**Exhibit10.445**

 

**LOAN AGREEMENT**

 

**THIS LOAN AGREEMENT**,dated as of the 29thday of December, 2004, (as amended, restated, replaced, supplemented orotherwise modified from time to time, this **“Agreement”**),between **NOMURA CREDIT & CAPITAL INC.,** aDelaware corporation, having an address at Two World Financial Center, BuildingB, New York, New York 10281 (**“Lender”**),and **INLAND WESTERN WESLEY CHAPEL NORTHWOODS, L.L.C.**,a Delaware limited liability company, having an address at 2901 ButterfieldRoad, Oak Brook, Illinois 60523 (**“Borrower”**).

 

W I T N E S S E T H:

 

WHEREAS, Borrower desires to obtain the Loan(as hereinafter defined) from Lender;**and

 

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

 

NOW, THEREFORE, in consideration of themaking of the Loan by Lender and the covenants, agreements, representations andwarranties set forth in this Agreement, the parties hereto hereby covenant,agree, represent and warrant as follows:

 

**ARTICLE I**

 

**DEFINITIONS; PRINCIPLES OFCONSTRUCTION**

 

Section 1.1                                      Definitions.For all purposes of this Agreement, except as otherwise expressly required orunless the context clearly indicates a contrary intent:

 

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

 

**“ALTA”** shallmean American Land Title Association, or any successor thereto.

 

**“Annual Budget”**shall mean the operating budget, including all planned capital expenditures,for the Property prepared by Borrower for the applicable Fiscal Year or otherperiod.

 

**“Assignment of Leases”**shall mean, with respect to the Property, that certain first priorityAssignment of Leases and Rents, dated as of the Closing Date, from Borrower, asassignor, to Lender, as assignee, assigning to Lender all of Borrower’sinterest in and to the Leases and Rents of the Property as security for theLoan, as the same may be amended, restated, replaced, supplemented or otherwisemodified from time to time.

 

**“Assignment of Management Agreement”**shall mean that certain Assignment of Management Agreement and Subordination ofManagement Fees dated as of the Closing Date

 

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among Lender, Borrower and Manager, as thesame may be amended, restated, replaced, supplemented or otherwise modifiedfrom time to time.

 

**“****Award”** shall mean any compensationpaid by any Governmental Authority in connection with a Condemnation in respectof all or any part of the Property.

 

**“Basic Carrying Costs”**shallmean, with respect to the Property, the sum of the following costs associatedwith the Property for the relevant Fiscal Year or payment period: (i) Taxes and(ii) Insurance Premiums.

 

**“Borrower”**shallmean **INLAND WESTERN WESLEY CHAPEL NORTHWOODS,L.L.C., a Delaware limited liability company,**together with itspermitted successors and assigns.

 

**“Business Day”**shallmean any day other than a Saturday, Sunday or any other day on which nationalbanks in New York, New York are not open for business.

 

**“Capital Expenditures”**shallmean, for any period, the amount expended for items capitalized underaccounting principles reasonably acceptable to Lender, consistently applied(including expenditures for building improvements or major repairs, leasingcommissions and tenant improvements).

 

**“Cash Expenses”**shallmean, for any period, the operating expenses for the operation of the Propertyas set forth in an Approved Annual Budget to the extent that such expenses areactually incurred by Borrower minus any payments into the Tax and InsuranceEscrow Fund.

 

**“Casualty”**shallhave the meaning specified in Section 6.2 hereof.

 

**“Casualty/Condemnation Prepayment”** shall have the meaning specified in Section 6.4(e)hereof.

 

**“Casualty Consultant”**shall have the meaning set forth in Section 6.4(b)(iii) hereof.

 

**“Casualty Retainage”** shall have the meaning set forth in Section 6.4(b)(iv)hereof.

 

**“Closing Date”** shall mean the date hereof.

 

**“Code”**shallmean the Internal Revenue Code of 1986, as amended, as it may be furtheramended from time to time, and any successor statutes thereto, and applicableU.S. Department of Treasury regulations issued pursuant thereto in temporary orfinal form.

 

**“Condemnation”** shall mean a temporary or permanenttaking by any Governmental Authority as the result or in lieu or inanticipation of the exercise of the right of condemnation or eminent domain, ofall or any part of the Property, or any interest therein or

 

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right accruing thereto, including any rightof access thereto or any change of grade affecting the Property or any partthereof.

 

**“Contract of Sale Earnout Period”**shall mean the period commencing on the date hereof and continuing through andincluding December 7, 2005.

