Exhibit 10.5

 

PROMISSORY NOTE

 

$13,000,000.00

  June 9, 2004

 

FOR VALUE RECEIVED, the undersigned, 935 HQ ASSOCIATES, LLC, a Delaware limited
liability company (“Borrower”), whose address is 1075 First Avenue, King of
Prussia, Pennsylvania 19406 (and whose taxpayer identification number is
51-0509051), promises to pay to the order of CIBC INC., a Delaware corporation
(“Lender”), at the office of Lender at 622 Third Avenue, 10th Floor, Attn: Real
Estate Finance Group, New York, New York 10017, or at such other place as Lender
may designate to Borrower in writing from time to time, the principal sum of
THIRTEEN MILLION and 00/100 DOLLARS ($13,000,000.00) together with interest on
so much thereof as is from time to time outstanding and unpaid, from the date of
the advance of the principal evidenced hereby, at the Applicable Interest Rate
(as hereinafter defined), in lawful money of the United States of America, which
shall at the time of payment be legal tender in payment of all debts and dues,
public and private.

 

PARTICULAR DEFINITIONS

 

The following terms, as used in this Note, shall have the following meaning,
which meaning shall be applicable equally to the singular and the plural of the
items defined:

 

(a) “Anticipated Repayment Date” shall mean July 1, 2014.

 

(b) “Initial Term Interest Rate” shall mean a rate of Six and Thirty-Two
One-Hundredths percent (6.32%) per annum.

 

(c) “Maturity Date” shall mean July 1, 2034.

 

(d) “Monthly Payment Amount” shall mean the amount of $80,636.02.

 

Additional terms are defined in Section 3.05 of this Note.

 

ARTICLE I

 

TERMS AND CONDITIONS

 

1.01. Payment of Principal and Interest.

 

(a) Interest shall be computed hereunder based on a 360-day year and paid for
the actual number of days elapsed for any whole or partial month in which
interest is being calculated. In computing the number of days during which
interest accrues, the day on which funds are initially advanced shall be
included (regardless of the time of day such advance is made), and the day on
which funds are repaid shall be included unless repayment is credited prior to
close of business. Payments in federal funds immediately available in the place
designated for payment received by Lender prior to 2:00 p.m. local time on a
business day in the State of Lender’s principal office at said place of payment
shall be credited prior to close of business, while other payments may, at the
option of Lender, not be credited until immediately available to Lender in
federal funds at the place designated for payment prior to 2:00 p.m. local time
at said place of payment on a day on which Lender is open for business.

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(b) Principal and interest shall be payable in equal consecutive monthly
installments, each in the amount of the Monthly Payment Amount, on the first day
of each calendar month (each such date, a “Payment Date”) until payment in full
of this Note beginning on the first day of the second full calendar month
following the date of this Note (or on the first day of the first full calendar
month following the date hereof, in the event the advance of the principal
amount evidenced by this Note is the first day of a calendar month). On the
Maturity Date, the entire outstanding principal balance hereof, together with
all accrued but unpaid interest thereon and all other sums due hereunder, shall
be due and payable in full. So long as no Event of Default (as hereinafter
defined) exists hereunder, each such monthly installment shall be applied first,
to any amounts hereafter advanced by Lender hereunder or under any other Loan
Document, second, to any late fees and other amounts payable to Lender, third,
to the payment of accrued interest and last to reduction of principal.

 

(c) If the advance of the principal amount evidenced by this Note is made on a
date other than the first day of a calendar month, then Borrower shall pay to
Lender contemporaneously with the execution hereof interest at the Initial Term
Interest Rate for a period from the date of such advance through and including
the last day of such calendar month.

 

1.02. Prepayment.

 

(a) Voluntary Prepayment. Borrower may not voluntarily prepay this Note in whole
or in part at any time prior to the expiration of the Lock-out Period. “Lock-out
Period” shall mean the period of time from the date hereof to, but not
including, the date that is three (3) months prior to the Anticipated Repayment
Date (as previously defined). After the expiration of the Lock-out Period,
Borrower may prepay this Note in whole only, provided, that (i) written notice
of such prepayment is received by Lender not more than sixty (60) days and not
less than thirty (30) days prior to the date of such prepayment, (ii) such
prepayment is accompanied by all interest accrued hereunder and all other sums
due hereunder and under the other Loan Documents (as defined in Section 1.04)
and (iii) such prepayment (x) is received by Lender on a Payment Date (as
defined in Article III), or (y) if not received on a Payment Date, is
accompanied by a payment of interest, calculated at the Applicable Interest
Rate, on the amount prepaid, based on the number of days from the date such
prepayment is received through the next Payment Date.

