exv10w3





Exhibit 10.3


     LOAN SERVICING NO. 003401474



      




LOAN AGREEMENT




Dated as of May 22, 2006



Between



AmREIT RIVERWALK, LP,

as Borrower



and



BANK OF AMERICA, N.A.,

as Lender



 




 









 





TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	ARTICLE I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
	 	 	1	 
	 
	Section 1.1 Definitions
	 	 	1	 
	Section 1.2 Principles of Construction
	 	 	13	 
	 
	ARTICLE II. GENERAL TERMS
	 	 	13	 
	 
	Section 2.1 The Loan
	 	 	13	 
	Section 2.2 Disbursement to Borrower
	 	 	13	 
	Section 2.3 The Note, Mortgage and Loan Documents
	 	 	14	 
	Section 2.4 Loan Payments
	 	 	14	 
	Section 2.5 Loan Prepayments
	 	 	14	 
	 
	ARTICLE III. CONDITIONS PRECEDENT
	 	 	14	 
	 
	Section 3.1 Conditions Precedent
	 	 	14	 
	 
	ARTICLE IV. REPRESENTATIONS AND WARRANTIES
	 	 	14	 
	 
	Section 4.1 Organization
	 	 	14	 
	Section 4.2 Status of Borrower
	 	 	15	 
	Section 4.3 Validity of Documents
	 	 	15	 
	Section 4.4 No Conflicts
	 	 	15	 
	Section 4.5 Litigation
	 	 	16	 
	Section 4.6 Agreements
	 	 	16	 
	Section 4.7 Solvency
	 	 	16	 
	Section 4.8 Full and Accurate Disclosure
	 	 	16	 
	Section 4.9 No Plan Assets
	 	 	17	 
	Section 4.10 Not a Foreign Person
	 	 	17	 
	Section 4.11 Enforceability
	 	 	17	 
	Section 4.12 Business Purposes
	 	 	17	 
	Section 4.13 Compliance
	 	 	17	 
	Section 4.14 Financial Information
	 	 	18	 
	Section 4.15 Condemnation
	 	 	18	 
	Section 4.16 Utilities and Public Access; Parking
	 	 	18	 
	Section 4.17 Separate Lots
	 	 	19	 
	Section 4.18 Assessments
	 	 	19	 
	Section 4.19 Insurance
	 	 	19	 
	Section 4.20 Use of Property
	 	 	19	 
	Section 4.21 Certificate of Occupancy; Licenses
	 	 	19	 
	Section 4.22 Flood Zone
	 	 	19	 
	Section 4.23 Physical Condition
	 	 	20	 
	Section 4.24 Boundaries
	 	 	20	 
	Section 4.25 Leases and Rent Roll
	 	 	20	 






i









 






	 	 	 	 	 
	 	 	Page	 
	Section 4.26 Filing and Recording Taxes
	 	 	21	 
	Section 4.27 Management Agreement
	 	 	21	 
	Section 4.28 Illegal Activity
	 	 	21	 
	Section 4.29 Construction Expenses
	 	 	21	 
	Section 4.30 Personal Property
	 	 	21	 
	Section 4.31 Taxes
	 	 	21	 
	Section 4.32 Permitted Encumbrances
	 	 	22	 
	Section 4.33 Federal Reserve Regulations
	 	 	22	 
	Section 4.34 Investment Company Act
	 	 	22	 
	Section 4.35 Reciprocal Easement Agreements
	 	 	22	 
	Section 4.36 No Change in Facts or Circumstances; Disclosure
	 	 	23	 
	Section 4.37 Intellectual Property
	 	 	23	 
	Section 4.38 Compliance with Anti-Terrorism Laws
	 	 	23	 
	Section 4.39 Patriot Act
	 	 	24	 
	Section 4.40 Survival
	 	 	24	 
	 
	ARTICLE V. BORROWER COVENANTS
	 	 	24	 
	 
	Section 5.1 Existence; Compliance with Legal Requirements
	 	 	24	 
	Section 5.2 Maintenance and Use of Property
	 	 	25	 
	Section 5.3 Waste
	 	 	25	 
	Section 5.4 Taxes and Other Charges
	 	 	25	 
	Section 5.5 Litigation
	 	 	26	 
	Section 5.6 Access to Property
	 	 	26	 
	Section 5.7 Notice of Default
	 	 	26	 
	Section 5.8 Cooperate in Legal Proceedings
	 	 	26	 
	Section 5.9 Performance by Borrower
	 	 	27	 
	Section 5.10 Awards ; Insurance Proceeds
	 	 	27	 
	Section 5.11 Financial Reporting
	 	 	27	 
	Section 5.12 Estoppel Statement
	 	 	29	 
	Section 5.13 Leasing Matters
	 	 	29	 
	Section 5.14 Property Management
	 	 	31	 
	Section 5.15 Liens
	 	 	32	 
	Section 5.16 Debt Cancellation
	 	 	32	 
	Section 5.17 Zoning
	 	 	32	 
	Section 5.18 ERISA
	 	 	32	 
	Section 5.19 No Joint Assessment
	 	 	33	 
	Section 5.20 Reciprocal Easement Agreements
	 	 	33	 
	 
	ARTICLE VI. ENTITY COVENANTS
	 	 	33	 
	 
	Section 6.1 Single Purpose Entity/Separateness
	 	 	33	 
	Section 6.2 Change of Name, Identity or Structure
	 	 	37	 
	Section 6.3 Business and Operations
	 	 	37	 
	 
	ARTICLE VII. NO SALE OR ENCUMBRANCE
	 	 	37	 
	 






ii









 






	 	 	 	 	 
	 	 	Page	 
	Section 7.1 Transfer Definitions
	 	 	37	 
	Section 7.2 No Sale/Encumbrance
	 	 	38	 
	Section 7.3 Permitted Transfers
	 	 	38	 
	Section 7.4 Lender’s Rights
	 	 	39	 
	Section 7.5 Assumption
	 	 	39	 
	Section 7.6 Subordinate Loan
	 	 	41	 
	 
	ARTICLE VIII. INSURANCE; CASUALTY; CONDEMNATION; RESTORATION
	 	 	42	 
	 
	Section 8.1 Insurance
	 	 	42	 
	Section 8.2 Casualty
	 	 	45	 
	Section 8.3 Condemnation
	 	 	46	 
	Section 8.4 Restoration
	 	 	46	 
	 
	ARTICLE IX. RESERVE FUNDS
	 	 	50	 
	 
	Section 9.1 Required Repairs
	 	 	50	 
	Section 9.2 Replacements
	 	 	50	 
	Section 9.3 Tenant Improvements and Leasing Commissions
	 	 	51	 
	Section 9.4 Required Work
	 	 	52	 
	Section 9.5 Release of Reserve Funds
	 	 	53	 
	Section 9.6 Tax and Insurance Reserve Funds
	 	 	56	 
	Section 9.7 Reserve Funds Generally
	 	 	57	 
	Section 9.8 Excess Cash
	 	 	60	 
	Section 9.9 Operating Expenses; Extraordinary Expenses
	 	 	60	 
	 
	ARTICLE X. CASH MANAGEMENT
	 	 	60	 
	 
	Section 10.1 Lockbox Account and Cash Management Account
	 	 	60	 
	Section 10.2 Deposits and Withdrawals
	 	 	62	 
	Section 10.3 Security Interest
	 	 	64	 
	 
	ARTICLE XI. EVENTS OF DEFAULT; REMEDIES
	 	 	66	 
	 
	Section 11.1 Event of Default
	 	 	66	 
	Section 11.2 Remedies
	 	 	68	 
	 
	ARTICLE XII. ENVIRONMENTAL PROVISIONS
	 	 	68	 
	 
	Section 12.1 Environmental Representations and Warranties
	 	 	68	 
	Section 12.2 Environmental Covenants
	 	 	69	 
	Section 12.3 Lender’s Rights
	 	 	70	 
	Section 12.4 Operations and Maintenance Programs
	 	 	70	 
	Section 12.5 Environmental Definitions
	 	 	70	 
	Section 12.6 Indemnification
	 	 	71	 
	 
	ARTICLE XIII. SECONDARY MARKET
	 	 	72	 
	 






iii









 






	 	 	 	 	 
	 	 	Page	 
	Section 13.1 Transfer of Loan
	 	 	72	 
	Section 13.2 Delegation of Servicing
	 	 	72	 
	Section 13.3 Dissemination of Information
	 	 	72	 
	Section 13.4 Cooperation
	 	 	73	 
	 
	ARTICLE XIV. INDEMNIFICATIONS
	 	 	73	 
	 
	Section 14.1 General Indemnification
	 	 	73	 
	Section 14.2 Mortgage and Intangible Tax Indemnification
	 	 	74	 
	Section 14.3 ERISA Indemnification
	 	 	74	 
	Section 14.4 Survival
	 	 	74	 
	 
	ARTICLE XV. EXCULPATION
	 	 	75	 
	 
	Section 15.1 Exculpation
	 	 	75	 
	 
	ARTICLE XVI. NOTICES
	 	 	77	 
	 
	Section 16.1 Notices
	 	 	77	 
	 
	ARTICLE XVII. FURTHER ASSURANCES
	 	 	78	 
	 
	Section 17.1 Replacement Documents
	 	 	78	 
	Section 17.2 Recording of Mortgage, etc.
	 	 	78	 
	Section 17.3 Further Acts etc.
	 	 	79	 
	Section 17.4 Changes in Tax, Debt, Credit and Documentary Stamp Laws
	 	 	79	 
	Section 17.5 Expenses
	 	 	80	 
	Section 17.6 Cost of Enforcement
	 	 	80	 
	 
	ARTICLE XVIII. WAIVERS
	 	 	81	 
	 
	Section 18.1 Remedies Cumulative; Waivers
	 	 	81	 
	Section 18.2 Modification, Waiver in Writing
	 	 	81	 
	Section 18.3 Delay Not a Waiver
	 	 	81	 
	Section 18.4 Trial by Jury
	 	 	81	 
	Section 18.5 Waiver of Notice
	 	 	82	 
	Section 18.6 Remedies of Borrower
	 	 	82	 
	Section 18.7 Waiver of Marshalling of Assets
	 	 	82	 
	Section 18.8 Waiver of Statute of Limitations
	 	 	83	 
	Section 18.9 Waiver of Counterclaim
	 	 	83	 
	 
	ARTICLE XIX. GOVERNING LAW
	 	 	83	 
	 
	Section 19.1 Choice of Law
	 	 	83	 
	Section 19.2 Severability
	 	 	83	 
	Section 19.3 Preferences
	 	 	83	 
	 
	ARTICLE XX. MISCELLANEOUS
	 	 	83	 
	 






iv









 






	 	 	 	 	 
	 	 	Page	 
	Section 20.1 Survival
	 	 	83	 
	Section 20.2 Lender’s Discretion
	 	 	84	 
	Section 20.3 Headings
	 	 	84	 
	Section 20.4 Schedules Incorporated
	 	 	84	 
	Section 20.5 Offsets, Counterclaims and Defenses
	 	 	84	 
	Section 20.6 No Joint Venture or Partnership; No Third Party Beneficiaries
	 	 	84	 
	Section 20.7 Publicity
	 	 	85	 
	Section 20.8 Conflict Construction of Documents; Reliance
	 	 	86	 
	Section 20.9 Entire Agreement
	 	 	86	 






v









 






LOAN AGREEMENT




     THIS LOAN AGREEMENT, dated as of May 22, 2006 (as amended, restated, replaced, supplemented or
otherwise modified from time to time, this “Agreement”), between BANK OF AMERICA, NA, a national
banking association, having an address at 214 North Tryon Street, Charlotte, North Carolina 28255
(together with its successors and/or assigns, “Lender”) and AmREIT RIVERWALK, LP, a Texas limited
partnership, having an address at 8 Greenway Plaza, Suite 1000, Houston, TX 77046 (together with
its successors and/or assigns, “Borrower”).



RECITALS:



     Borrower desires to obtain the Loan (defined below) from Lender.



     Lender is willing to make the Loan to Borrower, subject to and in accordance with the terms of
this Agreement and the other Loan Documents (defined below).



     In consideration of the making of the Loan by Lender and the covenants, agreements,
representations and warranties set forth in this Agreement, the parties hereto hereby covenant,
agree, represent and warrant as follows:



ARTICLE I.

DEFINITIONS; PRINCIPLES OF CONSTRUCTION



     Section 1.1 Definitions



     For all purposes of this Agreement, except as otherwise expressly required or unless the
context clearly indicates a contrary intent:



     “Additional Replacement” shall have the meaning set forth in Section 9.5(g) hereof.



     “Additional Required Repair” shall have the meaning set forth in Section 9.5(f)
hereof.



     “Affiliate” shall mean, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by or is under common control with such Person or is a
director or officer of such Person or of an Affiliate of such Person.



     “Affiliated Manager” shall have the meaning set forth in Section 7.1 hereof.



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



     “Annual Budget” shall mean the operating budget, including all planned capital
expenditures, for the Property approved by Lender in accordance with Section 5.11(a)(iv) hereof for
the applicable calendar year or other period.



1









 





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



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



     “Borrower Principal” shall mean each Person, if any (and if more than one,
individually and collectively, as the context may require) identified as a Borrower Principal in
connection with any assumption of the Loan pursuant to the terms of this Agreement.



     “Borrower’s Account” shall mean account # ____________________ entitled
______________________ maintained by Borrower at ____________________________, which account shall
be under the exclusive domain and control of Borrower.



     “Business Day” shall mean a day on which Lender is open for the conduct of
substantially all of its banking business at its office in the city in which the Note is payable
(excluding Saturdays and Sundays).



     “Cash Management Account” shall have tie meaning set forth in Section 10.1(a).



     “Cash Management Period” shall mean any period (a) commencing on the earlier to occur
of (i) the date upon which the Debt Service Coverage Ratio for the Property, as reasonably
determined by Lender, for the immediately preceding twelve (12) month period is less than 1.10 to
1.00, or (ii) an Event of Default, and (b) ending on, as applicable, the date the Debt Service
Coverage Ratio equals or exceeds 1.20 to 1.00 for the immediately preceding three (3) month period
or the date such Event of Default ceases to exist.



     “Casualty” shall have the meaning set forth in Section 8.2.



     “Closing Date” shall mean the date of the funding of the Loan. “Control” shall have
the meaning set forth in Section 7.1 hereof.



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



     “Creditors Rights Laws” shall mean with respect to any Person, any existing or future
law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization,
conservatorship, arrangement, adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to its debts or debtors.



     “Debt” shall mean the outstanding principal amount set forth in, and evidenced by,
this Agreement and the Note together with all interest accrued and unpaid thereon and all other
sums



2









 




due to Lender in respect of the Loan under the Note, this Agreement, the Mortgage or any other
Loan Document.




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



     “Debt Service Coverage Ratio” shall mean, as of any date of determination, for the
applicable period of calculation, the ratio, as determined by Lender, of (i) Net Operating Income
to (ii) the aggregate amount of Debt Service which would be due for the same period assuming the
maximum principal amount of the Loan is outstanding.



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



     “Default Rate” shall have the meaning set forth in the Note.



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



     “Eligible Institution” shall mean a depository institution or trust company insured by
the Federal Deposit Insurance Corporation, the short term unsecured debt obligations or commercial
paper of which are rated at least “A-1” by S&P, “P-1” by Moody’s and “F-1” by Fitch in the case of
accounts in which funds are held for thirty (30) days or less (or, in the case of accounts in which
funds are held for more than thirty (30) days, the long term unsecured debt obligations of which
are rated at least “AA-” by Fitch and S&P (or “A-” by S&P, if such depository’s short term
unsecured debt rating is at least “A-1” by S&P) and “Aa2” by Moody’s). Notwithstanding the
foregoing, prior to a Securitization, Bank of America, N.A. shall be an Eligible Institution.



     “Embargoed Person” shall mean any person identified by OFAC or any other Person with
whom a Person resident in the United States of America may not conduct business or transactions by
prohibition of federal law or Executive Order of the President of the United States of America.



     “Environmental Law” shall have the meaning set forth in Section 12.5 hereof.



     “Environmental Liens” shall have the meaning set forth in Section 12.5 hereof.



3









 





     “Environmental Report” shall have the meaning set forth in Section 12.5 hereof.



     “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time and any successor statutes thereto and applicable regulations issued pursuant
thereto in temporary or final form.



     “Event of Default” shall have the meaning set forth in Section 11.1 hereof.



     “Excess Cash” shall mean an amount equal to all funds remaining in the Cash Management
Account on each Scheduled Payment Date following the disbursements and application of funds from
the Cash Management Account in accordance with the terms of Section 10.2(c)(i)-(vii) hereof.



     “Excess Cash Reserve Account” shall have the meaning set forth in Section 9.8 hereof.



     “Excess Cash Reserve Funds” shall have the meaning set forth in Section 9.8 hereof.



     “Extraordinary Expense” shall mean an operating expense or capital expenditure with
respect to the Property that (i) is not set forth on the Annual Budget and (ii) is not subject to
payment by withdrawals from the Replacement Reserve Account or the Leasing Reserve Account.
Borrower shall deliver promptly to Lender a reasonably detailed explanation of such proposed
Extraordinary Expense for the approval of Lender.



     “Extraordinary Expense Reserve Account” shall have the meaning set forth in Section
9.9 hereof.



     “Extraordinary Expense Reserve Funds” shall have the meaning set forth in Section 9.9
hereof.



     “Fitch” shall mean Fitch, Inc.



     “GAAP” shall mean generally accepted accounting principles in the United States of
America as of the date of the applicable financial report.



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



     “Hazardous Materials” shall have the meaning set forth in Section 12.5 hereof.



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



     “Indemnified Parties” shall mean (a) Lender, (b) any prior owner or holder of the Loan
or Participations in the Loan, (c) any servicer or prior servicer of the Loan, (d) any Investor or
any prior Investor in any Securities, (e) any trustees, custodians or other fiduciaries who hold or
who have held a full or partial interest in the Loan for the benefit of any Investor or other third
party, (f) any receiver or other fiduciary appointed in a foreclosure or other Creditors Rights



4









 




Laws proceeding, (g) any officers, directors, shareholders, partners, members, employees,
agents, servants, representatives, contractors, subcontractors, affiliates or subsidiaries of any
and all of the foregoing, and (h) the heirs, legal representatives, successors and assigns of any
and all of the foregoing (including, without limitation, any successors by merger, consolidation or
acquisition of all or a substantial portion of the Indemnified Parties’ assets and business), in
all cases whether during the term of the Loan or as part of or following a foreclosure of the
Mortgage.




     “Insurance Premiums” shall have the meaning set forth in Section 8.1(b) hereof.



     “Insurance Proceeds” shall have the meaning set forth in Section 8.4(b) hereof.



     “Interest Bearing Reserve Accounts” shall mean all Reserve Accounts other than the Tax
and Insurance Reserve Account.



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



     “Investor” shall have the meaning set forth in Section 13.3 hereof.



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



     “Leasing Reserve Account” shall have the meaning set forth in Section 9.3(b) hereof.



     “Leasing Reserve Funds” shall lave the meaning set forth in Section 9.3(b) hereof.



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



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



     “LLC Agreement” shall have the meaning set forth in Section 6.1(c).



     “Loan” shall mean the loan made by Lender to Borrower pursuant to this Agreement.



5









 





     “Loan Documents” shall mean, collectively, this Agreement, the Note, the Mortgage, the
Assignment of Management Agreement, the Lockbox Agreement and any and all other documents,
agreements and certificates executed and/or delivered in connection with the Loan, as the same may
be amended, restated, replaced, supplemented or otherwise modified from time to time.



     “Lockbox” shall mean the post office address established pursuant to the Lockbox
Agreement and maintained by Lockbox Bank on behalf of Borrower and Lender pursuant to the terms
thereof and to which Borrower shall direct all Rents and other income from the Property be sent
pursuant to the terms of this Agreement.



     “Lockbox Account” shall have the meaning set forth in Section 10.1(a) hereof.



     “Lockbox Agreement” shall mean that certain three party agreement by and among
Borrower, Lender and Lockbox Bank, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time, relating to the operation and maintenance of, and application
of funds in, the Lockbox Account.



     “Lockbox Bank” shall mean a financial institution acceptable to and approved by Lender
in its sole discretion to act as the Lockbox Bank under the Lockbox Agreement.



     “Losses” shall mean any and all claims, suits, liabilities (including, without
limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs,
expenses, fines, penalties, charges, fees, judgments, awards, amounts paid in settlement of
whatever kind or nature (including but not limited to reasonable legal fees and other costs of
defense).



     “Major Lease” shall mean as to the Property (i) any Lease which, individually or when
aggregated with all other leases at the Property with the same Tenant or its Affiliate, either (A)
accounts for fifteen percent (15%) or more of the Property’s rental income, or (B) demises 5,000
square feet or more of the Property’s gross leasable area, (ii) any Lease which contains any
option, offer, right of first refusal or other similar entitlement to acquire all or any portion of
the Property, or (iii) any instrument guaranteeing or providing credit support for any Lease
meeting the requirements of (i) or (ii) above.



     “Management Agreement” shall mean the management agreement entered into by and between
Borrower and the Manager, pursuant to which the Manager is to provide management and other services
with respect to the Property, as the same may be amended, restated, replaced, supplemented or
otherwise modified in accordance with the terms of this Agreement.



     “Manager” shall mean AmREIT Realty Investment Corporation, a Texas corporation, or
such other entity selected as the manager of the Property in accordance with the terms of this
Agreement.



     “Maturity Date” shall have the meaning set forth in the Note.



     “Member” shall have the meaning set forth in Section 6.1(c).



     “Mold” shall have the meaning set forth in Section 12.5 hereof.



6









 





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



     “Mortgage” shall mean that certain first priority mortgage/deed of trust/deed to
secure debt and security agreement dated the date hereof, executed and delivered by Borrower as
security for the Loan and encumbering the Property, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.



     “Net Operating Income” shall mean, with respect to any period of time, the amount
obtained by subtracting Operating Expenses from Operating Income, as such amount may be adjusted by
Lender in its good faith discretion based on Lender’s underwriting standards, including without
limitation, adjustments for vacancy allowance.



     “Net Proceeds” shall have the meaning set forth in Section 8.4(b) hereof.



     “Net Proceeds Deficiency” shall have the meaning set forth in Section 8.4(b)(vi)
hereof.



     “Note” shall mean that certain promissory note of even date herewith in the principal
amount of $20,000,000.00, made by Borrower in favor of Lender, as the same may be amended,
restated, replaced, supplemented or otherwise modified from time to time.



     “OFAC” shall have the meaning set forth in Section 4.38 hereof.



     “Operating Expenses” shall mean, with respect to any period of time, the total of all
expenses actually paid or payable, computed in accordance with GAAP, of whatever kind relating to
the operation, maintenance and management of the Property, including without limitation, utilities,
ordinary repairs and maintenance, Insurance Premiums, license fees, Taxes and Other Charges,
advertising expenses, payroll and related taxes, computer processing charges, management fees equal
to the greater of 3% of the Operating Income and the management fees actually paid under the
Management Agreement, operational equipment or other lease payments as approved by Lender, but
specifically excluding depreciation and amortization, income taxes, Debt Service, any incentive
fees due under the Management Agreement, any item of expense that in accordance with GAAP should be
capitalized but only to the extent the same would qualify for funding from the Reserve Accounts,
any item of expense that would otherwise be covered by the provisions hereof but which is paid by
any Tenant under such Tenant’s Lease or other agreement, and deposits into the Reserve Accounts.



     “Operating Expense Reserve Account” shall have the meaning set forth in Section 9.9
hereof.



     “Operating Expense Reserve Funds” shall have the meaning set forth in Section 9.9
hereof.



     “Operating Income” shall mean, with respect to any period of time, all income,
computed in accordance with GAAP, derived from the ownership and operation of the Property from
whatever source, including, but not limited to, Rents (including without limitation, Rents
under any Sponsor Lease), utility charges, escalations, forfeited security deposits, interest on
credit accounts, service fees or charges, license fees, parking fees, rent concessions or credits,
and other required pass-throughs but excluding sales, use and occupancy or other taxes on



7









 




receipts required to be accounted for by Borrower to any Governmental Authority, refunds and
uncollectible accounts, sales of furniture, fixtures and equipment, interest income from any source
other than the escrow accounts, Reserve Accounts or other accounts required pursuant to the Loan
Documents, Insurance Proceeds (other than business interruption or other loss of income insurance),
Awards, unforfeited security deposits, utility and other similar deposits, income from tenants not
paying rent, income from tenants in bankruptcy, non-recurring or extraordinary income, including,
without limitation lease termination payments, and any disbursements to Borrower from the Reserve
Accounts.




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



     “Participations” shall have the meaning set forth in Section 13.1 hereof.



     “Patriot Act” shall have the meaning set forth in Section 4.38 hereof.



     “Permitted Encumbrances” shall mean collectively, (a) the Lien and security interests
created by the Loan Documents, (b) all Liens, encumbrances and other matters disclosed in the Title
Insurance Policy, (c) Liens, if any, for Taxes imposed by any Governmental Authority not yet due or
delinquent, and (d) such other title and survey exceptions as Lender has approved or may approve in
writing in Lender’s sole discretion.