 

**“Debt”** shallmean the outstanding principal amount set forth in, and evidenced by, thisAgreement and the Note together with all interest accrued and unpaid thereonand all other sums (including the Prepayment Consideration) due to Lender inrespect of the Loan under the Note, this Agreement, the Mortgage or any otherLoan Document.

 

**“Debt Service”**shall mean, with respect to any particular period of time, scheduled interestpayments under the Note.

**“Debt Service Coverage Ratio”**shall mean a ratio for the applicable period in which:

 

(a)                                  thenumerator is the Net Operating Income (excluding interest on credit accounts)for such period as set forth in the statements required hereunder, withoutdeduction for (i) actual management fees incurred in connection with theoperation of the Property, (ii) amounts paid to the Reserve Funds, less (A)management fees equal to the greater of (1) assumed management fees of four anda half percent (4.5%) of Gross Income from Operations or (2) the actualmanagement fees incurred, (B) assumed Replacement Reserve Fund contributions equalto $0.15 per square foot of gross leaseable area at the Property; and (C)assumed reserves for tenant improvements and leasing commissions equal to $1.15per square foot of gross leaseable area at the Property; and

 

(b)                                 thedenominator is the aggregate amount of interest due and payable on the Note forsuch applicable period.

 

**“Default”**shall mean the occurrence of any event hereunder or under any other LoanDocument which, but for the giving of notice or passage of time, or both, wouldbe an Event of Default.

 

**“Default Rate”**shall mean, with respect to the Loan, a rate per annum equal to the lesser of(a) the maximum rate permitted by applicable law, or (b) five percent (5%)above the Interest Rate.

 

**“Disclosure Document”**shall have the meaning set forth in Section 9.2 hereof.

 

**“Eligible Account”**shall mean a separate and identifiable account from all other funds held by theholding institution that is either (a) an account or accounts maintained with afederal or state-chartered depository institution or trust company whichcomplies with the definition of Eligible Institution or (b) a segregated trustaccount or accounts maintained with a federal or state chartered depositoryinstitution or trust company acting in its fiduciary capacity which, in thecase of a state chartered depository institution or trust company, is subjectto regulations substantially similar to 12 C.F.R. §9.10(b), having in eithercase a combined capital and surplus of at least $50,000,000 and subject tosupervision or examination by federal and state

 

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authority.  An Eligible Account will not be evidenced bya certificate of deposit, passbook or other instrument.

 

**“Eligible Institution”** shallmean a depository institution or trust company insured by the Federal DepositInsurance Corporation the short term unsecured debt obligations or commercialpaper of which are rated at least A-1 by Standard & Poor’s RatingsServices, P-1 by Moody’s Investors Service, Inc., and F-1 + by Fitch, Inc. inthe case of accounts in which funds are held for 30 days or less (or, in thecase of accounts in which funds are held for more than 30 days, the long termunsecured debt obligations of which are rated at least “AA” by Fitch andS&P and “Aa” by Moody’s).

 

**“Environmental Indemnity”** shall mean that certain EnvironmentalIndemnity Agreement executed by Borrower in connection with the Loan for thebenefit of Lender, as the same may be amended, restated, replaced, supplementedor otherwise modified from time to time.

 

**“Environmental Report”** shall have the meaning as defined inthe Environmental Indemnity executed by the Borrower.

 

**“ERISA”**shallmean the Employee Retirement Income Security Act of 1974, as amended.

 

**“Event of Default”** shall have the meaning set forth in Section 8.1(a)hereof.

 

**“Exchange Act”** shall have the meaning set forth in Section 9.2hereof.

 

**“Fiscal Year”** shall mean each twelve (12) monthperiod commencing on January 1 and ending on December 31 during each yearof the term of the Loan.

 

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

 

**“Gross Income from Operations”** shall mean all sustainable income asreported on the financial statements delivered by the Borrower in accordancewith this Agreement, computed in accordance with accounting principlesreasonably acceptable to Lender, consistently applied, derived from theownership and operation of the Property from whatever source, *including,*but not limited to, (i)Rents from Tenants that are in occupancy, open for business and paying unabatedRent, (ii) utility charges, (iii) escalations, (iv) intentionally omitted; (v)service fees or charges, (vi) license fees, (vii) parking fees, and (viii)other required pass-throughs but *excluding*(i) Rents from Tenants that are subject to any bankruptcy proceeding(unless such Tenant has affirmed its Lease or Inland Western Retail Real EstateTrust, Inc. has master leased such Tenant’s premises for full contract rent fora period not less than three years, and the net worth of Inland Western RetailReal Estate Trust, Inc. (as determined by Lender) is not less than such entity’snet worth as of December 31, 2003), or are not in occupancy, open forbusiness or paying unabated Rent, (ii) sales, use and occupancy or other taxeson receipts required to be accounted for by Borrower to any GovernmentalAuthority, (iii) refunds and uncollectible accounts, (iv) sales of furniture,fixtures and equipment, (v)

 

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Insurance Proceeds (other than business interruption or other loss ofincome insurance), (vi) Awards, (vii) unforfeited security deposits, (viii)utility and other similar deposits and (ix) any disbursements to Borrower fromthe Reserve Funds.  Gross income shallnot be diminished as a result of the Mortgage or the creation of anyintervening estate or interest in the Property or any part thereof.

