A NOTE WHICH PROVIDES FOR A VARIABLE INTEREST RATE AND

THE RIGHT TO REPAY AND REBORROW ON A REVOLVING BASIS

MORTGAGE

WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,

SECURITY AGREEMENT AND FIXTURE FILING

THE PARTIES TO THIS MORTGAGE WITH ABSOLUTE ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING (“Mortgage”), made as of April 30, 2010,
are KBSII MOUNTAIN VIEW, LLC, a Delaware limited liability company
(“Mortgagor”), having an address of c/o KBS Capital Advisors LLC, 620 Newport
Center Drive, Suite 1300, Newport Beach, CA 92660, to and for the benefit of
WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent for itself and
certain additional lenders (“Mortgagee”), having an address of 2030 Main Street,
Suite 800, Irvine, CA 92614.

ARTICLE 1. MORTGAGE

 

  1.1

GRANT.    For the purposes of and upon the terms and conditions in this
Mortgage, Mortgagor, for valuable consideration, the receipt of which is hereby
acknowledged, grants, conveys, assigns and mortgages to Mortgagee and its
successors and assigns forever, WITH MORTGAGE COVENANTS, all of that real
property located in the Township of Bernards, County of Somerset, State of New
Jersey, described on Exhibit A attached hereto, together with all right, title,
interest, and privileges of Mortgagor in and to all streets, ways, roads, and
alleys used in connection with or pertaining to such real property and any
improvements thereon, all development rights or credits, air rights, water,
water rights and water stock related to the real property, all timber, and all
minerals, oil and gas, and other hydrocarbon substances in, on or under the real
property, and all licenses, appurtenances, reversions, remainders, easements,
rights and rights of way appurtenant or related thereto;

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any and all rights of Mortgagor, as a declarant, under any covenants,
conditions, and restrictions now or hereafter pertaining to the real property
described on Exhibit A hereto, provided, however, that Mortgagee shall have no
liability under such covenants, conditions, and restrictions unless and until
Mortgagee forecloses on the real property; all buildings, other improvements and
fixtures now or hereafter located on the real property, including, but not
limited to, all apparatus, equipment, and appliances used in the operation or
occupancy of the real property, it being intended by the parties that all such
items shall be conclusively considered to be a part of the real property,
whether or not attached or affixed to the real property (the “Improvements”);
all interest or estate which Mortgagor may hereafter acquire in the property
described above, and all additions and accretions thereto, and the proceeds of
any of the foregoing; (all of the foregoing being collectively referred to as
the “Subject Property”). The listing of specific rights or property shall not be
interpreted as a limit of general terms.

 

  1.2

ADDRESS.    The address of the Subject Property is: 120 Mountain View Boulevard,
Township of Bernards, New Jersey 07920. However, neither the failure to
designate an address nor any inaccuracy in the address designated shall affect
the validity or priority of the lien of this Mortgage on the Subject Property as
described on Exhibit A.

ARTICLE 2. OBLIGATIONS SECURED

 

  1.3

OBLIGATIONS SECURED.    Mortgagor makes this Mortgage for the purpose of
securing the following obligations (“Secured Obligations”):

 

   (a)

Payment to Mortgagee of all sums at any time owing under that certain Secured
Promissory Note (as the same may be amended, restated or replaced from time to
time, the “Note”) of even date herewith, in the principal amount of One Hundred
Million Dollars ($100,000,000) executed by Mortgagor and certain other parties,
as borrowers (“Borrowers”), and payable to the order of Mortgagee, as lender;
and

 

   (b)

Payment and performance of all covenants and obligations of Mortgagor under this
Mortgage; and

 

   (c)

Payment and performance of all covenants and obligations on the part of Borrower
under that certain Loan Agreement (“Loan Agreement”) of even date herewith by
and between Borrowers, Mortgagee, and Lenders (as defined in the Loan
Agreement), the Hazardous Materials Indemnity Agreement, and all other “Loan
Documents” as defined in the Loan Agreement ; and

 

   (d)

Payment and performance of all covenants and obligations, if any, of any rider
attached as an Exhibit to this Mortgage; and

 

   (e)

Payment and performance of all future advances and other obligations that the
then record owner of all or part of the Subject Property may agree to pay and/or
perform (whether as principal, surety or guarantor) for the benefit of
Mortgagee, when such future advance or obligation is evidenced by a writing
which recites that it is secured by this Mortgage; and Mortgagor hereby
acknowledges and agrees that this Mortgage is given to secure advances that may
be made by Mortgagee and obligations that may be incurred by Mortgagor in
addition and subsequent to the advances evidenced by the Note; and

 

   (f)

Payment and performance of all covenants and obligations of Mortgagor under any
interest rate swap agreement, or other interest rate hedge agreement of any type
executed by and between Mortgagor and Mortgagee, which agreement is evidenced by
a writing which recites that it is secured by this Mortgage; and

 

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   (g)

All modifications, extensions and renewals of any of the obligations secured
hereby, however evidenced, including, without limitation: (i) modifications of
the required principal payment dates or interest payment dates or both, as the
case may be, deferring or accelerating payment dates wholly or partly; or
(ii) modifications, extensions or renewals at a different rate of interest
whether or not in the case of a note, the modification, extension or renewal is
evidenced by a new or additional promissory note or notes.

 

  1.4

OBLIGATIONS.    The term “obligations” is used herein in its broadest and most
comprehensive sense and shall be deemed to include, without limitation, all
interest and charges, prepayment charges (if any), late charges and loan fees at
any time accruing or assessed on any of the Secured Obligations.

 

  1.5

INCORPORATION.    All capitalized terms not defined herein shall have the
meanings given to them in the Loan Agreement. All terms of the Secured
Obligations and the documents evidencing such obligations are incorporated
herein by this reference. All persons who may have or acquire an interest in the
Subject Property shall be deemed to have notice of the terms of the Secured
Obligations and to have notice, if provided therein, that: (a) the Note or the
Loan Agreement may permit borrowing, repayment and re-borrowing so that
repayments shall not reduce the amounts of the Secured Obligations; and (b) the
rate of interest on one or more Secured Obligations may vary from time to time.

ARTICLE 3. ASSIGNMENT OF LEASES AND RENTS

 

  1.6

ASSIGNMENT.    Mortgagor absolutely and irrevocably assigns to Mortgagee all of
Mortgagor’s right, title and interest in, to and under: (a) all leases of the
Subject Property or any portion thereof, and all other agreements of any kind
relating to the use or occupancy of the Subject Property or any portion thereof,
whether now existing or entered into after the date hereof (“Leases”); (b) the
rents, revenue, income, issues, deposits and profits of the Subject Property,
including, without limitation, all parking income and all amounts payable and
all rights and benefits accruing to Mortgagor under the Leases (“Payments”); and
(iii) all rights and claims for damage against tenants arising out of defaults
under the Leases, including rights to termination fees and compensation with
respect to rejected Leases pursuant to Section 365(a) of the Federal Bankruptcy
Code or any replacement Section thereof. The term “Leases” shall also include
all guarantees of and security for the lessees’ performance thereunder, and all
amendments, extensions, renewals or modifications thereto which are permitted
hereunder. This is a present and absolute assignment, not an assignment for
security purposes, and Mortgagee’s right to the Leases and Payments is not
contingent upon, and may be exercised without possession of, the Subject
Property.

 

  1.7

GRANT OF LICENSE.    Mortgagee confers upon Mortgagor a license (“License”) to
collect and retain the Payments as they become due and payable, until the
occurrence of a Default (as hereinafter defined). Upon a Default, the License
shall be automatically revoked and Mortgagee may collect and apply the Payments
pursuant to Section 6.4 without notice and without taking possession of the
Subject Property. Mortgagor hereby irrevocably authorizes and directs the
lessees under the Leases to rely upon and comply with any notice or demand by
Mortgagee for the payment to Mortgagee of any rental or other sums which may at
any time become due under the Leases, or for the performance of any of the
lessees’ undertakings under the Leases, and the lessees shall have no right or
duty to inquire as to whether any Default has actually occurred or is then
existing hereunder. Mortgagor hereby relieves the lessees from any liability to
Mortgagor by reason of relying upon and complying with any such notice or demand
by Mortgagee.

 

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  1.8

EFFECT OF ASSIGNMENT.    The foregoing irrevocable assignment shall not cause
Mortgagee to be: (a) a mortgagee in possession; (b) responsible or liable for
the control, care, management or repair of the Subject Property or for
performing any of the terms, agreements, undertakings, obligations,
representations, warranties, covenants and conditions of the Leases; or
(c) responsible or liable for any waste committed on the Subject Property by the
lessees under any of the Leases or any other parties; for any dangerous or
defective condition of the Subject Property; or for any negligence in the
management, upkeep, repair or control of the Subject Property resulting in loss
or injury or death to any lessee, licensee, employee, invitee or other person.
Mortgagee shall not directly or indirectly be liable to Mortgagor or any other
person as a consequence of: (i) the exercise or failure to exercise by
Mortgagee, or any of their respective employees, agents, contractors or
subcontractors, any of the rights, remedies or powers granted to Mortgagee
hereunder; or (ii) the failure or refusal of Mortgagee to perform or discharge
any obligation, duty or liability of Mortgagor arising under the Leases.

 

  1.9

REPRESENTATIONS AND WARRANTIES.  Mortgagor represents and warrants that, to the
best of Mortgagor’s knowledge: (a) Mortgagor has delivered to Mortgagee a rent
roll that, as of the date hereof, contains a true, accurate and complete list of
all Leases; (b) all existing Leases are in full force and effect and are
enforceable in accordance with their respective terms, and no breach or default,
or event which would constitute a breach or default after notice or the passage
of time, or both, exists under any existing Leases on the part of any party;
(c) no rent or other payment under any existing Lease has been paid by any
lessee for more than one (1) month in advance; and (d) none of the lessor’s
interests under any of the Leases has been transferred or assigned.