 

(b) Involuntary Prepayment. Except as hereinafter provided in this subparagraph
(b), in the event that any prepayment is received by Lender prior to the
expiration of the Lock-out Period, or if a prepayment results from Lender’s
exercise of its remedies hereunder, Borrower shall pay Lender a Yield
Maintenance Charge (as defined below) in connection with such prepayment.
Prepayments of this Note prior to the expiration of the Lock-out Period shall be
permitted without notice, and without the imposition of a Yield Maintenance
Charge or any other premium or penalty in connection with Lender’s application
of insurance or condemnation proceeds on account of the Loan in accordance with
the terms and provisions of the Security Instrument (as defined in Section 1.04
hereof), provided, however, if an Event of Default shall have occurred and be
continuing at the time of the related casualty or condemnation, in addition to
applying such proceeds as provided in the Security Instrument, Borrower shall
pay a Yield Maintenance Charge to Lender. Lender, at its option, may elect to
use such proceeds and Yield Maintenance Charge to economically defease an amount
of the Loan equal to the proceeds applied as a prepayment, in the manner
provided in Section 1.03 below. Any prepayment during the Lockout Period shall
not reduce the Monthly Payment Amount payable hereunder unless such prepayment
is accompanied by a Yield Maintenance Charge and Lender elects, in its sole
discretion, to economically defease all or a portion of the Loan with the
related proceeds. No tender of a prepayment of this Note with respect to which a
Yield Maintenance Charge is due shall be effective unless such prepayment is
accompanied by such Yield Maintenance Charge.

 

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(c) No principal amount repaid or defeased may be re-borrowed.

 

1.03. Defeasance.

 

(a) At any time during the Defeasance Period (as hereinafter defined), Borrower
may obtain a release of the Security Property (as hereinafter defined) from the
lien of the Security Instrument upon the satisfaction of the following
conditions:

 

(1) not less than thirty (30) days’ prior written notice shall be given to
Lender specifying a date (the “Defeasance Date”) on which the Defeasance Deposit
(as hereinafter defined) is to be delivered;

 

(2) all accrued and unpaid interest and all other sums due under this Note and
under the other Loan Documents up to the Defeasance Date, including, without
limitation, all reasonable costs and expenses incurred by Lender or its agents
in connection with such defeasance (including, without limitation, any legal
fees and expenses incurred in connection with obtaining and reviewing the
Defeasance Collateral (as hereinafter defined) and the preparation of the
Defeasance Security Agreement (as hereinafter defined) and related
documentation), shall be paid in full on or prior to the Defeasance Date;

 

(3) no Event of Default, and no event or condition that, with the giving of
notice or passage of time or both, would constitute an Event of Default, shall
exist either at the time Borrower gives notice of the Defeasance Date to Lender
or on the Defeasance Date;

 

(4) on or before the Defeasance Date, Borrower shall pay to Lender the principal
amount of the Loan to be defeased together with an additional amount such that
the aggregate amount (the “Defeasance Deposit”) is sufficient to purchase (as
set forth in Section 1.03(d) below) direct, non-callable and non-prepayable
obligations of the United States of America or, at the option of Lender (and
with the approval of each applicable Rating Agency, if a Secondary Market
Transaction has then occurred (the two capitalized terms used above without
definition shall have the respective meanings attributed thereto in the Security
Instrument)), other securities considered “government securities” within the
meaning of the Investment Company Act of 1940, as amended (the “Defeasance
Collateral”) that provide for payments prior, but as close as possible, to all
successive Payment Dates occurring after the Defeasance Date through and
including the Anticipated Repayment Date, with each such payment being equal to
or greater than (1) the Monthly Payment Amount and (2) with respect to the
payment due on the Anticipated Repayment Date, the entire outstanding principal
balance of this Note together with any interest accrued as of such date and all
other amounts payable pursuant to the Loan Documents;

 

(5) the Defeasance Collateral shall be duly endorsed by the holder thereof as
directed by Lender or accompanied by a written instrument of transfer in form
and substance wholly satisfactory to Lender (including, without limitation, such
instruments as may be required by the depository institution holding such
securities to effectuate book-entry transfers and pledges through the book-entry
facilities of such institution) in order to create a first priority security
interest therein in favor of Lender in conformity with an applicable state and
federal laws governing granting of such security interests;

 

(6) Borrower shall deliver the following to Lender on or prior to the Defeasance
Date:

 

A. a pledge and security agreement, in form and substance satisfactory to Lender
in its sole discretion, creating a first priority security interest in favor of
Lender in the Defeasance Deposit and the Defeasance Collateral (the “Defeasance
Security

 

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Agreement”), which shall provide, among other things, that any excess received
by Lender from the Defeasance Collateral over the amounts payable by Borrower
hereunder shall be refunded to Borrower promptly after each monthly Payment
Date;

 

B. a certificate of Borrower certifying that all of the requirements set forth
in this Section 1.03 have been satisfied;

 

C. an opinion of counsel for Borrower in form and substance and delivered by
counsel reasonably satisfactory to Lender in its sole discretion stating, among
other things, (x) that Lender has a perfected first priority security interest
in the Defeasance Deposit and the Defeasance Collateral, (y) that the Defeasance
Security Agreement is enforceable against Borrower in accordance with its terms
and (z) that the defeasance will not cause the Trust (as hereinafter defined) to
fail to qualify as a “real estate mortgage investment conduit” (a “REMIC”),
within the meaning of Section 860D of the Internal Revenue Code of 1986, as
amended from time to time or any successor statute (the “Code”);

 

D. evidence in writing from each of the Rating Agencies (as defined in the
Security Instrument) to the effect that such release will not result in a
qualification, downgrade or withdrawal of any rating in effect immediately prior
to the Defeasance Date for any securities issued in connection with a Secondary
Market Transaction (as defined in the Security Instrument);

 

E. a certificate, in form reasonably acceptable to Lender, from a firm of
independent certified public accountants acceptable to Lender, certifying that
the Defeasance Collateral is sufficient to make the payments required by
Paragraph 1.03(a)(4) above; and

 

F. such other certificates, opinions, documents or instruments as Lender may
reasonably require.

 

All costs and expenses of satisfying the foregoing conditions and of the
transactions contemplated by this Section 1.03, including, without limitation,
the reasonable costs and expenses of Lender’s counsel, shall be paid by Borrower
simultaneously with the defeasance of this Note.