 

**“Improvements”** shall have the meaning set forth inthe granting clause of the Mortgage with respect to the Property.

 

**“Indebtedness”** of a Person, at a particular date,means the sum (without duplication) at such date of (a) indebtedness orliability for borrowed money; (b) obligations evidenced by bonds, debentures,notes, or other similar instruments; (c) obligations for the deferred purchaseprice of property or services (including trade obligations); (d) obligationsunder letters of credit; (e) obligations under acceptance facilities; (f) allguaranties, endorsements (other than for collection or deposit in the ordinarycourse of business) and other contingent obligations to purchase, to providefunds for payment, to supply funds, to invest in any Person or entity, orotherwise to assure a creditor against loss; and (g) obligations secured by anyLiens, whether or not the obligations have been assumed.

 

**“Indemnitor”** shall mean Inland Western Retail RealEstate Trust, Inc., a Maryland corporation.

 

**“Indemnity Agreement”** shall mean that certain IndemnityAgreement dated as of the Closing Date by Borrower and Indemnitor in favor ofLender.

 

**“Inland Western Retail Real Estate Trust,Inc.”** shallmean Inland Western Retail Real Estate Trust, Inc., a Maryland corporation.

 

**“Insurance Premiums”** shall have the meaning set forth in Section 6.1(b)hereof.

 

**“Insurance Proceeds”** shall have the meaning set forth in Section 6.4(b)hereof.

 

**“Interest Rate”** shall mean FOUR AND EIGHTY HUNDREDFIFTEEN THOUSANDTHS percent (4.815%) per annum.

**“Lease”** shallmean any lease, sublease or subsublease, letting, license, concession or otheragreement (whether written or oral and whether now or hereafter in effect)pursuant to which any Person is granted a possessory interest in, or right touse or occupy all or any portion of any space in the Property of Borrower, andevery modification, amendment or other agreement relating to such lease,sublease, subsublease, or other agreement entered into in connection with suchlease, sublease, subsublease, or other agreement and every guarantee of theperformance and observance of the covenants, conditions and agreements to beperformed and observed by the other party thereto.

 

**“Lease-Up Reserve Tenants”** shallmean, collectively, tenants on the Rent Roll identified as occupying thefollowing spaces: (i) Cellular Services, (ii) Anything Computers, (iii) Cork& Olive, (iv) The Bombay Company, (v) Tanning and Smoothie Store, (vi)Friedman’s Jewelry, (vii) Florida Health and Wellness, (viii) 1 800 DryCleaners and (ix) Tire Kingdom, the

 

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demised spaces for which are more particularly described in thatcertain Amendment to Agreement dated as of November 8, 2004 betweenBorrower and Kimco Tampa LP.

 

**“Legal Requirements”** shall mean, with respect to the Property,all federal, state, county, municipal and other governmental statutes, laws,rules, orders, regulations, ordinances, judgments, decrees and injunctions ofGovernmental Authorities affecting the Property or any part thereof, or theconstruction, use, alteration or operation thereof, or any part thereof,whether now or hereafter enacted and in force, and all permits, licenses andauthorizations and regulations relating thereto, and all covenants, agreements,restrictions and encumbrances contained in any instruments, either of record orknown to Borrower, at any time in force affecting the Property or any partthereof, 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.

 

**“Lender”** shall mean Nomura Credit &Capital Inc., together with its successors and assigns.

 

**“Licenses”**shall have the meaning set forth in Section 4.1.22 hereof.

 

**“Lien”** shall mean, with respect to theProperty, any mortgage, deed of trust, deed to secure debt, lien, pledge,hypothecation, assignment, security interest, or any other encumbrance, chargeor transfer of, on or affecting Borrower, the Property, any portion thereof orany interest therein, including, without limitation, any conditional sale orother title retention agreement, any financing lease having substantially thesame economic effect as any of the foregoing, the filing of any financingstatement, and mechanic’s, materialmen’s and other similar liens andencumbrances.