 

  1.10

COVENANTS.  Mortgagor covenants and agrees at Mortgagor’s sole cost and expense
to: (a) perform the obligations of lessor contained in the Leases and enforce by
all appropriate remedies performance by the lessees of the obligations of the
lessees contained in the Leases; (b) give Mortgagee prompt written notice of any
material default which occurs with respect to any of the Leases, whether the
default be that of the lessee or of the lessor; (c) exercise Mortgagor’s best
efforts to keep all portions of the Subject Property that are capable of being
leased leased at rental rates pursuant to the terms of the Loan Agreement;
(d) deliver to Mortgagee fully executed copies of each and every Lease that it
is required to deliver in accordance with the Loan Agreement; and (e) execute
and record such additional assignments of any Lease or, if required by the terms
of the Loan Agreement, use commercially reasonable efforts to obtain specific
subordinations (or subordination, attornment and non-disturbance agreements
executed by the lessor and lessee) of any Lease to the Mortgage, in form and
substance acceptable to Mortgagee, as Mortgagee may request. Mortgagor shall
not, without Mortgagee’s prior written consent or as otherwise permitted by any
provision of the Loan Agreement: (i) to the extent prohibited by the terms of
the Loan Agreement, enter into any Leases after the date hereof; (ii) execute
any other assignment relating to any of the Leases; (iii) to the extent
prohibited by the terms of the Loan Agreement, discount any rent or other sums
due under the Leases or collect the same in advance, other than to collect
rentals one (1) month in advance of the time when it becomes due; (iv) to the
extent prohibited by the terms of the Loan Agreement, terminate, modify or amend
any of the terms of the Leases or in any manner release or discharge the lessees
from any obligations thereunder; (v) to the extent prohibited by the terms of
the Loan Agreement, consent to any assignment or subletting by any lessee; or
(vi) subordinate or agree to subordinate any of the Leases to any other mortgage
or encumbrance. Any such attempted action in violation of the provisions of this
Section 3.5 shall be null and void. Without in any way limiting the requirement
of Mortgagee’s consent hereunder, any sums received by Mortgagor in
consideration of any termination (or the release or discharge of any lessee)
modification or amendment of any Lease shall be applied as set forth in the Loan
Agreement.

 

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  1.11

ESTOPPEL CERTIFICATES.    Within thirty (30) days after written request by
Mortgagee, Mortgagor shall deliver to Mortgagee and to any party designated by
Mortgagee estoppel certificates executed by Mortgagor and, and use its best
efforts to obtain such estoppel certificates executed by each of the lessees, in
each case in recordable form, certifying (if such be the case): (a) that the
foregoing assignment and the Leases are in full force and effect; (b) the date
of each lessee’s most recent payment of rent; (c) that there are no defenses or
offsets outstanding, or stating those claimed by Mortgagor or lessees under the
foregoing assignment or the Leases, as the case may be; and (d) any other
information reasonably requested by Mortgagee.

ARTICLE 4. SECURITY AGREEMENT AND FIXTURE FILING

 

  2.1

SECURITY INTEREST.    Mortgagor hereby grants and assigns to Mortgagee as of the
date hereof a security interest, to secure payment and performance of all of the
Secured Obligations, in all of the following described personal property in
which Mortgagor now or at any time hereafter has any interest (collectively, the
“Collateral”):

All goods, building and other materials, supplies, work in process, equipment,
machinery, fixtures, furniture, furnishings, signs and other personal property
and embedded software included therein, wherever situated, which are or are to
be incorporated into, used in connection with, or appropriated for use on
(i) the real property described on Exhibit A attached hereto and incorporated by
reference herein (to the extent the same are not effectively made a part of the
real property pursuant to Section 1.1 above) or (ii) the Improvements; together
with all rents (to the extent, if any, they are not subject to Article 3); all
inventory, accounts, cash receipts, deposit accounts, accounts receivable,
contract rights, licenses, agreements, (including, without limitation, all
acquisition agreements with respect to the Subject Property); all of Mortgagor’s
rights under any interest rate swap agreement, or other interest rate hedge
agreement of any type executed by and between Mortgagor and Mortgagee; all
Contracts referenced in Section 5.16 below (including property management and
leasing agreements), architects’ agreements, and/or construction agreements with
respect to the completion of any improvements on the Subject Property), general
intangibles, chattel paper (whether electronic or tangible), instruments,
documents, promissory notes, drafts, letters of credit, letter of credit rights,
supporting obligations, insurance policies, insurance and condemnation awards
and proceeds, any other rights to the payment of money, trade names, trademarks
and service marks arising from or related to the ownership, management, leasing
or operation of the Subject Property or any business now or hereafter conducted
thereon by Mortgagor; all permits, consents, approvals, licenses, authorizations
and other rights granted by, given by or obtained from, any governmental entity
with respect to the Subject Property; all deposits or other security now or
hereafter made with or given to utility companies by Mortgagor with respect to
the Subject Property; all advance payments of insurance premiums made by
Mortgagor with respect to the Subject Property; all plans, drawings and
specifications relating to the Subject Property; all loan funds held by
Mortgagee, whether or not disbursed; all funds deposited with Mortgagee pursuant
to any loan agreement; all reserves, deferred payments, deposits, accounts,
refunds, cost savings and payments of any kind related to the Subject Property
or any portion thereof; together with all replacements and proceeds of, and
additions and accessions to, any of the foregoing; together with all books,
records and files to the extent relating to any of the foregoing.

As to all of the above described personal property which is or which hereafter
becomes a “fixture” under applicable law, this Mortgage constitutes a fixture
filing under the Uniform Commercial Code, as amended or recodified from time to
time in

 

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the State of New Jersey (“UCC”), and is acknowledged and agreed to be a
“mortgage” under the UCC. For such purposes, the addresses of Mortgagor, as
“debtor,” and Mortgagee, as “secured party,” are as set forth in Section 7.11 of
the Mortgage.

 

  2.2

REPRESENTATIONS AND WARRANTIES.    Mortgagor represents and warrants that:
(a) Mortgagor has, as of the date of recordation of this Mortgage, and will
have, good title to the Collateral; (b) Mortgagor has not previously assigned or
encumbered the Collateral, and no financing statement covering any of the
Collateral has been delivered to any other person or entity; (c) Mortgagor’s
principal place of business is located at the address shown in Section 7.11; and
(d) Mortgagor’s legal name is exactly as set forth on the first page of this
Mortgage and all of Mortgagor’s organizational documents or agreements delivered
to Mortgagee are complete and accurate in every respect.

 

  2.3

COVENANTS.    Mortgagor agrees: (a) to execute and deliver such documents as
Mortgagee deems necessary to create, perfect and continue the security interests
contemplated hereby; (b) not to change its name, and as applicable, its chief
executive office, its principal residence or the jurisdiction in which it is
organized and/or registered without giving Mortgagee prior written notice
thereof; (c) to cooperate with Mortgagee in perfecting all security interests
granted herein and in obtaining such agreements from third parties as Mortgagee
deems necessary, proper or convenient in connection with the preservation,
perfection or enforcement of any of its rights hereunder; and (d) that Mortgagee
is authorized to file financing statements in the name of Mortgagor to perfect
Mortgagee’s security interest in Collateral.

 

  2.4

RIGHTS OF MORTGAGEE.    In addition to Mortgagee’s rights as a “Secured Party”
under the UCC, Mortgagee may, but shall not be obligated to, at any time without
notice and at the expense of Mortgagor: (a) give notice to any person of
Mortgagee’s rights hereunder and enforce such rights at law or in equity;
(b) insure, protect, defend and preserve the Collateral or any rights or
interests of Mortgagee therein; (c) inspect the Collateral; and (d) endorse,
collect and receive any right to payment of money owing to Mortgagor under or
from the Collateral. Notwithstanding the above, in no event shall Mortgagee be
deemed to have accepted any property other than cash in satisfaction of any
obligation of Mortgagor to Mortgagee unless Mortgagee shall make an express
written election of said remedy under applicable law.

 

  2.5

RIGHTS OF MORTGAGEE ON DEFAULT.    Upon the occurrence of a Default (hereinafter
defined) under this Mortgage, then in addition to all of Mortgagee’s rights as a
“Secured Party” under the UCC or otherwise at law:

 

   (a)

Mortgagee may (i) upon written notice, require Mortgagor to assemble any or all
of the Collateral and make it available to Mortgagee at a place designated by
Mortgagee; (ii) without prior notice, enter upon the Subject Property or other
place where any of the Collateral may be located and take possession of,
collect, sell, lease, license and dispose of any or all of the Collateral, and
store the same at locations acceptable to Mortgagee at Mortgagor’s expense;
(iii) sell, assign and deliver at any place or in any lawful manner all or any
part of the Collateral and bid and become the purchaser at any such sales;

 

   (b)

Mortgagee may, for the account of Mortgagor and at Mortgagor’s expense:
(i) operate, use, consume, sell, lease, license or dispose of the Collateral as
Mortgagee deems appropriate for the purpose of performing any or all of the
Secured Obligations; (ii) enter into any agreement, compromise, or settlement,
including insurance claims, which Mortgagee may deem desirable or proper with
respect to any of the Collateral; and (iii) endorse and deliver evidences of
title for, and receive,

 

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enforce and collect by legal action or otherwise, all indebtedness and
obligations now or hereafter owing to Mortgagor in connection with or on account
of any or all of the Collateral; and

 

   (c)

In disposing of Collateral hereunder, Mortgagee may disclaim all warranties of
title, possession, quiet enjoyment and the like. Any proceeds of any disposition
of any Collateral may be applied by Mortgagee to the payment of expenses
incurred by Mortgagee in connection with the foregoing, including reasonable
attorneys’ fees, and the balance of such proceeds may be applied by Mortgagee
toward the payment of the Secured Obligations in such order of application as
Mortgagee may from time to time elect.

Notwithstanding any other provision hereof, Mortgagee shall not be deemed to
have accepted any property other than cash in satisfaction of any obligation of
Mortgagor to Mortgagee unless Mortgagor shall make an express written election
of said remedy under applicable law. Mortgagor agrees that Mortgagee shall have
no obligation to process or prepare any Collateral for sale or other
disposition.