 

(b) Upon a defeasance in accordance with Section 1.03(a), Borrower shall, at
Lender’s request, assign all of Borrower’s obligations and rights under this
Note to a special-purpose, bankruptcy-remote entity (“Successor Borrower”) to be
formed, at Lender’s election, either by Borrower or by the Trust. In connection
therewith, the Successor Borrower shall execute an assumption agreement in form
and substance satisfactory to Lender in its sole discretion pursuant to which
Successor Borrower shall assume Borrower’s obligations under this Note and the
Defeasance Security Agreement. The sole asset of Successor Borrower shall be the
Defeasance Collateral unless Successor Borrower is formed by the Trust, in which
case the Trust may elect to have one entity serve as “Successor Borrower” with
respect to other notes owned by the Trust. In connection with such assignment
and assumption, Borrower and/or Successor Borrower shall deliver to Lender an
opinion of counsel in form and substance and delivered by counsel satisfactory
to Lender in its sole discretion stating, among other things, that such
assumption agreement is enforceable against Borrower and Successor Borrower, as
applicable, in accordance with its terms and that this Note, the Defeasance
Security Agreement and any other documents executed in connection with such
defeasance are enforceable against Borrower or Successor Borrower, as
applicable, in accordance with their respective terms. Upon an assumption by
Successor Borrower acceptable to Lender, Borrower shall be relieved of its
obligations under this Note and the Defeasance Security Agreement and, to the
extent such documents relate to the Security Property, the other Loan Documents.

 

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(c) Upon compliance with the requirements of Section 1.03(a) and (b), the
Security Property shall be released from the lien of the Security Instrument and
the other Loan Documents, and the Defeasance Collateral shall constitute the
collateral that shall secure this Note. Lender will, at Borrower’s expense,
execute and deliver any agreements reasonably requested by Borrower to release
the Security Property from the lien of the Security Instrument.

 

(d) Lender, as attorney-in-fact of Borrower, shall cause the purchase of the
Defeasance Collateral with the Defeasance Deposit, which purchase may be through
an affiliate of Lender. Borrower shall be responsible for the payment of any
brokerage or other transaction fees in connection with such purchase.

 

1.04. Security. The indebtedness evidenced by this Note and the obligations
created hereby are secured by, inter alia, that certain Mortgage, Assignment of
Leases and Rents and Security Agreement (as amended, consolidated, modified,
severed or spread from time to time, the “Security Instrument”) from Borrower to
Lender, dated on or about the date hereof, concerning property located in King
of Prussia, Pennsylvania. The Security Instrument together with this Note, the
Cash Management Agreement (as defined in Article III) and all other documents to
or of which Lender is a party or beneficiary now or hereafter evidencing,
securing, guarantying, modifying or otherwise relating to the indebtedness
evidenced hereby, as amended or modified from time to time, are herein referred
to collectively as the “Loan Documents”. All of the terms and provisions of the
Loan Documents are incorporated herein by reference. Some of the Loan Documents
are to be filed for record on or about the date hereof in the appropriate public
records.

 

1.05. Exculpation. Notwithstanding anything in the Loan Documents to the
contrary, but subject to the qualifications hereinbelow set forth, Lender agrees
that (i) Borrower shall be liable upon the indebtedness evidenced hereby and for
the other obligations arising under the Loan Documents to the full extent (but
only to the extent) of the security therefor, the same being all properties
(whether real or personal), rights, estates and interests now or at any time
hereafter securing the payment of this Note and/or the other obligations of
Borrower under the Loan Documents (collectively, the “Security Property”), (ii)
if default occurs in the timely and proper payment of all or any part of such
indebtedness evidenced hereby or in the timely and proper performance of the
other obligations of Borrower under the Loan Documents, any judicial or other
proceedings brought by Lender against Borrower shall be limited to the
preservation, enforcement and foreclosure, or any thereof, of the liens,
security titles, estates, assignments, rights and security interests now or at
any time hereafter securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents, and no attachment, execution
or other writ of process shall be sought, issued or levied upon any assets,
properties or funds of Borrower other than the Security Property except with
respect to the liability described below in this section, and (iii) in the event
of a foreclosure of such liens, security titles, estates, assignments, rights or
security interests securing the payment of this Note and/or the other
obligations of Borrower under the Loan Documents, no judgment for any deficiency
upon the indebtedness evidenced hereby shall be sought or obtained by Lender
against Borrower, except with respect to the liability described below in this
section; provided, however, that, notwithstanding the foregoing provisions of
this section, Borrower shall be fully liable, and subject to legal action, for
all losses, costs and expenses incurred by Lender (including, without
limitation, the fees and expenses of Lender’s counsel) by reason of:

 

(a) proceeds paid under any insurance policies (or paid as a result of any other
claim or cause of action against any person or entity) by reason of damage, loss
or destruction to all or any portion of the Security Property, to the full
extent of such proceeds not previously delivered to Lender, but which, under the
terms of the Loan Documents, should have been delivered to Lender;