     “Permitted Investments” shall mean to the extent available from Lender or Lender’s
servicer for deposits in the Reserve Accounts and the Cash Management Account, any one or more of
the following obligations or securities acquired at a purchase price of not greater than par,
including those issued by a servicer of the Loan, the trustee under any securitization or any of
their respective Affiliates, payable on demand or having a maturity date not later than the
Business Day immediately prior to the date on which the funds used to acquire such investment are
required to be used under this Agreement and meeting one of the appropriate standards set forth
below:



     (a) obligations of, or obligations fully guaranteed as to payment of principal and interest
by, the United States or any agency or instrumentality thereof provided such obligations are backed
by the full faith and credit of the United States of America including, without limitation,
obligations of: the U.S. Treasury (all direct or fully guaranteed obligations), the Fanners Home
Administration (certificates of beneficial ownership), the General Services Administration
(participation certificates), the U.S. Maritime Administration (guaranteed Title XI financing), the
Small Business Administration (guaranteed participation certificates and guaranteed pool
certificates), the U.S. Department of Housing and Urban Development (local authority bonds) and the
Washington Metropolitan Area Transit Authority (guaranteed transit bonds); provided, however, that
the investments described in this clause must (i) have a predetermined fixed dollar of principal
due at maturity that cannot vary or change, (ii) be rated “AAA” or the equivalent by each of the
Rating Agencies, (iii) if rated by S&P, must not have an “r” highlighter affixed to their rating,
(iv) if such investments have a variable rate of interest, such interest rate must be tied to a
single interest rate index plus a fixed spread (if any) and must



8









 




move proportionately with that index, and (v) such investments must not be subject to
liquidation prior to their maturity;




     (b) Federal Housing Administration debentures;



     (c) obligations of the following United States government sponsored agencies: Federal Home
Loan Mortgage Com. (debt obligations), the Farm Credit System (consolidated system wide bonds and
notes), the Federal Home Loan Banks (consolidated debt obligations), the Federal National Mortgage
Association (debt obligations), the Financing Corp. (debt obligations), and the Resolution Funding
Com. (debt obligations); provided, however, that the investments described in this clause must (i)
have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) if
rated by S&P, must not have an “r” highlighter affixed to their rating, (iii) if such
investments have a variable rate of interest, such interest rate must be tied to a single interest
rate index plus a fixed spread (if any) and must move proportionately with that index, and (iv)
such investments must not be subject to liquidation prior to their maturity;



     (d) federal funds, unsecured certificates of deposit, time deposits, bankers’ acceptances and
repurchase agreements with maturities of not more than 365 days of any bank, the short term
obligations of which at all times are rated in the highest short term rating category by each
Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency in the
highest short term rating category and otherwise acceptable to each other Rating Agency, as
confirmed in writing that such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the
Securities); provided, however, that the investments described in this clause must (i) have a
predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) if rated
by S&P, must not have an “r” highlighter affixed to their rating, (iii) if such investments
have a variable rate of interest, such interest rate must be tied to a single interest rate index
plus a fixed spread (if any) and must move proportionately with that index, and (iv) such
investments must not be subject to liquidation prior to their maturity;



     (e) fully Federal Deposit Insurance Corporation insured demand and time deposits in, or
certificates of deposit of, or bankers’ acceptances with maturities of not more than 365 days and
issued by, any bank or trust company, savings and loan association or savings bank, the short term
obligations of which at all times are rated in the highest short term rating category by each
Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency in the
highest short term rating category and otherwise acceptable to each other Rating Agency, as
confirmed in writing that such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the
Securities); provided, however, that the investments described in this clause must (i) have a
predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) if rated
by S&P, must not have an “r” highlighter affixed to their rating, (iii) if such investments
have a variable rate of interest, such interest rate must be tied to a single interest rate index
plus a fixed spread (if any) and must move proportionately with that index, and (iv) such
investments must not be subject to liquidation prior to their maturity;



9









 





     (f) debt obligations with maturities of not more than 365 days and at all times rated by each
Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency and
otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment
would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or,
if higher, then current ratings assigned to the Securities) in its highest long-term unsecured
rating category; provided, however, that the investments described in this clause must (i) have a
predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) if rated
by S&P, must not have an “r” highlighter affixed to their rating, (iii) if such investments
have a variable rate of interest, such interest rate must be tied to a single interest rate index
plus a fixed spread (if any) and must move proportionately with that index, and (iv) such
investments must not be subject to liquidation prior to their maturity;



     (g) commercial paper (including both non- interest-bearing discount obligations and
interest-bearing obligations payable on demand or on a specified date not more than one year after
the date of issuance thereof) with maturities of not more than 365 days and that at all times is
rated by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating
Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such
investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the
initial, or, if higher, then current ratings assigned to the Securities) in its highest short-term
unsecured debt rating; provided, however, that the investments described in this clause must (i)
have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) if
rated by S&P, must not have an “r” highlighter affixed to their rating, (iii) if such
investments have a variable rate of interest, such interest rate must be tied to a single interest
rate index plus a fixed spread (if any) and must move proportionately with that index, and (iv)
such investments must not be subject to liquidation prior to their maturity;



     (h) units of taxable money market funds, with maturities of not more than 365 days and which
funds are regulated investment companies, seek to maintain a constant net asset value per share and
invest solely in obligations backed by the full faith and credit of the United States, which funds
have the highest rating available from each Rating Agency (or, if not rated by all Rating Agencies,
rated by at least one Pitting Agency and otherwise acceptable to each other Rating Agency, as
confirmed in writing that such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the
Securities) for money market funds; and



     (i) any other security, obligation or investment which has been approved as a Permitted
Investment in writing by (i) Lender and (ii) each Rating Agency, as evidenced by a written
confirmation that the designation of such security, obligation or investment as a Permitted
Investment will not, in and of itself, result in a downgrade, qualification or withdrawal of the
initial, or, if higher, then current ratings assigned to the Securities by such Rating Agency;



     provided, however, that no obligation or security shall be a Permitted Investment if (A) such
obligation or security evidences a right to receive only interest payments, (B) the right to
receive principal and interest payments on such obligation or security are derived from an
underlying investment that provides a yield to maturity in excess of one hundred twenty percent
(120%) of the yield to maturity at par of such underlying investment or (C) such obligation or
security has a remaining term to maturity in excess of one (1) year.



10









 





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



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



     “Policies” shall have the meaning specified in Section 8.1(b) hereof.



     “Prohibited Transfer” shall have the meaning set forth in Section 7.2 hereof.



     “Property” shall mean the parcel of real property, the Improvements thereon and all
Personal Property owned by Borrower and encumbered by the Mortgage, together with all rights
pertaining to such property and Improvements, as more particularly described in the granting clause
of the Mortgage and referenced to therein as the “Property”.



     “Property Condition Report” shall mean a report prepared by a company satisfactory to
Lender regarding the physical condition of the Property, satisfactory in form and substance to
Lender in its sole discretion.



     “Rating Agencies” shall mean each of S&P, Moody’s and Fitch, or any other nationally
recognized statistical rating agency which has been approved by Lender.



     “REA” shall mean any construction, operation and reciprocal easement agreement or
similar agreement (including any separate agreement or other agreement between Borrower and one or
more other parties to an REA with respect to such REA) affecting the Property or portion thereof.



     “Release” shall have the meaning set forth in Section 12.5 hereof.



     “Rent Roll” shall have the meaning set forth in Section 4.25 hereof. “Rents” shall
have the meaning set forth in the Mortgage.



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



     “Replacement Reserve Account” shall have the meaning set forth in Section 9.2(b)
hereof.



     “Replacement Reserve Funds” shall have the meaning set forth in Section 9.2(b) hereof.



     “Replacement Reserve Monthly Deposit” shall have the meaning set forth in Section
9.2(b) hereof.



     “Replacements” shall have the meaning set forth in Section 9.2(a) hereof.



     “Required Repair Account” shall have the meaning set forth in Section 9.1(b) hereof.



     “Required Repair Funds” shall have the meaning set forth in Section 9.1(b) hereof.




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     “Required Repairs” shall haw the meaning set forth in Section 9.1(a) hereof.



     “Required Work” shall have the meaning set forth in Section 9.4 hereof.



     “Reserve Accounts” shall mean the Tax and Insurance Reserve Account, the Replacement
Reserve Account, the Required Repair Account, the Leasing Reserve Account, the Excess Cash Reserve
Account, the Extraordinary Expense Reserve Account, the Operating Expense Reserve Account, or any
other escrow account established by the Loan Documents.



     “Reserve Funds” shall mean the Tax and Insurance Reserve Funds, the Replacement
Reserve Funds, the Required Repair Funds, the Leasing Reserve Funds, the Excess Cash Reserve Funds,
the Extraordinary Expense Reserve Funds, the Operating Expense Reserve Funds, or any other escrow
funds established by the Loan Documents.



     “Restoration” shall mean, following the occurrence of a Casualty or a Condemnation
which is of a type necessitating the repair of the Property, the completion of the repair and
restoration of the Property as nearly as possible to the condition the Property was in immediately
prior to such Casualty or Condemnation, with such alterations as may be reasonably approved by
Lender.



     “Restoration Consultant” shall have the meaning set forth in Section 8.4(b)(iii)
hereof.



     “Restoration Retainage” shall have the meaning set forth in Section 8.4(b)(iv) hereof.



     “Restricted Party” shall have the meaning set forth in Section 7.1 hereof.



     “Sale or Pledge” shall have the meaning set forth in Section 7.1 hereof.



     “Scheduled Payment Date” shall have the meaning set forth in the Note.



     “Securities” shall have the meaning set forth in Section 13.1 hereof.



     “Securitization” shall have the meaning set forth in Section 13.1hereof.



     “Special Member” shall have the meaning set forth in Section 6.1(c).



     “SPE Component Entity” shall mean, if required by Lender under Article 6, each general
partner if Borrower is a partnership, or the managing member if Borrower is a limited liability
company, which entity shall be a corporation whose sole asset is its interest in Borrower.



     “Sponsor” shall mean AmREIT, a Texas real estate investment trust.



     “Sponsor Lease” shall have the meaning set forth in Section 5.13(f) of this Agreement.



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



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



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     “Tax and Insurance Reserve Funds” shall have the meaning set forth in Section 9.6
hereof.



     “Tax and Insurance Reserve Account” shall have the meaning set forth in Section 9.6
hereof.



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



     “Tenant” shall mean any Person leasing, subleasing or otherwise occupying any portion
of the Property under a Lease or other occupancy agreement with Borrower.



     “Tenant Direction Letter” shall mean an instruction letter in the form of Exhibit B
attached hereto.



     “Termination Fee Deposit” shall have the meaning set forth in Section 9.3(b).



     “Title Insurance Policy” shall mean that certain ALTA (or its equivalent) mortgagee
title insurance policy issued with respect to the Property and insuring the lien of the Mortgage.



     “Transferee” shall have the meaning set forth in Section 7.5 hereof.



     “UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as
in effect in the State where the applicable Property is located.



     Section 1.2 Principles of Construction



     All references to sections and schedules are to sections and schedules in or to this Agreement
unless otherwise specified. All uses of the word “including” shall mean “including, without
limitation” unless the context shall indicate otherwise. Unless otherwise specified, the words
“hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of this Agreement.
Unless otherwise specified, all meanings attributed to defined terms herein shall be equally
applicable to both the singular and plural forms of the terms so defined.



ARTICLE II.

GENERAL TERMS




     Section 2.1 The Loan



     Subject to and upon the terms and conditions set forth herein, Lender hereby agrees to make
and Borrower hereby agrees to accept the Loan on the Closing Date.



     Section 2.2 Disbursement to Borrower



     Borrower may request and receive only one bon-owing in respect of the Loan and any amount
borrowed and repaid in respect of the Loan may not be reborrowed.



13









 





     Section 2.3 The Note, Mortgage and Loan Documents 



     The Loan shall be evidenced by the Note and secured by the Mortgage and the other Loan
Documents.



     Section 2.4 Loan Payments



     The Loan and interest thereon shall be payable pursuant to the terms of the Note.



     Section 2.5 Loan Prepayments



     The Loan may not be prepaid, in whole or in part, except in strict accordance with the express
terms and conditions of the Note.



ARTICLE III.

CONDITIONS PRECEDENT




     Section 3.1 Conditions Precedent



     The obligation of Lender to make the Loan hereunder is subject to the fulfillment by Borrower
or waiver by Lender of all of the conditions precedent to closing set forth in the application or
term sheet for the Loan delivered by Borrower to Lender and the commitment or commitment rider, if
any, to the application for the Loan issued by Lender.



ARTICLE IV.

REPRESENTATIONS AND WARRANTIES



     Borrower and, where specifically indicated, each Borrower Principal, represents and warrants
to Lender as of the Closing Date that:



     Section 4.1 Organization



     Borrower and each Borrower Principal (when not an individual) (a) has been duly organized and
is validly existing and in good standing with requisite power and authority to own its properties
and to transact the businesses in which it is now engaged, (b) is duly qualified to do business and
is in good standing in each jurisdiction where it is required to be so qualified in connection with
its properties, businesses and operations, (c) possesses all rights, licenses, permits and
authorizations, governmental or otherwise, necessary to entitle it to own its properties and to
transact the businesses in which it is now engaged, and the sole business of Borrower is the
ownership, management and operation of the Property, and (d) in the case of Borrower, has full
power, authority and legal right to mortgage, grant, bargain, sell, pledge, assign, warrant,
transfer and convey the Property pursuant to the terms of the Loan Documents, and in the case of
Borrower and each Borrower Principal, has full power, authority and legal right to keep and observe
all of the terms of the Loan Documents to which it is a party. Borrower and each Borrower owner
Principal represent and warrant that the chart attached hereto as Exhibit A sets forth an accurate
listing of the direct and indirect owners of the equity interests in
Borrower, each SPE Component Entity Of any) and each Borrower Principal (when not an
individual).



14









 





     Section 4.2 Status of Borrower



     Borrower’s exact legal name is correctly set forth on the first page of this Agreement, on the
Mortgage and on any UCC-1 Financing Statements filed in connection with the Loan. Borrower is an
organization of the type specified on the first page of this Agreement. Borrower is incorporated in
or organized under the laws of the state of Texas. Borrower’s principal place of business and chief
executive office, and the place where Borrower keeps its books and records, including recorded data
of any kind or nature, regardless of the medium of recording, including software, writings, plans,
specifications and schematics, has been for the preceding four months (or, if less, the entire
period of the existence of Borrower) the address of Borrower set forth on the first page of this
Agreement. Borrower’s organizational identification number, if any, assigned by the state of
incorporated or organization is correctly set forth on the first page of the Note.



     Section 4.3 Validity of Documents 



     Borrower and each Borrower Principal have taken all necessary action to authorize the
execution, delivery and performance of this Agreement and the other Loan Documents to which they
are parties. This Agreement and such other Loan Documents have been duly executed and delivered by
or on behalf of Borrower and each Borrower Principal and constitute the legal, valid and binding
obligations of Borrower and each Borrower Principal enforceable against Borrower and each Borrower
Principal in accordance with their respective terms, subject only to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and subject, as to
enforceability, to general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).



     Section 4.4 No Conflicts 



     The execution, delivery and performance of this Agreement and the other Loan Documents by
Borrower and each Borrower Principal will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in the creation or imposition of
any lien, charge or encumbrance (other than pursuant to the Loan Documents) upon any of the
property or assets of Borrower or any Borrower Principal pursuant to the terms of any agreement or
instrument to which Borrower or any Borrower Principal is a party or by which any of Borrower’s or
Borrower Principal’s property or assets is subject, nor will such action result in any violation of
the provisions of any statute or any order, rule or regulation of any Governmental Authority having
jurisdiction over Borrower or any Borrower Principal or any of Borrower’s or Borrower Principal’s
properties or assets, and any consent, approval, authorization, order, registration or
qualification of or with any Governmental Authority required for the execution, delivery and
performance by Borrower or Borrower Principal of this Agreement or any of the other Loan Documents
has been obtained and is in full force and effect.



15









 





     Section 4.5 Litigation



     There are no actions, suits or proceedings at law or in equity by or before any Governmental
Authority or other agency now pending or, to Borrower’s or Borrower Principal’s knowledge,
threatened against or affecting Borrower, any Borrower Principal, the Manager or the Property,
which actions, suits or proceedings, if determined against Borrower, any Borrower Principal, the
Manager or the Property, would materially adversely affect the condition (financial or otherwise)
or business of Borrower or any Borrower Principal or the condition or ownership of the Property.



     Section 4.6 Agreements 



     Borrower is not a party to any agreement or instrument or subject to any restriction which
would materially and adversely affect Borrower or the Property, or Borrower’s business, properties
or assets, operations or condition, financial or otherwise. Borrower is not in default in any
material respect in the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any agreement or instrument to which it is a party or by which Borrower
or the Property is bound. Borrower has no material financial obligation under any agreement or
instrument to which Borrower is a party or by which Borrower or the Property is otherwise bound,
other than (a) obligations incurred in the ordinary course of the operation of the Property and (b)
obligations under the Loan Documents.



     Section 4.7 Solvency



     Borrower and each Borrower Principal have (a) not entered into the transaction or executed the
Note, this Agreement or any other Loan Documents with the actual intent to hinder, delay or defraud
any creditor and (b) received reasonably equivalent value in exchange for their obligations under
such Loan Documents. Giving effect to the Loan, the fair saleable value of the assets of Borrower
and each Borrower Principal exceeds and will, immediately following the making of the Loan, exceed
the total liabilities of Borrower and each Borrower Principal, including, without limitation,
subordinated, unliquidated, disputed and contingent liabilities. No petition in bankruptcy has been
filed against Borrower, any Borrower Principal, any SPE Component Entity (if any) or Affiliated
Manager in the last ten (10) years, and neither Borrower nor any Borrower Principal, any SPE
Component Entity (if any) or Affiliated Manager in the last ten (10) years has made an assignment
for the benefit of creditors or taken advantage of any Creditors Rights Laws. Neither Borrower nor
any Borrower Principal, any SPE Component Entity (if any) or Affiliated Manager is contemplating
either the filing of a petition by it under any Creditors Rights Laws or the liquidation of all or
a major portion of Borrower’s assets or property, and Borrower has no knowledge of any Person
contemplating the filing of any such petition against Borrower or any Borrower Principal, any SPE
Component Entity (if any) or Affiliated Manager.



     Section 4.8 Full and Accurate Disclosure 



     No statement of fact made by or on behalf of Borrower or any Borrower Principal in this
Agreement or in any of the other Loan Documents or in any other document or certificate delivered
by or on behalf of Borrower or any Borrower Principal contains any untrue statement
of a material fact or omits to state any material fact necessary to make statements contained
herein or therein not misleading. There is no material fact presently known to Borrower or any



16









 




Borrower Principal which has not been disclosed to Lender which adversely affects, nor as far as
Borrower or any Borrower Principal can reasonably foresee, might adversely affect, the Property or
the business, operations or condition (financial or otherwise) of Borrower or any Borrower
Principal.




     Section 4.9 No Plan Assets 



     Borrower is not an “employee benefit plan,” as defined in Section 3(3) of ERISA, subject to
Title I of ERISA, and none of the assets of Borrower constitutes or will constitute “plan assets”
of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. In addition, (a)
Borrower is not a “governmental plan” within the meaning of Section 3(32) of ERISA and (b)
transactions by or with Borrower are not subject to state statutes regulating investment of, and
fiduciary obligations with respect to, governmental plans similar to the provisions of Section 406
of ERISA or Section 4975 of the Internal Revenue Code currently Borrower in effect, which prohibit
or otherwise restrict the transactions contemplated by this Agreement.



     Section 4.10 Not a Foreign Person



     Neither Borrower nor Borrower Principal is a foreign corporation, foreign partnership, foreign
trust, foreign estate or nonresident alien or a disregarded entity owned by any of them (as those
terms are defined in the Internal Revenue Code of 1986), and if requested by Lender, Borrower or
Borrower Principal will so certify (or in the case of a disregarded entity, its owner will certify)
to Lender or a person designated by Lender under penalties of perjury to the accuracy of this
representation, and will provide in such certification such additional information as Lender may
reasonably request.



     Section 4.11 Enforceability



     The Loan Documents are not subject to any right of rescission, set-off, counterclaim or
defense by Borrower, including the defense of usury, nor would the operation of any of the terms of
the Loan Documents, or the exercise of any right thereunder, render the Loan Documents
unenforceable, and neither Borrower nor Borrower Principal has asserted any right of rescission,
set-off, counterclaim or defense with respect thereto. No Default or Event of Default exists under
or with respect to any Loan Document.



     Section 4.12 Business Purposes



     The Loan is solely for the business purpose of Borrower, and is not for personal, family,
household, or agricultural purposes.



     Section 4.13 Compliance 



     Except as expressly disclosed by Borrower to Lender in writing in connection with the closing
of the Loan, Borrower and the Property, and the use and operation thereof, comply in all material
respects with all Legal Requirements, including, without limitation, building and zoning
ordinances and codes and the Americans with Disabilities Act. To Borrower’s knowledge,
Borrower is not in default or violation of any order, writ, injunction, decree or demand of any



17









 




Governmental Authority and Borrower has received no written notice of any such default or
violation. There has not been committed by Borrower or, to Borrower’s knowledge, any other Person
in occupancy of or involved with the operation or use of the Property any act or omission affording
any Governmental Authority the right of forfeiture as against the Property or any part thereof or
any monies paid in performance of Borrower’s obligations under any of the Loan Documents.




     Section 4.14 Financial Information



     All financial data, including, without limitation, the balance sheets, statements of cash
flow, statements of income and operating expense and rent rolls, that have been delivered to Lender
in respect of Borrower, any Borrower Principal and/or the Property (a) are true, complete and
correct in all material respects, (b) accurately represent the financial condition of Borrower,
Borrower Principal or the Property, as applicable, as of the date of such reports, and (c) to the
extent prepared or audited by an independent certified public accounting firm, have been prepared
in accordance with GAAP throughout the periods covered, except as disclosed therein. Borrower does
not have any contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable commitments that are known to
Borrower and reasonably likely to have a material adverse effect on the Property or the current
and/or intended operation thereof, except as referred to or reflected in said financial statements.
Since the date of such financial statements, there has been no materially adverse change in the
financial condition, operations or business of Borrower or Borrower Principal from that set forth
in said financial statements.



     Section 4.15 Condemnation



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



     Section 4.16 Utilities and Public Access; Parking



     The Property has adequate rights of access to public ways and is served by water, sewer,
sanitary sewer and storm drain facilities adequate to service the Property for full utilization of
the Property for its intended uses. All public utilities necessary to the full use and enjoyment of
the Property as currently used and enjoyed are located either in the public right-of-way abutting
the Property (which are connected so as to serve the Property without passing over other property)
or in recorded easements serving the Property and such easements are set forth in and insured by
the Title Insurance Policy. All roads necessary for the use of the Property for its current
purposes have been completed and dedicated to public use and accepted by all Governmental
Authorities. The Property has, or is served by, parking to the extent required to comply with all
Legal Requirements.



18









 





     Section 4.17 Separate Lots 



     The Property is assessed for real estate tax purposes as one or more wholly independent tax
lot or lots, separate from any adjoining land or improvements not constituting a part of such lot
or lots, and no other land or improvements is assessed and taxed together with the Property or any
portion thereof.



     Section 4.18 Assessments 



     To Borrower’s knowledge, there are no pending or proposed special or other assessments for
public improvements or otherwise affecting the Property, nor are there any contemplated
improvements to the Property that may result in such special or other assessments.



     Section 4.19 Insurance 



     Borrower has obtained and has delivered to Lender certified copies of all Policies or, to the
extent such Policies are not available as of the Closing Date, certificates of insurance with
respect to all such Policies reflecting the insurance coverages, amounts and other requirements set
forth in this Agreement. No claims have been made under any of the Policies, and to Borrower’s
knowledge, no Person, including Borrower, has done, by act or omission, anything which would impair
the coverage of any of the Policies.



     Section 4.20 Use of Property



     The Property is used exclusively for retail purposes and other appurtenant and related uses.



     Section 4.21 Certificate of Occupancy; Licenses



     All certifications, permits, licenses and approvals, including, without limitation,
certificates of completion or occupancy and any applicable liquor license required for the legal
use, occupancy and operation of the Property for the purpose intended herein, have been obtained
and are valid and in full force and effect. Borrower shall keep and maintain (or cause to be kept
and maintained) all licenses necessary for the operation of the Property for the purpose intended
herein. The use being made of the Property is in conformity with the final certificate of occupancy
(or compliance, if applicable) and any other permits or licenses issued for the Property.



     Section 4.22 Flood Zone 



     None of the Improvements on the Property are located in an area identified by the Federal
Emergency Management Agency as an area having special flood hazards, or, if any portion of the
Improvements is located within such area, Borrower has obtained the insurance prescribed in Section
8.1(a)(i).



19









 





     Section 4.23 Physical Condition



     Except as set forth in the Property Condition Report, to the best of Borrower’s knowledge, the
Property, including, without limitation, all buildings, improvements, parking facilities,
sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems,
electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation
systems and all structural components, are in good condition, order and repair in all material
respects. Except as set forth in the Property Condition Report, to Borrower’s knowledge after due
inquiry, there exists no structural or other material defects or damages in the Property, as a
result of a Casualty or otherwise, and whether latent or otherwise. Borrower has not received
notice from any insurance company or bonding company of any defects or inadequacies in the
Property, or any part thereof, which would adversely affect the insurability of the same or cause
the imposition of extraordinary premiums or charges thereon or of any termination or threatened
termination of any policy of insurance or bond.



     Section 4.24 Boundaries



     (a) None of the Improvements which were included in determining the appraised value of the
Property lie outside the boundaries and building restriction lines of the Property to any material
extent, and (b) no improvements on adjoining properties encroach upon the Property and no easements
or other encumbrances upon the Property encroach upon any of the Improvements so as to materially
affect the value or marketability of the Property.



     Section 4.25 Leases and Rent Roll



     Borrower has delivered to Lender a true, correct and complete rent roll for the Property (a
“Rent Roll”) which includes all Leases affecting the Property (including schedules for all executed
Leases for Tenants not yet in occupancy or under which the rent commencement date has not
occurred). Except as set forth in the Rent Roll (as same has been updated by written notice thereof
to Lender) and estoppel certificates delivered to Lender on or prior to the Closing Date: (a) each
Lease is in full force and effect; (b) the premises demised under the Leases have been completed
and the Tenants under the Leases have accepted possession of and are in occupancy of all of their
respective demised premises; (c) the Tenants under the Leases have commenced the payment of rent
under the Leases, there are no offsets, claims or defenses to the enforcement thereof, and Borrower
has no monetary obligations to any Tenant under any Lease; (d) all Rents due and payable under the
Leases have been paid and no portion thereof has been paid for any period more than thirty (30)
days in advance; (e) the rent payable under each Lease is the amount of fixed rent set forth in the
Rent Roll, and there is no claim or basis for a claim by the Tenant thereunder for an offset or
adjustment to the rent; (f) no Tenant has made any written claim of a material default against the
landlord under any Lease which remains outstanding nor has Borrower or Manager received, by
telephonic, in-person, e-mail or other communication, any notice of a material default under any
Lease; (g) to Borrower’s knowledge there is no present material default by the Tenant under any
Lease; (h) all security deposits under the Leases have been collected by Borrower; (i) Borrower is
the sole owner of the entire landlord’s interest in each Lease; (j) each Lease is the valid,
binding and enforceable obligation of Borrower and the applicable Tenant thereunder and there are
no agreements with the Tenants under the Leases other than as expressly set forth in the Leases;
(k) no Person has any possessory interest in, or
right to occupy, the Property or any portion thereof except under the terms of a Lease; (1)
none of the Leases contains any option or offer to purchase or right of first refusal to purchase
the



20









 




Property or any part thereof; (m) neither the Leases nor the Rents have been assigned, pledged
or hypothecated except to Lender, and no other Person has any interest therein except the Tenants
thereunder; and (n) no conditions exist which now give any Tenant or party the right to “go dark”
pursuant to the provision of its Lease and/or the REA.




     Section 4.26 Filing and Recording Taxes



     All mortgage, mortgage recording, stamp, intangible or other similar tax required to be paid
by any Person under applicable Legal Requirements currently in effect in connection with the
execution, delivery, recordation, filing, registration, perfection or enforcement of any of the
Loan Documents, including, without limitation, the Mortgage, have been paid or will be paid, and,
under current Legal Requirements, the Mortgage is enforceable in accordance with its terms by
Lender (or any subsequent holder thereof).



     Section 4.27 Management Agreement



     The Management Agreement is in full force and effect and there is no default thereunder by any
party thereto and, to Borrower’s knowledge, no event has occurred that, with the passage of time
and/or the giving of notice would constitute a default thereunder. No management fees under the
Management Agreement are accrued and unpaid.



     Section 4.28 Illegal Activity



     No portion of the Property has been or will be purchased, improved, equipped or fixtures with
proceeds of any illegal activity, and no part of the proceeds of the Loan will be used in
connection with any illegal activity.



     Section 4.29 Construction Expenses



     All costs and expenses of any and all labor, materials, supplies and equipment used in the
construction maintenance or repair of the Improvements have been paid in full. To Borrower’s
knowledge after due inquiry, there are no claims for payment for work, labor or materials affecting
the Property which are or may become a lien prior to, or of equal priority with, the Liens created
by the Loan Documents.



     Section 4.30 Personal Property



     Borrower has paid in full for, and is the owner of, all Personal Property (other than tenants’
property) used in connection with the operation of the Property, free and clear of any and all
security interests, liens or encumbrances, except for Permitted Encumbrances and the Lien and
security interest created by the Loan Documents.



     Section 4.31 Taxes



     Borrower and Borrower Principal have filed all federal, state, county, municipal, and city
income, personal property and other tax returns required to have been filed by them and have
paid all taxes and related liabilities which have become due pursuant to such returns or
pursuant to any assessments received by them. Neither Borrower nor Borrower Principal knows of any



21









 




basis for any additional assessment in respect of any such taxes and related liabilities for prior
years.




     Section 4.32 Permitted Encumbrances



     None of the Permitted Encumbrances, individually or in the aggregate, materially interferes
with the benefits of the security intended to be provided by the Loan Documents, materially and
adversely affects the value of the Property, impairs the use or the operation of the Property or
impairs Borrower’s ability to pay its obligations in a timely manner.