 

**“Loan”** shall mean the loan made by Lender toBorrower pursuant to this Agreement and evidenced by the Note.

 

**“Loan Documents”** shall mean, collectively, thisAgreement, the Note, the Mortgage, the Assignment of Leases and Rents, theEnvironmental Indemnity, the Assignment of Management Agreement, the IndemnityAgreement and all other documents executed and/or delivered in connection withthe Loan.

 

**“Management Agreement”** shall mean, with respect to theProperty, the management agreement entered into by and between Borrower and theManager, pursuant to which the Manager is to provide management and otherservices with respect to the Property.

 

**“Manager”**shall mean **INLAND US****MANAGEMENT, LLC**.

 

**“Maturity Date”** shall mean January 11, 2010 orsuch other date on which the final payment of principal of the Note becomes dueand payable as therein or herein provided, whether at such stated maturitydate, by declaration of acceleration, or otherwise.

 

**“Maximum****Legal Rate”** shall mean the maximum nonusuriousinterest rate, if any, that at any time or from time to time may be contractedfor, taken, reserved, charged or received on the indebtedness evidenced by theNote and as provided for herein or the other Loan

 

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Documents, under the laws of such state or states whose laws are heldby any court of competent jurisdiction to govern the interest rate provisionsof the Loan.

 

**“Monthly Debt Service Payment Amount”**shall mean an amount equal to $44,909.91.

 

**“Mortgage”**shall mean, with respect to the Property, that certain first priority Mortgage,Assignment of Leases and Rents, Security Agreement and Fixture Filing, datedthe Closing Date, executed and delivered by Borrower as security for the Loanand encumbering the Property, as the same may be amended, restated, replaced,supplemented or otherwise modified from time to time.

 

**“Net Cash Flow”**shall mean, with respect to the Property for any period, the amount obtained bysubtracting Operating Expenses and Capital Expenditures for such period fromGross Income from Operations for such period.

 

**“Net Cash Flow After Debt Service”**shall mean, with respect to the Property for any period, the amount obtained bysubtracting Debt Service for such period from Net Cash Flow for such period.

 

**“Net Cash Flow Schedule”**shall have the meaning set forth in Section 5.1.11(b) hereof.

 

**“Net Operating Income”**shall mean the amount obtained by subtracting from Gross Income from Operations(i) Operating Expenses, and (ii) a vacancy allowance equal to the greater of(x) market vacancy (as reasonably determined by Lender), less actual vacancy,and (y) underwritten vacancy of seven (7%) percent, less actual vacancy.  Notwithstanding the foregoing, if actualvacancy exceeds market vacancy and underwritten vacancy, then there shall be noadjustment for a vacancy allowance.

 

**“Net Proceeds”**shall have the meaning set forth in Section 6.4(b) hereof.

 

**“Net Proceeds Deficiency”**shall have the meaning set forth in Section 6.4(b)(vi) hereof.

 

**“Net Proceeds Prepayment”**shall have the meaning set forth in Section 6.4(c) hereof.

 

**“Note”** shallmean that certain Promissory Note of even date herewith in the principal amountof Eleven Million One Hundred Ninety Two Thousand Five Hundred and No/100Dollars ($11,192,500.00), made by Borrower in favor of Lender, as the same maybe amended, restated, replaced, supplemented or otherwise modified from time totime.

 

**“Officers’ Certificate”**shall mean a certificate delivered to Lender by Borrower which is signed by theSole Member.

 

**“Operating Expenses”**shall mean the total of all expenditures, computed in accordance withaccounting principles reasonably acceptable to Lender, consistently applied, of

 

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whatever kind relating to the operation, maintenance and management ofthe Property that are incurred on a regular monthly or other periodic basis,including without limitation, utilities, ordinary repairs and maintenance,insurance, license fees, property taxes and assessments, advertising expenses,management fees, payroll and related taxes, computer processing charges,operational equipment or other lease payments as approved by Lender, and othersimilar costs, but excluding depreciation, Debt Service, Capital Expendituresand contributions to the Reserve Funds.

 

**“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 ofvaults, chutes and similar areas adjoining the Property, now or hereafterlevied or assessed or imposed against the Property or any part thereof.

 

**“Partial Prepayment Conditions”** shall have the meaning set forth in Schedule IIhereof.

 

**“Payment Date”** shall mean the eleventh (11th) day ofeach calendar month during the term of the Loan or, if such day is not aBusiness Day, the immediately succeeding Business Day.