 

(b) proceeds or awards resulting from the condemnation or other taking in lieu
of condemnation of all or any portion of the Security Property, or any of them,
to the full extent of such proceeds or awards not previously delivered to
Lender, but which, under the terms of the Loan Documents, should have been
delivered to Lender;

 

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(c) all tenant security deposits or other refundable deposits paid to or held by
Borrower or any other person or entity in connection with leases of all or any
portion of the Security Property which are not applied in accordance with the
terms of the applicable lease or other agreement, to the full extent of such
deposits;

 

(d) rent and other payments received from tenants under leases of all or any
portion of the Security Property paid more than one month in advance, to the
full extent of any such rents collected by Borrower and not remitted to Lender
promptly upon the occurrence of an Event of Default;

 

(e) rents, issues, profits and revenues of all or any portion of the Security
Property received or applicable to a period after the occurrence of any Event of
Default or any event which, solely with the passage of time, would constitute an
Event of Default hereunder, which are not paid to Lender, to the full extent of
the rents, issues, profits and revenues not so applied;

 

(f) waste committed on the Security Property, damage to the Security Property as
a result of the intentional misconduct or gross negligence of Borrower or any
Indemnitor (as defined in the Security Instrument) or any holder of equity
interests in Borrower or Indemnitor, or any person acting on behalf of, or at
the direction of, Borrower or Indemnitor, or any removal of the Security
Property in violation of the terms of the Loan Documents;

 

(g) failure to pay, or make deposits to the Impound Account (as defined in the
Security Instrument) on account of, any valid taxes, assessments, mechanic’s
liens, materialmen’s liens or other liens which could create liens on any
portion of the Security Property which would be superior to the lien or security
title of the Security Instrument or the other Loan Documents;

 

(h) failure by Borrower to pay, or make deposits to the Impound Account on
account of, the premiums on insurance policies required under the Loan Documents
to be maintained by Borrower or with respect to the Security Property;

 

(i) fraud or material misrepresentation or failure to disclose a material fact
by Borrower or any Indemnitor, or any holder of equity interests in Borrower or
Indemnitor, or any person acting on behalf of, or at the direction of, Borrower
or Indemnitor; and

 

(j) the filing by Borrower of a voluntary bankruptcy petition, or the filing
against Borrower of an involuntary bankruptcy petition by any general partner,
managing member or other constituent entity of Borrower, by any indemnitor with
respect to Borrower’s obligations under the Loan Documents, or by any affiliate
of any of them.

 

Furthermore, notwithstanding anything to the contrary in the Loan Documents, in
the event that: (A) Borrower fails to obtain Lender’s prior written consent to
any subordinate financing or other voluntary lien encumbering the Security
Property, if such consent is required by the Loan Documents; (B) Borrower fails
to obtain Lender’s prior written consent to any assignment, transfer or
conveyance of the Security Property or any interest therein, if such consent is
required by Loan Documents; or (C) payment of the first full installment of the
Monthly Payment Amount (together with all required reserves) is not paid when
due, then the Loan shall be fully recourse to Borrower.

 

Nothing contained in this section shall (1) be deemed to be a release or
impairment of the indebtedness evidenced by this Note or the other obligations
of Borrower under the Loan Documents or the lien of the Loan Documents upon the
Security Property, or (2) preclude Lender from foreclosing the Loan Documents in
case of any default or from enforcing any of the other rights of Lender except
as stated in this section, or (3) reduce, release, relieve, waive, limit or
impair in any way whatsoever the Indemnity and Guaranty Agreement and/or the
Hazardous Substances Indemnity Agreement each of even date executed and
delivered in connection with the indebtedness evidenced by this Note or release,

 

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relieve, reduce, waive or impair in any way whatsoever, any obligation of any
party to such Indemnity and Guaranty Agreement and Hazardous Substances
Indemnity Agreement or (4) waive any right that Lender may have under Section
506 (a), 506 (b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to
file a claim for the full amount of the Loan or to require that all collateral
shall continue to secure all of the indebtedness owing to Lender in accordance
with the Loan Documents.

 

1.06. Event of Default. It is hereby expressly agreed that should any default
occur in the payment of principal or interest as stipulated above and such
payment is not made within seven (7) days of the date such payment is due
(provided that no grace period is provided for the payment of principal and
interest due on the Maturity Date), or should an “Event of Default” (as defined
in the Security Instrument) occur, or should any other default occur under any
of the Loan Documents which is not cured within any applicable grace or cure
period, then an “Event of Default” shall exist hereunder, and in such event the
indebtedness evidenced hereby, including all sums advanced or accrued hereunder
or under any other Loan Document, and all unpaid interest accrued thereon,
shall, at the option of Lender and without notice to Borrower, at once become
due and payable and may be collected forthwith, whether or not there has been a
prior demand for payment and regardless of the stipulated date of maturity.