     Section 4.33 Federal Reserve Regulations 



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



     Section 4.34 Investment Company Act



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



     Section 4.35 Reciprocal Easement Agreements 



     (a) Neither Borrower, nor any other party is currently in default (nor has any notice been
given or received with respect to an alleged or current default) under any of the terms and
conditions of the REA, and the REA remains unmodified and in full force and effect;



     (b) All easements granted pursuant to the REA which were to have survived the site preparation
and completion of construction (to the extent that the same has been completed), remain in full
force and effect and have not been released, terminated, extinguished or discharged by agreement or
otherwise;



     (c) All sums due and owing by Borrower to the other parties to the REA (or by the other
parties to the REA to the Borrower) pursuant to the terms of the REA, including without limitation,
all sums, charges, fees, assessments, costs, and expenses in connection with any taxes, site
preparation and construction, non-shareholder contributions, and common area and other property
management activities have been paid, are current, and no lien has attached on the Property (or
threat thereof been made) for failure to pay any of the foregoing;



     (d) The terms, conditions, covenants, uses and restrictions contained in the REA do not
conflict in any manner with any terms, conditions, covenants, uses and restrictions contained



22









 




in
any Lease or in any agreement between Borrower and occupant of any peripheral parcel, including
without limitation, conditions and restrictions with respect to kiosk placement, tenant
restrictions (type, location or exclusivity), sale of certain goods or services, and/or other use
restrictions; and




     (e) The terms, conditions, covenants, uses and restrictions contained in each Lease do not
conflict in any manner with any terms, conditions, covenants, uses and restrictions contained in
the REA, any other Lease or in any agreement between Borrower and occupant of any peripheral
parcel, including without limitation, conditions and restrictions with respect to kiosk placement,
tenant restrictions (type, location or exclusivity), sale of certain goods or services, and/or
other use restrictions.



     Section 4.36 No Change in Facts or Circumstances; Disclosure 



     All information submitted by Borrower or its agents to Lender and in all financial statements,
rent rolls, reports, certificates and other documents submitted in connection with the Loan or in
satisfaction of the terms thereof and all statements of fact made by Borrower in this Agreement or
in any other Loan Document, are accurate, complete and connect in all material respects. There has
been no material adverse change in any condition, fact, circumstance or event that would make any
such information inaccurate, incomplete or otherwise misleading in any material respect or that
otherwise materially and adversely affects or might materially and adversely affect the Property or
the business operations or the financial condition of Borrower. Borrower has disclosed to Lender
all material facts and has not failed to disclose any material fact that could cause any
representation or warranty made herein to be materially misleading.



     Section 4.37 Intellectual Property



     All trademarks, trade names and service marks necessary to the business of Borrower as
presently conducted or as Borrower contemplates conducting its business are in good standing and,
to the extent of Borrower’s actual knowledge, uncontested. Borrower has not infringed, is not
infringing, and has not received notice of infringement with respect to asserted trademarks, trade
names and service marks of others. To Borrower ‘s knowledge, there is no infringement by others of
trademarks, trade names and service marks of Borrower.



     Section 4.38 Compliance with Anti-Terrorism Laws 



     None of Borrower, Borrower Principal or any Person who Controls Borrower or Borrower Principal
currently is identified by the Office of Foreign Assets Control, Department of the Treasury
(“OFAC”) or otherwise qualifies as a Embargoed Person, and Borrower has implemented procedures to
ensure that no Person who now or hereafter owns a direct or indirect equity interest in Borrower is
an Embargoed Person or is Controlled by an Embargoed Person. None of Borrower or Borrower Principal
is in violation of any applicable law relating to anti-money laundering or anti-terrorism,
including, without limitation, those related to transacting business with Embargoed Persons or the
requirements of the Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, U.S.
Public Law 107-56, and the related regulations issued thereunder, including temporary
regulations (collectively, as the same may be amended from time to time, the “Patriot Act”). To



23









 




the
best of Borrower’s knowledge, no tenant at the Property is currently identified by OFAC or
otherwise qualifies as an Embargoed Person, or is owned or Controlled by an Embargoed Person.
Borrower has determined that Manager has implemented procedures approved by Borrower to ensure that
no tenant at the Property is currently identified by OFAC or otherwise qualifies as an Embargoed
Person, or is owned or Controlled by an Embargoed Person.




     Section 4.39 Patriot Act



     Neither Borrower nor Borrower Principal shall (a) be or become subject at any time to any law,
regulation, or 1st of any government agency (including, without limitation, the list maintained by
OFAC and accessible through the OFAC website) that prohibits or limits any lender from making any
advance or extension of credit to Borrower or from otherwise conducting business with Borrower and
Borrower Principal, or (b) fail to provide documentary and other evidence of Borrower’s identity as
may be requested by any lender at any time to enable any lender to verify Borrower’s identity or to
comply with any applicable law or regulation, including, without limitation, the Patriot Act. In
addition, Borrower hereby agrees to provide to Lender any additional information that Lender deems
necessary from time to time in order to ensure compliance with all applicable laws concerning money
laundering and similar activities.



     Section 4.40 Survival



     Borrower agrees that, unless expressly provided otherwise, all of the representations and
warranties of Borrower set forth in this Article 4 and elsewhere in this Agreement and in the other
Loan Documents shall survive for so long as any portion of the Debt remains owing to Lender. All
representations, warranties, covenants and agreements made in this Agreement or in the other Loan
Documents by Borrower shall be deemed to have been relied upon by Lender notwithstanding any
investigation heretofore or hereafter made by Lender or on its behalf.



ARTICLE V.

BORROWER COVENANTS




     From the date hereof and until repayment of the Debt in full and performance in full of all
obligations of Borrower under the Loan Documents or the earlier release of the Lien of the Mortgage
(and all related obligations) in accordance with the terms of this Agreement and the other Loan
Documents, Borrower hereby covenants and agrees with Lender that:



     Section 5.1 Existence; Compliance with Legal Requirements 



     (a) Borrower shall do or cause to be done all things necessary to preserve, renew and keep in
full force and effect its existence, rights, licenses, permits and franchises and comply with all
Legal Requirements applicable to it and the Property. Borrower hereby covenants and agrees not to
commit, permit or suffer to exist any act or omission affording any Governmental Authority the
right of forfeiture as against the Property or any part thereof or any monies paid in performance
of Borrower’s obligations under any of the Loan Documents. Borrower shall at all
times maintain, preserve and protect all franchises and trade names used in connection with
the operation of the Property.



24









 





     (b) After prior written notice to Lender, Borrower, at its own expense, may contest by
appropriate legal proceeding, promptly initiated and conducted in good faith and with due
diligence, the Legal Requirements affecting the Property, provided that (i) no Default or Event of
Default has occurred and is continuing; (ii) such proceeding shall be permitted under and be
conducted in accordance with the provisions of any other instrument to which Borrower or the
Property is subject and shall not constitute a default thereunder; (iii) neither the Property, any
part thereof or interest therein, any of the tenants or occupants thereof, nor Borrower shall be
affected in any material adverse way as a result of such proceeding; (iv) non-compliance with the
Legal Requirements shall not impose civil or criminal liability on Borrower or Lender; (v) Borrower
shall have furnished the security as may be required in the proceeding or by Lender to ensure
compliance by Borrower with the Legal Requirements; and (vi) Borrower shall have furnished to
Lender all other items reasonably requested by Lender.



     Section 5.2 Maintenance and Use of Property



     Borrower shall cause the Property to be maintained in a good and safe condition and repair.
The Improvements and the Personal Property shall not be removed, demolished or materially altered
(except for normal replacement of the Personal Property) without the consent of Lender. If under
applicable zoning provisions the use of all or any portion of the Property is or shall become a
nonconforming use, Borrower will not cause or permit the nonconforming use to be discontinued or
the nonconforming Improvement to be abandoned without the express written consent of Lender.



     Section 5.3 Waste



     Borrower shall not commit or suffer any waste of the Property or make any change in the use of
the Property which will in any way materially increase the risk of fire or other hazard arising out
of the operation of the Property, or take any action that might invalidate or give cause for
cancellation of any Policy, or do or permit to be done thereon anything that may in any way impair
the value of the Property or the security for the Loan. Borrower will not, without the prior
written consent of Lender, permit any drilling or exploration for or extraction, removal, or
production of any minerals from the surface or the subsurface of the Property, regardless of the
depth thereof or the method of mining or extraction thereof.



     Section 5.4 Taxes and Other Charges



     (a) Borrower shall pay all Taxes and Other Charges now or hereafter levied or assessed or
imposed against the Property or any part thereof as the same become due and payable; provided,
however, Borrower’s obligation to directly pay Taxes shall be suspended for so long as Borrower
complies with the terms and provisions of Section 9.6 hereof. Borrower shall furnish to Lender
receipts for the payment of the Taxes and the Other Charges prior to the date the same shall become
delinquent (provided, however, that Borrower is not required to furnish such receipts for payment
of Taxes in the event that such Taxes have been paid by Lender pursuant to Section 9.6 hereof).
Borrower shall not suffer and shall promptly cause to be paid
and discharged any Lien or charge whatsoever which may be or become a Lien or charge against
the Property, and shall promptly pay for all utility services provided to the Property.



25









 





     (b) After prior written notice to Lender, Borrower, at its own expense, may contest by
appropriate legal proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in part of any Taxes or Other Charges,
provided that (i) no Default or Event of Default has occurred and remains uncured; (ii) such
proceeding shall be permitted under and be conducted in accordance with the provisions of any other
instrument to which Borrower is subject and shall not constitute a default thereunder and such
proceeding shall be conducted in accordance with all applicable Legal Requirements; (iii) neither
the Property nor any part thereof or interest therein will be in danger of being sold, forfeited,
terminated, canceled or lost; (iv) Borrower shall promptly upon final determination thereof pay the
amount of any such Taxes or Other Charges, together with all costs, interest and penalties which
may be payable in connection therewith; (v) such proceeding shall suspend the collection of such
contested Taxes or Other Charges from the Property; and (vi) Borrower shall furnish such security
as may be required in the proceeding, or deliver to Lender such reserve deposits as may be
requested by Lender, to insure the payment of any such Taxes or Other Charges, together with all
interest and penalties thereon (unless Borrower has paid all of the Taxes or Other Charges under
protest). Lender may pay over any such cash deposit or part thereof held by Lender to the claimant
entitled thereto at any time when, in the judgment of Lender, the entitlement of such claimant is
established or the Property (or part thereof or interest therein) shall be in danger of being sold,
forfeited, terminated, canceled or lost or there shall be any danger of the Lien of the Mortgage
being primed by any related Lien.



     Section 5.5 Litigation



     Borrower shall give prompt written notice to Lender of any litigation or governmental
proceedings pending or threatened in writing against Borrower which might materially adversely
affect Borrower’s condition (financial or otherwise) or business or the Property.



     Section 5.6 Access to Property



     Subject to the rights of Tenants under Leases, Borrower shall permit agents, representatives
and employees of Lender to inspect the Property or any part thereof at reasonable hours upon
reasonable advance notice.



     Section 5.7 Notice of Default



     Borrower shall promptly advise Lender of any material adverse change in the condition
(financial or otherwise) of Borrower, any Borrower Principal or the Property or of the occurrence
of any Default or Event of Default of which Borrower has knowledge.



     Section 5.8 Cooperate in Legal Proceedings 



     Borrower shall at Borrower’s expense cooperate fully with Lender with respect to any
proceedings before any court, board or other Governmental Authority which may in any way affect the
rights of Lender hereunder or any rights obtained by Lender under any of the other
Loan Documents and, in connection therewith, permit Lender, at its election, to participate in
any such proceedings.



26









 





     Section 5.9 Performance by Borrower



     Borrower shall in a timely manner observe, perform and fulfill each and every covenant, term
and provision to be observed and performed by Borrower under this Agreement and the other Loan
Documents and any other agreement or instrument affecting or pertaining to the Property and any
amendments, modifications or changes thereto.



     Section 5.10 Awards ; Insurance Proceeds 



     Borrower shall cooperate with Lender in obtaining for Lender the benefits of any Awards or
Insurance Proceeds lawfully or equitably payable in connection with the Property, and Lender shall
be reimbursed for any expenses incurred in connection therewith (including reasonable, actual
attorneys’ fees and disbursements, and the payment by Borrower of the expense of an appraisal on
behalf of Lender in case of a Casualty or Condemnation affecting the Property or any part thereof)
out of such Awards or Insurance Proceeds.



     Section 5.11 Financial Reporting 



     (a) Borrower and Borrower Principal shall keep adequate books and records of account in
accordance with GAAP, or in accordance with other methods acceptable to Lender in its sole
discretion, consistently applied and shall furnish to Lender:



          (i) quarterly and annual (and prior to a Securitization, if requested by Lender, monthly)
certified rent rolls signed and dated by Borrower, detailing the names of all Tenants of the
Improvements, the portion of Improvements (in terms of square footage) occupied by each Tenant, the
base rent, additional rent and any other charges payable under each Lease (including annual store
sales required to be reported by Tenant under any Lease), and the term of each Lease, including the
commencement and expiration dates and any tenant extension, expansion or renewal options, the
extent to which any Tenant is in default under any Lease, and any other information as is
reasonably required by Lender, within thirty (30) days after the end of each calendar month, thirty
(30) days after the end of each fiscal quarter or sixty (60) days after the close of each fiscal
year of Borrower, as applicable;




          (ii) quarterly and annual (and prior to a Securitization, if requested by Lender, monthly)
operating statements of the Property, prepared and certified by Borrower in the form required by
Lender (or if required by Lender following the occurrence and during the continuance of an Event of
Default, an audited annual operating statement prepared by an independent certified public
accountant acceptable to Lender), detailing the revenues received, the expenses incurred and the
net operating income before and after debt service (principal and interest) and major capital
improvements for the period of calculation and containing appropriate year-to-date information,
within thirty (30) days after the end of each calendar month, thirty (30) days after the end of
each fiscal quarter or sixty (60) days after the close of each fiscal year of Borrower, as
applicable;




          (iii) annual balance sheets, profit and loss statements, statements of cash flows, and
statements of change in financial position of Borrower and Borrower Principal in the form required
by Lender, prepared and certified by Borrower and Borrower Principal (or if required by Lender
following the occurrence and during the continuance of an Event of Default, annual audited
financial statements prepared by an independent certified public accountant acceptable to




27









 







Lender),
within ninety (90) days after the close of each fiscal year of Borrower and Borrower Principal, as
the case may be; and




          (iv) an Annual Budget not later than thirty (30) days prior to the commencement of each fiscal
year of Borrower in form reasonably satisfactory to Lender. In the event that Lender objects to a
proposed Annual Budget submitted by Borrower, Lender shall advise Borrower of such objections
within fifteen (15) days after receipt thereof (and deliver to Borrower a reasonably detailed
description of such objections) and Borrower shall promptly revise such Annual Budget and resubmit
the same to Lender. Lender shall advise Borrower of any objections to such revised Annual Budget
within ten (10) days after receipt thereof (and deliver to Borrower a reasonably detailed
description of such objections) and Borrower shall promptly revise the same in accordance with the
process described in this subsection until Lender approves the Annual Budget. Until such time that
Lender approves a proposed Annual Budget, which approval shall not be unreasonably withheld,
conditioned or delayed, the most recent Annual Budget shall apply; provided that, such approved
Annual Budget shall be adjusted to reflect actual increases in Taxes, Insurance Premiums, utilities
expenses and expenses under the Management Agreement.




     (b) Upon request from Lender, Borrower shall promptly furnish to Lender:



          (i) a property management report for the Property, showing the number of inquiries made and/or
rental applications received from tenants or prospective tenants and deposits received from tenants
and any other information requested by Lender, in reasonable detail and certified by Borrower under
penalty of perjury to be true and complete, but no more frequently than quarterly;




          (ii) an accounting of all security deposits held in connection with any Lease of any part of
the Property, including the name and identification number of the accounts in which such security
deposits are held, the name and address of the financial institutions in which such security
deposits are held and the name of the Person to contact at such financial institution, along with
any authority or release necessary for Lender to obtain information regarding such accounts
directly from such financial institutions; and




          (iii) a report of all letters of credit provided by any Tenant in connection with any Lease of
any part of the Property, including the account numbers of such letters of credit, the names and
addresses of the financial institutions that issued such letters of credit and the names of the
Persons to contact at such financial institutions, along with any authority or release necessary
for Lender to obtain information regarding such letters of credit directly from such financial
institutions.




     (c) Borrower and Borrower Principal shall furnish Lender with such other additional financial
or management information (including state and federal tax returns) as may, from time
to time, be reasonably required by Lender in form and substance satisfactory to Lender
(including, without limitation, any financial reports required to be delivered by any Tenant or any
guarantor of any Lease pursuant to the terms of such Lease), and shall furnish to Lender and its
agents convenient facilities for the examination and audit of any such books and records.



28









 





     (d) All items requiring the certification of Borrower shall, except where Borrower is an
individual, require a certificate executed by the general partner, managing member or chief
executive officer of Borrower, as applicable (and the same rules shall apply to any sole
shareholder, general partner or managing member which is not an individual).



     (e) Without limiting any other rights available to Lender under this Loan Agreement or any of
the other Loan Documents, in the event Borrower shall fail to timely furnish Lender any financial
document or statement in accordance with this Borrower Section 5.11, Borrower shall promptly pay to
Lender a non-refundable charge in the amount of $500 for each such failure after the first such
failure. The payment of such amount shall not be construed to relieve Borrower of any Event of
Default hereunder arising from such failure.



     Section 5.12 Estoppel Statement



     (a) After request by Lender, Borrower shall within fifteen (15) Business Days furnish Lender
with a statement, duly acknowledged and certified, setting forth (i) the amount of the original
principal amount of the Note, (ii) the rate of interest on the Note, (iii) the unpaid principal
amount of the Note, (iv) the date installments of interest and/or principal were last paid, (v) any
offsets or defenses to the payment of the Debt, if any, and (vi) that the Note, this Agreement, the
Mortgage and the other Loan Documents are valid, legal and binding obligations and have not been
modified or if modified, giving particulars of such modification.



     (b) Borrower shall use its best efforts to deliver to Lender, promptly upon request, duly
executed estoppel certificates from any one or more Tenants as required by Lender attesting to such
facts regarding the related Lease as Lender may require, including, but not limited to attestations
that each Lease covered thereby is in full force and effect with no defaults thereunder on the part
of any party, that none of the Rents have been paid more than one month in advance, except as
security, and that the Tenant claims no defense or offset against the full and timely performance
of its obligations under the Lease.



     Section 5.13 Leasing Matters 



     (a) Borrower may enter into a proposed Lease (including the renewal or extension of an
existing Lease (a “Renewal Lease”)) without the prior written consent of Lender, provided such
proposed Lease or Renewal Lease (i) provides for rental rates and terms comparable to existing
local market rates and terms (taking into account the type and quality of the tenant) as of the
date such Lease is executed by Borrower (unless, in the case of a Renewal Lease, the rent payable
during such renewal, or a formula or other method to compute such rent, is provided for in the
original Lease), (ii) is an arm’s- length transaction with a bona fide, independent third party
tenant, (iii) does not have a materially adverse effect on the value of the Property taken as a
whole, (iv) is subject and subordinate to the Mortgage and the Tenant thereunder agrees to attorn
to Lender, (v) does not contain any option, offer, right of first refusal, or other similar right
to
acquire all or any portion of the Property, (vi) has a base tem of less than twenty (20) years
including options to renew, (vii) has no rent, credits, free rents or concessions granted
thereunder, except as are consistent with the then local market for similar types and sizes of
property and leases, and (viii) is written on the standard form of lease approved by Lender. All
proposed Leases which do not satisfy the requirements set forth in this subsection shall be subject
to the



29









 




prior approval of Lender and its counsel, at Borrower’s expense. Borrower shall promptly
deliver to Lender copies of all Leases which are entered into pursuant to this subsection together
with Borrower’s certification that it has satisfied all of the conditions of this Section.




     (b) Borrower (i) shall observe and perform all the obligations imposed upon the landlord under
the Leases and shall not do or permit to be done anything to impair the value of any of the Leases
as security for the Debt; (ii) shall promptly send copies to Lender of all notices of default which
Borrower shall send or receive thereunder; (iii) shall enforce all of the material terms, covenants
and conditions contained in the Leases upon the part of the tenant thereunder to be observed or
performed; (iv) shall not collect any of the Rents more than one (1) month in advance (except
security deposits shall not be deemed Rents collected in advance); (v) shall not execute any other
assignment of the landlord’s interest in any of the Leases or the Rents; and (vi) shall not consent
to any assignment of or subletting under any leases not in accordance with their terms, without the
prior written consent of Lender.



     (c) Borrower may, without the prior written consent of Lender, amend, modify or waive the
provisions of any Lease or terminate, reduce Rents under, accept a sun-ender of space under, or
shorten the term of, any Lease (including any guaranty, letter of credit or other credit support
with respect thereto) provided that such action (taking into account, in the case of a termination,
reduction in rent, surrender of space or shortening of term, the planned alternative use of the
affected space) does not have a materially adverse effect on the value of the Property taken as a
whole, and provided that such Lease, as amended, modified or waived, is otherwise in compliance
with the requirements of this Agreement and any subordination agreement binding upon Lender with
respect to such Lease. A termination of a Lease with a tenant who is in default beyond applicable
notice and grace periods shall not be considered an action which has a materially adverse effect on
the value of the Property taken as a whole. Any amendment, modification, waiver, termination, rent
reduction, space surrender or term shortening which does not satisfy the requirements set forth in
this subsection shall be subject to the prior approval of Lender (not to be unreasonably withheld
or delayed) and its counsel, at Borrower’s expense. Borrower shall promptly deliver to Lender
copies of amendments, modifications and waivers which are entered into pursuant to this subsection
together with Borrower’s certification that it has satisfied all of the conditions of this
subsection.



     (d) Notwithstanding anything contained herein to the contrary, Borrower shall not, without the
prior written consent of Lender, enter into, renew, extend, amend, modify, waive any provisions of,
terminate, reduce Rents under, accept a surrender of space under, or shorten the term of any Major
Lease.



     (e) Notwithstanding anything contained herein to the contrary, Borrower shall not, without the
prior written consent of Lender, enter into, renew, extend, amend, modify, waive any provisions of,
terminate, reduce Rents under, accept a surrender of space under, or shorten the term of any Lease
during a Cash Management Period.



     (f) Notwithstanding anything contained herein to the contrary, Sponsor may lease or sublease
all or any portion of space which may now or hereafter become available at the Property pursuant to
Lease approved by Lender in its reasonable discretion (each a “Sponsor Lease”) provided that each
such Sponsor Lease is at a rent not less than the then current rent for



30









 




comparable space and
properties in the local market as determined by Lender in its reasonable discretion and which is
otherwise in form and substance acceptable to Lender in its reasonable discretion .




     (g) In connection with all requests for approvals or consents by Lender pursuant to this
Section 5.13, the Lender’s approval shall be deemed granted if such request is not disapproved in
writing within fifteen (15) Business Days of the later to occur of Lender’s receipt of (i) written
request for such approval in an envelope marked “LENDER’S RESPONSE IS REQUIRED WITHIN FIFTEEN (15)
BUSINESS DAYS OF RECEIPT OF THIS NOTICE PURSUANT TO THE TERMS OF THE LOAN AGREEMENT” and (ii) all
other information and documentation related thereto reasonably requested by Lender.



     Section 5.14 Property Management



     (a) Borrower shall (i) promptly perform and observe all of the covenants required to be
performed and observed by it under the Management Agreement and do all things necessary to preserve
and to keep unimpaired its material rights thereunder; (ii) promptly notify Lender of any default
under the Management Agreement of which it is aware; (iii) promptly deliver to Lender a copy of any
notice of default or other material notice received by Borrower under the Management Agreement;
(iv) promptly give notice to Lender of any notice or information that Borrower receives which
indicates that the Manager is terminating the Management Agreement or that the Manager is otherwise
discontinuing its management of the Property; and (v) promptly enforce the performance and
observance of all of the covenants required to be performed and observed by Manager under the
Management Agreement.



     (b) If at any time, (i) the Manager shall become insolvent or a debtor in a bankruptcy
proceeding; (ii) an Event of Default has occurred and is continuing; or (iii) a default has
occurred and is continuing under the Management Agreement, Borrower shall, at the request of
Lender, terminate the Management Agreement upon thirty (30) days prior notice to Manager and
replace Manager with a manager approved by Lender on terms and conditions satisfactory to Lender,
it being understood and agreed that the management fee for such replacement manager shall not
exceed then prevailing market rates.



     (c) In addition to the foregoing, in the event that Lender, in Lender’s reasonable discretion,
at any time prior to the termination of the Assignment of Management Agreement, determines that the
Property is not being managed in accordance with generally accepted management practices for
projects similarly situated, Lender may deliver written notice thereof to Borrower and the Manager,
which notice shall specify with particularity the grounds for Lender’s determination. If Lender
reasonably determines that the conditions specified in Lender’s notice are not remedied to Lender’s
reasonable satisfaction by Borrower or the Manager within thirty (30) days from the date of such
notice or that Borrower or the Manager have failed to diligently undertake correcting such
conditions within such thirty (30) day period, Lender may direct Borrower to terminate the
Management Agreement and to replace the
Manager with a manager approved by Lender on terms and conditions satisfactory to Lender, it
being understood and agreed that the management fee for such replacement manager shall not exceed
then prevailing market rates.



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     (d) Borrower shall not, without the prior written consent of Lender (which consent shall not
be unreasonably withheld, conditioned or delayed): (i) surrender, terminate or cancel the
Management Agreement or otherwise replace Manager or enter into any other management agreement with
respect to the Property; (ii) reduce or consent to the reduction of the term of the Management
Agreement; (iii) increase or consent to the increase of the amount of any charges under the
Management Agreement; or (iv) otherwise modify, change, supplement, alter or amend, or waive or
release any of its rights and remedies under, the Management Agreement in any material respect.



     Section 5.15 Liens



     Subject to Borrower’s light to contest same pursuant to the terms of the Mortgage, Borrower
shall not, without the prior written consent of Lender, create, incur, assume or suffer to exist
any Lien on any portion of the Property or permit any such action to be taken, except Permitted
Encumbrances.



     Section 5.16 Debt Cancellation



     Borrower shall not cancel or otherwise forgive or release any claim or debt (other than
termination of Leases in accordance herewith) owed to Borrower by any Person, except for adequate
consideration and in the ordinary course of Borrower’s business.



     Section 5.17 Zoning



     Borrower shall not initiate or consent to any zoning reclassification of any portion of the
Property or seek any variance under any existing zoning ordinance or use or permit the use of any
portion of the Property in any manner that could result in such use becoming a nonconforming use
under any zoning ordinance or any other applicable land use law, rule or regulation, without the
prior consent of Lender.



     Section 5.18 ERISA



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



     (a) Borrower further covenants and agrees to deliver to Lender such certifications or other
evidence from time to time throughout the term of the Loan, as requested by Lender in its sole
discretion, that (i) Borrower is not and does not maintain an “employee benefit plan” as defined in
Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental plan” within the
meaning of Section 3(3) of ERISA; (ii) Borrower is not subject to state statutes regulating
investments and fiduciary obligations with respect to governmental plans; and (iii) one or more of
the following circumstances is true:




          (A) Equity interests in Borrower are publicly offered securities, within the
meaning of 29 C.F.R. §2510.3-101(b)(2);



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          (B) Less than twenty- five percent (25%) of each outstanding class of equity
interests in Borrower are held by “benefit plan investors” within the meaning of 29
C.F.R. §2510.3-101(f)(2); or




          (C) Borrower qualifies as an “operating company” or a “real estate operating
company” within the meaning of 29 C.F.R. §2510.3-101(c) or (e).