 

  2.6

POWER OF ATTORNEY.    To the extent permitted by applicable law, the Mortgagor
hereby authorize the Mortgagee to file and refile any financing statements,
continuation statements, or other security agreements that the Mortgagee may
require from time to time to confirm the lien of this Mortgage with respect to
such property. Without limiting the foregoing, the Mortgagor hereby irrevocably
constitutes and appoints the Mortgagee with full power of substitution, as its
true and lawful attorney-in-fact with full irrevocable power and authority
(coupled with interest) in the place and stead of the Mortgagor and in the name
of the Mortgagor or in the Mortgagee’s own name, for the Mortgagee to execute,
deliver, and file such instruments for and on behalf of the
Mortgagor. Notwithstanding any release of any or all of that property included
in the Mortgaged Premises which is deemed to be “real property”, and proceedings
to foreclose this Mortgage or its satisfaction of record, the terms hereof shall
survive as a security agreement with respect to the security interest created
hereby and referred to above until the repayment or satisfaction in full of the
obligations of the Mortgagor as are now or hereafter secured hereby.

 

  2.7

POSSESSION AND USE OF COLLATERAL.    Except as otherwise provided in this
Section or the other Loan Documents (as defined in the Loan Agreement), so long
as no Default exists under this Mortgage or any of the Loan Documents, Mortgagor
may possess, use, move, transfer or dispose of any of the Collateral in the
ordinary course of Mortgagor’s business and in accordance with the Loan
Agreement.

ARTICLE 5. RIGHTS AND DUTIES OF THE PARTIES

 

  3.1

TITLE.    Mortgagor represents and warrants that, except as disclosed to
Mortgagee in a writing which refers to this warranty, Mortgagor lawfully holds
and possesses fee simple title to the Subject Property without limitation on the
right to encumber, and that this Mortgage is a first and prior lien on the
Subject Property. Mortgagor hereby represents and warrants that all of the
Subject Property is a single tax parcel, and there are no properties included in
such tax parcel other than the Subject Property. Mortgagor further covenants and
agrees that it shall not cause all or any portion of the Subject Property to be
subdivided or for any lots or boundary lines to be adjusted, changed or altered
for either ad valorem tax purposes or otherwise, and shall not consent to the
assessment of the Subject Property in more than one tax parcel or in conjunction
with any property other than the Subject Property.

 

  3.2

TAXES AND ASSESSMENTS.

 

   (a)

Subject to Mortgagor’s rights to contest in good faith payment of taxes as
provided in Section 5.2(b) below, Mortgagor shall pay prior to delinquency all
taxes,

 

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assessments, levies and charges imposed by any public or quasi-public authority
or utility company which are or which may become a lien upon or cause a loss in
value of the Subject Property or any interest therein. Mortgagor shall also pay
prior to delinquency all taxes, assessments, levies and charges imposed by any
public authority upon Mortgagee by reason of its interest in any Secured
Obligation or in the Subject Property, or by reason of any payment made to
Mortgagee pursuant to any Secured Obligation; provided, however, Mortgagor shall
have no obligation to pay taxes which may be imposed from time to time upon
Mortgagee and which are measured by and imposed upon Mortgagee’s net income.

 

   (b)

Mortgagor may contest in good faith any taxes or assessments if: (i) Mortgagor
pursues the contest diligently and in compliance with applicable laws, in a
manner which Mortgagee determines is not prejudicial to Mortgagee, and does not
impair the rights of Mortgagee under any of the Loan Documents; and
(b) Mortgagor deposits with Mortgagee any funds or other forms of assurance
which Mortgagee in good faith determines from time to time appropriate to
protect Mortgagee from the consequences of the contest being unsuccessful.
Mortgagor’s compliance with this Section shall operate to prevent such claim,
demand, levy or assessment from becoming a Default.

 

  3.3

TAX AND INSURANCE IMPOUNDS.    At any time following the occurrence of a
Default, at Mortgagee’s option and upon its demand, Mortgagor shall, until all
Secured Obligations have been paid in full, pay to Mortgagee monthly, annually
or as otherwise directed by Mortgagee an amount estimated by Mortgagee to be
equal to: (a) all taxes, assessments, levies and charges imposed by any public
or quasi-public authority or utility company which are or may become a lien upon
the Subject Property or Collateral and will become due for the tax year during
which such payment is so directed; and (b) premiums for fire, hazard and
insurance required or requested pursuant to the Loan Documents when same are
next due. If Mortgagee determines that any amounts paid by Mortgagor are
insufficient for the payment in full of such taxes, assessments, levies, charges
and/or insurance premiums, Mortgagee shall notify Mortgagor of the increased
amounts required to pay all amounts when due, whereupon Mortgagor shall pay to
Mortgagee within thirty (30) days thereafter the additional amount as stated in
Mortgagee’s notice. All sums so paid shall not bear interest, except to the
extent and in any minimum amount required by law; and Mortgagee shall, unless
Mortgagor is otherwise in Default hereunder or under any Loan Document, apply
said funds to the payment of, or at the sole option of Mortgagee release said
funds to Mortgagor for the application to and payment of, such sums, taxes,
assessments, levies, charges, and insurance premiums. Upon Default by Mortgagor
hereunder or under any Loan Document, Mortgagee may apply all or any part of
said sums to any Secured Obligation and/or to cure such Default, in which event
Mortgagor shall be required to restore all amounts so applied, as well as to
cure any other events or conditions of Default not cured by such application.
Upon assignment of this Mortgage, Mortgagee shall have the right to assign all
amounts collected and in its possession to its assignee whereupon Mortgagee
shall be released from all liability with respect thereto. Within ninety-five
(95) days following full repayment of the Secured Obligations (other than full
repayment of the Secured Obligations as a consequence of a foreclosure or
conveyance in lieu of foreclosure of the liens and security interests securing
the Secured Obligations) or at such earlier time as Mortgagee may elect, the
balance of all amounts collected and in Mortgagee’s possession shall be paid to
Mortgagor and no other party shall have any right or claim thereto.

 

  3.4

PERFORMANCE OF SECURED OBLIGATIONS.    Mortgagor shall promptly pay and perform
each Secured Obligation for which it is responsible hereunder or under the Loan
Agreement when due.

 

  3.5

LIENS, ENCUMBRANCES AND CHARGES.    Mortgagor shall immediately discharge any
lien not approved by Mortgagee in writing that has or may attain priority over
this Mortgage.

 

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Subject to the provisions of the following sentence, Mortgagor shall pay when
due all obligations secured by or which may become liens and encumbrances which
shall now or hereafter encumber or appear to encumber all or any part of the
Subject Property or Collateral, or any interest therein, whether senior or
subordinate hereto. If a claim of lien, judgment or notice of unpaid balance and
right to file lien is recorded which affects the Subject Property, Mortgagor
shall, within twenty (20) calendar days of such recording or service or within
five (5) calendar days of Mortgagee’s demand, whichever occurs first: (a) pay
and discharge the claim of lien, judgment or amount in controversy pursuant to
the notice of unpaid balance and right to file lien; (b) effect the release
thereof by recording or delivering to Mortgagee a surety bond in sufficient form
and amount; or (c) provide Mortgagee with other assurances which Mortgagee
deems, in its sole discretion, to be satisfactory for the payment of such claim
of lien or bonded stop notice and for the full and continuous protection of
Mortgagee from the effect of such lien or bonded stop notice.

 

  3.6

DAMAGES; INSURANCE AND CONDEMNATION PROCEEDS.

 

   (a)

The following (whether now existing or hereafter arising) are all absolutely and
irrevocably assigned by Mortgagor to Mortgagee and, at the request of Mortgagee,
shall be paid directly to Mortgagee: (i) all awards of damages and all other
compensation payable directly or indirectly by reason of a condemnation or
proposed condemnation for public or private use affecting all or any part of, or
any interest in, the Subject Property or Collateral; (ii) all other claims and
awards for damages to, or decrease in value of, all or any part of, or any
interest in, the Subject Property or Collateral; (iii) all proceeds of any
insurance policies (whether or not expressly required by Beneficiary to be
maintained by Trustor, including, without limitation, earthquake insurance,
environmental insurance and terrorism insurance, if any) payable by reason of
loss sustained to all or any part of the Subject Property or Collateral; and
(iv) all interest which may accrue on any of the foregoing. Subject to
applicable law and Section 5.6(b) below, and without regard to any requirement
contained in Section 5.7(d), Mortgagee may at its discretion apply all or any of
the proceeds it receives to its expenses in settling, prosecuting or defending
any claim and may apply the balance to the Secured Obligations in any such order
acceptable to Mortgagee, and/or Mortgagee may release all or any part of the
proceeds to Mortgagor upon any conditions Mortgagee may impose. Mortgagee may
commence, appear in, defend or prosecute any assigned claim or action and may
adjust, compromise, settle and collect all claims and awards assigned to
Mortgagee; provided, however, in no event shall Mortgagee be responsible for any
failure to collect any claim or award, regardless of the cause of the failure,
including, without limitation, any malfeasance or nonfeasance by Mortgagee or
its employees or agents.

 

   (b)

Mortgagee shall permit insurance or condemnation proceeds held by Mortgagee to
be used for repair or restoration but may condition such application upon
reasonable conditions, including, without limitation: (i) the deposit with
Mortgagee of such additional funds which Mortgagee determines are needed to pay
all costs of the repair or restoration, (including, without limitation, taxes,
financing charges, insurance and rent during the repair period); (ii) the
establishment of an arrangement for lien releases and disbursement of funds
acceptable to Mortgagee; (iii) the delivery to Mortgagee of plans and
specifications for the work, a contract for the work signed by a contractor
acceptable to Mortgagee, a cost breakdown for the work and a payment and
performance bond for the work, all of which shall be acceptable to Mortgagee;
and (iv) the delivery to Mortgagee of evidence acceptable to Mortgagee (aa) that
after completion of the work the income from the Subject Property will be
sufficient to pay all expenses and debt service for the Subject Property; (bb)
of the continuation of Leases acceptable to and required by Mortgagee; (cc) that
upon completion of the work, the size, capacity and total value of the Subject
Property will be at least as

 

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great as it was before the damage or condemnation occurred; (dd) that there has
been no material adverse change in the financial condition or credit of
Mortgagor since the date of this Mortgage; (ee) no Default shall have occurred;
and (ff) of the satisfaction of any additional conditions that Mortgagee may
reasonably establish to protect its security. Mortgagor hereby acknowledges that
the conditions described above are reasonable, and, if such conditions have not
been satisfied within sixty (60) days of receipt by Mortgagee of such insurance
or condemnation proceeds, then Mortgagee may apply such insurance or
condemnation proceeds to pay the Secured Obligations in such order and amounts
as Mortgagee in its sole discretion may choose.