 

**“Permitted Encumbrances”** shall mean, with respect to theProperty, collectively, (a) the Liens and security interests created by theLoan Documents, (b) all Liens, encumbrances and other matters disclosed in theTitle Insurance Policy relating to the Property or any part thereof, (c) Liens,if any, for Taxes imposed by any Governmental Authority not yet due ordelinquent, and (d) such other title and survey exceptions as Lender hasapproved or may approve in writing in Lender’s reasonable discretion, whichPermitted Encumbrances in the aggregate do not materially adversely affect thevalue or use of the Property or Borrower’s ability to repay the Loan.

 

**“Permitted Investments”** shall mean any one or more of thefollowing obligations or securities acquired at a purchase price of not greaterthan par, including those issued by Servicer, the trustee under anySecuritization or any of their respective Affiliates, payable on demand orhaving a maturity date not later than the Business Day immediately prior to thefirst Payment Date following the date of acquiring such investment and meetingone of the appropriate standards set forth below:

 

(i)                                     obligationsof, or obligations fully guaranteed as to payment of principal and interest by,the United States or any agency or instrumentality thereof provided suchobligations are backed by the full faith and credit of the United States ofAmerica including, without limitation, obligations of: the U.S. Treasury (alldirect or fully guaranteed obligations), the Farmers Home Administration(certificates of beneficial ownership), the General Services Administration(participation certificates), the U.S. Maritime Administration (guaranteedTitle XI financing), the Small Business Administration (guaranteedparticipation certificates and guaranteed pool certificates), the U.S.Department of Housing and Urban Development (local authority bonds) and theWashington Metropolitan Area Transit Authority (guaranteed transit bonds); provided,however, that the investments described in this clause must (A) have apredetermined

 

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fixed dollar of principal due at maturitythat cannot vary or change, (B) if rated by S&P, must not have an “r”highlighter affixed to their rating, (C) if such investments have a variablerate of interest, such interest rate must be tied to a single interest rateindex plus a fixed spread (if any) and must move proportionately with thatindex, and (D) such investments must not be subject to liquidation prior totheir maturity;

 

(ii)                                  FederalHousing Administration debentures;

 

(iii)                               obligationsof the following United States government sponsored agencies: Federal Home LoanMortgage Corp. (debt obligations), the Farm Credit System (consolidatedsystemwide bonds and notes), the Federal Home Loan Banks (consolidated debtobligations), the Federal National Mortgage Association (debt obligations), theStudent Loan Marketing Association (debt obligations), the Financing Corp.(debt obligations), and the Resolution Funding Corp. (debt obligations); provided,however, that the investments described in this clause must (A) have apredetermined fixed dollar of principal due at maturity that cannot vary orchange, (B) if rated by S&P, must not have an “r” highlighter affixed totheir rating, (C) if such investments have a variable rate of interest, suchinterest rate must be tied to a single interest rate index plus a fixed spread(if any) and must move proportionately with that index, and (D) suchinvestments must not be subject to liquidation prior to their maturity;

 

(iv)                              federalfunds, unsecured certificates of deposit, time deposits, bankers’ acceptancesand repurchase agreements with maturities of not more than 365 days of anybank, the short term obligations of which at all times are rated in the highestshort term rating category by each Rating Agency (or, if not rated by allRating Agencies, rated by at least one Rating Agency in the highest short termrating category and otherwise acceptable to each other Rating Agency, asconfirmed in writing that such investment would not, in and of itself, resultin a downgrade, qualification or withdrawal of the initial, or, if higher, thencurrent ratings assigned to the Securities); provided, however,that the investments described in this clause must (A) have a predeterminedfixed dollar of principal due at maturity that cannot vary or change, (B) ifrated by S&P, must not have an “r” highlighter affixed to their rating, (C)if such investments have a variable rate of interest, such interest rate mustbe tied to a single interest rate index plus a fixed spread (if any) and mustmove proportionately with that index, and (D) such investments must not besubject to liquidation prior to their maturity;

 

(v)                                 fullyFederal Deposit Insurance Corporation-insured demand and time deposits in, orcertificates of deposit of, or bankers’ acceptances issued by, any bank ortrust company, savings and loan association or savings bank, the short termobligations of which at all times are rated in the highest short term ratingcategory by each Rating Agency (or, if not rated by all Rating Agencies, ratedby at least one Rating Agency in the highest short term rating category andotherwise acceptable to each other Rating Agency, as confirmed in writing thatsuch investment would not, in and of itself, result in a downgrade,qualification or withdrawal of the initial, or, if higher, then current ratingsassigned to the Securities); provided, however, that theinvestments described in this clause must (A) have a predetermined fixed dollarof principal due at maturity that cannot vary or change, (B) if rated byS&P, must not have an “r” highlighter affixed to their

 