     Section 5.19 No Joint Assessment 



     Borrower shall not suffer, permit or initiate the joint assessment of the Property with (a)
any other real property constituting a tax lot separate from the Property, or (b) any portion of
the Property which may be deemed to constitute personal property, or any other procedure whereby
the Lien of any taxes which may be levied against such personal property shall be assessed or
levied or charged to the Property.



     Section 5.20 Reciprocal Easement Agreements 



     Borrower shall not enter into, terminate or modify any REA without Lender’s prior written
consent, which consent shall not be unreasonably withheld, conditioned or delayed. Borrower shall
enforce, comply with, and cause each of the parties to the REA to comply with all of the material
economic terms and conditions contained in the REA.



ARTICLE VI.

ENTITY COVENANTS




     Section 6.1 Single Purpose Entity/Separateness



     Until the Debt has been paid in full, Borrower represents, wan-ants and covenants as follows:



     (a) Borrower has not and will not:



          (i) engage in any business or activity other than the ownership, operation and maintenance of
the Property, and activities incidental thereto;




          (ii) acquire or own any assets other than (A) the Property, and (B) such incidental Personal
Property as may be necessary for the operation of the Property;




          (iii) merge into or consolidate with any Person, or dissolve, terminate, liquidate in whole or
in part, transfer or otherwise dispose of all or substantially all of its assets or change its
legal structure;




          (iv) fail to observe all material organizational formalities, or fail to preserve its
existence as an entity duly organized, validly existing and in good standing (if applicable) under
the applicable Legal Requirements of the jurisdiction of its organization or formation, or
amend, modify, terminate or fail to comply with the provisions of its organizational documents;




          (v) own any subsidiary, or make any investment in, any Person;




33









 








          (vi) commingle its assets with the assets of any other Person, or permit any Affiliate or
constituent party independent access to its bank accounts;




          (vii) incur any debt, secured or unsecured, direct or contingent (including guaranteeing any
obligation), other than (A) the Debt, (B) trade and operational indebtedness incurred in the
ordinary course of business with trade creditors, provided such indebtedness is (1) unsecured, (2)
not evidenced by a note, (3) on commercially reasonable terms and conditions, and (4) due not more
than sixty (60) days past the date incurred and paid on or prior to such date, and/or (C) financing
leases and purchase money indebtedness incurred in the ordinary course of business relating to
Personal Property on commercially reasonable terms and conditions; provided however, the aggregate
amount of the indebtedness described in (B) and (C) shall not exceed at any time three percent (3%)
of the outstanding principal amount of the Note;




          (viii) fail to maintain its records, books of account, bank accounts, financial statements,
accounting records and other entity documents separate and apart from those of any other Person;
except that Borrower’s financial position, assets, liabilities, net worth and operating results may
be included in the consolidated financial statements of an Affiliate, provided that such
consolidated financial statements contain a footnote indicating that Borrower is a separate legal
entity and that it maintains separate books and records;




          (ix) enter into any contract or agreement with any general partner, member, shareholder,
principal, guarantor of the obligations of Borrower, or any Affiliate of the foregoing, except upon
terms and conditions that are intrinsically fair, commercially reasonable and substantially similar
to those that would be available on an arm’s-length basis with unaffiliated third parties;




          (x) maintain its assets in such a manner that it will be costly or difficult to segregate,
ascertain or identify its individual assets from those of any other Person;




          (xi) assume or guaranty the debts of any other Person, hold itself out to be responsible for
the debts of any other Person, or otherwise pledge its assets for the benefit of any other Person
or hold out its credit as being available to satisfy the obligations of any other Person;




          (xii) make any loans or advances to any Person;




          (xiii) fail to file its own tax returns or files a consolidated federal income tax return with
any Person (unless prohibited or required, as the case may be, by applicable Legal Requirements);




          (xiv) fail either to hold itself out to the public as a legal entity separate and distinct
from any other Person or to conduct its business solely in its own name or fail to correct any
known misunderstanding regarding its separate identity;




          (xv) fail to maintain adequate capital for the normal obligations reasonably foreseeable in a
business of its size and character and in light of its contemplated business operations;




34









 








          (xvi) if it is a partnership or limited liability company, without the unanimous written
consent of all of its partners or members, as applicable, and the written consent of 100% of the
directors or managers, as applicable, of each SPE Component Entity (if any), (a) file or consent to
the filing of any petition, either voluntary or involuntary, to take advantage of any Creditors
Rights Laws, (b) seek or consent to the appointment of a receiver, liquidator or any similar
official, (c) take any action that might cause such entity to become insolvent, or (d) make an
assignment for the benefit of creditors;




          (xvii) fail to allocate shared expenses (including, without limitation, shared office space
and services performed by an employee of an Affiliate) among the Persons sharing such expenses and
to use separate stationery, invoices and checks;




          (xviii) fail to remain solvent or pay its own liabilities (including, without limitation,
salaries of its own employees) only from its own funds, provided that there are sufficient funds
from the operation of the Property to do so;




          (xix) acquire obligations or securities of its partners, members, shareholders or other
affiliates, as applicable;




          (xx) violate or cause to be violated the assumptions made with respect to Borrower and its
principals in any opinion letter pertaining to substantive consolidation delivered to Lender in
connection with the Loan; or




          (xxi) fail to maintain a sufficient number of employees in light of its contemplated business
operations.




     (b) If Borrower is a limited partnership or limited liability company, each general partner in
the case of a limited partnership, or the managing member in the case of a limited liability
company (each an “SPE Component Entity”) of Borrower, as applicable, shall be a corporation or
limited liability company whose sole asset is its interest in Borrower. Each SPE Component Entity
(i) will at all times comply with each of the covenants, terms and provisions contained in Section
6.1(a)(iii) — (vi) and (viii) — (xxi), as if such representation, warranty or covenant was made
directly by such SPE Component Entity; (ii) will not engage in any business or activity other than
owning an interest in Borrower; (iii) will not acquire or own any assets other than its
partnership, membership, or other equity interest in Borrower; (iv) will not incur any debt,
secured or unsecured, direct or contingent (including guaranteeing any obligation); and (v) will
cause Borrower to comply with the provisions of this Section 6.1. Prior to the withdrawal or the
disassociation of any SPE Component Entity from Borrower, Borrower shall immediately appoint a new
general partner or managing member whose articles of incorporation or organization, as applicable,
are substantially similar to those of such SPE Component Entity and, if an opinion letter
pertaining to substantive consolidation was required at closing, deliver a new opinion letter
acceptable to Lender and the Rating Agencies with respect to the new SPE Component Entity and its
equity owners. Notwithstanding the foregoing, to the extent Borrower
is a single member Delaware limited liability company, so long as Borrower maintains such
formation status, no SPE Component Entity shall be required.



35









 





     (c) In the event Borrower is a single member Delaware limited liability company, the limited
liability company agreement of Borrower (the “LLC Agreement”) shall provide that (i) upon the
occurrence of any event that causes the sole member of Borrower (“Member”) to cease to be the
member of Borrower (other than (A) upon an assignment by Member of all of its limited liability
company interest in Borrower and the admission of the transferee, or (B) the resignation of Member
and the admission of an additional member, in either case in accordance with the terms of the Loan
Documents and the LLC Agreement), the person executing the LLC Agreement as a “Special Member” (as
such term is defined in the LLC Agreement) (“Special Member”) shall, without any action of any
other Person and simultaneously with the Member ceasing to be the member of Borrower, automatically
be admitted to Borrower and shall continue Borrower without dissolution and (ii) Special Member may
not resign from Borrower or transfer its rights as Special Member unless a successor Special Member
has been admitted to Borrower as Special Member in accordance with requirements of Delaware law.
The LLC Agreement shall further provide that (i) Special Member shall automatically cease to be a
member of Borrower upon the admission to Borrower of a substitute Member, (ii) Special Member shall
be a member of Borrower that has no interest in the profits, losses and capital of Borrower and has
no right to receive any distributions of Borrower assets, (iii) pursuant to Section 18-301 of the
Delaware Limited Liability Company Act (the “Act”), Special Member shall not be required to make
any capital contributions to Borrower and shall not receive a limited liability company interest in
Borrower, (iv) Special Member, in its capacity as Special Member, may not bind Borrower and (v)
except as required by any mandatory provision of the Act, Special Member, in its capacity as
Special Member, shall have no right to vote on, approve or otherwise consent to any action by, or
matter relating to, Borrower, including, without limitation, the merger, consolidation or
conversion of Borrower. In order to implement the admission to Borrower of Special Member, Special
Member shall execute a counterpart to the LLC Agreement. Prior to its admission to Borrower as
Special Member, Special Member shall not be a member of Borrower.



     Upon the occurrence of any event that causes the Member to cease to be a member of Borrower,
to the fullest extent permitted by law, the personal representative of Member shall, within ninety
(90) days after the occurrence of the event that terminated the continued membership of Member in
Borrower, agree in writing (i) to continue Borrower and (ii) to the admission of the personal
representative or its nominee or designee, as the case may be, as a substitute member of Borrower,
effective as of the occurrence of the event that terminated the continued membership of Member of
Borrower in Borrower. Any action initiated by or brought against Member or Special Member under any
Creditors Rights Laws shall not cause Member or Special Member to cease to be a member of Borrower
and upon the occurrence of such an event, the business of Borrower shall continue without
dissolution. The LLC Agreement shall provide that each of Member and Special Member waives any
right it might have to agree in writing to dissolve Borrower upon the occurrence of any action
initiated by or brought against Member or Special Member under any Creditors Rights Laws, or the
occurrence of an event that causes Member or Special Member to cease to be a member of Borrower.




36











 





     Section 6.2 Change of Name, Identity or Structure 



     Borrower shall not change or permit to be changed (a) Borrower’s name, (b) Borrower’s identity
(including its trade name or names), (c) Borrower’s principal place of business set forth on the
first page of this Agreement, (d) the corporate, partnership or other organizational structure of
Borrower, each SPE Component Entity (if any), or Borrower Principal, (e) Borrower’s state of
organization, or (f) Borrower’s organizational identification number, without in each case
notifying Lender of such change in writing at least thirty (30) days prior to the effective date of
such change and, in the case of a change in Borrower’s structure, without first obtaining the prior
written consent of Lender. In addition, Borrower shall not change or permit to be changed any
organizational documents of Borrower or any SPE Component Entity (if any) if such change would
adversely impact the covenants set forth in Section 6.1 hereof. Borrower authorizes Lender to file
any financing statement or financing statement amendment required by Lender to establish or
maintain the validity, perfection and priority of the security interest granted herein. At the
request of Lender, Borrower shall execute a certificate in form satisfactory to Lender listing the
trade names under which Borrower intends to operate the Property, and representing and warranting
that Borrower does business under no other trade name with respect to the Property. If Borrower
does not now have an organizational identification number and later obtains one, or if the
organizational identification number assigned to Borrower subsequently changes, Borrower shall
promptly notify Lender of such organizational identification number or change.



     Section 6.3 Business and Operations 



     Borrower will qualify to do business and will remain in good standing under the laws of the
State as and to the extent the same are required for the ownership, maintenance, management and
operation of the Property.



ARTICLE VII.

NO SALE OR ENCUMBRANCE




     Section 7.1 Transfer Definitions 



     For purposes of this Article 7 an “Affiliated Manager” shall mean any managing agent in which
Borrower, Borrower Principal, any SPE Component Entity (if any) or any affiliate of such entities
has, directly or indirectly, any legal, beneficial or economic interest; “Control” shall mean the
power to direct the management and policies of a Restricted Party, directly or indirectly, whether
through the ownership of voting securities or other beneficial interests, by contract or otherwise;
"Restricted Party” shall mean Borrower, Borrower Principal, any SPE Component Entity (if any), any
Affiliated Manager, or any shareholder, partner, member or non-member manager, or any direct or
indirect legal or beneficial owner of Borrower, Borrower Principal, any SPE Component Entity (if
any), any Affiliated Manager or any non-member manager; and a “Sale or Pledge” shall mean a
voluntary or involuntary sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, grant of any options with respect to, or any other transfer or disposition of (directly
or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not
for consideration or of record) of a legal or beneficial interest.



37









 





     Section 7.2 No Sale/Encumbrance 



     (a) Borrower shall not cause or permit a Sale or Pledge of the Property or any part thereof or
any legal or beneficial interest therein nor permit a Sale or Pledge of an interest in any
Restricted Party (in each case, a “Prohibited Transfer”), other than pursuant to Leases of space in
the Improvements to Tenants in accordance with the provisions of Section 5.13, without the prior
written consent of Lender.



     (b) A Prohibited Transfer shall include, but not be limited to, (i) an installment sales
agreement wherein Borrower agrees to sell the Property or any part thereof for a price to be paid
in installments; (ii) an agreement by Borrower leasing all or a substantial part of the Property
for other than actual occupancy by a space tenant thereunder or a sale, assignment or other
transfer of, or the grant of a security interest in, Borrower’s right, title and interest in and to
any Leases or any Rents; (iii) if a Restricted Party is a corporation, any merger, consolidation or
Sale or Pledge of such corporation’s stock or the creation or issuance of new stock in one or a
series of transactions; (iv) if a Restricted Party is a limited or general partnership or joint
venture, any merger or consolidation or the change, removal, resignation or addition of a general
partner or the Sale or Pledge of the partnership interest of any general or limited partner or any
profits or proceeds relating to such partnership interests or the creation or issuance of new
partnership interests; (v) if a Restricted Party is a limited liability company, any merger or
consolidation or the change, removal, resignation or addition of a managing member or non- member
manager (or if no managing member, any member) or the Sale or Pledge of the membership interest of
any member or any profits or proceeds relating to such membership interest; (vi) if a Restricted
Party is a trust or nominee trust, any merger, consolidation or the Sale or Pledge of the legal or
beneficial interest in a Restricted Party or the creation or issuance of new legal or beneficial
interests; or (vii) the removal or the resignation of the Manager (including, without limitation,
an Affiliated Manager) other than in accordance with Section 5.14.



     Section 7.3 Permitted Transfers 



     Notwithstanding the provisions of Section 7.2, the following transfers shall not be deemed to
be a Prohibited Transfer: (a) a transfer by devise or descent or by operation of law upon the death
of a member, partner or shareholder of a Restricted Party, so long as Borrower delivers notice to
Lender as soon as practicable thereafter and that such Restricted Party is promptly reconstituted,
if applicable, following the death of such member, partner or shareholder and there is no change in
Control of such Restricted Party as a result of such transfer; (b) transfers for estate planning
purposes of an individual’s interests in any Restricted Party to the spouse or any lineal
descendant of such individual, or to a trust for the benefit of any one or more of such individual,
spouse or lineal descendant, so long as such Restricted Party is reconstituted, if required,
following such transfer and there is no change in Control of such Restricted Party as a result of
such transfer; (c) the Sale or Pledge, in one or a series of transactions, of not more than
forty-nine percent (49%) of the stock, limited partnership interests or non-managing membership
interests (as the case may be) in a Restricted Party; provided, however, no such transfers shall
result in a change in Control in the Restricted Party or change in control of the Property, and as
a condition to each such transfer, Lender shall receive not less than thirty (30) days prior
written notice of such proposed transfer; notwithstanding anything to the contrary
contained in this Section 7.3, Sponsor must continue to own, directly or indirectly, at least
a 51% interest in, and Control, Borrower.



38









 





     Section 7.4 Lender’s Rights 



     Lender reserves the right to condition the consent to a Prohibited Transfer requested
hereunder upon (a) a modification of the terms hereof and an assumption of the Note and the other
Loan Documents as so modified by the proposed Prohibited Transfer, (b) receipt of payment of a
transfer fee equal to one percent (1%) of the outstanding principal balance of the Loan and all of
Lender’s expenses incurred in connection with such Prohibited Transfer, (c) receipt of written
confirmation from the Rating Agencies that the Prohibited Transfer will not result in a downgrade,
withdrawal or qualification of the initial, or if higher, then current ratings issued in connection
with a Securitization, or if a Securitization has not occurred, any ratings to be assigned in
connection with a Securitization, (d) the proposed transferee’s continued compliance with the
covenants set forth in this Agreement (including, without limitation, the covenants in Article 6)
and the other Loan Documents, (e) a new manager for the Property and a new management agreement
satisfactory to Lender, and (f) the satisfaction of such other conditions and/or legal opinions as
Lender shall determine in its sole discretion to be in the interest of Lender. All expenses
incurred by Lender shall be payable by Borrower whether or not Lender consents to the Prohibited
Transfer. Lender shall not be required to demonstrate any actual impairment of its security or any
increased risk of default hereunder in order to declare the Debt immediately due and payable upon a
Prohibited Transfer made without Lender’s consent. This provision shall apply to each and every
Prohibited Transfer, whether or not Lender has consented to any previous Prohibited Transfer.



     Section 7.5 Assumption



     Notwithstanding the foregoing provisions of this Article 7, following the date which is six
(6) months from the Closing Date, Lender shall not unreasonably withhold consent to a transfer of
the Property in its entirety to, and the related assumption of the Loan by, any Person (a
“Transferee”) provided that each of the following terms and conditions are satisfied:



     (a) no Default or Event of Default has occurred;



     (b) Borrower shall have (i) delivered written notice to Lender of the terms of such
prospective transfer not less than sixty (60) days before the date on which such transfer is
scheduled to close and, concurrently therewith, all such information concerning the proposed
Transferee as Lender shall reasonably require and (ii) paid to Lender a non-refundable processing
fee in the amount of $5,000. Lender shall have the right to approve or disapprove the proposed
transfer based on its then current underwriting and credit requirements for similar loans secured
by similar properties which loans are sold in the secondary market, such approval not to be
unreasonably withheld. In determining whether to give or withhold its approval of the proposed
transfer, Lender shall consider the experience and track record of Transferee and its principals in
owning and operating facilities similar to the Property, the financial strength of Transferee and
its principals, the general business standing of Transferee and its principals and Transferee’s and
its principals’ relationships and experience with contractors, vendors, tenants, lenders and other
business entities; provided, however, that, notwithstanding Lender’s agreement
to consider the foregoing factors in determining whether to give or withhold such approval,
such approval shall be given or withheld based on what Lender determines to be commercially



39









 




reasonable and, if given, may be given subject to such conditions as Lender may deem reasonably
appropriate;




     (c) Borrower shall have paid to Lender, concurrently with the closing of such transfer, (i) a
non-refundable assumption fee in an amount equal to (A) one-quarter of one percent (0.25%) of the
then outstanding principal balance of the Note with respect to the first such transfer and (B)
one-half of one percent (0.50%) of the then outstanding principal balance of the Note with respect
to each such transfer thereafter, and (ii) all out-of-pocket costs and expenses, including
reasonable attorneys’ fees, incurred by Lender in connection with the transfer;



     (d) (i) Transferee shall have assumed and agreed to pay the Debt as and when due subject to
the provisions of Article 15 hereof and, prior to or concurrently with the closing of such
transfer, Transferee and its constituent partners, members or shareholders as Lender may require,
shall have executed, without any cost or expense to Lender, such documents and agreements as Lender
shall reasonably require to evidence and effectuate said assumption and (ii) if required by Lender,
a Person affiliated with Transferee and acceptable to Lender shall have assumed the obligations of
Borrower Principal under the Loan Documents with respect to all acts and events occurring or
arising after the transfer of the Property pursuant to this Section 7.5;



     (e) Borrower and Transferee, without any cost to Lender, shall furnish any information
requested by Lender for the preparation of, and shall authorize Lender to file, new financing
statements and financing statement amendments and other documents to the fullest extent permitted
by applicable law, and shall execute any additional documents reasonably requested by Lender,



     (f) Borrower shall have delivered to Lender, without any cost or expense to Lender, such
endorsements to Lender’s Title Insurance Policy insuring that fee simple or leasehold title to the
Property, as applicable, is vested in Transferee (subject to Permitted Encumbrances), hazard
insurance endorsements or certificates and other similar materials as Lender may deem necessary at
the time of the transfer, all in form and substance satisfactory to Lender;



     (g) Transferee shall have furnished to Lender, if Transferee is a corporation, partnership,
limited liability company or other entity, all appropriate papers evidencing Transferee’s
organization and good standing, and the qualification of the signers to execute the assumption of
the Debt, which papers shall include certified copies of all documents relating to the organization
and formation of Transferee and of the entities, if any, which are partners or members of
Transferee. Transferee and such constituent partners, members or shareholders of Transferee (as the
case may be), as Lender shall require, shall comply with the covenants set forth in Article 6
hereof;



     (h) Transferee shall assume the obligations of Borrower under any Management Agreement or
provide a new management agreement with a new manager which meets with the requirements of Section
5.14 hereof and assign to Lender as additional security such new management agreement;



40









 





     (i) Transferee shall furnish an opinion of counsel satisfactory to Lender and its counsel (A)
that Transferee’s formation documents provide for the matters described in subparagraph (g) above,
(B) that the assumption of the Debt has been duly authorized, executed and delivered, and that the
Note, the Mortgage, this Agreement, the assumption agreement and the other Loan Documents are
valid, binding and enforceable against Transferee in accordance with their terms, (C) that
Transferee and any entity which is a controlling stockholder, member or general partner of
Transferee, have been duly organized, and are in existence and good standing, and ()) with respect
to such other matters as Lender may reasonably request;



     (j) if required by Lender, Lender shall have received confirmation in writing from the Rating
Agencies that rate the Securities to the effect that the transfer will not result in a
qualification, downgrade or withdrawal of any rating initially assigned or to be assigned to the
Securities; and



     (k) Borrower’s obligations under the contract of sale pursuant to which the transfer is
proposed to occur shall expressly be subject to the satisfaction of the terms and conditions of
this Section 7.5.



     A consent by Lender with respect to a transfer of the Property in its entirety to, and the
related assumption of the Loan by, a Transferee pursuant to this Section 7.5 shall not be construed
to be a waiver of the right of Lender to consent to any subsequent Sale or Pledge of the Property.
Upon the transfer of the Property pursuant to this Section 7.5, Borrower and Borrower Principal
shall be relieved of all liability under the Loan Documents for acts, events, conditions, or
circumstances occurring or arising after the date of such transfer, except to the extent that such
acts, events, conditions, or circumstances are the proximate result of acts, events, conditions, or
circumstances that existed prior to the date of such transfer, whether or not discovered prior or
subsequent to the date of such transfer.



     Section 7.6 Subordinate Loan



     Except as expressly provided in this Section 7.6, subordinate financing with respect to the
Property or Borrower is not permitted. Subject to satisfactory due diligence and underwriting,
Lender shall in its discretion agree to allow future subordinate debt once during the term of the
Loan, provided AmREIT Riverwalk, LP or an assumptor approved by Lender pursuant to Section 7.5
above is the Borrower. Without limiting the foregoing, Lender’s approval of such subordinate debt
may be conditioned on such criteria as Lender may elect in its reasonable discretion, including
without limitation, (a) no Default or Event of Default may exist under any of the Loan Documents,
(b) Borrower shall provide Lender with not less than sixty (60) days prior written notice of such
proposed subordinate financing, (c) the principal amount of such subordinate loan shall not exceed
an amount which, when added to the then outstanding principal balance of the Loan, results in (i) a
loan to value ratio greater than 85%, as determined by Lender based on a then current appraisal
reasonably acceptable to Lender or (ii) a debt service coverage ratio less than 1.10x, as
determined by Lender based on the underwritten net cash flow as reasonably determined by Lender and
a fixed loan constant equal to the greater of (A) the loan constant meeting Rating Agency
guidelines and (B) the actual annual payment due under the Loan plus the annual payment due under
the subordinate loan determined based on the actual interest rate and amortization schedule on such
subordinate loan; (d) the term of the subordinate



41









 




loan shall be co-terminus with the Loan and repaid at the time of a sale of the Property or
assumption of the Loan pursuant to the terms hereof (e) the subordinate loan shall not be secured
other than by a pledge of the beneficial ownership interests in Borrower, (f) the subordinate loan
lender shall be an institutional lender acceptable to Lender and shall at all times comply with
standard rating agency criteria for “qualified transferees,” (g) Lender shall receive written
confirmation from the Rating Agencies that the making of the subordinate loan shall not result in a
downgrade, withdrawal, or qualification of the then current ratings, (h) the Borrower and the
subordinate loan lender shall execute and deliver to Lender such documentation as Lender may
require in its reasonable discretion, including without limitation a subordination and
intercreditor agreement and amendments to the Loan Documents, all of which shall be in form and
substance reasonably satisfactory to Lender, (i) all documents and instruments evidencing or
securing the subordinate loan shall be in form and substance reasonably satisfactory to Lender, (j)
Borrower shall deliver to Lender, at Borrower’s sole cost and expense, revised and/or updated
versions of the opinions of counsel given in connection with the closing of the Loan acceptable to
Lender reflecting the subordinate loan, (k) Borrower, at Borrower’s sole cost and expense, shall
provide to Lender such due diligence as Lender may require, including without limitation, title
endorsements, UCC, tax lien, bankruptcy, judgment, litigation and other searches with respect to
the Property, Borrower and Borrower Principal, and (1) Borrower shall have paid or reimbursed
Lender and all Rating Agencies for all out of pocket costs and expenses incurred by Lender or such
Rating Agencies (including, without limitation, reasonable attorneys’ fees and disbursements) in
connection with the subordinate loan and Borrower shall have paid or caused to be paid all title
premiums, recording charges, filing fees, taxes or other expenses (including, without limitation,
mortgage and intangibles taxes and documentary stamp taxes) payable in connection therewith.




ARTICLE VIII.

INSURANCE; CASUALTY; CONDEMNATION; RESTORATION




     Section 8.1 Insurance 



     (a) Borrower shall obtain and maintain, or cause to be maintained, at all times insurance for
Borrower and the Property providing at least the following coverages:



          (i) comprehensive “special causes of loss” form of insurance (or its equivalent) on the
Improvements and the Personal Property (A) in an amount equal to not less than one hundred percent
(100%) of the “Full Replacement Cost,” which for purposes of this Agreement shall mean actual
replacement value (exclusive of costs of excavations, foundations, underground utilities and
footings); (B) written on a replacement cost basis and containing either an agreed amount
endorsement with respect to the Improvements and Personal Property or a waiver of all co- insurance
provisions; (C) providing for no deductible in excess of $10,000 for all such insurance coverage;
(D) at all times insuring against at least those hazards that are commonly insured against under a
“special causes of loss” form of policy, as the same shall exist on the date hereof, and together
with any increase in the scope of coverage provided under such form after the date hereof; and (E)
if any of the Improvements or the use of the Property shall at any time constitute legal
non-conforming structures or uses, providing coverage for contingent liability from Operation of
Building Laws, Demolition Costs and Increased Cost of Construction Endorsements and containing an
“Ordinance or Law Coverage” or “Enforcement” endorsement.