 

   (c)

Notwithstanding the foregoing provisions of this Section 5.6, if the insurance
or condemnation proceeds equal $1,000,000 or less, Mortgagee shall release such
proceeds to Mortgagor for repair or restoration of the Subject Property without
any additional requirements or conditions.

 

  3.7

MAINTENANCE AND PRESERVATION OF THE SUBJECT PROPERTY.    Subject to the
provisions of the Loan Agreement, Mortgagor covenants: (a) to insure the Subject
Property and Collateral against such risks as Mortgagee may require pursuant to
the Loan Agreement and, at Mortgagee’s request (but not more than fifteen
(15) days prior to the termination date of any existing coverage), to provide
evidence of such insurance to Mortgagee, and to comply with the requirements of
any insurance companies providing such insurance; (b) to keep the Subject
Property and Collateral in good condition and repair; (c) not to remove or
demolish the Subject Property or Collateral or any part thereof, not to alter,
restore or add to the Subject Property or Collateral and not to initiate or
acquiesce in any change in any zoning or other land classification which affects
the Subject Property without Mortgagee’s prior written consent or as provided in
the Loan Agreement; (d) to complete or restore promptly and in good and
workmanlike manner the Subject Property and Collateral, or any part thereof
which may be damaged or destroyed, without regard to whether Mortgagee elects to
require that insurance proceeds be used to reduce the Secured Obligations as
provided in Section 5.6; (e) to comply with all laws, ordinances, regulations
and standards, and all covenants, conditions, restrictions and equitable
servitudes, whether public or private, of every kind and character which affect
the Subject Property or Collateral and pertain to acts committed or conditions
existing thereon, including, without limitation, any work, alteration,
improvement or demolition mandated by such laws, covenants or requirements;
(f) not to commit or permit waste of the Subject Property or Collateral; and
(g) to do all other acts which from the character or use of the Subject Property
or Collateral may be reasonably necessary to maintain and preserve its value.

 

  3.8

DEFENSE AND NOTICE OF LOSSES, CLAIMS AND ACTIONS.    At Mortgagor’s sole
expense, Mortgagor shall protect, preserve and defend the Subject Property and
Collateral and title to and right of possession of the Subject Property and
Collateral, the security hereof and the rights and powers of Mortgagee hereunder
against all adverse claims. Mortgagor shall give Mortgagee prompt notice in
writing of the assertion of any claim, of the filing of any action or
proceeding, of the occurrence of any damage to the Subject Property or
Collateral and of any condemnation offer or action.

 

  3.9

POWERS OF MORTGAGEE.  Mortgagee may, without affecting the personal liability of
any person for payment of any indebtedness or performance of any obligations
secured hereby and without liability therefor and without notice: (a) release
all or any part of the Subject Property; (b) consent to the making of any map or
plat thereof; and (c) join in any grant of easement thereon, any declaration of
covenants and restrictions, or any extension agreement or any agreement
subordinating the lien or charge of this Mortgage.

 

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  3.10

COMPENSATION; EXCULPATION; INDEMNIFICATION.

 

   (a)

Mortgagor shall pay to Mortgagee reasonable compensation for services rendered
concerning this Mortgage, including without limit any statement of amounts owing
under any Secured Obligation. Mortgagee shall not directly or indirectly be
liable to Mortgagor or any other person as a consequence of (i) the exercise of
the rights, remedies or powers granted to Mortgagee in this Mortgage; (ii) the
failure or refusal of Mortgagee to perform or discharge any obligation or
liability of Mortgagor under any agreement related to the Subject Property or
Collateral or under this Mortgage; or (iii) any loss sustained by Mortgagor or
any third party resulting from Mortgagee’s failure (whether by malfeasance,
nonfeasance or refusal to act) to lease the Subject Property after a Default
(hereinafter defined) or from any other act or omission (regardless of whether
same constitutes negligence) of Mortgagee in managing the Subject Property after
a Default unless the loss is caused by the gross negligence or willful
misconduct of Mortgagee and no such liability shall be asserted against or
imposed upon Mortgagee, and all such liability is hereby expressly waived and
released by Mortgagor.

 

   (b)

Mortgagor shall pay all amounts and indebtedness arising under this Section 5.10
immediately upon demand by Mortgagee together with interest thereon from the
date the indebtedness arises at the rate of interest then applicable to the
principal balance of the Note as specified therein.

 

  3.11

DUE ON SALE OR ENCUMBRANCE.    The terms “Loan”, “Loan Documents” and “Loan
Agreement” have the meaning given them in the Loan Agreement described in
Section 2.1. Mortgagor represents, agrees and acknowledges that:

 

   (a)

Improvement and operation of real property is a highly complex activity which
requires substantial knowledge of law and business conditions and practices, and
an ability to control, coordinate and schedule the many factors affecting such
improvement and operation. Experience, financial stability, managerial ability
and a good reputation in the business community enhance an owner’s and
operator’s ability to obtain market rents and to induce cooperation in
scheduling and are taken into account by Mortgagee in approving loan
applications.

 

   (b)

Mortgagor has represented to Mortgagee, not only in the representations and
warranties contained in the Loan Documents, but also in its initial loan
application and in all of the negotiations connected with Mortgagee making the
Loan, certain facts concerning Mortgagor’s financial stability, managerial and
operational ability, reputation, skill, and creditworthiness. Mortgagee has
relied upon these representations and warranties as a substantial and material
consideration in its decision to make the Loan.

 

   (c)

The conditions and terms provided in the Loan Agreement were induced by these
representations and warranties and would not have been made available by
Mortgagee in the absence of these representations and warranties.

 

   (d)

Mortgagee would not have made this Loan if Mortgagee did not have the right to
sell, transfer, assign, or grant participations in the Loan and in the Loan
Documents, and that such participations are dependent upon the potential
participants’ reliance on such representations and warranties.

 

   (e)

Mortgagor’s financial stability and managerial and operational ability and that
of those persons or entities having a direct or beneficial interest in Mortgagor
are a substantial

 

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and material consideration to any third parties who have entered or will enter
into agreements with Mortgagor.

 

   (f)

Mortgagee has relied upon the skills and services offered by such third parties
and the provision of such skills and services is jeopardized if Mortgagor
breaches its covenants contained below regarding Transfers.

 

   (g)

A transfer of possession of or title to the Subject Property, or a change in the
person or entity operating, developing, constructing or managing the Subject
Property, would substantially increase the risk of Default under the Loan
Documents and significantly and materially impair and reduce Mortgagee’s
security for the Note.

 

   (h)

As used herein, the term “Transfer” shall mean each of the following actions or
events: the sale, transfer, assignment, lease as a whole, encumbrance,
hypothecation, mortgage or pledge in any manner whatsoever, whether voluntarily,
involuntarily or by operation of law of: (i) the Subject Property or Collateral
or any interest therein; (ii) title to any other security more specifically
described in any Loan Document; (iii) Mortgagor’s right, title and/or interest
in the Loan Documents and any subsequent documents executed by Mortgagor in
connection therewith; (iv) legal or beneficial ownership of any partnership
interest in Mortgagor if Mortgagor is a partnership; (v) legal or beneficial
ownership of any membership interest in Mortgagor if Mortgagor is a limited
liability company; (vi) legal or beneficial ownership of any partnership
interest in any general partner, venturer or member of Mortgagor; or (vii) legal
or beneficial ownership of any of the stock in Mortgagor if Mortgagor is a
corporation or in any general partner, venturer or member in Mortgagor that is a
corporation.

 

   (i)

Mortgagor shall not make or commit to make any Transfer without Mortgagee’s
prior written consent, which it may grant or withhold at its sole discretion
(except with respect to those Transfers reasonably approved by Mortgagee or
otherwise expressly permitted under Sections 9.17, 9.18 and 9.19 of the Loan
Agreement). It is expressly agreed that Mortgagee may predicate Mortgagee’s
decision to grant consent to a Transfer on such terms and conditions as
Mortgagee may require, in Mortgagee’s sole discretion, including without
limitation (i) consideration of the creditworthiness of the party to whom such
Transfer will be made and its development and management ability with respect to
the Subject Property, (ii) consideration of whether the security for repayment,
performance and discharge of the Secured Obligations, or Mortgagee’s ability to
enforce its rights, remedies, and recourses with respect to such security, will
be impaired in any way by the proposed Transfer, (iii) an increase in the rate
of interest payable under the Note or any other change in the terms and
provisions of the Note and other Loan Documents, (iv) reimbursement of Mortgagee
for all costs and expenses incurred by Mortgagee in investigating the
creditworthiness and management ability of the party to whom such Transfer will
be made and in determining whether Mortgagee’s security will be impaired by the
proposed Transfer, (v) payment to Mortgagee of a transfer fee to cover the cost
of documenting the Transfer in its records, (vi) payment of Mortgagee’s
reasonable attorneys’ fees in connection with such Transfer, (vii) endorsements
(to the extent available under applicable law) to any existing mortgagee title
insurance policies or construction binders insuring Mortgagee’s liens and
security interests covering the Subject Property, and (viii) require additional
security for the payment, performance and discharge of the Secured Obligations.
If Mortgagee’s consent should be given, any Transfer shall be subject to the
Loan Documents and any transferee of Mortgagor’s interest shall: (i) assume all
of Mortgagor’s obligations thereunder; and (ii) agree to be bound by all
provisions and perform all obligations contained therein; provided, however,
that such assumption shall not release Mortgagor or any maker or any guarantor
of the Note from any

 

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liability thereunder or under any other Loan Documents without the prior written
consent of Mortgagee. In the event of any Transfer without the prior written
consent of Mortgagee, whether or not Mortgagee elects to enforce its right to
accelerate the Loan pursuant to Sections 6.1 and 6.2, all sums owing under the
Note, as well as all other charges, expenses and costs owing under the Loan
Documents, shall at the option of Mortgagee, automatically bear interest at five
percent (5%) above the rate provided in the Note, from the date (or any date
thereafter) of such unconsented to Transfer. Mortgagor acknowledges that the
automatic shift(s) to this alternate rate is reasonable since the
representations that Mortgagee relied upon in making the Loan may no longer be
relied upon. A consent by Mortgagee to one or more Transfers shall not be
construed as a consent to further Transfers or as a waiver of Mortgagee’s
consent with respect to future Transfers.