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rating, (C) if such investments have avariable rate of interest, such interest rate must be tied to a single interestrate index plus a fixed spread (if any) and must move proportionately with thatindex, and (D) such investments must not be subject to liquidation prior totheir maturity;

 

(vi)                              debtobligations with maturities of not more than 365 days and at all times rated byeach Rating Agency (or, if not rated by all Rating Agencies, rated by at leastone Rating Agency and otherwise acceptable to each other Rating Agency, asconfirmed in writing that such investment would not, in and of itself, resultin a downgrade, qualification or withdrawal of the initial, or, if higher, thencurrent ratings assigned to the Securities) in its highest long-term unsecuredrating category; provided, however, that the investmentsdescribed in this clause must (A) have a predetermined fixed dollar of principaldue at maturity that cannot vary or change, (B) if rated by S&P, must nothave an “r” highlighter affixed to their rating, (C) if such investments have avariable rate of interest, such interest rate must be tied to a single interestrate index plus a fixed spread (if any) and must move proportionately with thatindex, and (D) such investments must not be subject to liquidation prior totheir maturity;

 

(vii)                           commercialpaper (including both non-interest-bearing discount obligations and interest-bearingobligations payable on demand or on a specified date not more than one yearafter the date of issuance thereof) with maturities of not more than 365 daysand that at all times is rated by each Rating Agency (or, if not rated by allRating Agencies, rated by at least one Rating Agency and otherwise acceptableto each other Rating Agency, as confirmed in writing that such investment wouldnot, in and of itself, result in a downgrade, qualification or withdrawal ofthe initial, or, if higher, then current ratings assigned to the Securities) inits highest short-term unsecured debt rating; provided, however,that the investments described in this clause must (A) have a predeterminedfixed dollar of principal due at maturity that cannot vary or change, (B) ifrated by S&P, must not have an “r” highlighter affixed to their rating, (C)if such investments have a variable rate of interest, such interest rate mustbe tied to a single interest rate index plus a fixed spread (if any) and mustmove proportionately with that index, and (D) such investments must not besubject to liquidation prior to their maturity;

 

(viii)                        unitsof taxable money market funds, which funds are regulated investment companies,seek to maintain a constant net asset value per share and invest solely inobligations backed by the full faith and credit of the United States, whichfunds have the highest rating available from each Rating Agency (or, if notrated by all Rating Agencies, rated by at least one Rating Agency and otherwiseacceptable to each other Rating Agency, as confirmed in writing that suchinvestment would not, in and of itself, result in a downgrade, qualification orwithdrawal of the initial, or, if higher, then current ratings assigned to theSecurities) for money market funds; and

 

(ix)                                anyother security, obligation or investment which has been approved as a PermittedInvestment in writing by (a) Lender and (b) each Rating Agency, as evidenced bya written confirmation that the designation of such security, obligation or investmentas a Permitted Investment will not, in and of itself, result in a downgrade,qualification or

 

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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) suchobligation or security evidences a right to receive only interest payments or(B) the right to receive principal and interest payments on such obligation orsecurity are derived from an underlying investment that provides a yield tomaturity in excess of 120% of the yield to maturity at par of such underlyinginvestment.

 

**“Permitted Prepayment Date”** shall mean the date that is three (3)years from the first day of the calendar month immediately following theClosing Date.

 

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

 

**“Personal Property”** shall have the meaning set forth inthe granting clause of the Mortgage with respect to the Property.

 

**“Physical Conditions Report”** shall mean, with respect to theProperty, a report prepared by a company satisfactory to Lender regarding thephysical condition of the Property, satisfactory in form and substance toLender in its sole discretion, which report shall, among other things, (a)confirm that the Property and its use complies, in all material respects, withall applicable Legal Requirements (including, without limitation, zoning,subdivision and building laws) and (b) include a copy of a final certificate ofoccupancy with respect to all Improvements on the Property.

 

**“Policies”** shall have the meaning specified in Section 6.1(b)hereof.

 

**“Prepayment Consideration”** shall have the meaning set forth in Section 2.3.1.

 

**“Prepayment Rate”** shall mean the bond equivalent yield(in the secondary market) on the United States Treasury Security that as of thePrepayment Rate Determination Date has a remaining term to maturity closest to,but not exceeding, the remaining term to the Maturity Date, as most recentlypublished in the “Treasury Bonds, Notes and Bills” section in The WallStreet Journal as of the date of the related tender of the payment.  If more than one issue of United StatesTreasury Securities has the remaining term to the Maturity Date referred toabove, the “Prepayment Rate” shall be the yield on the United States TreasurySecurity most recently issued as of such date.  If the publication of the Prepayment Rate inThe Wall Street Journal is discontinued, Lender shall determine the PrepaymentRate on the basis of “Statistical Release H.15(519), Selected Interest Rates,” or any successor publication,published by the Board of Governors of the Federal Reserve System, or on thebasis of such other publication or statistical guide as Lender may reasonablyselect.