 

1.07. Late Charges and Default Interest Rate. In the event that any payment is
not received by Lender on the date when due (subject to the applicable grace
period), then in addition to any default interest payments due hereunder,
Borrower shall also pay to Lender a late charge in an amount equal to five
percent (5.0%) of the amount of such overdue payment (the “Late Charge”);
provided that the Late Charge shall not apply to the payment of principal due on
the Maturity Date. So long as any Event of Default exists hereunder, regardless
of whether or not there has been an acceleration of the indebtedness evidenced
hereby, and at all times after maturity of the indebtedness evidenced hereby
(whether by acceleration or otherwise), interest shall accrue on the outstanding
principal balance of this Note at a rate per annum equal to four percent (4.0%)
plus the Applicable Interest Rate, or if such increased rate of interest may not
be charged or collected under applicable law, then at the maximum rate of
interest, if any, which may be charged or collected from Borrower under
applicable law (the “Default Interest Rate”), and such default interest shall be
immediately due and payable. Borrower acknowledges that it would be extremely
difficult or impracticable to determine Lender’s actual damages resulting from
any late payment or Event of Default, and such late charges and default interest
are reasonable estimates of those damages and do not constitute a penalty.
Interest at the Default Rate shall continue to accrue on any judgment Lender may
obtain against Borrower on this Note or the Security Instrument until Lender
acquires record title to the Security Property or the judgment, including
interest and costs, have been paid in full.

 

1.08. Cumulative Remedies. The remedies of Lender in this Note or in the Loan
Documents, or at law or in equity, shall be cumulative and concurrent, and may
be pursued singly, successively or together in Lender’s discretion. In the event
this Note, or any part hereof, is collected by or through an attorney-at-law,
Borrower agrees to pay all costs of collection including, but not limited to,
reasonable attorneys’ fees.

 

ARTICLE II

 

GENERAL CONDITIONS

 

2.01. No Waiver: Amendment. No failure to accelerate the debt evidenced hereby
by reason of default hereunder, acceptance of a partial or past due payment, or
indulgences granted from time to time shall be construed (i) as a novation of
this Note or as a reinstatement of the indebtedness evidenced hereby or as a
waiver of such right of acceleration or of the right of Lender thereafter to
insist upon strict compliance with the terms of this Note, or (ii) to prevent
the exercise of such right of acceleration or any

 

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other right granted hereunder or by any applicable laws; and Borrower hereby
expressly waives the benefit of any statute or rule of law or equity now
provided, or which may hereafter be provided, which would produce a result
contrary to or in conflict with the foregoing. No extension of the time for the
payment of this Note or any installment due hereunder, made by agreement with
any person now or hereafter liable for the payment of this Note shall operate to
release, discharge, modify, change or affect the original liability of Borrower
under this Note, either in whole or in part unless Lender agrees otherwise in
writing. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.

 

2.02. Waivers. Presentment for payment, demand, protest and notice of demand,
protest and nonpayment and all other notices are hereby waived by Borrower.
Borrower hereby further waives and renounces, to the fullest extent permitted by
law, all rights to the benefits of any moratorium, reinstatement, marshalling,
forbearance, valuation, stay, extension, redemption, appraisement, exemption and
homestead now or hereafter provided by the Constitution and laws of the United
States of America and of each state thereof, both as to itself and in and to all
of its property, real and personal, against the enforcement and collection of
the obligations evidenced by this Note or the other Loan Documents.

 

2.03. Limit of Validity. The provisions of this Note and of all agreements
between Borrower and Lender, whether now existing or hereafter arising and
whether written or oral, are hereby expressly limited so that in no contingency
or event whatsoever, whether by reason of demand or acceleration of the maturity
of this Note or otherwise, shall the amount paid, or agreed to be paid
(“Interest”), to Lender for the use, forbearance or detention of the money
loaned under this Note exceed the maximum amount permissible under applicable
law. If, from any circumstance whatsoever, performance or fulfillment of any
provision hereof or of any agreement between Borrower and Lender shall, at the
time performance or fulfillment of such provision shall be due, exceed the limit
for Interest prescribed by law or otherwise transcend the limit of validity
prescribed by applicable law, then ipso facto the obligation to be performed or
fulfilled shall be reduced to such limit and if, from any circumstance
whatsoever, Lender shall ever receive anything of value deemed Interest by
applicable law in excess of the maximum lawful amount, an amount equal to any
excessive Interest shall be applied to the reduction of the principal balance
owing under this Note in the inverse order of its maturity (whether or not then
due) or at the option of Lender be paid over to Borrower, and not to the payment
of Interest. All Interest (including, but not limited to, any amounts or
payments deemed to be Interest) paid or agreed to be paid to Lender shall, to
the extent permitted by applicable law, be amortized, prorated, allocated and
spread throughout the full period until payment in full of the principal balance
of this Note so that the Interest thereof for such full period will not exceed
the maximum amount permitted by applicable law. This Section 2.03 will control
all agreements between Borrower and Lender.

 

2.04. Use of Funds. Borrower hereby warrants, represents and covenants that the
loan evidenced hereby is for business or commercial purposes only, and no
advance of funds evidenced hereby shall be used by Borrower for personal, family
or household purposes. The foregoing shall not, however, prohibit Borrower from
distributing surplus proceeds (after payment from time to time of all amounts
that Borrower is required to pay pursuant to the Loan Documents) to the owners
of equity interests in Borrower.