 

  3.12

RELEASES, EXTENSIONS, MODIFICATIONS AND ADDITIONAL SECURITY.    Without notice
to or the consent, approval or agreement of any persons or entities having any
interest at any time in the Subject Property and Collateral or in any manner
obligated under the Secured Obligations (“Interested Parties”), Mortgagee may,
from time to time, release any person or entity from liability for the payment
or performance of any Secured Obligation, take any action or make any agreement
extending the maturity or otherwise altering the terms or increasing the amount
of any Secured Obligation, or accept additional security or release all or a
portion of the Subject Property and Collateral and other security for the
Secured Obligations. None of the foregoing actions shall release or reduce the
personal liability of any of said Interested Parties, or release or impair the
priority of the lien of and security interests created by this Mortgage upon the
Subject Property and Collateral.

 

  3.13

RELEASE.    Upon payment in full of all obligations secured hereby, Mortgagee
shall release and discharge the Subject Property or that portion thereof then
held hereunder. When the Subject Property has been fully released, the last such
release shall operate as a reassignment of all future rents, issues and profits
of the Subject Property to the person or persons legally entitled thereto.
Notwithstanding anything contained herein to the contrary, Mortgagee hereby
agrees, subject to the provisions of Section 2.10 of the Loan Agreement, to
release and discharge the Subject Property, notwithstanding the fact that all of
the Secured Obligations have not been satisfied.

 

  3.14

SUBROGATION.    Mortgagee shall be subrogated to the lien of all encumbrances,
whether released of record or not, paid in whole or in part by Mortgagee
pursuant to the Loan Documents or by the proceeds of any loan secured by this
Mortgage.

 

  3.15

RIGHT OF INSPECTION.    Mortgagee, its agents and employees, may enter the
Subject Property at any reasonable time for the purpose of inspecting the
Subject Property and Collateral and ascertaining Mortgagor’s compliance with the
terms hereof.

 

  3.16

CONTRACTS.    Mortgagor will deliver to Mortgagee a copy of each Contract
promptly after the execution of same by all parties thereto and subject to any
approval of Mortgagee required by any of the Loan Documents. Within twenty
(20) days after a request by Mortgagee, Mortgagor shall prepare and deliver to
Mortgagee a complete listing of all Contracts, showing date, term, parties,
subject matter, concessions, whether any defaults exist, and other information
specified by Mortgagee, of or with respect to each of such Contracts, together
with a copy thereof (if so requested by Mortgagee). Mortgagor represents and
warrants that none of the Contracts encumber or create a lien on the Subject
Property, but are personal with Mortgagor. As used herein, the term “Contract”
shall mean any management agreement, leasing and brokerage agreement, and
operating or service contract with respect to the Subject Property or
Collateral.

 

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ARTICLE 6. DEFAULT PROVISIONS

 

  4.1

DEFAULT.  For all purposes hereof, the term “Default” shall mean (a) the
existence of any Event of Default as defined in the Loan Agreement; (b) at
Mortgagee’s option, the failure of Mortgagor to make any payment of principal or
interest on the Note or to pay any other amount due hereunder or under the Note
when the same is due and payable, whether at maturity, by acceleration or
otherwise; (c) the failure of Mortgagor to perform any non-monetary obligation
hereunder, or the failure to be true of any representation or warranty of
Mortgagor contained herein and the continuance of such failure for ten (10) days
after notice, or within any longer grace period, if any, allowed in the Loan
Agreement for such failure, or (d) if Mortgagor or any other Person shall make a
Transfer without the prior written consent of Mortgagee (which consent may be
withheld in Mortgagee’s sole discretion (except for those Transfers reasonably
approved by Mortgagee or otherwise expressly permitted under Sections 9.17, 9.18
and 9.19 of the Loan Agreement) or conditioned as provided in Section 5.11).

 

  4.2

RIGHTS AND REMEDIES.  At any time after Default, Mortgagee shall have all the
following rights and remedies:

 

   (a)

With or without notice, to declare all Secured Obligations immediately due and
payable;

 

   (b)

With or without notice, and without releasing Mortgagor from any Secured
Obligation, and without becoming a mortgagee in possession, to cure any breach
or Default of Mortgagor and, in connection therewith, to enter upon the Subject
Property and do such acts and things as Mortgagee deems necessary or desirable
to protect the security hereof, including, without limitation: (i) to appear in
and defend any action or proceeding purporting to affect the security of this
Mortgage or the rights or powers of Mortgagee under this Mortgage; (ii) to pay,
purchase, contest or compromise any encumbrance, charge, lien or claim of lien
which, in the sole judgment of Mortgagee, is or may be senior in priority to
this Mortgage, the judgment of Mortgagee being conclusive as between the parties
hereto; (iii) to obtain insurance; (iv) to pay any premiums or charges with
respect to insurance required to be carried under this Mortgage; or (v) to
employ counsel, accountants, contractors and other appropriate persons;

 

   (c)

To commence and maintain an action or actions in any court of competent
jurisdiction to foreclose this Mortgage or to obtain specific enforcement of the
covenants of Mortgagor hereunder, and Mortgagor agrees that such covenants shall
be specifically enforceable by injunction or any other appropriate equitable
remedy and that for the purposes of any suit brought under this subparagraph,
Mortgagor waives the defense of laches and any applicable statute of
limitations;

 

   (d)

To apply to a court of competent jurisdiction for and obtain appointment of a
receiver of the Subject Property as a matter of strict right and without regard
to the adequacy of the security for the repayment of the Secured Obligations,
the existence of a declaration that the Secured Obligations are immediately due
and payable, or the filing of a notice of default, and Mortgagor hereby consents
to such appointment;

 

   (e)

To enter upon, possess, manage and operate the Subject Property or any part
thereof, to take and possess all documents, books, records, papers and accounts
of Mortgagor or the then owner of the Subject Property, to make, terminate,
enforce or modify Leases of the Subject Property upon such terms and conditions
as Mortgagee deems proper, to make repairs, alterations and improvements to the
Subject Property as necessary, in Mortgagee’s sole judgment, to protect or
enhance the security hereof;

 

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   (f)

To resort to and realize upon the security hereunder and any other security now
or later held by Mortgagee concurrently or successively and in one or several
consolidated or independent judicial actions or lawfully taken non-judicial
proceedings, or both, and to apply the proceeds received upon the Secured
Obligations all in such order and manner as Mortgagee determines in its sole
discretion;

 

   (g)

Upon sale of the Subject Property at any foreclosure sale, Mortgagee may credit
bid (as determined by Mortgagee in its sole and absolute discretion) all or any
portion of the Secured Obligations. In determining such credit bid, Mortgagee
may, but is not obligated to, take into account all or any of the following:
(i) appraisals of the Subject Property as such appraisals may be discounted or
adjusted by Mortgagee in its sole and absolute underwriting discretion;
(ii) expenses and costs incurred by Mortgagee with respect to the Subject
Property prior to foreclosure; (iii) expenses and costs which Mortgagee
anticipates will be incurred with respect to the Subject Property after
foreclosure, but prior to resale, including, without limitation, costs of
structural reports and other due diligence, costs to carry the Subject Property
prior to resale, costs of resale (e.g. commissions, attorneys’ fees, and taxes),
costs of any hazardous materials clean-up and monitoring, costs of deferred
maintenance, repair, refurbishment and retrofit, costs of defending or settling
litigation affecting the Subject Property, and lost opportunity costs (if any),
including the time value of money during any anticipated holding period by
Mortgagee; (iv) declining trends in real property values generally and with
respect to properties similar to the Subject Property; (v) anticipated discounts
upon resale of the Subject Property as a distressed or foreclosed property;
(vi) the fact of additional collateral (if any), for the Secured Obligations;
and (vii) such other factors or matters that Mortgagee (in its sole and absolute
discretion) deems appropriate. In regard to the above, Mortgagor acknowledges
and agrees that: (w) Mortgagee is not required to use any or all of the
foregoing factors to determine the amount of its credit bid; (x) this Section
does not impose upon Mortgagee any additional obligations that are not imposed
by law at the time the credit bid is made; (y) the amount of Mortgagee’s credit
bid need not have any relation to any loan-to-value ratios specified in the Loan
Documents or previously discussed between Mortgagor and Mortgagee; and
(z) Mortgagee’s credit bid may be (at Mortgagee’s sole and absolute discretion)
higher or lower than any appraised value of the Subject Property;

 

   (h)

Upon the completion of any foreclosure of all or a portion of the Subject
Property, commence an action to recover any of the Secured Obligations that
remains unpaid or unsatisfied; and

 

   (i)

Exercise any and all other remedies available to Mortgagee at law or in equity,
or under the Note, Loan Agreement or other Loan Documents for such Default.

 

  4.3

APPLICATION OF FORECLOSURE SALE PROCEEDS.    To the extent permitted by
applicable law, Mortgagee shall apply all proceeds of any foreclosure sale:
(a) to payment of all sums expended by Mortgagee under the terms hereof and not
then repaid, with accrued interest at the rate of interest specified in the Note
to be applicable on or after maturity or acceleration of the Note; (b) to
payment of all other Secured Obligations; and (c) the remainder, if any, to the
person or persons legally entitled thereto.