42









 




In addition, Borrower shall obtain: (y) if any portion of the Improvements is currently or at any
time in the future located in a “special flood hazard area” designated by the Federal Emergency
Management Agency, flood hazard insurance in an amount equal to the maximum amount of such
insurance available under the National Flood Insurance Act of 1968, the Flood Disaster Protection
Act of 1973 or the National Flood Insurance Reform Act of 1994, as each may be amended; and (z)
earthquake insurance in amounts and in form and substance reasonably satisfactory to Lender in the
event the Property is located in an area with a high degree of seismic risk, provided that the
insurance pursuant to clauses (y) and (z) hereof shall be on terms consistent with the special
causes of loss form required under this subsection (i). Notwithstanding anything to the contrary
herein, Borrower shall have ten (10) Business Days to provide the coverage required under clause
(y) above ;




          (ii) commercial general liability insurance against claims for personal injury, bodily injury,
death or property damage occurring upon, in or about the Property, with such insurance (A) to be on
the so-called “occurrence” form with a general aggregate limit of not less than $2,000,000 and a
per occurrence limit of not less than $1,000,000; (B) to continue at not less than the aforesaid
limit until required to be changed by Lender in writing by reason of changed economic conditions
making such protection inadequate; and (C) to cover at least the following hazards: (1) premises
and operations; (2) products and completed operations; (3) independent contractors; and (4)
contractual liability;



          (iii) loss of rents insurance or business income insurance, as applicable, (A) with loss
payable to Lender; (B) covering all risks required to be covered by the insurance provided for in
subsection (i) above; and (C) which provides that after the physical loss to the Improvements and
Personal Property occurs, the loss of rents or income, as applicable, will be insured until
completion of Restoration or the expiration of twelve (12) months, whichever first occurs, and
notwithstanding that the policy may expire prior to the end of such period. For hotels, motels,
health care, and other property types without a standard rent roll, the amount of business income
insurance required shall be not less than eighteen (18) months of debt service, taxes, insurance,
and other fixed expenses. The amount of such loss of rents or business income insurance, as
applicable, shall be determined prior to the date hereof and at least once each year thereafter
based on Borrower’s reasonable estimate of the gross income from the Property for the succeeding
period of coverage as required above. All proceeds payable to Lender pursuant to this subsection
shall be held by Lender and shall be applied to the obligations secured by the Loan Documents from
time to time due and payable hereunder and under the Note; provided, however, that nothing herein
contained shall be deemed to relieve Borrower of its obligations to pay the obligations secured by
the Loan Documents on the respective dates of payment provided for in the Note, this Agreement and
the other Loan Documents except to the extent such amounts are actually paid out of the proceeds of
such loss of rents or business income insurance, as applicable;



          (iv) at all times during which structural construction, repairs or alterations are being made
with respect to the Improvements, and only if the Property coverage form does not otherwise apply,
(A) owner’s contingent or protective liability insurance covering claims not covered by or under
the terms or provisions of the above mentioned commercial general liability insurance policy; and
(B) the insurance provided for in subsection (i) above written in a so-called Builder’s Risk
Completed Value form (1) on a non-reporting basis, (2) against “special causes of



43









 




loss” insured against pursuant to subsection (i) above, (3) including permission to occupy the
Property, and (4) with an agreed amount endorsement waiving co- insurance provisions;




          (v) to the extent Borrower has employees, workers’ compensation, subject to the statutory
limits of the State, and employer’s liability insurance in respect of any work or operations on or
about the Property, or in connection with the Property or its operation (if applicable);



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



          (vii) excess liability insurance in an amount not less than $5,000,000 per occurrence on terms
consistent with the commercial general liability insurance required under subsection (ii) above;
and



          (viii) upon sixty (60) days’ written notice, such other reasonable insurance and in such
reasonable amounts as Lender from time to time may reasonably request against such other insurable
hazards which at the time are commonly insured against for property similar to the Property located
in or around the region in which the Property is located.



     With respect to the Policies required to be maintained pursuant to clauses (i) through (viii)
above, Borrower shall use commercially reasonable efforts, consistent with those of prudent owners
of institutional quality commercial real estate, to maintain insurance coverage against Losses
resulting from acts of terrorism.



     (b) All insurance provided for in Section 8.1(a) shall be obtained under valid and enforceable
policies (collectively, the “Policies” or in the singular, the “Policy”), and shall be subject to
the reasonable approval of Lender as to insurance companies, amounts, deductibles, loss payees and
insureds. The Policies shall be issued by financially sound and responsible insurance companies
authorized to do business in the State and having a claims paying ability rating of “BBB” or better
by S&P and “Baa2” by Moody’s (or such other ratings promulgated from time to time by S&P and
Moody’s for properties and transactions similar in type and size to the Property and the Loan)
and/or a general policy rating of “A” or better and a financial class of VIII or better by A.M.
Best Company, Inc. The Policies described in Section 8.1(a) shall designate Lender and its
successors and assigns as additional insureds, mortgagees and/or loss payee as deemed appropriate
by Lender. To the extent such Policies are not available as of the Closing Date, Borrower shall
deliver to Lender prior to the Closing Date an Acord 28 or similar certificate of insurance
evidencing the coverages and amounts required hereunder and, upon request of Lender as soon as
available after the Closing Date, certified copies of all Policies. Not less than ten (10) days
prior to the expiration dates of any insurance coverage in place with respect to the Property,
Borrower shall deliver to Lender an Acord 28 or similar certificate, accompanied by evidence
satisfactory to Lender of payment of the premiums due in connection therewith (the “Insurance
Premiums”), and, as soon as available thereafter, certified copies of all renewal Policies.



44









 





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



     (d) All Policies provided for or contemplated by Section 8.1(a), except for the Policy
referenced in Section 8.1(a)(v), shall name Borrower as the insured and Lender as the additional
insured, as its interests may appear, and in the case of property damage, boiler and machinery,
flood and earthquake insurance, shall contain a standard non-contributing mortgagee clause in favor
of Lender providing that the loss thereunder shall be payable to Lender.



     (e) All Policies provided for in Section 8.1(a) shall contain clauses or endorsements to the
effect that:



          (i) no act or negligence of Borrower, or anyone acting for Borrower, or of any Tenant or other
occupant, or failure to comply with the provisions of any Policy, which might otherwise result in a
forfeiture of the insurance or any part thereof, shall in any way affect the validity or
enforceability of the insurance insofar as Lender is concerned;



          (ii) the Policies shall not be materially changed (other than to increase the coverage
provided thereby) or canceled by the insurer without at least thirty (30) days’ (ten (10) days’ in
the case of non-payment of premium) prior written notice to Lender and any other party named
therein as an additional insured;



          (iii) the issuers thereof shall give written notice to Lender if the Policies have not been
renewed thirty (30) days prior to its expiration; and



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



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



     Section 8.2 Casualty



     If the Property shall be damaged or destroyed, in whole or in part, by fire or other casualty
(a “Casualty”), Borrower shall give prompt notice of such damage to Lender and shall promptly
commence and diligently prosecute the Restoration of the Property in accordance with Section 8.4 to
the extent Net Proceeds are made available by Lender or if Borrower is required to do so pursuant
to the terms of any Lease. Borrower shall pay all costs of such Restoration whether or not such
costs are covered by insurance. Lender may, but shall not be obligated to make proof of loss if not
made promptly by Borrower. Borrower shall adjust all claims for



45









 




Insurance Proceeds in consultation with, and approval of, Lender; provided, however, if an
Event of Default has occurred and is continuing, Lender shall have the exclusive right to
participate in the adjustment of all claims for Insurance Proceeds.




     Section 8.3 Condemnation



     Borrower shall promptly give Lender notice of the actual or threatened commencement of any
proceeding for the Condemnation of the Property of which Borrower has knowledge and shall deliver
to Lender copies of any and all papers served in connection with such proceedings. Lender may
participate in any such proceedings, and Borrower shall from time to time deliver to Lender all
instruments requested by it to permit such participation. Borrower shall, at its expense,
diligently prosecute any such proceedings, and shall consult with Lender, its attorneys and
experts, and cooperate with them in the carrying on or defense of any such proceedings.
Notwithstanding any taking by any public or quasi-public authority through Condemnation or
otherwise (including but not limited to any transfer made in lieu of or in anticipation of the
exercise of such taking), Borrower shall continue to pay the Debt at the time and in the manner
provided for its payment in the Note and in this Agreement and the Debt shall not be reduced until
any Award shall have been actually received and applied by Lender, after the deduction of expenses
of collection, to the reduction or discharge of the Debt. Lender shall not be limited to the
interest paid on the Award by the condemning authority but shall be entitled to receive out of the
Award interest at the rate or rates provided herein or in the Note. If the Property or any portion
thereof is taken by a condemning authority, Borrower shall promptly commence and diligently
prosecute the Restoration of the Property and otherwise comply with the provisions of Section 8.4,
whether or not Lender makes any Net Proceeds available pursuant to Section 8.4. If the Property is
sold, through foreclosure or otherwise, prior to the receipt by Lender of the Award, Lender shall
have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered
or denied, to receive the Award, or a portion thereof sufficient to pay the Debt.



     Section 8.4 Restoration



     The following provisions shall apply in connection with the Restoration of the Property:



     (a) If the Net Proceeds shall be less than $500,000 and the costs of completing the
Restoration shall be less than $500,000, the Net Proceeds will be disbursed by Lender to Borrower
upon receipt, provided that all of the conditions set forth in Section 8.4(b)(i) are met and
Borrower delivers to Lender a written undertaking to expeditiously commence and to satisfactorily
complete with due diligence the Restoration in accordance with the terms of this Agreement.



     (b) If the Net Proceeds are equal to or greater than $500,000 or the costs of completing the
Restoration are equal to or greater than $500,000, Lender shall make the Net Proceeds available for
the Restoration in accordance with the provisions of this Section 8.4. The term “Net Proceeds” for
purposes of this Section 8.4 shall mean: (i) the net amount of all insurance proceeds received by
Lender pursuant to Section 8.1 (a)(i), (iv), (vi) and (viii) as a result of a Casualty, after
deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel
fees), if any, in collecting the same (“Insurance Proceeds”), or



46









 




(ii) the net amount of the Award as a result of a Condemnation, after deduction of its
reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in
collecting the same (“Condemnation Proceeds”), whichever the case may be.




          (i) The Net Proceeds shall be made available to Borrower for Restoration provided that each of
the following conditions are met:




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




          (B) (1) in the event the Net Proceeds are Insurance Proceeds, less than forty percent
(40%) of the total floor area of the Improvements on the Property has been damaged,
destroyed or rendered unusable as a result of a Casualty and the amount of damage does not
exceed forty percent (40%) of the Property’s fair market value immediately prior to the
occurrence of such Casualty, or (2) in the event the Net Proceeds are Condemnation Proceeds,
less than ten percent (10%) of the land constituting the Property is taken, such land is
located along the perimeter or periphery of the Property, and less than fifteen percent
(15%) of the aggregate floor area of the Improvements is taken and the taking does not
exceed fifteen percent (15%) of the Property’s fair market value immediately prior to the
occurrence of such taking;




          (C) Leases covering in the aggregate at least sixty- five percent (65%) of the total
rentable space in the Property which has been demised under executed and delivered Leases in
effect as of the date of the occurrence of such Casualty or Condemnation, whichever the case
may be, and each Major Lease in effect as of such date shall remain in full force and effect
during and after the completion of the Restoration without abatement of rent beyond the time
required for Restoration;




          (D) Borrower shall commence the Restoration as soon as reasonably practicable (but in
no event later than sixty (60) days after such Casualty or Condemnation, whichever the case
may be, occurs) and shall diligently pursue the same to satisfactory completion;




          (E) Lender shall be satisfied that any operating deficits, including all scheduled
payments of principal and interest under the Note, which will be incurred with respect to
the Property as a result of the occurrence of any such Casualty or Condemnation, whichever
the case may be, will be covered out of the insurance coverage referred to in Section
8.1(a)(iii) above;




          (F) Lender shall be satisfied that the Restoration will be completed on or before the
earliest to occur of (1) six (6) months prior to the Maturity Date, (2) the earliest date
required for such completion under the terms of any Leases or material agreements affecting
the Property, (3) such time as may be required under applicable zoning law, ordinance, rule
or regulation, or (4) the expiration of the insurance coverage referred to in Section
8.1(a)(iii);




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



47









 






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




          (I) such Casualty or Condemnation, as applicable, does not result in the loss of access
to the Property or the Improvements;




          (J) Borrower shall deliver, or cause to be delivered, to Lender a signed detailed
budget approved in writing by Borrower’s architect or engineer stating the entire cost of
completing the Restoration, which budget shall be acceptable to Lender; and




          (K) the Net Proceeds together with any cash or cash equivalent deposited by Borrower
with Lender are sufficient in Lender’s reasonable judgment to cover the cost of the
Restoration.



          (ii) The Net Proceeds shall be held by Lender until disbursements commence, and, until
disbursed in accordance with the provisions of this Section 8.4(b), shall constitute additional
security for the Debt and other obligations under the Loan Documents. The Net Proceeds shall be
disbursed by Lender to, or as directed by, Borrower from time to time during the course of the
Restoration, upon receipt of evidence satisfactory to Lender that (A) all the conditions precedent
to such advance, including those set forth in Section 8.4(b)(i), have been satisfied, (B) all
materials installed and work and labor performed (except to the extent that they are to be paid for
out of the requested disbursement) in connection with the related Restoration item have been paid
for in full, and (C) there exist no notices of pendency, stop orders, mechanic’s or materialman’s
liens or notices of intention to file same, or any other liens or encumbrances of any nature
whatsoever on the Property which have not either been fully bonded to the satisfaction of Lender
and discharged of record or in the alternative fully insured to the satisfaction of Lender by the
title company issuing the Title Insurance Policy. Notwithstanding the foregoing, Insurance Proceeds
from the Policies required to be maintained by Borrower pursuant to Section 8.1(a)(iii) shall be
controlled by Lender at all times, shall not be subject to the provisions of this Section 8.4 and
shall be used solely for the payment of the obligations under the Loan Documents and Operating
Expenses.



          (iii) All plans and specifications required in connection with the Restoration shall be
subject to prior review and acceptance in all respects by Lender and by an independent consulting
engineer selected by Lender (the “Restoration Consultant”) in their reasonable discretion. Lender
shall have the use of the plans and specifications and all permits, licenses and approvals required
or obtained in connection with the Restoration. The identity of the contractors, subcontractors and
materialmen engaged in the Restoration, as well as the contracts in excess of $200,000 under which
they have been engaged, shall be subject to prior review and acceptance by Lender and the
Restoration Consultant. All costs and expenses incurred by Lender in connection with making the Net
Proceeds available for the Restoration, including, without limitation, reasonable counsel fees and
disbursements and the Restoration Consultant’s fees, shall be paid by Borrower.



          (iv) In no event shall Lender be obligated to make disbursements of the Net Proceeds in excess
of an amount equal to the costs actually incurred from time to time for work



48









 




in place as part of the Restoration, as certified by the Restoration Consultant, minus the
Restoration Retainage. The term “Restoration Retainage” shall mean an amount equal to ten percent
(10%) of the costs actually incurred for work in place as part of the Restoration, as certified by
the Restoration Consultant, until the Restoration has been completed. The Restoration Retainage
shall be reduced to five percent (5%) of the costs incurred upon receipt by Lender of satisfactory
evidence that fifty percent (50%) of the Restoration has been completed. The Restoration Retainage
shall in no event, and notwithstanding anything to the contrary set forth above in this Section
8.4(b), be less than the amount actually held back by Borrower from contractors, subcontractors and
materialmen engaged in the Restoration. The Restoration Retainage shall not be released until the
Restoration Consultant certifies to Lender that the Restoration has been completed in accordance
with the provisions of this Section 8.4(b) and that all approvals necessary for the re-occupancy
and use of the Property have been obtained from all appropriate Governmental Authorities, and
Lender receives evidence satisfactory to Lender that the costs of the Restoration have been paid in
full or will be paid in full out of the Restoration Retainage; provided, however, that Lender will
release the portion of the Restoration Retainage being held with respect to any contractor,
subcontractor or materialman engaged in the Restoration as of the date upon which the Restoration
Consultant certifies to Lender that the contractor, subcontractor or materialman has satisfactorily
completed all work and has supplied all materials in accordance with the provisions of the
contractor’s, subcontractor’s or materialman’s contract, the contractor, subcontractor or
materialman delivers the lien waivers and evidence of payment in full of all sums due to the
contractor, subcontractor or materialman as may be reasonably requested by Lender or by the title
company issuing the Title Insurance Policy, and Lender receives an endorsement to the Title
Insurance Policy insuring the continued priority of the lien of the Mortgage and evidence of
payment of any premium payable for such endorsement. If required by Lender, the release of any such
portion of the Restoration Retainage shall be approved by the surety company, if any, which has
issued a payment or performance bond with respect to the contractor, subcontractor or materialman.




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



          (vi) If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the
reasonable and good faith opinion of Lender in consultation with the Restoration Consultant, be
sufficient to pay in full the balance of the costs which are estimated by the Restoration
Consultant to be incurred in connection with the completion of the Restoration, Borrower shall
deposit the deficiency (the “Net Proceeds Deficiency”) with Lender before any further disbursement
of the Net Proceeds shall be made. The Net Proceeds Deficiency deposited with Lender shall be held
by Lender and shall be disbursed for costs actually incurred in connection with the Restoration on
the same conditions applicable to the disbursement of the Net Proceeds, and until so disbursed
pursuant to this Section 8.4(b) shall constitute additional security for the Debt and other
obligations under the Loan Documents.



          (vii) The excess, if any, of the Net Proceeds and the remaining balance, if any, of the Net
Proceeds Deficiency deposited with Lender after the Restoration Consultant certifies to Lender that
the Restoration has been completed in accordance with the provisions of this Section 8.4(b), and
the receipt by Lender of evidence satisfactory to Lender that all costs incurred in connection with
the Restoration have been paid in full, shall be remitted by Lender to



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Borrower, provided no Event of Default shall have occurred and shall be continuing under the
Note, this Agreement or any of the other Loan Documents.




     (c) All Net Proceeds not required (i) to be made available for the Restoration or (ii) to be
returned to Borrower as excess Net Proceeds pursuant to Section 8.4(b)(vii) may (x) be retained and
applied by Lender toward the payment of the Debt whether or not then due and payable in such order,
priority and proportions as Lender in its sole discretion shall deem proper, or, (y) at the sole
discretion of Lender, the same may be paid, either in whole or in part, to Borrower for such
purposes and upon such conditions as Lender shall designate. If, pursuant to this Section 8.4,
Lender shall receive and retain Net Proceeds, (i) the lien of the Mortgage shall be reduced only by
the amount thereof received and retained by Lender and actually applied by Lender in reduction of
the Debt; and (ii) notwithstanding any other provisions hereof, Borrower shall not be required to
repair or restore the portion of the Property affected by such Casualty or Condemnation to the
condition or character the Property was in immediately prior to such Casualty or Condemnation so
long as no Event of Default exists, but Borrower shall be required to remove all debris with
respect to the portion of the Property not required to be restored in a manner that is safe and is
not dangerous to health or other property and is in compliance with all applicable laws.



     (d) In the event of foreclosure of the Mortgage, or other transfer of title to the Property in
extinguishment in whole or in part of the Debt, all right, title and interest of Borrower in and to
the Policies then in force concerning the Property and all proceeds payable thereunder shall
thereupon vest in the purchaser at such foreclosure, Lender or other transferee in the event of
such other transfer of title.



ARTICLE IX.

RESERVE FUNDS




     Section 9.1 Required Repairs 



     (a) Borrower shall make the repairs and improvements to the Property set forth on Schedule I
and as more particularly described in the Property Condition Report prepared in connection with the
closing of the Loan (such repairs hereinafter referred to as “Required Repairs”). Borrower shall
complete the Required Repairs in a good and workmanlike manner on or before the date that is twelve
(12) months from the date hereof or within such other time frame for completion specifically set
forth on Schedule I.



     (b) Borrower shall establish on the date hereof an Eligible Account with Lender or Lender’s
agent to fund the Required Repairs (the “Required Repair Account”) into which Borrower shall
deposit on the date hereof the amount of $0, which amount equals 125% of the estimated cost for the
completion of the Required Repairs. Amounts so deposited shall hereinafter be referred to as the
"Required Repair Funds.”



     Section 9.2 Replacements 



     (a) On an ongoing basis throughout the term of the Loan, Borrower shall make capital repairs,
replacements and improvements necessary to keep the Property in good order and repair and in a good
marketable condition or prevent deterioration of the Property, including, but



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not limited to, those repairs, replacements and improvements more particularly described in
the Property Condition Report prepared in connection with the closing of the Loan (collectively,
the “Replacements”). Borrower shall complete all Replacements in a good and workmanlike manner as
soon as commercially reasonable after commencing to make each such Replacement.




     (b) Borrower shall establish on the date hereof an Eligible Account (or, during any Cash
Management Period, a sub-account of the Cash Management Account) with Lender or Lender’s agent to
fund the Replacements (the “Replacement Reserve Account”). Upon tie occurrence of an Event of
Default, Borrower shall deposit into the Replacement Reserve Account on or before the next
Scheduled Payment Date an amount equal to the aggregate total which would have accumulated in such
account if Borrower had made the Replacement Reserve Monthly Deposit on each Scheduled Payment Date
prior thereto. Upon the occurrence and during the continuance of an Event of Default, Borrower
shall deposit into the Replacement Reserve Account on each Scheduled Payment Date (the “Replacement
Reserve Monthly Deposit”) an amount equal to $583.42; provided that such monthly deposits shall not
be required following the discontinuance of such Event of Default. Amounts so deposited shall
hereinafter be referred to as “Replacement Reserve Funds .” Lender may, in its reasonable
discretion, adjust the Replacement Reserve Monthly Deposit from time to time to an amount
sufficient to maintain the proper maintenance and operation of the Property. In the event Lender
shall at any time increase the Replacement Reserve Monthly Deposit, Borrower may, at its election,
request that Lender obtain, at the sole cost and expense of Borrower, a Property Condition Report
prepared by an engineer selected by Lender in its reasonable discretion, in which case the
Replacement Reserve Monthly Deposit shall be adjusted by Lender based on the results of such
report, provided that in no event shall such amounts be reduced below the initial amount of the
Replacement Reserve Monthly Deposit set forth in herein.



     Section 9.3 Tenant Improvements and Leasing Commissions 



     (a) Borrower hereby agrees to (a) perform, or cause to be performed, tenant improvements
required under any Lease entered into in accordance with the provisions of Section 5.13 of this
Agreement (collectively, the ‘Tenant Improvements”), and (b) pay the costs of leasing commissions
incurred by Borrower in connection with the leasing of the Property or a portion thereof
(collectively, “Leasing Commissions”).



     (b) Borrower shall establish on the date hereof an Eligible Account (or, during any Cash
Management Period, a sub-account of the Cash Management Account) with Lender or Lender’s agent to
fund Tenant Improvements and Leasing Commissions (the “Leasing Reserve Account”) into which
Borrower shall deposit on the date hereof $0. In addition, upon the occurrence and during the
continuance of an Event of Default, Borrower shall deposit with Lender into the Leasing Reserve
Account any sum or termination fee payable to Borrower in connection with any Tenant’s election to
exercise any early termination option contained in its respective lease of space at the Property
(the “Termination Fee Deposit”) on the date of Borrower’s receipt thereof, provided that such
deposits shall not be required following the discontinuance of such Event of Default. Amounts so
deposited shall hereinafter be referred to as the “Leasing Reserve Funds .”



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     Section 9.4 Required Work



     Borrower shall diligently pursue all Required Repairs and Replacements (collectively, the
"Required Work”) to completion in accordance with the following requirements:



     (a) Lender reserves the right, at its option, to approve all contracts or work orders with
materialmen, mechanics, suppliers, subcontractors, contractors or other parties providing labor or
materials in connection with the Required Work to the extent such contracts or work orders exceed
$200,000. Upon Lender’s request, Borrower shall assign any contract or subcontract to Lender.



     (b) In the event Lender determines in its reasonable discretion that any Required Work is not
being or has not been performed in a workmanlike or timely manner, Lender shall have the option to
withhold disbursement for such unsatisfactory Required Work and to proceed under existing contracts
or to contract with third parties to complete such Required Work and to apply the Required Repair
Funds or the Replacement Reserve Funds, as applicable, toward the labor and materials necessary to
complete such Required Work, without providing any prior notice to Borrower and to exercise any and
all other remedies available to Lender upon an Event of Default hereunder.



     (c) In order to facilitate Lender’s completion of the Required Work, Borrower grants Lender
the right to enter onto the Property and perform any and all work and labor necessary to complete
the Required Work and/or employ watchmen to protect the Property from damage. All sums so expended
by Lender, to the extent not from the Reserve Funds, shall be deemed to have been advanced under
the Loan to Borrower and secured by the Mortgage. For this purpose Borrower constitutes and
appoints Lender its true and lawful attorney-in-fact with full power of substitution to complete or
undertake the Required Work in the name of Borrower upon Borrower’s failure to do so in a
workmanlike and timely manner. Such power of attorney shall be deemed to be a power coupled with an
interest and cannot be revoked. Borrower empowers said attorney-in-fact as follows: (i) to use any
of the Reserve Funds for the purpose of making or completing the Required Work; (ii) to make such
additions, changes and corrections to the Required Work as shall be necessary or desirable to
complete the Required Work; (iii) to employ such contractors, subcontractors, agents, architects
and inspectors as shall be required for such purposes; (iv) to pay, settle or compromise all
existing bills and claims which are or may become Liens against the Property, or as may be
necessary or desirable for the completion of the Required Work, or for clearance of title; (v) to
execute all applications and certificates in the name of Borrower which may be required by any of
the contract documents; (vi) to prosecute and defend all actions or proceedings in connection with
the Property or the rehabilitation and repair of the Property; and (vii) to do any and every act
which Borrower might do on its own behalf to fulfill the terms of this Agreement.



     (d) Nothing in this Section 9.4 shall: (i) make Lender responsible for making or completing
the Required Work; (ii) require Lender to expend funds in addition to the Reserve Funds to make or
complete any Required Work; (iii) obligate Lender to proceed with the Required Work; or (iv)
obligate Lender to demand from Borrower additional sums to make or complete any Required Work.



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     (e) Borrower shall permit Lender and Lender’s agents and representatives (including, without
limitation, Lender’s engineer, architect, or inspector) or third parties performing Required Work
pursuant to this Section 9.4 to enter onto the Property during normal business hours (subject to
the rights of tenants under their Leases) to inspect the progress of any Required Work and all
materials being used in connection therewith, to examine all plans and shop drawings relating to
such Required Work which are or may be kept at the Property, and to complete any Required Work made
pursuant to this Section 9.4. Borrower shall cause all contractors and subcontractors to cooperate
with Lender and Lender’s representatives or such other persons described above in connection with
inspections described in this Section 9.4 or the completion of Required Work pursuant to this
Section 9.4.



     (f) Lender may, to the extent any Required Work would reasonably require an inspection of the
Property, inspect the Property at Borrower’s expense prior to making a disbursement of the Reserve
Funds in order to verify completion of the Required Work for which reimbursement is sought.
Borrower shall pay Lender a reasonable inspection fee not exceeding $1,000 for each such
inspection. Lender may require that such inspection be conducted by an appropriate independent
qualified professional selected by Lender and/or may require a copy of a certificate of completion
by an independent qualified professional acceptable to Lender prior to the disbursement of the
Reserve Funds. Borrower shall pay the expense of the inspection as required hereunder, whether such
inspection is conducted by Lender or by an independent qualified professional.



     (g) The Required Work and all materials, equipment, fixtures, or any other item comprising a
part of any Required Work shall be constructed, installed or completed, as applicable, free and
clear of all mechanic’s, materialman’s or other Liens (except for Permitted Encumbrances).



     (h) Before each disbursement of the Reserve Funds, Lender may require Borrower to provide
Lender with a search of title to the Property effective to the date of the disbursement, which
search shows that no mechanic’s or materialmen’s or other Liens of any nature have been placed
against the Property since the date of recordation of the Mortgage and that title to the Property
is free and clear of all Liens (except for Permitted Encumbrances).



     (i) All Required Work shall comply with all Legal Requirements and applicable insurance
requirements including, without limitation, applicable building codes, special use permits,
environmental regulations, and requirements of insurance underwriters.



     (j) Borrower hereby assigns to Lender all rights and claims Borrower may have against all
Persons supplying labor or materials in connection with the Required Work; provided, however, that
Lender may not pursue any such rights or claims unless an Event of Default has occurred and remains
uncured.