 

2.05. Unconditional Payment. Borrower is and shall be obligated to pay
principal, interest and any and all other amounts which become payable hereunder
or under the other Loan Documents absolutely and unconditionally and without any
abatement, postponement, diminution or deduction and without any reduction for
counterclaim or setoff. In the event that at any time any payment received by
Lender hereunder shall be deemed by a court of competent jurisdiction to have
been a voidable preference or fraudulent conveyance under any bankruptcy,
insolvency or other debtor relief law, then the obligation to make such payment
shall survive any cancellation or satisfaction of this Note or return thereof to

 

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Borrower and shall not be discharged or satisfied with any prior payment thereof
or cancellation of this Note, but shall remain a valid and binding obligation
enforceable in accordance with the terms and provisions hereof, and such payment
shall be immediately due and payable upon demand.

 

ARTICLE III

 

HYPERAMORTIZATION

 

3.01. Deposit of Rents and Profits. Upon the commencement of any Sweep Period
(as defined in the Cash Management Agreement) prior to the Anticipated Repayment
Date, Borrower shall thereafter cause the Rents and Profits (as defined in the
Security Instrument) to be deposited in the applicable accounts required by the
Cash Management Agreement and such sums shall be applied on the first day of
each calendar month in the following listed order of priority:

 

(a) First, payments to the Impound Account (as defined in the Security
Instrument) in accordance with the terms and conditions of the Security
Instrument;

 

(b) Next, the payment of the Monthly Payment Amount;

 

(c) Next, payments of any other amounts due under the Loan Documents not
expressly set forth below in this Section 3.01;

 

(d) Next, payments to the Replacement Reserve (as defined in the Security
Instrument) in accordance with the terms and conditions of the Security
Instrument; and

 

(e) Lastly, payment to Borrower of any excess amounts.

 

Notwithstanding any provision of this Note to the contrary, following an Event
of Default, Lender reserves the right to (x) take such enforcement actions as it
deems appropriate under the Loan Documents or otherwise under law or in equity
and (y) apply sums received to the amounts owed under the Loan Documents at such
times and in such amounts, order and manner as Lender shall in its sole
discretion elect from time to time.

 

3.02. Amounts Outstanding at the Anticipated Repayment Date. In the event that
Borrower does not pay to Lender on or before the Anticipated Repayment Date the
outstanding principal balance of this Note together with all accrued and unpaid
interest hereon and all other sums then due and payable hereunder and under the
Loan Documents, the following shall apply:

 

(a) From and after the Anticipated Repayment Date, interest shall accrue on the
unpaid principal balance from time to time outstanding on this Note at the
Extended Term Rate. Interest accrued at the Extended Term Rate and not paid
pursuant to this Section 3.02 shall be deferred and added to the outstanding
principal balance of this Note (together with all accrued interest thereon) and
shall earn interest at the Extended Term Rate to the extent permitted by
applicable law (such accrued interest together with any interest accrued thereon
is hereinafter defined as “Accrued Interest”). All of the outstanding principal
balance, including any Accrued Interest, shall be due and payable on the
Maturity Date.

 

(b) Borrower shall cause all Rents and Profits to be deposited directly into the
applicable accounts required by the Cash Management Agreement and Borrower shall
pay on the Anticipated Repayment Date and each Payment Date thereafter up to and
including the Maturity Date, the following payments from Rents and Profits on or
before such day in the listed order of priority:

 

(1) First, payments to the Impound Account in accordance with the terms and
conditions of the Security Instrument;

 

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(2) Next, the payment of the Monthly Payment Amount to be applied first to the
payment of interest computed at the Initial Term Interest Rate (as hereinafter
defined) with the remainder applied to the reduction of the outstanding
principal balance of this Note;

 

(3) Next, payments to Lender of any other amounts due under the Loan Documents
not expressly set forth below in this Section 3.02(b);

 

(4) Next, payments to the Replacement Reserve, each in accordance with the terms
and conditions of the Security Instrument;

 

(5) Next, payments for monthly Cash Expenses (as hereinafter defined), less
management fees payable to affiliates of Borrower, pursuant to the terms and
conditions of the related Approved Annual Budget (as hereinafter defined);

 

(6) Next, payment for monthly Net Capital Expenditures (as hereinafter defined),
pursuant to the terms and conditions of the related Approved Annual Budget;

 

(7) Next, payment for Extraordinary Expenses (as hereinafter defined) approved
by Lender, if any;

 

(8) Next, payments to Lender to be applied against the outstanding principal due
under this Note (but not including any Accrued Interest) until such principal
amount (not including any Accrued Interest) is paid in full;

 

(9) Next, payments to Lender for Accrued Interest; and

 

(10) Lastly, payment to the Borrower of any excess amounts.

 

(c) In the event that the Borrower must incur an Extraordinary Expense, then
Borrower shall promptly deliver to Lender a reasonably detailed explanation of
such proposed Extraordinary Expense for the Lender’s approval.

 

3.03. Payment of Monthly Payment Amount. Nothing in this Article III shall
limit, reduce or otherwise affect Borrower’s obligations to make payments of the
Monthly Payment Amount and/or payments to the Impound Account or the Replacement
Reserve or any other sums due hereunder and under the other Loan Documents,
whether or not Rents and Profits are available to make such payments.