 

  4.4

APPLICATION OF OTHER SUMS.    To the extent permitted by applicable law, all
sums received by Mortgagee under Section 6.2 or Section 3.2, less all costs and
expenses incurred by Mortgagee or any receiver under Section 6.2 or Section 3.2,
including, without limitation, attorneys’ fees, shall be applied in payment of
the Secured Obligations in such

 

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order as Mortgagee shall determine in its sole discretion; provided, however,
Mortgagee shall have no liability for funds not actually received by Mortgagee.

 

  4.5

NO CURE OR WAIVER.    Neither Mortgagee’s nor any receiver’s entry upon and
taking possession of all or any part of the Subject Property and Collateral, nor
any collection of rents, issues, profits, insurance proceeds, condemnation
proceeds or damages, other security or proceeds of other security, or other
sums, nor the application of any collected sum to any Secured Obligation, nor
the exercise or failure to exercise of any other right or remedy by Mortgagee or
any receiver shall cure or waive any breach, Default or notice of default under
this Mortgage, or nullify the effect of any notice of default or sale (unless
all Secured Obligations then due have been paid and performed and Mortgagor has
cured all other defaults), or impair the status of the security, or prejudice
Mortgagee in the exercise of any right or remedy, or be construed as an
affirmation by Mortgagee of any tenancy, lease or option or a subordination of
the lien of or security interests created by this Mortgage.

 

  4.6

PAYMENT OF COSTS, EXPENSES AND ATTORNEYS’ FEES.    Mortgagor agrees to pay to
Mortgagee immediately and without demand all costs and expenses incurred by
Mortgagee (including, without limitation, post-judgment costs and expenses)
pursuant to Section 6.2 (including, without limitation, court costs and
attorneys’ fees, whether incurred in litigation or not) with interest from the
date of expenditure until said sums have been paid at the rate of interest then
applicable to the principal balance of the Note as specified therein

 

  4.7

NOTICE OF SALE.  Mortgagee shall give Mortgagor reasonable notice of the time
and place of any public sale of the personal property or of the time after which
any private sale or other intended disposition of the personal property is to be
made. Reasonable notice shall mean notice that is at least ten (10) days before
the time of the sale or disposition.

 

  4.8

ELECTION OF REMEDIES.  Election by Mortgagee to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make expenditures or to
take action or to perform an obligation of the Mortgagor under this Mortgage,
after Mortgagor’s failure to perform, shall not affect Mortgagee’s right to
declare a default and exercise its remedies. Nothing under this Mortgage or
otherwise shall be construed so as to limit or restrict the rights and remedies
available to Mortgagee following event of Default, or in any way to limit or
restrict the rights and ability of Mortgagee to proceed directly against
Mortgagor and/or against any other co-maker, guarantor, surety, or endorser,
and/or to proceed against any other collateral, directly or indirectly securing
the indebtedness.

 

  4.9

POWER TO FILE NOTICES AND CURE DEFAULTS.  To the extent permitted by applicable
law, Mortgagor hereby irrevocably appoints Mortgagee and its successors and
assigns, as its attorney-in-fact, which agency is coupled with an interest,
(a) to execute and/or record any notices of completion, cessation of labor, or
any other notices that Mortgagee deems appropriate to protect Mortgagee’s
interest, (b) upon the issuance of a deed pursuant to the foreclosure of the
lien of this Mortgage or the delivery of a deed in lieu of foreclosure, to
execute all instruments of assignment or further assurance with respect to the
Subject Property and Collateral, Leases and Payments in favor of the grantee of
any such deed, as may be necessary or desirable for such purpose, (c) to
prepare, execute and file or record financing statements, continuation
statements, applications for registration and like papers necessary to create,
perfect or preserve Mortgagee’s security interests and rights in or to any of
the Subject Property and Collateral, and (d) upon the occurrence of an event,
act or omission which, with notice or passage of time or both, would constitute
a Default, Mortgagee may perform any obligation of Mortgagor hereunder;
provided, however, that: (i) Mortgagee as such attorney-in-fact shall only be
accountable for such funds as are actually received by Mortgagee; and
(ii) Mortgagee shall not be liable to Mortgagor or any other person or entity
for any failure to act (whether such failure constitutes negligence) by
Mortgagee under this Section.

 

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Loan No. 1002012

 

  4.10

REMEDIES CUMULATIVE. All rights and remedies of Mortgagee provided hereunder are
cumulative and are in addition to all rights and remedies provided by applicable
law (including specifically that of foreclosure of this Mortgage) or in any
other agreements between Mortgagor and Mortgagee. No failure on the part of
Mortgagee to exercise any of its rights hereunder arising upon any Default shall
be construed to prejudice its rights upon the occurrence of any other or
subsequent Default. No delay on the part of Mortgagee in exercising any such
rights shall be construed to preclude it from the exercise thereof at any time
while that Default is continuing. Mortgagee may enforce any one or more remedies
or rights hereunder successively or concurrently. By accepting payment or
performance of any of the Secured Obligations after its due date, Mortgagee
shall not thereby waive the agreement contained herein that time is of the
essence, nor shall Mortgagee waive either its right to require prompt payment or
performance when due of the remainder of the Secured Obligations or its right to
consider the failure to so pay or perform a Default.

ARTICLE 7. MISCELLANEOUS PROVISIONS

 

  5.1

ADDITIONAL PROVISIONS.  The Loan Documents contain or incorporate by reference
the entire agreement of the parties with respect to matters contemplated herein
and supersede all prior negotiations. The Loan Documents grant further rights to
Mortgagee and contain further agreements and affirmative and negative covenants
by Mortgagor which apply to this Mortgage and to the Subject Property and
Collateral and such further rights and agreements are incorporated herein by
this reference.

 

  5.2

MERGER.    No merger shall occur as a result of Mortgagee’s acquiring any other
estate in, or any other lien on, the Subject Property unless Mortgagee consents
to a merger in writing.

 

  5.3

OBLIGATIONS OF MORTGAGOR, JOINT AND SEVERAL.    If more than one person has
executed this Mortgage as “Mortgagor”, the obligations of all such persons
hereunder shall be joint and several.

 

  5.4

RECOURSE TO SEPARATE PROPERTY.    Any married person who executes this Mortgage
as a Mortgagor agrees that any money judgment which Mortgagee obtains pursuant
to the terms of this Mortgage or any other obligation of that married person
secured by this Mortgage may be collected by execution upon that person’s
separate property, and any community property of which that person is a manager.

 

  5.5

WAIVER OF MARSHALLING RIGHTS.    Mortgagor, for itself and for all parties
claiming through or under Mortgagor, and for all parties who may acquire a lien
on or interest in the Subject Property and Collateral, hereby waives all rights
to have the Subject Property and Collateral and/or any other property, which is
now or later may be security for any Secured Obligation (“Other Property”)
marshalled upon any foreclosure of the lien of this Mortgage or on a foreclosure
of any other lien or security interest against any security for any of the
Secured Obligations. Mortgagee shall have the right to sell, and any court in
which foreclosure proceedings may be brought shall have the right to order a
sale of, the Subject Property and any or all of the Collateral or Other Property
as a whole or in separate parcels, in any order that Mortgagee may designate.

 

  5.6

RULES OF CONSTRUCTION.    When the identity of the parties or other
circumstances make it appropriate the masculine gender includes the feminine
and/or neuter, and the singular number includes the plural. The term “Subject
Property” and “Collateral” means all and any part of the Subject Property and
Collateral, respectively, and any interest in the Subject Property and
Collateral, respectively.

 

  5.7

SUCCESSORS IN INTEREST.    The terms, covenants, and conditions herein contained
shall be binding upon and inure to the benefit of the heirs, successors and
assigns of the parties

 

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Loan No. 1002012

 

      

hereto; provided, however, that this Section 7.7 does not waive or modify the
provisions of Section 6.2(e).

 

  5.8

EXECUTION IN COUNTERPARTS.  To facilitate execution, this document may be
executed in as many counterparts as may be convenient or required. It shall not
be necessary that the signature or acknowledgment of, or on behalf of, each
party, or that the signature of all persons required to bind any party, or the
acknowledgment of such party, appear on each counterpart. All counterparts shall
collectively constitute a single document. It shall not be necessary in making
proof of this document to produce or account for more than a single counterpart
containing the respective signatures of, or on behalf of, and the respective
acknowledgments of, each of the parties hereto. Any signature or acknowledgment
page to any counterpart may be detached from such counterpart without impairing
the legal effect of the signatures or acknowledgments thereon and thereafter
attached to another counterpart identical thereto except having attached to it
additional signature or acknowledgment pages.

 

  5.9

GOVERNING LAW.    This Mortgage shall be construed in accordance with the laws
of the State of New Jersey, except to the extent that federal laws preempt the
laws of the State of New Jersey.

 

  5.10

INCORPORATION.  Exhibits A and B, as attached, are incorporated into this
Mortgage by this reference.