 

**“Prepayment Rate Determination Date”** shall mean the date which is five (5)Business Days prior to the prepayment date.

 

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**“Property”** shall mean the parcel of realproperty, the Improvements thereon and all personal property owned by Borrowerand encumbered by the Mortgage, together with all rights pertaining to suchproperty and Improvements, as more particularly described in the GrantingClauses of the Mortgage and referred to therein as the “Property”.

 

**“Provided Information”** shall have the meaning set forth in Section 9.1(a)hereof.

 

**“Qualifying Entity”** shall have the meaning set forth in Section 5.2.13(b)hereof.

 

**“Qualifying Manager”** shall mean either (a) a reputable andexperienced management organization reasonably satisfactory to Lender, whichorganization or its principals possess at least ten (10) years experience inmanaging properties similar in size, scope and value of the Property and which,on the date Lender determines whether such management organization is aQualifying Manager, manages at least one million square feet of retail space,provided that Borrower shall have obtained prior written confirmation from theRating Agency that management of the Property by such entity will not cause adowngrading, withdrawal or qualification of the then current rating of thesecurities issued pursuant to the Securitization, or (b) the fee owner of theProperty, provided that such owner possesses experience in managing andoperating properties similar in size, scope and value of the Property.  Lender acknowledges that on the Closing Date,Manager shall be deemed to be a Qualifying Manager.

 

**“Rating Agencies”** shall mean each of Standard &Poor’s Ratings Services, a division of McGraw-Hill, Inc., Moody’s InvestorsService, Inc. and Fitch, Inc., or any other nationally-recognized statisticalrating agency which has been approved by Lender.

 

**“Rating Surveillance Charge”** shall have the meaning set forth in Section 9.3hereof.

 

**“Relevant Leasing Threshold”** shall mean Four Thousand or moreleasable square footage at the Property.

 

**“Relevant Restoration Threshold”** shall mean Three Hundred FiftyThousand and No/100 dollars ($350,000.00).

 

**“REMIC Trust”** shall mean a “real estate mortgageinvestment conduit” within the meaning of Section 860D of the Code thatholds the Note.

 

**“Rents”** shall mean, with respect to theProperty, all rents, rent equivalents, moneys payable as damages or in lieu ofrent or rent equivalents, royalties (including, without limitation, all oil andgas or other mineral royalties and bonuses), income, receivables, receipts,revenues, deposits (including, without limitation, security, utility and otherdeposits), accounts, cash, issues, profits, charges for services rendered, andother consideration of whatever form or nature received by or paid to or forthe account of or benefit of Borrower or its agents or employees from any andall sources arising from or attributable to the Property, and proceeds, if any,from business interruption or other loss of income insurance.

 

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**“Replacement Reserve Account”** shall have the meaning set forth in Section 7.3.1hereof.

 

**“Replacement Reserve Fund”** shall have the meaning set forth in Section 7.3.1hereof.

 

**“Replacement Reserve Monthly Deposit”** shall****havethe meaning set forth in Section 7.3.1 hereof.

 

**“Replacements”** shall have the meaning set forth in Section 7.3.1(a)hereof.

 

**“Required Repair Account”** shall have the meaning set forth in Section 7.1.1hereof.

 

**“Required Repair Fund”** shall have the meaning set forth in Section 7.1.1hereof.

 

**“Required Repairs”** shall have the meaning set forth in Section 7.1.1hereof.

 

**“Reserve Funds”** shall mean the Tax and Insurance Escrow****Fund,the Replacement Reserve Fund, the Required Repair Fund (if any), or any otherescrow fund established by theLoan Documents.

 

**“Restoration”** shall have the meaning set forth in Section 6.2hereof.

 

**“Securities”** shall have the meaning set forth in Section 9.1hereof.

 

**“Securities Act”** shall have the meaning set forth in Section 9.2hereof.

 

**“Securitization”** shall have the meaning set forth in Section 9.1hereof.

 

**“Servicer”** shall have the meaning set forth in Section 9.6hereof.

 

**“Servicing Agreement”** shall have the meaning set forth in Section 9.6hereof.

 

**“Severed Loan Documents”** shall have the meaning set forth in Section 8.2(c)hereof.

 

**“Severing Documentation”** shall have the meaning set forth in Section 9.7hereof.

 