     Section 9.5 Release of Reserve Funds 



     (a) Upon written request from Borrower and satisfaction of the requirements set forth in this
Section 9.5, Lender shall disburse to Borrower amounts from (i) the Required Repair Account to the
extent necessary to pay for or to reimburse Borrower for the actual costs of each



53









 




Required Repair (but not exceeding 125% of the original estimated cost of such Required Repair
as set forth on Schedule I, unless Lender has agreed to reimburse Borrower for such excess cost
pursuant to Section 9.5(f)) or (ii) the Replacement Reserve Account to the extent necessary to
reimburse Borrower for the actual costs of any approved Replacements. Notwithstanding the preceding
sentence, in no event shall Lender be required to (x) disburse any amounts which would cause the
amount of funds remaining in the Required Repair Account after any disbursement (other than with
respect to the final disbursement) to be less than 125% of the then current estimated cost of
completing all remaining Required Repairs for the Property, (y) disburse funds from any of the
Reserve Accounts if an Event of Default exists, or (z) disburse funds from the Replacement Reserve
Account to reimburse Borrower for the costs of routine repairs or maintenance to the Property or
for costs which are to be reimbursed from funds held in the Required Repair Account.




     (b) With each request for disbursement, Borrower shall certify in writing to Lender that all
Required Work has been performed in accordance with all Legal Requirements and that all such
Required Work has been completed lien free and paid for in full or will be paid for in full upon
disbursement of the requested funds. In addition, each request for disbursement in excess of
$50,000 shall be on a form provided or approved by Lender and shall (i) include copies of invoices
for all items or materials purchased and all labor or services provided, (ii) specify (A) the
Required Work for which the disbursement is requested, (B) the quantity and price of each item
purchased, if the Required Work includes the purchase or replacement of specific items, (C) the
price of all materials (grouped by type or category) used in any Required Work other than the
purchase or replacement of specific items, and (D) the cost of all contracted labor or other
services applicable to each Required Work for which such request for disbursement is made, (iii) if
requested by Lender, conditional lien waivers from each contractor, supplier, materialman, mechanic
or subcontractor with respect to the completion of its work or delivery of its materials. Except as
provided in Section 9.5(d), each request for disbursement shall be made only after completion of
the Required Repair or Replacement (or the portion thereof completed in accordance with Section
9.5(d)), as applicable, for which disbursement is requested. Borrower shall provide Lender evidence
satisfactory to Lender in its reasonable judgment of such completion or performance.



     (c) Any lien waiver delivered hereunder shall conform to all Legal Requirements and shall
cover all work performed and materials supplied (including equipment and fixtures) for the Property
by that contractor, supplier, subcontractor, mechanic or materialman through the date covered by
the current disbursement request.



     (d) If (i) the cost of any item of Required Work exceeds $200,000, (ii) the contractor
performing such Required Work requires periodic payments pursuant to terms of a written contract,
and (iii) Lender has approved in writing in advance such periodic payments, a request for
disbursement from the Reserve Accounts may be made after completion of a portion of the work under
such contract, provided (A) such contract requires payment upon completion of such portion of work,
(B) the materials for which the request is made are on site at the Property and are properly
secured or have been installed in the Property, (C) all other conditions in this Agreement for
disbursement have been satisfied, and (D) in the case of a Replacement, funds remaining in the
Replacement Reserve Account are, in Lender’s judgment, sufficient to complete such Replacement and
other Replacements when required.



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     (e) Borrower shall not make a request for, nor shall Lender have any obligation to make, any
disbursement from any Reserve Account more frequently than once in any calendar month and (except
in connection with the final disbursement) in any amount less than the lesser of (i) $100,000 or
(ii) the total cost of the Required Work for which the disbursement is requested.



     (f) In the event any Borrower requests a disbursement from the Required Repair Account to pay
for or to reimburse Borrower for the actual cost of labor or materials used in connection with
repairs or improvements other than the Required Repairs specified on Schedule I, or for a Required
Repair to the extent the cost of such Required Repair exceeds 125% of the estimated cost of such
Required Repair as set forth on Schedule I (in either case, an “Additional Required Repair”),
Borrower shall disclose in writing to Lender the reason why funds in the Required Repair Account
should be used to pay for such Additional Required Repair. If Lender reasonably determines that (i)
such Additional Required Repair is of the type intended to be covered by the Required Repair
Account, (ii) such Additional Required Repair is not covered or is not of the type intended to be
covered by the Replacement Reserve Account, (iii) costs for such Additional Required Repair are
reasonable, (iv) the funds in the Required Repair Account are sufficient to pay for such Additional
Required Repair and all other Required Repairs for the Property specified on Schedule I, and (v)
all other conditions for disbursement under this Agreement have been met, Lender may disburse funds
from the Required Repair Account.



     (g) In the event any Borrower requests a disbursement from the Replacement Reserve Account to
pay for or to reimburse Borrower for the actual cost of labor or materials used in connection with
repairs or improvements other than the Replacements specified in the Property Condition Report
prepared in connection with the closing of the Loan (an “Additional Replacement”), Borrower shall
disclose in writing to Lender the reason why funds in the Replacement Reserve Account should be
used to pay for such Additional Replacement. If Lender reasonably determines that (i) such
Additional Replacement is of the type intended to be covered by the Replacement Reserve Account,
(ii) such Additional Replacement is not covered or is not of the type intended to be covered by the
Required Repair Account, (iii) costs for such Additional Replacement are reasonable, (iv) the funds
in the Replacement Reserve Account are sufficient to pay for such Additional Replacement and all
other Replacements for the Property specified in the Property Condition Report, and (v) all other
conditions for disbursement under this Agreement have been met, Lender may disburse funds from the
Replacement Reserve Account.



     (h) Lender’s disbursement of any Reserve Funds or other acknowledgment of completion of any
Required Work in a manner satisfactory to Lender shall not be deemed a certification or warranty by
Lender to any Person that the Required Work has been completed in accordance with Legal
Requirements.



     (i) If the funds in any Reserve Account should exceed the amount of payments actually applied
by Lender for the purposes of the account, Lender in its sole discretion shall either return any
excess to Borrower or credit such excess against future payments to be made to that Reserve
Account. If at any time Lender reasonably determines that the Reserve Funds are not or will not be
sufficient to make the required payments, Lender shall notify Borrower of such determination and
Borrower shall pay to Lender any amount necessary to make up the deficiency within ten (10) days
after notice from Lender to Borrower requesting payment thereof.



55









 





     (j) The insufficiency of any balance in any of the Reserve Accounts shall not relieve Borrower
from its obligation to fulfill all preservation and maintenance covenants in the Loan Documents.



     (k) Upon the earlier to occur of (i) the timely completion of all Required Repairs and any
Additional Required Repairs, if any, in accordance with the requirements of this Agreement, as
verified by Lender in its reasonable discretion, or (ii) the payment in full of the Debt, all
amounts remaining on deposit, if any, in the Required Repair Account shall be returned to Borrower
or the Person shown on Lender’s records as being the owner of the Property and no other party shall
have any right or claim thereto.



     (l) Upon payment in full of the Debt, all amounts remaining on deposit, if any, in the
Replacement Reserve Account shall be promptly returned to Borrower or the Person shown on Lender’s
records as being the owner of the Property and no other party shall have any right or claim
thereto.



     (m) Upon the payment in full of the Debt, all amounts remaining on deposit, if any, in the
Leasing Reserve Account shall be promptly returned to Borrower or the Person shown on Lender’s
records as being the owner of the Property and no other party shall have any right or claim
thereto.



     Section 9.6 Tax and Insurance Reserve Funds 



     Borrower shall establish on the date hereof an Eligible Account (or, during any Cash
Management Period, a sub-account of the Cash Management Account) with Lender or Lender’s agent
sufficient to discharge Borrower’s obligations for the payment of Taxes and Insurance Premiums
pursuant to Section 5.4 and Section 8.1 hereof (the “Tax and Insurance Reserve Account”). Upon the
occurrence of an Event of Default, Borrower shall deposit into the Tax and Insurance Reserve
Account on or before the next Scheduled Payment Date and amount reasonably determined by Lender
which, when added to the required monthly deposits set forth in the next sentence, is sufficient to
make the payments of Taxes and Insurance Premiums as required herein. Upon the occurrence and
during the continuance of an Event of Default, Borrower shall deposit into the Tax and Insurance
Reserve Account on each Scheduled Payment Date (a) one-twelfth of the Taxes that Lender estimates
will be payable during the next ensuing twelve (12) months or such higher amount necessary to
accumulate with Lender sufficient funds to pay all such Taxes at least thirty (30) days prior to
the earlier of (i) the date that the same will become delinquent and (ii) the date that additional
charges or interest will accrue due to the non-payment thereof, and (b) except to the extent Lender
has waived the insurance escrow because the insurance required hereunder is maintained under a
blanket insurance Policy acceptable to Lender in accordance with Section 8.1(c), one-twelfth of the
Insurance Premiums that Lender estimates will be payable during the next ensuing twelve (12) months
for the renewal of the coverage afforded by the Policies upon the expiration thereof or such higher
amount necessary to accumulate with Lender sufficient funds to pay all such Insurance Premiums at
least thirty (30) days prior to the expiration of the Policies (said amounts in (a) and (b) above
hereinafter called the “Tax and Insurance Reserve Funds”); provided that such monthly deposits
shall not be required following the discontinuance of such Event of Default. Lender will apply the
Tax and Insurance Reserve Funds to payments of Taxes and Insurance Premiums required to be made by




56












 




Borrower pursuant to Section 5.4 and Section 8.1 hereof. In making any disbursement from
the Tax and Insurance Reserve Account, Lender may do so according to any bill, statement or
estimate procured from the appropriate public office or tax lien service (with respect to Taxes) or
insurer or agent (with respect to Insurance Premiums), without inquiry into the accuracy of such
bill, statement or estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien
or title or claim thereof. If the amount of the Tax and Insurance Reserve Funds shall exceed the
amounts due for Taxes and Insurance Premiums pursuant to Section 5.4 and Section 8.1 hereof, Lender
shall, in its sole discretion, return any excess to Borrower or credit such excess against future
payments to be made to the Tax and Insurance Reserve Account. In allocating any such excess, Lender
may deal with the person shown on Lender’s records as being the owner of the Property. Any amount
remaining in the Tax and Insurance Reserve Account after the Debt has been paid in full shall be
returned to Borrower or the person shown on Lender’s records as being the owner of the Property and
no other party shall have any right or claim thereto. If at any time Lender reasonably determines
that the Tax and Insurance Reserve Funds are not or will not be sufficient to pay Taxes and
Insurance Premiums by the dates set forth in (a) and (b) above, Lender shall notify Borrower of
such determination and Borrower shall pay to Lender any amount necessary to make up the deficiency
within ten (10) days after notice from Lender to Borrower requesting payment thereof.




     Section 9.7 Reserve Funds Generally



     (a) (i) Except for the Interest Bearing Reserve Accounts, no earnings or interest on the
Reserve Accounts shall be payable to Borrower. Neither Lender nor any loan servicer that at any
time holds or maintains such non-interest-bearing Reserve Accounts shall have any obligation to
keep or maintain such Reserve Accounts or any funds deposited therein in interest-bearing accounts.
If Lender or any such loan servicer elects in its sole and absolute discretion to keep or maintain
any non-interest-bearing Reserve Account or any funds deposited therein in an interest-bearing
account, the account shall be an Eligible Account and (A) such funds shall not be invested except
in Permitted Investments, and (B) all interest earned or accrued thereon shall be for the account
of and be retained by Lender or such loan servicer.



          (ii) Funds deposited in the Interest Bearing Reserve Accounts shall be held in an
interest-bearing business savings account and interest shall be credited to Borrower. In no event
shall Lender or any loan servicer that at any time holds or maintains any Interest Bearing Reserve
Account be required to select any particular interest-bearing account or the account that yields
the highest rate of interest, provided that selection of the account shall be consistent with the
general standards at the time being utilized by Lender or the loan servicer, as applicable, in
establishing similar accounts for loans of comparable type. All such interest shall be and become
part of the applicable Interest Bearing Reserve Account and shall be disbursed in accordance with
Section 9.5 above; provided, however, that Lender may, at its election, retain any such interest
for its own account during the occurrence and continuance of an Event of Default. Borrower agrees
that it shall include all interest on Reserve Funds in the Interest Bearing Reserve Accounts as the
income of Borrower (and, if Borrower is a partnership or other pass-through entity, the partners,
members or beneficiaries of Borrower, as the case may be), and shall be the owner of the Reserve
Funds in the Interest Bearing Reserve Accounts for federal and applicable state and local tax
purposes, except to the extent that Lender retains any interest for its own account during the
occurrence and continuance of an Event of Default as provided herein.






57









 








     (b) Borrower grants to Lender a first-priority perfected security interest in, and assigns and
pledges to Lender, each of the Reserve Accounts and any and all Reserve Funds now or hereafter
deposited in the Reserve Accounts as additional security for payment of the Debt. Until expended or
applied in accordance herewith, the Reserve Accounts and the Reserve Funds shall constitute
additional security for the Debt. The provisions of this Section 9.7 are intended to give Lender or
any subsequent holder of the Loan “control” of the Reserve Accounts within the meaning of the UCC.



     (c) The Reserve Accounts and any and all Reserve Funds now or hereafter deposited in the
Reserve Accounts shall be subject to the exclusive dominion and control of Lender, which shall hold
the Reserve Accounts and any or all Reserve Funds now or hereafter deposited in the Reserve
Accounts subject to the terms and conditions of this Agreement. Borrower shall have no right of
withdrawal from the Reserve Accounts or any otter right or power with respect to the Reserve
Accounts or any or all of the Reserve Funds now or hereafter deposited in the Reserve Accounts,
except as expressly provided in this Agreement.



     (d) Lender shall furnish or cause to be furnished to Borrower, without charge, an annual
accounting of each Reserve Account in the normal format of Lender or its loan servicer, showing
credits and debits to such Reserve Account and the purpose for which each debit to each Reserve
Account was made.



     (e) As long as no Event of Default has occurred, Lender shall make disbursements from the
Reserve Accounts in accordance with this Agreement. All such disbursements shall be deemed to have
been expressly pre-authorized by Borrower, and shall not be deemed to constitute the exercise by
Lender of any remedies against Borrower unless an Event of Default has occurred and is continuing
and Lender has expressly stated in writing its intent to proceed to exercise its remedies as a
secured party, pledgee or lienholder with respect to the Reserve Accounts.



     (f) If any Event of Default occurs, Borrower shall immediately lose all of its rights to
receive disbursements from the Reserve Accounts until the earlier to occur of (i) the date on which
such Event of Default is cured to Lender’s reasonable satisfaction, or (ii) the payment in full of
the Debt. In addition, at Lender’s election, Borrower shall lose all of its rights to receive
interest on the Interest Bearing Reserve Accounts during the occurrence and continuance of an Event
of Default. Upon the occurrence of any Event of Default, Lender may exercise any or all of its
rights and remedies as a secured party, pledgee and lienholder with respect to the Reserve
Accounts. Without limitation of the foregoing, upon any Event of Default, Lender may use and
disburse the Reserve Funds (or any portion thereof) for any of the following purposes: (A)
repayment of the Debt, including, but not limited to, principal prepayments and the prepayment
premium applicable to such full or partial prepayment (as applicable); (B) reimbursement of Lender
for all losses, fees, costs and expenses (including, without limitation, reasonable legal fees)
suffered or incurred by Lender as a result of such Event of Default; (C) payment of any amount
expended in exercising any or all rights and remedies available to Lender at law or in equity or
under this Agreement or under any of the other Loan Documents; (D) payment of any item from any of
the Reserve Accounts as required or permitted under this Agreement; or (E) any other purpose
permitted by applicable law; provided, however, that any such application of funds shall not cure
or be deemed to cure any Event of Default. Without limiting any other provisions



58









 




hereof, each of the remedial actions described in the immediately preceding sentence shall be deemed to be a
commercially reasonable exercise of Lender’s rights and remedies as a secured party with respect to
the Reserve Funds and shall not in any event be deemed to constitute a setoff or a foreclosure of a
statutory banker’s lien. Nothing in this Agreement shall obligate Lender to apply all or any
portion of the Reserve Funds to effect a cure of any Event of Default, or to pay the Debt, or in
any specific order of priority. The exercise of any or all of Lender’s rights and remedies under
this Agreement or under any of the other Loan Documents shall not in any way prejudice or affect
Lender’s right to initiate and complete a foreclosure under the Mortgage.




     (g) The Reserve Funds shall not constitute escrow or trust funds and may be commingled with
other monies held by Lender. Notwithstanding anything else herein to the contrary, Lender may
commingle in one or more Eligible Accounts any and all funds controlled by Lender, including,
without limitation, funds pledged in favor of Lender by other Borrowers, whether for the same
purposes as the Reserve Accounts or otherwise. Without limiting any other provisions of this
Agreement or any other Loan Document, the Reserve Accounts may be established and held in such name
or names as Lender or its loan servicer, as agent for Lender, shall deem appropriate, including,
without limitation, in the name of Lender or such loan servicer as agent for Lender. In the case of
any Reserve Account which is held in a commingled account, Lender or its loan servicer, as
applicable, shall maintain records sufficient to enable it to determine at all times which portion
of such account is related to the Loan. The Reserve Accounts are solely for the protection of
Lender. With respect to the Reserve Accounts, Lender shall have no responsibility beyond the
allowance of due credit for the sums actually received by Lender or beyond the reimbursement or
payment of the costs and expenses for which such accounts were established in accordance with their
terms. Upon assignment of the Loan by Lender, any Reserve Funds shall be turned over to the
assignee and any responsibility of Lender as assignor shall terminate. The requirements of this
Agreement concerning Reserve Accounts in no way supersede, limit or waive any other rights or
obligations of the parties under any of the Loan Documents or under applicable law.



     (h) Borrower shall not, without obtaining the prior written consent of Lender, further pledge,
assign or grant any security interest in the Reserve Accounts or the Reserve Funds deposited
therein or permit any Lien to attach thereto, except for the security interest granted in this
Section 9.7, or any levy to be made thereon, or any UCC Financing Statements, except those naming
Lender as the secured party, to be filed with respect thereto.



     (i) Borrower will maintain the security interest created by this Section 9.7 as a first
priority perfected security interest and will defend the right, title and interest of Lender in and
to the Reserve Accounts and the Reserve Funds against the claims and demands of all Persons
whomsoever. At any time and from time to time, upon the written request of Lender, and at the sole
expense of Borrower, Borrower will promptly and duly execute and deliver such further instruments
and documents and will take such further actions as Lender reasonably may request for the purpose
of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein
granted.



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     Section 9.8 Excess Cash



     Concurrently with the establishment of the Cash Management Account, Borrower shall establish a
sub-account of the Cash Management Account into which Borrower shall deposit all Excess Cash on
each Scheduled Payment Date during any Cash Management Period (the “Excess Cash Reserve Account”).
Amounts so deposited shall hereinafter be referred to as the “Excess Cash Reserve Funds.” Provided
no Event of Default has occurred and is continuing, sums from the Excess Cash Reserve Account in an
amount not to exceed three (3) months Debt Service shall be disbursed to Borrower’s Account upon
the discontinuation of a Cash Management Period. In the event a Cash Management Period occurs twice
during the term of the Loan, Borrower shall not be entitled to any disbursement of the amounts in
the Excess Cash Reserve Account during the remaining term of the Loan, the Cash Management Period
shall continue, and Borrower shall continue to be obligated to pay Excess Cash to Lender on each
Scheduled Payment Date until the Debt is paid in full. All remaining sums, if any, in the Excess
Cash Reserve Account shall be disbursed to Borrower’s Account upon the payment in full of the Debt.



     Section 9.9 Operating Expenses; Extraordinary Expenses.



     (a) Concurrently with the establishment of the Cash Management Account, Borrower shall
establish a sub-account of the Cash Management Account into which Borrower shall deposit, on each
Scheduled Payment Date during any Cash Management Period, funds sufficient to pay all Operating
Expenses to be incurred for the following month in accordance with the Annual Budget approved by
Lender (the “Operating Expense Reserve Account.” Amounts so deposited shall hereinafter be referred
to as the “Operating Expense Reserve Funds.” Provided no Event of Default has occurred and is
continuing, sums from the Operating Expense Reserve Account shall be disbursed by Lender to
Borrower following receipt and approval of Borrower’s written request for the payment of such
Operating Expenses.



     (b) Concurrently with the establishment of the Cash Management Account, Borrower shall
establish a sub-account of the Cash Management Account with Lender or Lender’s agent into which
Borrower shall deposit, on each Scheduled Payment Date during any Cash Management Period, funds
sufficient to pay any Extraordinary Expenses for the following month which have been approved by
Lender (the “Extraordinary Expense Reserve Account.”) Amounts so deposited shall hereinafter be
referred to as the “Extraordinary Expense Reserve Funds.” Provided no Event of Default has occurred
and is continuing, sums from the Extraordinary Expense Reserve Account shall be disbursed by Lender
to Borrower following receipt and approval of Borrower’s written request for the payment of such
Extraordinary Expenses.



ARTICLE X.

CASH MANAGEMENT




     Section 10.1 Lockbox Account and Cash Management Account.



     (a) Borrower covenants that, no later than thirty (30) days after the Closing Date, Borrower
will establish and shall maintain, (i) pursuant to a Lockbox Agreement, a non-interest




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bearing Eligible Account into which Borrower shall, and shall cause Manager to,
deposit or cause to be deposited, all Rents and other revenue from the Property (such account, all
funds at any time on deposit therein and any proceeds, replacements or substitutions of such
account or funds therein, are referred to herein as the “Lockbox Account”), and (ii) an interest
bearing Eligible Account into which funds in the Lockbox Account shall be transferred pursuant to
the terms of Section 10.2(b) hereof (such account, the sub-accounts thereof, all funds at any time
on deposit therein and any proceeds, replacements or substitutions of such account or funds
therein, are referred to herein as the “Cash Management Account”).




     (b) The Lockbox Account and Cash Management Account shall each be in the name of Borrower for
the benefit of Lender, provided that Borrower shall be the owner of all funds on deposit in such
accounts for federal and applicable state and local tax purposes (except to the extent Lender
retains any interest earned on the Cash Management Account for its own account following the
occurrence and during the continuance of an Event of Default). Sums on deposit in the Cash
Management Account shall not be invested except in such Permitted Investments as determined and
directed by Lender and all income earned thereon shall be the income of Borrower and be applied to
and become part of the Cash Management Account, to be disbursed in accordance with this Article 10.
Neither Lockbox Bank nor Lender shall have any liability for any loss resulting from the investment
of funds in Permitted Investments in accordance with the terms and conditions of this Agreement.



     (c) The Lockbox Account and Cash Management Account shall be subject to the exclusive dominion
and control of Lender and, except as otherwise expressly provided herein, neither Borrower, Manager
nor any other party claiming on behalf of, or through, Borrower or Manager, shall have any right of
withdrawal therefrom or any other right or power with respect thereto.



     (d) Borrower agrees to pay the customary fees and expenses of Deposit Bank (incurred in
connection with maintaining the Lockbox Account) and Lender (incurred in connection with
maintaining the Lockbox Account) and any successors thereto in connection therewith, as separately
agreed by them from time to time.



     (e) Lender shall be responsible for the performance only of such duties with respect to the
Cash Management Account as are specifically set forth herein, and no duty shall be implied from any
provision hereof. Lender shall not be under any obligation or duty to perfonn any act which would
involve it in expense or liability or to institute or defend any suit in respect hereof, or to
advance any of its own monies. Borrower shall indemnify and hold Lender and its directors,
employees, officers and agents harmless from and against any loss, cost or damage (including,
without limitation, reasonable attorneys’ fees and disbursements) incurred by such parties in
connection with the Cash Management Account other than such as result from the gross negligence or
willful misconduct of Lender or intentional nonperformance by Lender of its obligations under this
Agreement.



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     Section 10.2 Deposits and Withdrawals.



     (a) Borrower represents, warrants and covenants that:



          (i) Concurrently with the execution of this Agreement, Borrower has delivered to Lender a
Tenant Direction Letter with respect to each existing Lease notifying and advising each Tenant
thereunder to send directly to the Lockbox all payments of Rents or any other item payable under
such Leases. In addition, concurrently with the execution of any Lease after the date hereof,
Borrower shall deliver to Lender a Tenant Direction Letter with respect to such Lease. Lender shall
hold all Tenant Direction Letters prior to the occurrence of a Cash Management Period. Borrower
hereby expressly authorizes Lender to deliver any or all of the Tenant Direction Letters to the
applicable Tenants upon the occurrence of a Cash Management Period. If Borrower fails to provide
any such notice (and without prejudice to Lender’s rights with respect to such default), Lender
shall have the right, and Borrower hereby grants to Lender a power of attorney (which power of
attorney shall be coupled with an interest and irrevocable so long as any portion of the Debt
remains outstanding), to sign and deliver a Tenant Direction Letter;




          (ii) Borrower shall, and shall cause Manager to, instruct all Persons that maintain open
accounts with Borrower or Manager with respect to the Property or with whom Borrower or Manager
does business on an “accounts receivable” basis with respect to the Property to deliver all
payments due under such accounts to the Lockbox. Neither Borrower nor Manager shall direct any such
Person to make payments due under such accounts in any other manner;




          (iii) All Rents or other income from the Property shall (A) be deemed additional security for
payment of the Debt and shall be held in trust for the benefit, and as the property, of Lender, (B)
not be commingled with any other funds or property of Borrower or Manager, and (C) if received by
Borrower or Manager notwithstanding the delivery of a Tenant Direction Letter, be deposited in the
Lockbox Account within one (1) Business Day of receipt;




          (iv) Without the prior written consent of Lender, so long as any portion of the Debt remains
outstanding, neither Borrower nor Manager shall terminate, amend, revoke or modify any Tenant
Direction Letter in any manner whatsoever or direct or cause any Tenant to pay any amount in any
manner other than as provided in the related Tenant Direction Letter; and




          (v) So long as any portion of the Debt remains outstanding, neither Borrower, Manager nor any
other Person shall open or maintain any accounts other than the Lockbox Account into which revenues
from the ownership and operation of the Property are deposited. The foregoing shall not prohibit
Borrower from utilizing one or more separate accounts for the disbursement or retention of funds
that have been transferred to Borrower pursuant to the express terms of this Agreement.




     (b) Provided no Event of Default has occurred, at all times other than during a Cash
Management Period, notwithstanding anything to the contrary herein, Borrower shall have the sole
right to withdraw funds on deposit in the Lockbox Account and may do so from time to time. Upon
receipt of notice pursuant to the Lockbox Agreement by Lockbox Bank of the



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commencement of a Cash Management Period or the occurrence of an Event of Default, (i) all
rights of Borrower to the withdrawal of funds from the Lockbox Account shall immediately cease and
be automatically vested with Lender, and (ii) Lender shall have the right to transfer, or cause to
be transferred, and Borrower hereby irrevocably authorizes Lender to transfer, or cause to be
transferred, and Lender shall transfer, on each Business Day by wire transfer or other method of
transfer mutually agreeable to Lockbox Bank and Lender of immediately available funds, all
collected and available balances in the Lockbox Account to the Cash Management Account to be held
until disbursed by Lender pursuant to Section 10.2(c). Provided no Event of Default has occurred
and is continuing, all rights of Lender to the withdrawal of funds from the Lockbox Account shall
immediately cease and be automatically vested with Borrower upon the earlier to occur of (a)
payment in full of the Debt or (b) the discontinuation of a Cash Management Period. In the event a
Cash Management Period occurs twice during the term of the Loan, Borrower shall not be entitled to
any rights to the withdrawal of funds from the Lockbox Account during the remaining term of the
Loan, the Cash Management Period shall continue, and Lender shall continue to have the right to the
withdrawal of funds from the Lockbox Account until the Debt is paid in full.