 

  5.11

NOTICES. All notices, demands or other communications required or permitted to
be given pursuant to the provisions of this Mortgage shall be in writing and
shall be considered as properly given if delivered personally or sent by
certified United States mail, return receipt requested, or by Overnight Express
Mail or by overnight commercial courier service, charges prepaid. Notices so
sent shall be effective upon receipt at the address set forth below; provided,
however, that non-receipt of any communication as the result of any change of
address of which the sending party was not notified or as the result of a
refusal to accept delivery shall be deemed receipt of such communication. For
purposes of notice, the address of the parties shall be:

 

Page 18

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Loan No. 1002012

 

 

Mortgagor:

  

 

KBSII MOUNTAIN VIEW, LLC,

a Delaware limited liability company

c/o KBS Capital Advisors LLC

620 Newport Center Drive, Suite 1300,

Newport Beach, CA 92660

Tel: (949) 417-6500

Fax: (949) 417-6518

 

With a copy:

KBS Realty Advisors, LLC

590 Madison Avenue, 26th Floor

New York, NY 10022

Attn: Charlie Valentino

Tel: (212) 644-6662

Fax: (212) 644-1372

 

 

Mortgagee:

  

 

WELLS FARGO BANK, NATIONAL ASSOCIATION

Real Estate Group (AU #2955)

Orange County

2030 Main Street, Suite 800

Irvine, CA 92614

Attn: Irie Dadabhoy, Relationship Manager

Tel: (949) 251-4322

Fax: (949) 851-9728

Loan #: 1002012

 

 

With a copy to:

  

 

Wells Fargo Bank, National Association

Disbursement and Operations Center

2120 East Park Place, Suite 100

El Segundo, CA 90245

Attention: Azucena Dela Cruz

 

Any party shall have the right to change its address for notice hereunder to any
other location within the continental United States by the giving of thirty
(30) days notice to the other party in the manner set forth hereinabove.
Mortgagor shall forward to Mortgagee, without delay, any notices, letters or
other communications delivered to the Subject Property or to Mortgagor naming
Mortgagee, “Lender” or the “Construction Lender” or any similar designation as
addressee, or which could reasonably be deemed to affect the construction of the
Improvements or the ability of Mortgagor to perform its obligations to Mortgagee
under the Note or the Loan Agreement.

 

  5.12

LIMITATIONS ON RECOURSE.    The limitations on personal liability of
shareholders, partners and members of Borrower contained in Section 13.27 of the
Loan Agreement shall apply to this Mortgage.

 

  5.13

SEVERABILITY.  If any provision of this Mortgage is deemed to be invalid by
reason of the operation of law, or by reason of the interpretation placed
thereon by any administrative agency or any court, Mortgagee and Mortgagor shall
negotiate an equitable adjustment in the provisions of the same in order to
effect, to the maximum extent permitted by law, the

 

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Loan No. 1002012

 

      

purpose of this Mortgage and the validity and enforceability of the remaining
provisions, or portions or applications thereof, shall not be affected thereby
and shall remain in full force and effect.

 

  5.14

WRITTEN MODIFICATIONS.    This Mortgage shall not be amended, modified or
supplemented without the written agreement of Mortgagor and Mortgagee at the
time of such amendment, modification or supplement.

THE MORTGAGOR HEREBY DECLARES THAT THE MORTGAGOR HAS READ THIS MORTGAGE,

HAS RECEIVED A COMPLETELY FILLED-IN COPY OF IT WITHOUT CHARGE THEREFOR, AND

HAS SIGNED THIS MORTGAGE AS OF THE DATE AT THE TOP OF THE FIRST PAGE.

[Signatures Follow on Next Page]

 

Page 20

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IN WITNESS WHEREOF, Mortgagor has executed this Mortgage, under seal, as of the
day and year set forth above.

 

“MORTGAGOR”

KBSII MOUNTAIN VIEW, LLC,

a Delaware limited liability company

By:   KBSII REIT ACQUISITION III, LLC,  

a Delaware limited liability company,

its sole member

  By:   KBS REIT PROPERTIES II, LLC,    

a Delaware limited liability company,

its sole member

    By:   KBS LIMITED PARTNERSHIP II,      

a Delaware limited partnership,

its sole member

      By:   KBS REAL ESTATE INVESTMENT        

TRUST II, INC.,

a Maryland corporation,

general partner

        By:   /s/ Charles J. Schreiber, Jr.           Charles J. Schreiber, Jr.
          Chief Executive Officer

--------------------------------------------------------------------------------

EXHIBIT A

DESCRIPTION OF SUBJECT PROPERTY

Exhibit A to Mortgage with Absolute Assignment of Leases and Rents, Security
Agreement and Fixture Filing executed by KBSII MOUNTAIN VIEW, LLC, a Delaware
limited liability, as Mortgagor, for the benefit of WELLS FARGO BANK, NATIONAL
ASSOCIATION, as administrative agent for itself and certain other lenders, as
Mortgagee, dated as of April 30, 2010.

All that certain tract or parcel of land and premises, situate, lying and being
in the Township of Bernards, County of Somerset, State of New Jersey, more
particularly described as follows:

Parcel One:

Being known and designated as Lot 59.05 in Block 187 on a certain Map entitled
“Final Plat, Section One, Mountainview Corporate Center, Lot 59.01, Block 187,
filed in the Somerset County Clerk’s Office on June 11, 2003 as Map
No. 5386-3226.

Parcel One being also described in accordance with a survey made by Richard C.
Mathews, NJPLS of Stires Associates, dated April 17, 2008, revised to June 23,
2008 as follows:

Beginning at a point in the southerly line of Lot 5 Block 11301 also known as
Mountain View Boulevard, a private road, said point being located a distance of
1068.21 feet along the southerly line of Lot 5 Block 11301, Mountain View
Boulevard, from the intersection of the westerly line of Liberty Corner -
Martinsville Road with the southerly line of Lot 59.01 Block 187, Mountain View
Boulevard and from said point running;

Thence 1) South 58 degrees 00 minutes 27 seconds West a distance of 1550.71
feet;

Thence 2) South 52 degrees 37 minutes 52 seconds West a distance of 462.02 feet;

Thence 3) North 61 degrees 14 minutes 26 seconds West a distance of 139.17 feet;

Thence 4) South 38 degrees 33 minutes 05 seconds West a distance of 119.57 feet
to a point on a curve;

Thence 5) along a non-tangent curve to the left, said curve having a radius of
431.25 feet, a length along the arc of 131.74 feet, a bearing along the chord of
North 60 degrees 47 minutes 25 seconds West and a distance along the chord of
131.23 feet to a point of tangency;

Thence 6) North 69 degrees 32 minutes 30 seconds West a distance of 136.71 feet
to a point in the southerly line of Lot 59.01;

Thence 7) along the line of Lot 5 on a non-tangent curve to the right, said
curve having a radius of 1195.00 feet, a length along the arc of 671.02 feet, a
bearing along the chord of North 36 degrees 32 minutes 41 seconds East and a
distance along the chord of 622.24 feet to a point of tangency;

Thence 8) continuing along the line of Lot 59.01, North 52 degrees 37 minutes 52
seconds East a distance of 315.48 feet to a point of curvature;

Thence 9) continuing along the line of Lot 59.01, on a curve to the right, said
curve having a radius of 1120.00 feet, a length along the arc of 257.25 feet, a
bearing along the chord of North 59 degrees 12 minutes 41 seconds East and a
distance along the chord of 256.69 feet to a point of compound curvature;

Thence 10) continuing along the line of Lot 59.01, on a curve to the right, said
curve having a radius of 2220.00 feet, a length along the arc of 954.60 feet, a
bearing along the chord of North 78 degrees 06 minutes 36 seconds East and a
distance along the chord of 947.26 feet to a point of compound curvature;

Thence 11) continuing along the line of Lot 59.01, on a curve to the right, said
curve having a radius of 1770.00 feet, a length along the arc of 331.17 feet, a
bearing along the chord of South 84 degrees 12

 

Exhibit A

--------------------------------------------------------------------------------

Loan No. 1002012

 

minutes 41 seconds East and a distance along the chord of 330.69 feet to a Point
and Place of Beginning.

FOR INFORMATIONAL PURPOSES ONLY: BEING KNOWN AND DESIGNATED AS BLOCK 11301, LOTS
9 (FORMERLY KNOWN AS BLOCK 187 Lot 59.05) ON THE OFFICIAL TAX MAP OF THE
TOWNSHIP OF BERNARDS, COUNTY OF SOMERSET, NEW JERSEY.

Parcel Two:

Together with the benefits of a Non-Exclusive Right and Easement of Enjoyment in
and to the Common Areas (as defined in the Declaration, as hereinafter defined)
and a continuous, perpetual and Non-Exclusive Easement of unobstructed access,
ingress and egress through, over, in, upon, under and across the Roadway (as
defined in the Declaration) and the Emergency Access Roadway (as defined in the
Declaration) to the Roadway in the event of an emergency, as contained in the
Declaration of Covenants, Easements and Restrictions as set forth in Deed Book
5386, page 3130, as amended by First Amendment to Declaration of Covenants,
Easements and Restrictions as set forth in Deed Book 5874, page 520 (as amended,
the “Declaration”)

Parcel Three:

Together with the benefits of a Non-exclusive Easement over and across the Road
Easement Area (as defined in the Easement Agreement, hereinafter defined) for
ingress and egress over the Emergency Road (as defined in the Easement
Agreement) to and from Mountain Road for emergency purposes and the
Non-Exclusive easements for drainage purposes over the Road Easement Area and
the Drainage Easement Area (as defined in the Easement agreement), as contained
in the Easement agreement as set forth in Deed Book 2231, page 546 (the
“Easement Agreement”).

 

Exhibit A

--------------------------------------------------------------------------------

EXHIBIT B

NON-BORROWER MORTGAGOR RIDER

Exhibit B to Mortgage with Absolute Assignment of Leases and Rents, Security
Agreement and Fixture Filing executed by KBSII MOUNTAIN VIEW, LLC, a Delaware
limited liability, as Mortgagor, for the benefit of WELLS FARGO BANK, NATIONAL
ASSOCIATION, as administrative agent for itself and certain other lenders, as
Mortgagee, dated as of April 30, 2010 (“Mortgage”).

To the extent the Mortgage secures one or more promissory notes and other loan
documents (“Loan Documents”) made by a party or parties (each individually, a
“Borrower” and collectively, “Borrowers”) not identical to the party or parties
constituting Mortgagor, the party or parties constituting Mortgagor agree as
follows:

 

1.