 

3.04. Annual Budgets. For each fiscal year commencing with the fiscal year in
which the Anticipated Repayment Date occurs, Borrower shall submit to Lender for
Lender’s written approval an Annual Budget (as hereinafter defined) not later
than sixty (60) days prior to the commencement of such fiscal year, in form
satisfactory to Lender setting forth in reasonable detail budgeted monthly
operating income and monthly operating capital and other expenses for the
Property (as hereinafter defined). Each Annual Budget shall contain, among other
things, limitations on management fees, third party service fees, and other
expenses as Borrower may reasonably determine. Lender shall have the right to
approve such Annual Budget (which approval shall not be unreasonably withheld),
and in the event that Lender objects to the proposed Annual Budget submitted by
Borrower, Lender shall advise Borrower of such objections within fifteen (15)
days after receipt thereof (and deliver to Borrower a reasonably detailed
description of such objections) and Borrower shall within three (3) days after
receipt of notice of any such objections revise such Annual Budget and resubmit
the same to Lender. Lender shall advise Borrower of any objections to such
revised Annual Budget within ten (10) days after receipt thereof (and deliver to
Borrower a reasonably detailed description of such objections) and Borrower
shall revise the same in accordance with the process described in this
subparagraph until the Lender approves an Annual Budget, provided, however, that
if Lender shall not advise Borrower of its objections to any proposed Annual
Budget within the applicable time period set forth in this paragraph, then such
proposed Annual Budget shall be deemed approved by Lender. Until such time as
Lender approves a proposed Annual Budget, the most recently Approved Annual
Budget shall apply; provided that such Approved Annual Budget shall be adjusted
to reflect actual increases in real estate taxes, insurance premiums and
utilities expenses.

 

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3.05. Definitions. The following items, as used in this Note, shall have the
following meaning which meaning shall be applicable equally to the singular and
the plural of the items defined:

 

(a) “Annual Budget” shall mean an annual budget submitted by Borrower to Lender
in accordance with the terms of Section 3.04 of this Note.

 

(b) “Applicable Interest Rate” shall mean from (a) the date of this Note through
but not including the Anticipated Repayment Date, the Initial Term Interest
Rate, and (b) from and after the Anticipated Repayment Date through and
including the date this Note is paid in full, the Extended Term Rate.

 

(c) “Approved Annual Budget” shall mean each Annual Budget approved by Lender in
accordance with the terms herein.

 

(d) “Capital Expenditures” shall mean for any period, the amount expended for
items capitalized under generally accepted accounting principles, including
expenditures for building improvements or major repairs.

 

(e) “Cash Expenses” shall mean for any period, the operating expenses for the
Property (as defined in the Security Instrument and hereinafter referred to as
the “Property”) as set forth in an Approved Annual Budget to the extent that
such expenses are actually incurred by Borrower minus payments into the Impound
Account and the Replacement Reserve.

 

(f) “Cash Management Agreement” shall mean that certain Cash Management
Agreement of even date herewith executed by Borrower and Lender and, if
applicable, any property manager retained by Borrower, in connection with this
Note.

 

(g) “Defeasance Period” shall mean the period of time commencing on the date
which is the earlier to occur of (i) two (2) years after the “startup day”,
within the meaning of Section 860G(a)(9) of Code, of the REMIC that holds this
Note (such REMIC is referred to as the “Trust”) and (ii) four (4) years after
the date hereof, and ending on the Anticipated Repayment Date.

 

(h) “Extended Term Rate” shall mean a rate per annum equal to the greater of (i)
the Initial Term Interest Rate plus three (3) percentage points or (ii) the
Treasury Rate plus three (3) percentage points.

 

(i) “Extraordinary Expense” shall mean an extraordinary operating expense or
capital expense not set forth in the Approved Annual Budget or allotted for in
the Replacement Reserve.

 

(j) “Loan” shall mean the loan by Lender to Borrower evidenced, inter alia, by
this Note and secured, inter alia, by the Security Instrument.

 

(k) “Net Capital Expenditures” shall mean for any period the amount by which
Capital Expenditures during such period exceeds reimbursements for such items
during such period from any fund (including, but not limited to, the Replacement
Reserve) established pursuant to the Loan Documents.

 

(l) “Note” shall mean this Promissory Note, as amended from time to time.

 

(m) “Payment Date” shall mean with respect to any month shall be the first day
of such month; provided, however, that if the first day of a given month shall
not be a business day, then the Payment Date for such month shall be the next
business day to occur after the first day of such month.

 

11

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

 

(o) “Yield Maintenance Charge” shall mean, as of any date, the greater of (1)
the excess, if any, of the Defeasance Deposit over the outstanding principal
balance of this Note, and (2) an amount equal to one percent (1%) of the
outstanding principal balance of this Note.

 

ARTICLE IV

 

MISCELLANEOUS

 

4.01. Miscellaneous. This Note shall be interpreted, construed and enforced
according to the laws of the State of Pennsylvania. The terms and provisions
hereof shall be binding upon and inure to the benefit of Borrower and Lender and
their respective heirs, executors, legal representatives, successors,
successors-in-title and assigns, whether by voluntary action of the parties or
by operation of law. As used herein, the terms “Borrower” and “Lender” shall be
deemed to include their respective heirs, executors, legal representatives,
successors, successors-in-title and assigns, whether by voluntary action of the
parties or by operation of law. If Borrower consists of more than one person or
entity, each shall be jointly and severally liable to perform the obligations of
Borrower under this Note. All personal pronouns used herein, whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural and vice versa. Titles of articles and
sections are for convenience only and in no way define, limit, amplify or
describe the scope or intent of any provisions hereof. Time is of the essence
with respect to all provisions of this Note. This Note and the other Loan
Documents contain the entire agreements between the parties hereto relating to
the subject matter hereof and thereof and all prior agreements relative hereto
and thereto which are not contained herein or therein are terminated.