     (c) During a Cash Management Period, on each Scheduled Payment Date (and if such day is not a
Business Day, then the immediately preceding day which is a Business Day) commencing the month
immediately following the month during which the Cash Management Period commences, Borrower hereby
irrevocably authorizes Lender to withdraw or allocate to the sub-accounts of the Cash Management
Account, as the case may be, amounts received in the Cash Management Account, in each case to the
extent that sufficient funds remain therefor:



          (i) funds sufficient to pay the monthly deposits to the Tax and Insurance Reserve Account
shall be allocated to the Tax and Insurance Reserve Account to be held and disbursed in accordance
with Section 9.6;




          (ii) funds sufficient to pay the Monthly Payment Amount shall be withdrawn and paid to Lender;




          (iii) funds sufficient to pay the Replacement Reserve Monthly Deposit shall be allocated to
the Replacement Reserve Account to be held and disbursed in accordance with Section 9.5;




          (iv) funds sufficient to pay the Leasing Reserve Monthly Deposit and Termination Fee Deposits
shall be allocated to the Leasing Reserve Account to be held and disbursed in accordance with
Section 9.5;




          (v) funds sufficient to pay any interest accruing at the Default Rate, late payment charges,
if any, and any other sums due and payable to Lender under any of the Loan Documents, shall be
withdrawn and paid to Lender and applied against such items;




          (vi) funds sufficient to pay Lockbox Bank for all costs and expenses incurred by Lockbox Bank
in connection with the maintenance and administration of the Lockbox Account;




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          (vii) during a Cash Management Period, funds sufficient to pay Operating Expenses (to the
extent actually incurred) for the following month incurred in accordance with the related Annual
Budget shall be allocated to the Operating Expense Reserve Account to be held and disbursed in
accordance with Section 9.9;




          (viii) during a Cash Management Period, funds sufficient to pay any Extraordinary Expenses for
the following month which have been approved by Lender shall be allocated to the Extraordinary
Expense Account to be held and disbursed in accordance with Section 9.9;




          (ix) funds in an amount equal to the balance (if any) remaining on deposit in the Cash
Management Account after the foregoing withdrawals and allocations shall, during any Cash
Management Period, be deposited in the Excess Cash Reserve Account to be held and disbursed in
accordance with Section 9.8, or if a Cash Management Period is not in effect, be transferred to
Borrower’s Account.




     (d) Notwithstanding anything to the contrary herein, Borrower acknowledges that Borrower is
responsible for monitoring the sufficiency of funds deposited in the Cash Management Account and
that Borrower is liable for any deficiency in available funds, irrespective of whether Borrower has
received any account statement, notice or demand from Lender or Lender’s servicer. If the amount on
deposit in the Cash Management Account is insufficient to make all of the withdrawals and
allocations described in Section 10.2(c)(i) through (vi) above, Borrower shall deposit such
deficiency into the Cash Management Account within five (5) days (provided that such five (5) day
period shall not constitute a grace period for any default or Event of Default under this Agreement
or any other Loan Document based on a failure to satisfy any monetary obligation provided in any
Loan Document).



     (e) If an Event of Default shall have occurred and be continuing, Borrower hereby irrevocably
authorizes Lender to make any and all withdrawals from the Lockbox Account and Cash Management
Account and transfers between any of the Reserve Accounts as Lender shall determine in Lender’s
sole and absolute discretion and Lender may use all funds contained in any such accounts for any
purpose, including but not limited to repayment of the Debt in such order, proportion and priority
as Lender may determine in its sole and absolute discretion. Lender’s right to withdraw and apply
funds as stated herein shall be in addition to all other rights and remedies provided to Lender
under this Agreement, the Note, the Mortgage and the other Loan Documents.



     Section 10.3 Security Interest.



     (a) To secure the full and punctual payment of the Debt and performance of all obligations of
Borrower now or hereafter existing under this Agreement and the other Loan Documents, Borrower
hereby grants to Lender a first-priority perfected security interest in the Lockbox Account and
Cash Management Account, all interest, cash, checks, drafts, certificates and instruments, if any,
from time to time deposited or held therein, any and all amounts invested in Permitted Investments,
and all “proceeds” (as defined in the UCC as in effect in the state in which the Lockbox Account
and Cash Management Account are located or maintained) of any or all of the foregoing. Furthermore,
Borrower shall not, without obtaining the prior written consent




64












 




of Lender, further pledge, assign or grant any security interest in any of the foregoing
or permit any Lien to attach thereto or any levy to be made thereon or any UCC Financing Statements
to be filed with respect thereto. Borrower will maintain the security interest created by this
Section 10.3(a) as a first priority perfected security interest and will defend the right, title
and interest of Lender in and to the Lockbox Account and Cash Management Account against the claims
and demands of all Persons whomsoever.




     (b) Borrower authorizes Lender to file any financing statement or statements required by
Lender to establish or maintain the validity, perfection and priority of the security interest
granted herein in connection with the Lockbox Account and Cash Management Account. Borrower agrees
that at any time and from time to time, at the expense of Borrower, Borrower will promptly and duly
execute and deliver all further instruments and documents, and take all further action, that may be
necessary or desirable, or that Lender may reasonably request, in order to perfect and protect any
security interest granted or purported to be granted hereby (including, without limitation, any
security interest in and to any Permitted Investments) or to enable Lender to exercise and enforce
its rights and remedies hereunder.



     (c) Upon the occurrence of an Event of Default, Lender may exercise any or all of its rights
and remedies as a secured party, pledgee and lienholder with respect to the Lockbox Account and
Cash Management Account. Without limitation of the foregoing, upon any Event of Default, Lender may
use the Lockbox Account and Cash Management Account for any of the following purposes: (A)
repayment of the Debt, including, but not limited to, principal prepayments and the prepayment
premium applicable to such full or partial prepayment (as applicable); (B) reimbursement of Lender
for all losses, fees, costs and expenses (including, without limitation, reasonable legal fees)
suffered or incurred by Lender as a result of such Event of Default; (C) payment of any amount
expended in exercising any or all rights and remedies available to Lender at law or in equity or
under this Agreement or under any of the other Loan Documents; (D) payment of any item as required
or permitted under this Agreement; or (E) any other purpose permitted by applicable law; provided,
however, that any such application of funds shall not cure or be deemed to cure any Event of
Default. Without limiting any other provisions hereof, each of the remedial actions described in
the immediately preceding sentence shall be deemed to be a commercially reasonable exercise of
Lender’s rights and remedies as a secured party with respect to the Lockbox Account and Cash
Management Account and shall not in any event be deemed to constitute a setoff or a foreclosure of
a statutory banker’s lien. Nothing in this Agreement shall obligate Lender to apply all or any
portion of the Lockbox Account or Cash Management Account to effect a cure of any Event of Default,
or to pay the Debt, or in any specific order of priority. The exercise of any or all of Lender’s
rights and remedies under this Agreement or under any of the other Loan Documents shall not in any
way prejudice or affect Lender’s right to initiate and complete a foreclosure under the Mortgage.



     (d) Definitions. Notwithstanding anything to the contrary contained herein, For
purposes of this Article 10 only, Business Day shall mean a day on which Lender and Lockbox Bank
are both open for the conduct of substantially all of their respective banking business at the
office in the city in which the Note is payable, with respect to Lender and at the office in the
city where the Lockbox Account is maintained, with respect to Lockbox Bank (in both instances,
excluding Saturdays and Sundays).



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ARTICLE XI.

EVENTS OF DEFAULT; REMEDIES




     Section 11.1 Event of Default



     The occurrence of any one or more of the following events shall constitute an “Event of
Default”:



     (a) if any portion of the Debt is not paid prior to the fifth day following the date the same
is due or if the entire Debt is not paid on or before the Maturity Date;



     (b) except as otherwise expressly provided in the Loan Documents, if any of the Taxes or Other
Charges are not paid when the same are due and payable, unless there is sufficient money in the Tax
and Insurance Reserve Account for payment of amounts then due and payable and Lender’s access to
such money has not been constrained or restricted in any manner;



     (c) if (i) the Policies are not kept in full force and effect, (ii) the Acord 28 (or similar)
certificate is not delivered to Lender in accordance with Section 8.1 or (iii) certified copies of
the Policies are not delivered to Lender upon request, provided such copies are available;



     (d) if Borrower breaches any covenant with respect to itself or any SPE Component Entity (if
any) contained in Article 6 or any covenant contained in Article 7 hereof;



     (e) if any representation or warranty of, or with respect to, Borrower, Borrower Principal,
any SPE Component Entity, or any member, general partner, principal or beneficial owner of any of
the foregoing, made herein, in any other Loan Document, or in any certificate, report, financial
statement or other instrument or document furnished to Lender at the time of the closing of the
Loan or during the term of the Loan shall have been false or misleading in any material respect
when made;



     (f) if (i) Borrower, or any managing member or general partner of Borrower, Borrower
Principal, or any SPE Component Entity (if any) shall commence any case, proceeding or other action
(A) under any Creditors Rights Laws, seeking to have an order for relief entered with respect to
it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, or (B) seeking
appointment of a receiver, trustee, custodian, conservator or other similar official for it or for
all or any substantial part of its assets, or Borrower, any managing member or general partner of
Borrower, Borrower Principal, or any SPE Component Entity (if any) shall make a general assignment
for the benefit of its creditors; or (ii) there shall be commenced against Borrower, any managing
member or general partner of Borrower, Borrower Principal, or any SPE Component Entity (if any) any
case, proceeding or other action of a nature referred to in clause (i) above which (A) results in
the entry of an order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of sixty (60) days; or (iii) there shall be
commenced against Borrower, any managing member or general partner of Borrower, Borrower Principal,
or any SPE Component Entity (if any) any case, proceeding or other action seeking issuance of a
wan-ant of attachment, execution, distraint or similar process against all or any substantial part
of its assets which results in the entry of any order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry
thereof; or (iv) Borrower, any managing



66









 




member or general partner of Borrower, Borrower Principal, or any SPE Component Entity (if
any) shall take any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) Borrower,
any managing member or general partner of Borrower, Borrower Principal, or any SPE Component Entity
(if any) shall generally not, or shall be unable to, or shall admit in writing its inability to,
pay its debts as they become due;




     (g) if Borrower shall be in default beyond applicable notice and grace periods under any other
mortgage, deed of trust, deed to secure debt or other security agreement covering any part of the
Property, whether it be superior or junior in lien to the Mortgage;



     (h) if the Property becomes subject to any mechanic’s, materialman’s or other Lien other than
a Lien for any Taxes or Other Charges not then due and payable and the Lien shall remain
undischarged of record (by payment, bonding or otherwise) for a period of forty-five (45) days;



     (i) if any federal tax lien is filed against Borrower, any member or general partner of
Borrower, Borrower Principal, or any SPE Component Entity (if any) or the Property and same is not
discharged of record within thirty (30) days after same is filed;



     (j) if a judgment is filed against the Borrower in excess of $100,000 which is not vacated or
discharged within 60 days;



     (k) if any default occurs under any guaranty or indemnity executed in connection herewith and
such default continues after the expiration of applicable grace periods, if any;



     (l) if Borrower shall permit any event within its control to occur that would cause any REA to
terminate without notice or action by any party thereto or would entitle any party to terminate any
REA and the term thereof by giving notice to Borrower; or any REA shall be surrendered, terminated
or canceled for any reason or under any circumstance whatsoever except as provided for in such REA;
or any term of any REA shall be modified or supplemented without Lender’s consent; or Borrower
shall fail, within ten (10) Business Days after demand by Lender, to exercise its option to renew
or extend the term of any REA or shall fail or neglect to pursue diligently all actions necessary
to exercise such renewal rights pursuant to such REA except as provided for in such REA; or



     (m) if Borrower shall continue to be in default under any other term, covenant or condition of
this Agreement or any of the Loan Documents for more than ten (10) days after notice from Lender in
the case of any default which can be cured by the payment of a sum of money or for thirty (30) days
after notice from Lender in the case of any other default, provided that if such default cannot
reasonably be cured within such thirty (30) day period and Borrower shall have commenced to cure
such default within such thirty (30) day period and thereafter diligently and expeditiously
proceeds to cure the same, such thirty (30) day period shall be extended for so long as it shall
require Borrower in the exercise of due diligence to cure such default, it being agreed that no
such extension shall be for a period in excess of ninety (90) days.



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     Section 11.2 Remedies



     (a) Upon the occurrence of an Event of Default (other than an Event of Default described in
Section 11.1(f) above) and at any time thereafter Lender may, in addition to any other rights or
remedies available to it pursuant to this Agreement and the other Loan Documents or at law or in
equity, take such action, without notice or demand, that Lender deems advisable to protect and
enforce its rights against Borrower and in the Property, including, without limitation, declaring
the Debt to be immediately due and payable, and Lender may enforce or avail itself of any or all
rights or remedies provided in the Loan Documents against Borrower and the Property, including,
without limitation, all rights or remedies available at law or in equity; and upon any Event of
Default described in Section 11.1(f) above, the Debt and all other obligations of Borrower
hereunder and under the other Loan Documents shall immediately and automatically become due and
payable, without notice or demand, and Borrower hereby expressly waives any such notice or demand,
anything contained herein or in any other Loan Document to the contrary notwithstanding.



     (b) Upon the occurrence of an Event of Default, all or any one or more of the rights, powers,
privileges and other remedies available to Lender against Borrower under this Agreement or any of
the other Loan Documents executed and delivered by, or applicable to, Borrower or at law or in
equity may be exercised by Lender at any time and from time to time, whether or not all or any of
the Debt shall be declared due and payable, and whether or not Lender shall have commenced any
foreclosure proceeding or other action for the enforcement of its rights and remedies under any of
the Loan Documents with respect to the Property. Any such actions taken by Lender shall be
cumulative and concurrent and may be pursued independently, singularly, successively, together or
otherwise, at such time and in such order as Lender may determine in its sole discretion, to the
fullest extent permitted by law, without impairing or otherwise affecting the other rights and
remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan
Documents.



ARTICLE XII.

ENVIRONMENTAL PROVISIONS



     Section 12.1 Environmental Representations and Warranties



     Borrower represents and warrants to the best of its knowledge, based upon an Environmental
Report of the Property and information that Borrower knows without any further independent
investigation, that: (a) there are no Hazardous Materials or underground storage tanks in, on, or
under the Property, except those that are both (i) in compliance with Environmental Laws and with
permits issued pursuant thereto (if such permits are required), if any, and (ii) either (A) in the
case of Hazardous Materials, in amounts not in excess of that necessary to operate the Property for
the purposes set forth herein or (B) fully disclosed to and approved by Lender in writing pursuant
to an Environmental Report; (b) there are no past, present or threatened Releases of Hazardous
Materials in violation of any Environmental Law or which would require remediation by a
Governmental Authority in, on, under or from the Property except as described in the Environmental
Report; (c) there is no threat of any Release of Hazardous Materials migrating to the Property
except as described in the Environmental Report; (d) there is no past or present non-compliance
with Environmental Laws, or with permits issued



68









 




pursuant thereto, in connection with the Property except as described in the Environmental
Report; (e) Borrower does not know of, and has not received, any written or oral notice or other
communication from any Person relating to Hazardous Materials in, on, under or from the Property;
(f) the Property is free of Mold; and (g) Borrower has truthfully and fully provided to Lender, in
writing, any and all information relating to environmental conditions in, on, under or from the
Property known to Borrower or contained in Borrower’s files and records, including but not limited
to any reports relating to Hazardous Materials in, on, under or migrating to or from the Property
and/or to the environmental condition of or the presence of Mold at the Property.




     Section 12.2 Environmental Covenants 



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



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     Section 12.3 Lender’s Rights 



     Lender and any other Person designated by Lender, including but not limited to any
representative of a Governmental Authority, and any environmental consultant, and any receiver
appointed by any court of competent jurisdiction, shall have the right, but not the obligation, to
enter upon the Property at all reasonable times to assess any and all aspects of the environmental
condition of the Property and its use, including but not limited to conducting any environmental
assessment or audit (the scope of which shall be determined in Lender’s sole discretion) and taking
samples of soil, groundwater or other water, air, or building materials, and conducting other
invasive testing. Borrower shall cooperate with and provide access to Lender and any such person or
entity designated by Lender.



     Section 12.4 Operations and Maintenance Programs 



     If recommended by the Environmental Report or any other environmental assessment or audit of
the Property, Borrower shall establish and comply with an operations and maintenance program with
respect to the Property, in form and substance reasonably acceptable to Lender, prepared by an
environmental consultant reasonably acceptable to Lender, which program shall address any
asbestos-containing material or lead based paint or Mold that may now or in the future be detected
at or on the Property. Without limiting the generality of the preceding sentence, Lender may
require (a) periodic notices or reports to Lender in form, substance and at such intervals as
Lender may specify, (b) an amendment to such operations and maintenance program to address changing
circumstances, laws or other matters, (c) at Borrower’s sole expense, supplemental examination of
the Property by consultants specified by Lender, (d) access to the Property by Lender, its agents
or servicer, to review and assess the environmental condition of the Property and Borrower’s
compliance with any operations and maintenance program, and (e) variation of the operations and
maintenance program in response to the reports provided by any such consultants.



     Section 12.5 Environmental Definitions 



     “Environmental Law” means any present and future federal, state and local laws, statutes,
ordinances, rules, regulations, standards, policies and other government directives or
requirements, as well as common law, including but not limited to the Comprehensive Environmental
Response, Compensation and Liability Act and the Resource Conservation and Recovery Act, that apply
to Borrower or the Property and relate to Hazardous Materials or protection of human health or the
environment. “Environmental Liens” means all Liens and other encumbrances imposed pursuant to any
Environmental Law, whether due to any act or omission of Borrower or any other Person.
“Environmental Report” means the written reports resulting from the environmental site assessments
of the Property delivered to Lender in connection with the Loan. “Hazardous Materials” shall mean
petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and
oil; explosives, flammable materials; radioactive materials; polychlorinated biphenyls and
compounds containing them; lead and lead-based paint; asbestos or asbestos-containing materials in
any form that is or could become friable; underground or above-ground storage tanks, whether empty
or containing any substance; any substance the presence of which on the Property is prohibited by
any federal, gate or local authority; any substance that requires special handling; and any



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other material or substance now or in the future defined as a “hazardous substance,”
“hazardous material”, “hazardous waste”, “toxic substance”, “toxic pollutant”, “contaminant”, or
“pollutant” within the meaning of any Environmental Law. “Mold” shall mean any mold, fungi,
bacterial or microbial matter present at or in the Property, including, without limitation,
building materials which is in a condition, location or a type which may pose a risk to human
health or safety or the environment, may result in damage to or would adversely affect or impair
the value or marketability of the Property. “Release” of any Hazardous Materials includes but is
not limited to any release, deposit, discharge, emission, leaking, spilling, seeping, migrating,
injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous
Materials.




     Section 12.6 Indemnification



     (a) Borrower and Borrower Principal covenant and agree at their sole cost and expense, to
protect, defend, indemnify, release and hold Indemnified Parties harmless from and against any and
all Losses imposed upon or incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the following: (i) any
presence of any Hazardous Materials in, on, above, or under the Property; (ii) any past, present or
threatened Release of Hazardous Materials in, on, above, under or from the Property; (iii) any
activity by Borrower, any Person affiliated with Borrower, and any Tenant or other user of the
Property in connection with any actual, proposed or threatened use, treatment, storage, holding,
existence, disposition or other Release, generation, production, manufacturing, processing,
refining, control, management, abatement, removal, handling, transfer or transportation to or from
the Property of any Hazardous Materials at any time located in, under, on or above the Property or
any actual or proposed remediation of any Hazardous Materials at any time located in, under, on or
above the Property, whether or not such remediation is voluntary or pursuant to court or
administrative order, including but not limited to any removal, remedial or corrective action; (iv)
any past, present or threatened non-compliance or violations of any Environmental Laws (or permits
issued pursuant to any Environmental Law) in connection with the Property or operations thereon,
including but not limited to any failure by Borrower, any person or entity affiliated with
Borrower, and any tenant or other user of the Property to comply with any order of any Governmental
Authority in connection with any Environmental Laws; (v) the imposition, recording or filing or the
threatened imposition, recording or filing of any Environmental Lien encumbering the Property; (vi)
any acts of Borrower, any person or entity affiliated with Borrower, and any tenant or other user
of the Property in (A) arranging for disposal or treatment, or arranging with a transporter for
transport for disposal or treatment, of Hazardous Materials at any facility or incineration vessel
containing such or similar Hazardous Materials or (B) accepting any Hazardous Materials for
transport to disposal or treatment facilities, incineration vessels or sites from which there is a
Release, or a threatened Release of any Hazardous Substance which causes the incurrence of costs
for remediation; and (vii) any misrepresentation or inaccuracy in any representation or warranty or
material breach or failure to perform any covenants or other obligations pursuant to this Agreement
relating to environmental matters.



     (b) Upon written request by any Indemnified Party, Borrower and Borrower Principal shall
defend same (if requested by any Indemnified Party, in the name of the Indemnified Party) by
attorneys and other professionals approved by the Indemnified Parties. Notwithstanding the




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foregoing, any Indemnified Parties may, in their sole discretion, engage their own attorneys
and other professionals to defend or assist them, and, at the option of Indemnified Parties, their
attorneys shall control the resolution of any claim or proceeding. Upon demand, Borrower and
Borrower Principal shall pay or, in the sole discretion of the Indemnified Parties, reimburse, the
Indemnified Parties for the payment of reasonable fees and disbursements of attorneys, engineers,
environmental consultants, laboratories and other professionals in connection therewith.




     (c) Notwithstanding the foregoing, neither Borrower nor Borrower Principal shall have any
liability for any Losses imposed upon or incurred by or asserted against any Indemnified Parties
and described in subsection (a) above to the extent that Borrower and/or Borrower Principal can
conclusively prove both that such Losses were caused solely by actions, conditions or events that
occurred after the date that Lender (or any purchaser at a foreclosure sale) actually acquired
title to the Property and that such Losses were not caused by the direct or indirect actions of
Borrower, Borrower Principal, or any partner, member, principal, officer, director, trustee or
manager of Borrower or Borrower Principal or any employee, agent, contractor or Affiliate of
Borrower or Borrower Principal. The obligations and liabilities of Borrower and Borrower Principal
under this Section 12.6 shall fully survive indefinitely notwithstanding any termination,
satisfaction, assignment, entry of a judgment of foreclosure, exercise of any power of sale, or
delivery of a deed in lieu of foreclosure of the Mortgage, except that, upon payment in full of the
Loan, Borrower and Borrower Principal shall be released from liability under this Section 12.6 upon
delivery to Lender of a environmental report in form and substance and from an engineer acceptable
to Lender and dated no earlier than the date on which the Loan is paid in full.



ARTICLE XIII.

SECONDARY MARKET




     Section 13.1 Transfer of Loan



     Lender may, at any time, sell, transfer or assign the Loan Documents, or grant participations
therein (“Participations”) or syndicate the Loan (“Syndication”) or issue mortgage pass-through
certificates or other securities evidencing a beneficial interest in a rated or unrated public
offering or private placement (“Securities”) (a Syndication or the issuance of Participations
and/or Securities, a “Securitization”).



     Section 13.2 Delegation of Servicing



     At the option of Lender, the Loan may be serviced by a servicer/trustee selected by Lender and
Lender may delegate all or any portion of its responsibilities under this Agreement and the other
Loan Documents to such servicer/trustee pursuant to a servicing agreement between Lender and such
servicer/trustee.



     Section 13.3 Dissemination of Information



     Lender may forward to each purchaser, transferee, assignee, or servicer of, and each
participant, or investor in, the Loan, or any Participations and/or Securities or any of their
respective successors (collectively, the “Investor”) or any Rating Agency rating the Loan, or any



72









 




Participations and/or Securities, each prospective Investor, and any organization maintaining
databases on the underwriting and performance of commercial mortgage loans, all documents and
information which Lender now has or may hereafter acquire relating to the Debt and to Borrower, any
managing member or general partner thereof, Borrower Principal, any SPE Component Entity (if any)
and the Property, including financial statements, whether furnished by Borrower or otherwise, as
Lender determines necessary or desirable. Borrower irrevocably waives any and all rights it may
have under applicable Legal Requirements to prohibit such disclosure, including but not limited to
any right of privacy.




     Section 13.4 Cooperation



     Borrower and Borrower Principal agree to cooperate with Lender in connection with any sale or
transfer of the Loan or any Participation and/or Securities created pursuant to this Article 13,
including, without limitation, (a) the delivery of an estoppel certificate required in accordance
with Section 5.12(a) and such other documents as may be reasonably requested by Lender, (b) the
execution of such amendments to the Loan Documents as may be requested by the holder of the Note or
the Rating Agencies or otherwise to effect the Securitization including, without limitation,
bifurcation of the Loan into two or more separate notes; provided, however, that Borrower shall not
be required to modify or amend any Loan Document if such modification or amendment would (i) change
the interest rate, the stated maturity or the amortization of principal set forth in the Note,
except in connection with a bifurcation of the Loan which may result in varying fixed interest
rates and amortization schedules, but which shall have the same initial weighted average coupon of
the original Note, or (ii) in the reasonable judgment of Borrower, modify or amend any other
material economic term of the Loan, or (iii) in the reasonable judgment of Borrower, materially
increase Borrower’s obligations and liabilities under the Loan Documents, and (c) make changes to
the organizational documents of Borrower and its principals and/or use its best efforts to cause
changes to the legal opinions delivered by Borrower in connection with the Loan, provided, that
such changes shall not result in a material adverse economic effect to Borrower. Borrower shall
also furnish and Borrower and Borrower Principal consent to Lender furnishing to such Investors or
such prospective Investors or such Rating Agency any and all information concerning the Property,
the Leases, the financial condition of Borrower or Borrower Principal as may be requested by
Lender, any Investor, any prospective Investor or any Rating Agency in connection with any sale or
transfer of the Loan or any Participations or Securities.



ARTICLE XIV.

INDEMNIFICATIONS




     Section 14.1 General Indemnification



     Borrower shall indemnify, defend and hold harmless the Indemnified Parties from and against
any and all Losses imposed upon or incurred by or asserted against any Indemnified Parties and
directly or indirectly arising out of or in any way relating to any one or more of the following:
(a) any accident, injury to or death of persons or loss of or damage to property occurring in, on
or about the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property
or adjacent parking areas, streets or ways; (b) any use, nonuse or condition in, on or about the
Property or any part thereof or on the adjoining sidewalks, curbs, adjacent



73









 




property or adjacent parking areas, streets or ways; (c) performance of any labor or services
or the furnishing of any materials or other property in respect of the Property or any part
thereof; (d) any failure of the Property to be in compliance with any applicable Legal
Requirements; (e) any and all claims and demands whatsoever which may be asserted against Lender by
reason of any alleged obligations or undertakings on its part to perform or discharge any of the
terms, covenants, or agreements contained in any Lease; (f) the holding or investing of the Reserve
Accounts or the performance of the Required Work, Additional Required Repairs or Additional
Replacements, or (g) the payment of any commission, charge or brokerage fee to anyone which may be
payable in connection with the funding of the Loan (collectively, the “Indemnified Liabilities”);
provided, however, that Borrower shall not have any obligation to Lender hereunder to the extent
that such Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or willful
misconduct of Lender. To the extent that the undertaking to indemnify, defend and hold harmless set
forth in the preceding sentence may be unenforceable because it violates any law or public policy,
Borrower shall pay the maximum portion that it is permitted to pay and satisfy under applicable law
to the payment and satisfaction of all Indemnified Liabilities incurred by Lender.




     Section 14.2 Mortgage and Intangible Tax Indemnification



     Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold
harmless the Indemnified Parties from and against any and all Losses imposed upon or incurred by or
asserted against any Indemnified Parties and directly or indirectly arising out of or in any way
relating to any tax on the making and/or recording of the Mortgage, the Note or any of the other
Loan Documents, but excluding any income, franchise or other similar taxes.