CONDITIONS TO EXERCISE OF RIGHTS.    Mortgagor hereby waives any right it may
now or hereafter have to require Mortgagee, as a condition to the exercise of
any remedy or other right against Mortgagor hereunder or under any other
document executed by Mortgagor in connection with any Secured Obligation: (a) to
proceed against any Borrower or other person, or against any other collateral
assigned to Mortgagee by Mortgagor or any Borrower or other person; (b) to
pursue any other right or remedy in Mortgagee’s power; (c) except as required by
applicable law, to give notice of the time, place or terms of any public or
private sale of real or personal property collateral assigned to Mortgagee by
any Borrower or other person (other than Mortgagor), or otherwise to comply with
the New Jersey Commercial Code (as modified or recodified from time to time)
with respect to any such personal property collateral; or (d) to make or give
(except as otherwise expressly provided in the Loan Documents) any presentment,
demand, protest, notice of dishonor, notice of protest or other demand or notice
of any kind in connection with any Secured Obligation or any collateral (other
than the Subject Property) for any Secured Obligation.

 

2.

DEFENSES.    Mortgagor hereby waives any defense it may now or hereafter have
that relates to: (a) any disability or other defense of any Borrowers or other
person; (b) the cessation, from any cause other than full performance, of the
obligations of Borrower or any other person; (c) the application of the proceeds
of any Secured Obligation, by any Borrower or other person, for purposes other
than the purposes represented to Mortgagor by any Borrower or otherwise intended
or understood by Mortgagor or any Borrower; (d) any act or omission by Mortgagee
which directly or indirectly results in or contributes to the release of any
Borrower or other person or any collateral for any Secured Obligation; (e) the
unenforceability or invalidity of any collateral assignment (other than the
Mortgage) or guaranty with respect to any Secured Obligation, or the lack of
perfection or continuing perfection or lack of priority of any lien (other than
the lien hereof) which secures any Secured Obligation; (f) any failure of
Mortgagee to marshal assets in favor of Mortgagor or any other person; (g) any
modification of any Secured Obligation, including any renewal, extension,
acceleration or increase in interest rate; (h) any and all rights and defenses
arising out of an election of remedies by Mortgagee, even though that election
of remedies, such as a nonjudicial foreclosure with respect to security for a
guaranteed obligation, has destroyed Mortgagor’s rights of subrogation and
reimbursement against the principal by the operation of law; (i) any law which
provides that the obligation of a surety or guarantor must neither be larger in
amount nor in other respects more burdensome than that of the principal or which
reduces a surety’s or guarantor’s obligation in proportion to the principal
obligation; (j) any failure of Mortgagee to file or enforce a claim in any
bankruptcy or other proceeding with respect to any person; (k) the election by
Mortgagee, in any bankruptcy proceeding of any person, of the application or
non-application of Section 1111(b)(2) of the United States Bankruptcy Code;
(l) any extension of credit or the grant of any lien under Section 364 of the
United States Bankruptcy Code; (m) any use of cash collateral under Section 363
of the United States Bankruptcy Code; or (n) any agreement or stipulation with
respect to the provision of adequate protection in any bankruptcy proceeding of
any person. Mortgagor further waives any and all rights and defenses that
Mortgagor may have because Borrowers’ debt is secured by real property; this
means, among other things, that: (1) Mortgagee may collect from Mortgagor
without first foreclosing on any real or personal property collateral pledged by
any Borrower or any other Person; (2) if Mortgagee forecloses on any real
property

 

Exhibit B-1

--------------------------------------------------------------------------------

Loan No. 1002012

 

    

collateral pledged by any Borrower or any other Person, then (A) the amount of
the debt may be reduced only by the price for which that collateral is sold at
the foreclosure sale, even if the collateral is worth more than the sale price,
and (B) Mortgagee may collect from Mortgagor even if Mortgagee, by foreclosing
on the real property collateral, has destroyed any right Mortgagor may have to
collect from Borrowers or any of them. The foregoing sentence is an
unconditional and irrevocable waiver of any rights and defenses Mortgagor may
have because Borrowers’ debt is secured by real property. These rights and
defenses being waived by Mortgagor include, but are not limited to, any rights
or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of
Civil Procedure or any equivalent statutes or other applicable laws in the State
of New Jersey. Without limiting the generality of the foregoing or any other
provision hereof, Mortgagor further expressly waives to the extent permitted by
law any and all rights and defenses, including without limitation any rights of
subrogation, reimbursement, indemnification and contribution, which might
otherwise be available to Mortgagor under California Civil Code Sections 2787 to
2855, inclusive, 2899 and 3433, or under California Code of Civil Procedure
Sections 580a, 580b, 580d and 726, or any of such sections, or any equivalent
statutes or other applicable laws in the State of New Jersey.

 

3.

SUBROGATION.    Mortgagor hereby waives, until such time as all Secured
Obligations are fully performed: (a) any right of subrogation against any
Borrower that relates to any Secured Obligation; (b) any right to enforce any
remedy Mortgagor may now or hereafter have against any Borrower that relates to
any Secured Obligation; and (c) any right to participate in any collateral now
or hereafter assigned to Mortgagee with respect to any Secured Obligation.

 

4.

BORROWER INFORMATION.    Mortgagor warrants and agrees: (a) that Mortgagee would
not make or modify and extend the Loan but for this Mortgage; (b) that Mortgagor
has not relied, and will not rely, on any representations or warranties by
Mortgagee to Mortgagor with respect to the credit worthiness of any Borrower or
the prospects of repayment of any Secured Obligations from sources other than
the Subject Property; (c) that Mortgagor has established and/or will establish
adequate means of obtaining from each Borrower on a continuing basis financial
and other information pertaining to the business operations, if any, and
financial condition of each Borrower; (d) that Mortgagor assumes full
responsibility for keeping informed with respect to each Borrower’s business
operations, if any, and financial condition; (e) that Mortgagee shall have no
duty to disclose or report to Mortgagor any information now or hereafter known
to Mortgagee with respect to any Borrower, including, without limitation, any
information relating to any of Borrower’s business operations or financial
condition; and (f) that Mortgagor is familiar with the terms and conditions of
the Loan Documents and consents to all provisions thereof.

 

5.

REINSTATEMENT OF LIEN.    Mortgagee’s rights hereunder shall be reinstated and
revived, and the enforceability of this Mortgage shall continue, with respect to
any amount at any time paid on account of any Secured Obligation which Mortgagee
is thereafter required to restore or return in connection with a bankruptcy,
insolvency, reorganization or similar proceeding with respect to any Borrower.

 

6.

SUBORDINATION.    Until all of the Secured Obligations have been fully paid and
performed: (a) Mortgagor hereby agrees that all existing and future indebtedness
and other obligations of each Borrower to Mortgagor (collectively, the
“Subordinated Debt”) shall be and are hereby subordinated to all Secured
Obligations which constitute obligations of the applicable Borrower, and the
payment thereof is hereby deferred in right of payment to the prior payment and
performance of all such Secured Obligations; (b) Mortgagor shall not collect or
receive any cash or non-cash payments on any Subordinated Debt or transfer all
or any portion of the Subordinated Debt; and (c) in the event that,
notwithstanding the foregoing, any payment by, or distribution of assets of, any
Borrower with respect to any Subordinated Debt is received by Mortgagor, such
payment or distribution shall be held in trust and immediately paid over to
Mortgagee, is hereby assigned to Mortgagee as security for the Secured
Obligations, and shall be held by Mortgagee in an interest bearing account until
all Secured Obligations have been fully paid and performed.

 

7.

LAWFULNESS AND REASONABLENESS.    Mortgagor warrants that all of the waivers in
this Mortgage are made with full knowledge of their significance, and of the
fact that events giving rise to any defense or other benefit waived by Mortgagor
may destroy or impair rights which Mortgagor would otherwise have against
Mortgagee, Borrower and other persons, or against collateral.

 

Exhibit B-2

--------------------------------------------------------------------------------

Loan No. 1002012

 

    

Mortgagor agrees that all such waivers are reasonable under the circumstances
and further agrees that, if any such waiver is determined (by a court of
competent jurisdiction) to be contrary to any law or public policy, the other
waivers herein shall nonetheless remain in full force and effect.

 

8.

ENFORCEABILITY.    Mortgagor hereby acknowledges that: (a) the obligations
undertaken by Mortgagor in this Mortgage are complex in nature, and (b) numerous
possible defenses to the enforceability of these obligations may presently exist
and/or may arise hereafter, and (c) as part of Mortgagee’s consideration for
entering into this transaction, Mortgagee has specifically bargained for the
waiver and relinquishment by Mortgagor of all such defenses, and (d) Mortgagor
has had the opportunity to seek and receive legal advice from skilled legal
counsel in the area of financial transactions of the type contemplated herein.
Given all of the above, Mortgagor does hereby represent and confirm to Mortgagee
that Mortgagor is fully informed regarding, and that Mortgagor does thoroughly
understand: (i) the nature of all such possible defenses, and (ii) the
circumstances under which such defenses may arise, and (iii) the benefits which
such defenses might confer upon Mortgagor, and (iv) the legal consequences to
Mortgagor of waiving such defenses. Mortgagor acknowledges that Mortgagor makes
this Mortgage with the intent that this Mortgage and all of the informed waivers
herein shall each and all be fully enforceable by Mortgagee, and that Mortgagee
is induced to enter into this transaction in material reliance upon the presumed
full enforceability thereof.

 

9.

WAIVER OF RIGHT TO TRIAL BY JURY.  TO THE EXTENT PERMITTED BY THEN APPLICABLE
LAW, EACH PARTY TO THIS MORTGAGE, AND BY ITS ACCEPTANCE HEREOF, BENEFICIARY,
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT
LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR
ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE; AND EACH PARTY AND BENEFICIARY HEREBY AGREES AND CONSENTS THAT ANY
PARTY TO THIS DEED OF TRUST AND BENEFICIARY MAY FILE AN ORIGINAL COUNTERPART OR
A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE
PARTIES HERETO AND BENEFICIARY TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

 

10.

INTEGRATION; INTERPRETATION.  This Mortgage and the other Loan Documents contain
or expressly incorporate by reference the entire agreement of the parties with
respect to the matters contemplated therein and supersede all prior negotiations
or agreements, written or oral. This Mortgage and the other Loan Documents shall
not be modified except by written instrument executed by all parties. Any
reference to the Loan Documents includes any amendments, renewals or extensions
now or hereafter approved by Mortgagee in writing.

 

Exhibit B-3