 

4.02. BORROWER HEREBY IRREVOCABLY AUTHORIZES AND EMPOWERS ANY ATTORNEY OR
ATTORNEYS OR THE PROTHONOTARY OR CLERK OF ANY COURT OF RECORD IN THE
COMMONWEALTH OF PENNSYLVANIA, OR ELSEWHERE, TO APPEAR FOR BORROWER IN ANY SUCH
COURT IN AN APPROPRIATE ACTION THERE BROUGHT OR TO BE BROUGHT AGAINST BORROWER
AT THE SUIT OF LENDER ON THIS NOTE, AND THEREIN TO CONFESS JUDGMENT AGAINST
BORROWER FOR ALL SUMS DUE FROM BORROWER TOGETHER WITH COSTS OF SUIT AND AN
ATTORNEY’S FEE FOR COLLECTION EQUAL TO $25,000; AND FOR SO DOING THIS NOTE OR A
COPY HEREOF VERIFIED BY AFFIDAVIT SHALL BE A SUFFICIENT WARRANT. THIS WARRANT OF
ATTORNEY SHALL BE EFFECTIVE ONLY AFTER AN EVENT OF DEFAULT, BUT SHALL NOT BE
EXHAUSTED BY ANY EXERCISE THEREOF.

 

12

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4.03. BORROWER HEREBY RELEASES LENDER AND SAID ATTORNEY OR ATTORNEYS FROM ALL
PROCEDURAL ERRORS, DEFECTS AND IMPERFECTIONS WHATSOEVER IN ENTERING JUDGMENT BY
CONFESSION AS AFORESAID OR IN ISSUING ANY PROCESS OR INSTITUTING ANY PROCEEDINGS
RELATING THERETO AND HEREBY WAIVES ALL BENEFIT THAT MIGHT ACCRUE TO BORROWER BY
VIRTUE OF ANY PRESENT OR FUTURE LAWS EXEMPTING THE SECURITY PROPERTY, AND ANY
OTHER COLLATERAL FOR THIS NOTE, OR ANY PART OF THE PROCEEDS ARISING FROM ANY
SALE OF ANY SUCH PROPERTY, FROM ATTACHMENT, LEVY OR SALE UNDER EXECUTION, OR
PROVIDING FOR ANY STAY OF EXECUTION, EXEMPTION FROM CIVIL PROCESS OR EXTENSION
OF TIME AND AGREES THAT SUCH PROPERTY MAY BE SOLD TO SATISFY ANY JUDGMENT
ENTERED ON THIS NOTE OR THE MORTGAGE, IN WHOLE OR IN PART AND IN ANY ORDER AS
MAY BE DESIRED BY LENDER.

 

4.04. BORROWER CONFIRMS TO LENDER THAT (I) BORROWER IS A BUSINESS ENTITY AND
THAT ITS PRINCIPALS ARE KNOWLEDGEABLE IN BUSINESS MATTERS; (II) THE TERMS OF
THIS NOTE, INCLUDING THE FOREGOING WARRANT OF ATTORNEY TO CONFESS JUDGMENT, HAVE
BEEN NEGOTIATED AND AGREED UPON IN A COMMERCIAL CONTEXT; AND (III) IT HAS FULLY
REVIEWED THE AFORESAID WARRANT OF ATTORNEY TO CONFESS JUDGMENT WITH ITS OWN
COUNSEL AND IS KNOWINGLY AND VOLUNTARILY WAIVING CERTAIN RIGHTS IT WOULD
OTHERWISE POSSESS, INCLUDING BUT NOT LIMITED TO, THE RIGHT TO ANY NOTICE OR A
HEARING PRIOR TO THE ENTRY OF JUDGMENT BY LENDER PURSUANT TO THE AFORESAID
WARRANT OF ATTORNEY.

 

[signature appears on following page]

 

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IN WITNESS WHEREOF, Borrower has executed this Note under seal as of the date
first above written.

 

935 HQ ASSOCIATES, LLC, a Delaware limited liability company By:   GSI Commerce,
Inc., a Delaware corporation, its Managing Member     By:   /s/ Jordan M.
Copland         Name: Jordan M. Copland         Title: Executive Vice President

 

COMMONWEALTH OF PENNSYLVANIA

 

COUNTY OF Philadelphia

 

On this, the 9th day of June, 2004 before me, a Notary Public, personally
appeared Jordan M. Copland, known to me (or satisfactorily proven) to be the
Executive Vice President of GSI Commerce, Inc., a Delaware corporation, the
Managing Member of 935 HQ Associates, LLC, a Delaware limited liability company
and acknowledged that being duly authorized to do so, executed the foregoing
instrument on behalf of such limited partnership as general partner of such
limited partnership for the purposes therein contained.

 

IN WITNESS WHEREOF, I have hereunto set my official hand and seal.

 

/s/ Sheldon Bender

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  [SEAL] Name: Sheldon Bender     My commission expires: May 2, 2006