     Section 14.3 ERISA Indemnification



     Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold
harmless the Indemnified Parties from and against any and all Losses (including, without
limitation, reasonable attorneys’ fees and costs incurred in the investigation, defense, and
settlement of Losses incurred in correcting any prohibited transaction or in the sale of a
prohibited loan, and in obtaining any individual prohibited transaction exemption under ERISA that
may be required, in Lender’s sole discretion) that Lender may incur, directly or indirectly, as a
result of a default under Section 4.9 or Section 5.18 of this Agreement.



     Section 14.4 Survival



     The obligations and liabilities of Borrower under this Article 14 shall fully survive
indefinitely notwithstanding any termination, satisfaction, assignment, entry of a judgment of
foreclosure, exercise of any power of sale, or delivery of a deed in lieu of foreclosure of the
Mortgage.



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ARTICLE XV.

EXCULPATION




     Section 15.1 Exculpation



     (a) Except as otherwise provided herein or in the other Loan Documents, Lender shall not
enforce the liability and obligation of Borrower or Borrower Principal, as applicable, to perform
and observe the obligations contained herein or in the other Loan Documents by any action or
proceeding wherein a money judgment shall be sought against Borrower or Borrower Principal, except
that Lender may bring a foreclosure action, action for specific performance or other appropriate
action or proceeding to enable Lender to enforce and realize upon this Agreement, the Note, the
Mortgage and the other Loan Documents, and the interest in the Property, the Rents and any other
collateral given to Lender created by this Agreement, the Note, the Mortgage and the other Loan
Documents; provided, however, that any judgment in any such action or proceeding shall be
enforceable against Borrower or Borrower Principal, as applicable, only to the extent of Borrower’s
or Borrower Principal’s interest in the Property, in the Rents and in any other collateral given to
Lender. Lender, by accepting this Agreement, the Note, the Mortgage and the other Loan Documents,
agrees that it shall not, except as otherwise provided in this Section 15.1, sue for, seek or
demand any deficiency judgment against Borrower or Borrower Principal in any such action or
proceeding, under or by reason of or under or in connection with this Agreement, the Note, the
Mortgage or the other Loan Documents. The provisions of this Section 15.1 shall not, however, (i)
constitute a waiver, release or impairment of any obligation evidenced or secured by this
Agreement, the Note, the Mortgage or the other Loan Documents; (ii) impair the right of Lender to
name Borrower or Borrower Principal as a party defendant in any action or suit for judicial
foreclosure and sale under this Agreement and the Mortgage; (iii) affect the validity or
enforceability of any indemnity (including, without limitation, those contained in Section 12.6 and
Article 14 of this Agreement), guaranty, master lease or similar instrument made in connection with
this Agreement, the Note, the Mortgage and the other Loan Documents; (iv) impair the right of
Lender to obtain the appointment of a receiver; (v) impair the enforcement of the assignment of
leases provisions contained in the Mortgage; or (vi) impair the right of Lender to obtain a
deficiency judgment or other judgmert on the Note against Borrower or Borrower Principal if
necessary to obtain any Insurance Proceeds or Awards to which Lender would otherwise be entitled
under this Agreement; provided however, Lender shall only enforce such judgment to the extent of
the Insurance Proceeds and/or Awards.



     (b) Notwithstanding the provisions of this Section 15.1 to the contrary, Borrower and Borrower
Principal shall be personally liable to Lender on a joint and several basis for Losses due to:



          (i) fraud or intentional misrepresentation by Borrower, Borrower Principal or any other
Affiliate of Borrower or Borrower Principal in connection with the execution and the delivery of
this Agreement, the Note, the Mortgage, any of the other Loan Documents, or any certificate,
report, financial statement or other instrument or document furnished to Lender at the time of the
closing of the Loan or during the term of the Loan;







75









 








          (ii) Borrower’s misapplication or misappropriation of Rents received by Borrower after the
occurrence of an Event of Default;




          (iii) Borrower’s misapplication or misappropriation of tenant security deposits or Rents
collected in advance;




          (iv) the misapplication or the misappropriation of Insurance Proceeds or Awards;




          (v) Borrower’s failure to pay Taxes, Other Charges (except to the extent that (A) sums
sufficient to pay such amounts have been deposited in escrow with Lender pursuant to the terms
hereof and there exists no impediment to Lender’s utilization thereof or (B) there is insufficient
cash flow from the operation of the Property), charges for labor or materials or other charges that
can create liens on the Property beyond any applicable notice and cure periods specified herein;




          (vi) Borrower’s failure to return or to reimburse Lender for all Personal Property taken from
the Property by or on behalf of Borrower and not replaced with Personal Property of the same
utility and of the same or greater value;




          (vii) any act of actual waste or arson by Borrower, any principal, Affiliate, member or
general partner thereof or by Borrower Principal, any principal, Affiliate, member or general
partner thereof; or




          (viii) Borrower’s failure following any Event of Default to deliver to Lender upon demand all
Rents and books and records relating to the Property.




     (c) Notwithstanding the foregoing, the agreement of Lender not to pursue recourse liability as
set forth in subsection (a) above SHALL BECOME NULL AND VOID and shall be of no further force and
effect and the Debt shall be fully recourse to Borrower and Borrower Principal on a joint and
several basis in the event (i) of a breach by Borrower, Borrower Principal or any SPE Component
Entity (if any) of any of the covenants set forth in Article 6 hereof, to the extent that such
breach is (A) material and (B) is not cured within thirty (30) days of the earlier to occur of
notice from Lender or Borrower’s knowledge of such breach, (ii) of a breach of any of the covenants
set forth in Article 7 hereof, (iii) the Property or any part thereof shall become an asset in a
voluntary bankruptcy or insolvency proceeding of Borrower, (iv) Borrower, Borrower Principal or any
Affiliate, officer, director, or representative which controls, directly or indirectly, Borrower or
Borrower Principal files, or joins in the filing of, an involuntary petition against Borrower under
any Creditors Rights Laws, or solicits or causes to be solicited petitioning creditors for any
involuntary petition against Borrower from any Person; (v) Borrower files an answer consenting to
or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other
Person under any Creditors Rights Laws, or solicits or causes to be solicited petitioning creditors
for any involuntary petition from any Person; or (vi) any Affiliate, officer, director, or
representative which controls Borrower consents to or acquiesces in or joins in an application for
the appointment of a custodian, receiver, trustee, or examiner for Borrower or any portion of the
Property.




76












 





     (d) Nothing herein shall be deemed to be a waiver of any right which Lender may have
under Section 506(a), 506(b), 1111(b) or any other provision of the U.S. Bankruptcy Code to file a
claim for the full amount of the indebtedness secured by the Mortgage or to require that all
collateral shall continue to secure all of the indebtedness owing to Lender in accordance with this
Agreement, the Note, the Mortgage or the other Loan Documents.



     (e) Subject to the terms of Section 12.6, upon payment in full of the Loan, Borrower Principal
shall be relieved of its obligations under this Article 15.



ARTICLE XVI.

NOTICES



     Section 16.1 Notices



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



	 	 	 

	If to Lender:

	 	Bank of America, N.A.
	 

	 	900 West Trade Street, Suite 650
	 

	 	NC1-026-06-01
	 

	 	Charlotte, North Carolina 28255
	 

	 	Attn: Servicing Manager
	 

	 	Telephone No: (866) 531-0957
	 

	 	Facsimile No.: (704) 317-4501
	 
	 	 
	With a copy to:

	 	Moore & Van Allen PLLC
	 

	 	100 North Tryon Street, 47th Floor
	 

	 	Charlotte, North Carolina 28202
	 

	 	Attention: Edward K. Oden, Esq.
	 

	 	Telephone No.: (704) 331-1000
	 

	 	Facsimile No.: (704) 331-1159
	 
	 	 
	If to Borrower:

	 	AmREIT Riverwalk, LP
	 

	 	8 Greenway Plaza, Suite 1000
	 

	 	Houston, Texas 77046
	 

	 	Attention: Chad C. Braun
	 

	 	Telephone No.: (713) 860-4924
	 

	 	Facsimile No.: (713) 850-0498






77









 






	 	 	 

	With a copy to:

	 	Wilson, Cribbs & Goren, P.C.
	 
	 	 
	 

	 	2500 Fannin
	 

	 	Houston, Texas 77002
	 

	 	Attention: Reid C. Wilson
	 

	 	Telephone No.: (713) 222-9000
	 

	 	Facsimile No.: (713) 229-8824





A notice shall be deemed to have been given: in the case of hand delivery, at the time of delivery;
in the case of registered or certified mail, when delivered or the first attempted delivery on a
Business Day; or in the case of expedited prepaid delivery and telecopy, upon the first attempted
delivery on a Business Day.




ARTICLE XVII.

FURTHER ASSURANCES



     Section 17.1 Replacement Documents 



     Upon receipt of an affidavit of an officer of Lender as to the loss, tleft, destruction or
mutilation of the Note or any other Loan Document which is not of public record: (i) with respect
to any Loan Document other than the Note, Borrower will issue, in lieu thereof, a replacement of
such other Loan Document, dated the date of such lost, stolen, destroyed or mutilated Loan Document
in the same principal amount thereof and otherwise of like tenor and (ii) with respect to the Note,
(a) Borrower will execute a reaffirmation of the Debt as evidenced by such Note acknowledging that
Lender has informed Borrower that the Note was lost, stolen destroyed or mutilated and that such
Debt continues to be an obligation and liability of the Borrower as set forth in the Note, a copy
of which shall be attached to such reaffirmation and (b) if requested by Lender, Borrower will
execute a replacement note and Lender or Lender’s custodian (at Lender’s option) shall provide to
Borrower Lender’s (or Lender’s custodian’s) then standard form of lost note affidavit and
indemnity, which such form shall be reasonably acceptable to Borrower.



     Section 17.2 Recording of Mortgage, etc



     Borrower forthwith upon the execution and delivery of the Mortgage and thereafter, from time
to time, will cause the Mortgage and any of the other Loan Documents creating a lien or security
interest or evidencing the lien hereof upon the Property and each instrument of further assurance
to be filed, registered or recorded in such manner and in such places as may be required by any
present or future law in order to publish notice of and fully to protect and perfect the lien or
security interest hereof upon, and the interest of Lender in, the Property. Borrower will pay all
taxes, filing, registration or recording fees, and all expenses incident to the preparation,
execution, acknowledgment and/or recording of the Note, the Mortgage, the other Loan Documents, any
note, deed of trust or mortgage supplemental hereto, any security instrument with respect to the
Property and any instrument of further assurance, and any modification or amendment of the
foregoing documents, and all federal, state, county and municipal taxes, duties, imposts,
assessments and charges arising out of or in connection with the execution and delivery of the
Mortgage, any deed of trust or mortgage supplemental hereto, any security instrument with respect
to the Property or any instrument of further assurance, and any



78









 




modification or amendment of the foregoing documents, except where prohibited by law so to do.




     Section 17.3 Further Acts etc



     Borrower will, at the cost of Borrower, and without expense to Lender, do, execute,
acknowledge and deliver all and every further acts, deeds, conveyances, deeds of trust, mortgages,
assignments, security agreements, control agreements, notices of assignments, transfers and
assurances as Lender shall, from time to time, reasonably require, for the better assuring,
conveying, assigning, transferring, and confirming unto Lender the property and rights hereby
mortgaged, deeded, granted, bargained, sold, conveyed, confirmed, pledged, assigned, warranted and
transferred or intended now or hereafter so to be, or which Borrower may be or may hereafter become
bound to convey or assign to Lender, or for carrying out the intention or facilitating the
performance of the terms of this Agreement or for filing, registering or recording the Mortgage, or
for complying with all Legal Requirements. Borrower, on demand, will execute and deliver, and in
the event it shall fail to so execute and deliver, hereby authorizes Lender to execute in the name
of Borrower or without the signature of Borrower to the extent Lender may lawfully do so, one or
more financing statements and financing statement amendments to evidence more effectively, perfect
and maintain the priority of the security interest of Lender in the Property. Borrower grants to
Lender an irrevocable power of attorney coupled with an interest for the purpose of exercising and
perfecting the rights and remedies available to Lender pursuant to this Section 17.3.



     Section 17.4 Changes in Tax, Debt, Credit and Documentary Stamp Laws 



     (a) If any law is enacted or adopted or amended after the date of this Agreement which deducts
the Debt from the value of the Property for the purpose of taxation or which imposes a tax, either
directly or indirectly, on the Debt or Lender’s interest in the Property, Borrower will pay the
tax, with interest and penalties thereon, if any. If Lender is advised by counsel chosen by it that
the payment of tax by Borrower would be unlawful or taxable to Lender or unenforceable or provide
the basis for a defense of usury then Lender shall have the option by written notice of not less
than one hundred twenty (120) days to declare the Debt immediately due and payable.



     (b) Borrower will not claim or demand or be entitled to any credit or credits on account of
the Debt for any part of the Taxes or Other Charges assessed against the Property, or any part
thereof, and no deduction shall otherwise be made or claimed from the assessed value of the
Property, or any part thereof, for real estate tax purposes by reason of the Mortgage or the Debt.
If such claim, credit or deduction shall be required by law, Lender shall have the option, by
written notice of not less than ore hundred twenty (120) days, to declare the Debt immediately due
and payable.



     If at any time the United States of America, any State thereof or any subdivision of any such
State shall require revenue or other stamps to be affixed to the Note, the Mortgage, or any of the
other Loan Documents or impose any other tax or charge on the same, Borrower will pay for the same,
with interest and penalties thereon, if any.



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     Section 17.5 Expenses 



     Borrower covenants and agrees to pay or, if Borrower fails to pay, to reimburse, Lender upon
receipt of written notice from Lender for all reasonable costs and expenses (including reasonable,
actual attorneys’ fees and disbursements and the allocated costs of internal legal services and all
actual disbursements of internal counsel) reasonably incurred by Lender in accordance with this
Agreement in connection with (a) the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby
and thereby and all the costs of furnishing all opinions by counsel for Borrower (including without
limitation any opinions requested by Lender as to any legal matters arising under this Agreement or
the other Loan Documents with respect to the Property); (b) Borrower’s ongoing performance of and
compliance with Borrower’s respective agreements and covenants contained in this Agreement and the
other Loan Documents on its part to be performed or complied with after the Closing Date,
including, without limitation, confirming compliance with environmental and insurance requirements;
(c) following a request by Borrower, Lender’s ongoing performance and compliance with all
agreements and conditions contained in this Agreement and the other Loan Documents on its part to
be performed or complied with after the Closing Date; (d) the negotiation, preparation, execution,
delivery and administration of any consents, amendments, waivers or other modifications to this
Agreement and the other Loan Documents and any other documents or matters requested by Lender; (e)
securing Borrower’s compliance with any requests made pursuant to the provisions of this Agreement;
(f) the filing and recording fees and expenses, title insurance and reasonable fees and expenses of
counsel for providing to Lender all required legal opinions, and other similar expenses incurred in
creating and perfecting the Lien in favor of Lender pursuant to this Agreement and the other Loan
Documents; (g) enforcing or preserving any rights, in response to third party claims or the
prosecuting or defending of any action or proceeding or other litigation, in each case against,
under or affecting Borrower, this Agreement, the other Loan Documents, the Property, or any other
security given for the Loan; and (h) enforcing any obligations of or collecting any payments due
from Borrower under this Agreement, the other Loan Documents or with respect to the Property or in
connection with any refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a “work-out” or of any insolvency or bankruptcy proceedings; provided,
however, that Borrower shall not be liable for the payment of any such costs and expenses to the
extent the same arise by reason of the gross negligence, illegal acts, fraud or willful misconduct
of Lender.



     Section 17.6 Cost of Enforcement



     In the event (a) that the Mortgage is foreclosed in whole or in part, (b) of the bankruptcy,
insolvency, rehabilitation or other similar proceeding in respect of Borrower or any of its
constituent Persons or an assignment by Borrower or any of its constituent Persons for the benefit
of its creditors, or (c) Lender exercises any of its other remedies under this Agreement or any of
the other Loan Documents, Borrower shall be chargeable with and agrees to pay all costs of
collection and defense, including reasonable attorneys’ fees and costs, incurred by Lender or
Borrower in connection therewith and in connection with any appellate proceeding or post-judgment
action involved therein, together with all required service or use taxes.



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ARTICLE XVIII.

WAIVERS




     Section 18.1 Remedies Cumulative; Waivers 



     The rights, powers and remedies of Lender under this Agreement shall be cumulative and not
exclusive of any other right, power or remedy which Lender may have against Borrower or Borrower
Principal pursuant to this Agreement or the other Loan Documents, or existing at law or in equity
or otherwise Lender’s rights, powers and remedies may be pursued singularly, concurrently or
otherwise, at such time and in such order as Lender may determine in Lender’s sole discretion. No
delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall
impair any such remedy, right or power or shall be construed as a waiver thereof, but any such
remedy, right or power may be exercised from time to time and as often as may be deemed expedient.
A waiver of one Default or Event of Default with respect to Borrower shall not be construed to be a
waiver of any subsequent Default or Event of Default by Borrower or to impair any remedy, right or
power consequent thereon.



     Section 18.2 Modification, Waiver in Writing



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



     Section 18.3 Delay Not a Waiver



     Neither any failure nor any delay on the part of Lender in insisting upon strict performance
of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege
hereunder, or under the Note or under any other Loan Document, or any other instrument given as
security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial
exercise thereof preclude any other future exercise, or the exercise of any other right, power,
remedy or privilege. In particular, and not by way of limitation, by accepting payment after the
due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender
shall not be deemed to have waived any right either to require prompt payment when due of all other
amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.



     Section 18.4 Trial by Jury



     BORROWER, BORROWER PRINCIPAL AND LENDER EACH HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY
ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY
SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH



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REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION
THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER,
BORROWER PRINCIPAL AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH
ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH OF LENDER, BORROWER
PRINCIPAL AND BORROWER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER, BORROWER PRINCIPAL AND LENDER.




     Section 18.5 Waiver of Notice 



     Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with
respect to matters for which this Agreement or the other Loan Documents specifically and expressly
provide for the giving of notice by Lender to Borrower and except with respect to matters for which
Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of
notice. Borrower hereby expressly waives the right to receive any notice from Lender with respect
to any matter for which this Agreement or the other Loan Documents do not specifically and
expressly provide for the giving of notice by Lender to Borrower.



     Section 18.6 Remedies of Borrower



     In the event that a claim or adjudication is made that Lender or its agents have acted
unreasonably or unreasonably delayed acting in any case where by law or under this Agreement or the
other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably
or promptly, Borrower agrees that neither Lender nor its agents shall be liable for any monetary
damages, and Borrower’s sole remedies shall be limited to commencing an action seeking injunctive
relief or declaratory judgment. The parties hereto agree that any action or proceeding to determine
whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment.
Lender agrees that, in such event, it shall cooperate in expediting any action seeking injunctive
relief or declaratory judgment.



     Section 18.7 Waiver of Marshalling of Assets 



     To the fullest extent permitted by law, Borrower, for itself and its successors and assigns,
waives all rights to a marshalling of the assets of Borrower, Borrower’s partners and others with
interests in Borrower, and of the Property, and agrees not to assert any right under any laws
pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead
exemption, the administration of estates of decedents, or any other matters whatsoever to defeat,
reduce or affect the right of Lender under the Loan Documents to a sale of the Property for the
collection of the Debt without any prior or different resort for collection or of the right of
Lender to the payment of the Debt out of the net proceeds of the Property in preference to every
other claimant whatsoever.



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     Section 18.8 Waiver of Statute of Limitations 



     Borrower hereby expressly waives and releases, to the fullest extent permitted by law, the
pleading of any statute of limitations as a defense to payment of the Debt or performance of its
Other Obligations.



     Section 18.9 Waiver of Counterclaim



     Borrower hereby waives the right to assert a counterclaim, other than a compulsory
counterclaim, in any action or proceeding brought against it by Lender or its agents.



ARTICLE XIX.

GOVERNING LAW



     Section 19.1 Choice of Law



     This Agreement shall be governed, construed, applied and enforced in accordance with the laws
of the State and applicable laws of the United States of America, except that, with respect to the
security interest in the Reserve Accounts, the Lockbox Account and the Cash Management Account, the
laws of the state where each such account are located shall apply.



     Section 19.2 Severability



     Wherever possible, each provision of this Agreement shall be interpreted in such manner as to
be effective and valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement.



     Section 19.3 Preferences



     Lender shall have the continuing and exclusive right to apply or reverse and reapply any and
all payments by Borrower to any portion of the obligations of Borrower hereunder. To the extent
Borrower makes a payment or payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be
repaid to a trustee, receiver or any other party under any Creditors Rights Laws, state or federal
law, common law or equitable cause, then, to the extent of such payment or proceeds received, the
obligations hereunder or part thereof intended to be satisfied shall be revived and continue in
full force and effect, as if such payment or proceeds had not been received by Lender.



ARTICLE XX.

MISCELLANEOUS



     Section 20.1 Survival



     This Agreement and all covenants, agreements, representations and warranties made herein and
in the certificates delivered pursuant hereto shall survive the making by Lender of the



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Loan and the execution and delivery to Lender of the Note, and shall continue in full force
and effect so long as all or any of the Debt is outstanding and unpaid unless a longer period is
expressly set forth herein or in the other Loan Documents. Whenever in this Agreement any of the
parties hereto is referred to, such reference shall be deemed to include the legal representatives,
successors and assigns of such party. All covenants, promises and agreements in this Agreement, by
or on behalf of Borrower, shall inure to the benefit of the legal representatives, successors and
assigns of Lender.




     Section 20.2 Lender’s Discretion



     Whenever pursuant to this Agreement, Lender exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to
approve or disapprove or to decide whether arrangements or terms are satisfactory or not
satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion
of Lender and shall be final and conclusive.



     Section 20.3 Headings 



     The Article and/or Section headings and the Table of Contents in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this Agreement for any
other purpose.



     Section 20.4 Schedules Incorporated



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



     Section 20.5 Offsets, Counterclaims and Defenses 



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



     Section 20.6 No Joint Venture or Partnership; No Third Party Beneficiaries



     (a) Borrower and Lender intend that the relationships created hereunder and under the other
Loan Documents be solely that of Borrower and lender. Nothing herein or therein is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between
Borrower and Lender nor to grant Lender any interest in the Property other than that of mortgagee,
beneficiary or lender.



     (b) This Agreement and the other Loan Documents are solely for the benefit of Lender and
Borrower and nothing contained in this Agreement or the other Loan Documents shall be deemed to
confer upon anyone other than Lender and Borrower any right to insist upon



84









 




or to enforce the performance or observance of any of the obligations contained herein or
therein. All conditions to the obligations of Lender to make the Loan hereunder are imposed solely
and exclusively for the benefit of Lender and no other Person shall have standing to require
satisfaction of such conditions in accordance with their terms or be entitled to assume that Lender
will refuse to make the Loan in the absence of strict compliance with any or all thereof and no
other Person shall under any circumstances be deemed to be a beneficiary of such conditions, any or
all of which may be freely waived in whole or in part by Lender if, in Lender’s sole discretion,
Lender deems it advisable or desirable to do so.




     (c) The general partners, members, principals and (if Borrower is a trust) beneficial owners
of Borrower are experienced in the ownership and operation of properties similar to the Property,
and Borrower and Lender are relying solely upon such expertise and business plan in connection with
the ownership and operation of the Property. Borrower is not relying on Lender’s expertise,
business acumen or advice in connection with the Property.



     (d) Notwithstanding anything to the contrary contained herein, Lender is not undertaking the
performance of (i) any obligations under the Leases; or (ii) any obligations with respect to such
agreements, contracts, certificates, instruments, franchises, permits, trademarks, licenses and
other documents.



     (e) By accepting or approving anything required to be observed, performed or fulfilled or to
be given to Lender pursuant to this Agreement, the Mortgage, the Note or the other Loan Documents,
including, without limitation, any officer’s certificate, balance sheet, statement of profit and
loss or other financial statement, survey, appraisal, or insurance policy, Lender shall not be
deemed to have warranted, consented to, or affirmed the sufficiency, the legality or effectiveness
of same, and such acceptance or approval thereof shall not constitute any warranty or affirmation
with respect thereto by Lender.



     (f) Borrower recognizes and acknowledges that in accepting this Agreement, the Note, the
Mortgage and the other Loan Documents, Lender is expressly and primarily relying on the truth and
accuracy of the representations and warranties set forth in Article 4 of this Agreement without any
obligation to investigate the Property and notwithstanding any investigation of the Property by
Lender; that such reliance existed on the part of Lender prior to the date hereof, that the
warranties and representations are a material inducement to Lender in making the Loan; and that
Lender would not be willing to make the Loan and accept this Agreement, the Note, the Mortgage and
the other Loan Documents in the absence of the warranties and representations as set forth in
Article 4 of this Agreement.



     Section 20.7 Publicity



     All news releases, publicity or advertising by Borrower or its Affiliates through any media
intended to reach the general public which refers to the Loan, Lender, Banc of America Securities
LLC, or any of their Affiliates shall be subject to the prior written approval of Lender, not to be
unreasonably withheld. Lender shall be permitted to make any news, releases, publicity or
advertising by Lender or its Affiliates through any media intended to reach the general public
which refers to the Loan, the Property, Borrower, Borrower Principal and their respective
Affiliates without the approval of Borrower or any such Persons. Borrower also agrees that



85









 




Lender may share any information pertaining to the Loan with Bank of America Corporation,
including its bank subsidiaries, Banc of America Securities LLC and any other Affiliates of the
foregoing, in connection with the sale or transfer of the Loan or any Participations and/or
Securities created.




     Section 20.8 Conflict Construction of Documents; Reliance 



     In the event of any conflict between the provisions of this Agreement and any of the other
Loan Documents, the provisions of this Agreement shall control. The parties hereto acknowledge that
they were represented by competent counsel in connection with the negotiation, drafting and
execution of the Loan Documents and that such Loan Documents shall not be subject to the principle
of construing their meaning against the party which drafted same. Borrower acknowledges that, with
respect to the Loan, Borrower shall rely solely on its own judgment and advisors in entering into
the Loan without relying in any manner on any statements, representations or recommendations of
Lender or any parent, subsidiary or Affiliate of Lender. Lender shall not be subject to any
limitation whatsoever in the exercise of any rights or remedies available to it under any of the
Loan Documents or any other agreements or instruments which govern the Loan by virtue of the
ownership by it or any parent, subsidiary or Affiliate of Lender of any equity interest any of them
may acquire in Borrower, and Borrower hereby irrevocably waives the right to raise any defense or
take any action on the basis of the foregoing with respect to Lender’s exercise of any such rights
or remedies. Borrower acknowledges that Lender engages in the business of real estate financings
and other real estate transactions and investments which may be viewed as adverse to or competitive
with the business of Borrower or its Affiliates.



     Section 20.9 Entire Agreement



     This Agreement and the other Loan Documents contain the entire agreement of the parties hereto
and thereto in respect of the transactions contemplated hereby and thereby, and all prior
agreements among or between such parties, whether oral or written between Borrower and Lender are
superseded by the terms of this Agreement and the other Loan Documents.



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




	 	 	 	 	 
	 	BORROWER:



AmREIT RWERWALK, LP, a Texas limited partnership

 	 
	 	By:  AmREIT Riverwalk GP, Inc., a Texas corporation, its general partner 	 



	 	 	 	 	 
	 	 	 
	 	By:  	 /s/   Chad C. Braun
 	 
	 	 	Name:  	Chad C. Braun 	 
	 	 	Title:  	Vice President 	 













 







	 	 	 	 	 
	 	LENDER:



BANK OF AMERICA, N.A., a national banking association

 	 
	 	By:  	/s/  Lisa K. McGee
 	 
	 	 	Name:  	Lisa K. McGee                                      	 
	 	 	Title:  	Vice President