**“Sole Member”** shall mean Inland Western Retail Real Estate Trust, Inc., a Marylandcorporation.

 

**“Special Purpose Entity”** means a corporation, limitedpartnership, limited liability company, or Delaware statutory trust which atall times on and after the Closing Date:

 

(i)                                     isorganized solely for the purpose of (A) acquiring, developing, owning, holding,selling, leasing, transferring, exchanging, managing and operating the Property,

 

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entering into this Agreement with the Lender,refinancing the Property in connection with a permitted repayment of the Loan,and transacting lawful business that is incident, necessary and appropriate toaccomplish the foregoing; or (B) acting as a general partner of the limitedpartnership that owns the Property, a member of the limited liability companythat owns the Property or the beneficiary or trustee of a Delaware statutorytrust that owns the Property;

 

(ii)                                  isnot engaged and will not engage in any business unrelated to (A) theacquisition, development, ownership, management or operation of the Property,(B) acting as general partner of the limited partnership that owns theProperty, (C) acting as a member of the limited liability company that owns theProperty, or (D) acting as the beneficiary or trustee of a Delaware statutorytrust that owns the Property, as applicable;

 

(iii)                               doesnot have and will not have any assets other than those related to the Propertyor its partnership interest in the limited partnership, the member interest inthe limited liability company or the beneficial interest in the Delawarestatutory trust that owns the Property or acts as the general partner, managingmember or beneficiary or trustee thereof, as applicable;

 

(iv)                              hasnot engaged, sought or consented to and will not engage in, seek or consent toany dissolution, winding up, liquidation, consolidation, merger, sale of all orsubstantially all of its assets, transfer of partnership, membership orbeneficial or trustee interests (if such entity is a general partner in alimited partnership, a member in a limited liability company or a beneficiaryof a Delaware trust) or amendment of its limited partnership agreement,articles of incorporation, articles of organization, certificate of formation,operating agreement or trust formation and governance documents (as applicable)with respect to the matters set forth in this definition;

 

(v)                                 ifsuch entity is a limited partnership, has as its only general partners, SpecialPurpose Entities that are corporations, limited partnerships or limitedliability companies;

 

(vi)                              intentionallyomitted;

 

(vii)                           ifsuch entity is a limited liability company and such limited liability companyhas more than one member, such limited liability company has as its manager aSpecial Purpose Entity that is a corporation and that owns at least 1.0% (onepercent) of the equity of the limited liability company;

 

(viii)                        ifsuch entity is a limited liability company and such limited liability companyhas only one member, such limited liability company (a) has been formed underDelaware law, and (b) has either a corporation or other person or entity thatshall become a member of the limited liability company upon the dissolution ordisassociation of the member;

 

(ix)                                ifsuch entity is (a) a limited liability company, has articles of organization, acertificate of formation and/or an operating agreement, as applicable, (b) alimited partnership, has a limited partnership agreement, (c) a corporation,has a

 

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certificate or articles of incorporation andbylaws, as applicable, or (d) a Delaware statutory trust, has organizationaldocuments that, in each case, provide that such entity will not: (1) dissolve,merge, liquidate, consolidate; (2) except as permitted herein, sell all orsubstantially all of its assets or the assets of the Borrower (as applicable)except as permitted herein; (3) engage in any other business activity, or amendits organizational documents with respect to the matters set forth in thisdefinition without the consent of the Lender; or (4) without the affirmativevote of all directors of the corporation (that is such entity or the generalpartner or managing or co-managing member or manager of such entity), file abankruptcy or insolvency petition or otherwise institute insolvency proceedingswith respect to itself or to any other entity in which it has a direct orindirect legal or beneficial ownership interest;

 

(x)                                   hasnot entered into or been a party to, and will not enter into or be a party to,any transaction with its partners, members, beneficiaries, shareholders orAffiliates except (A) in the ordinary course of its business and on terms whichare intrinsically fair, commercially reasonable and are no less favorable to itthan would be obtained in a comparable arm’s-length transaction with anunrelated third party and (B) in connection with this Agreement;

 

(xi)                                issolvent and pays its debts and liabilities (including, as applicable, sharedpersonnel and overhead expenses) from its assets as the same become due, and ismaintaining adequate capital for the normal obligations reasonably foreseeablein a business of its size and character and in light of its contemplatedbusiness operations;

 

(xii)                             hasnot failed and will not fail to correct any known misunderstanding regardingthe separate identity of such entity;

 

(xiii)                          willfile its own tax returns; provided, however, that Borrower’s assets andincome may be included in a consolidated tax return of its parent companies ifinclusion on such consolidated tax return is in compliance with applicable law;

 

(xiv)                         hasmaintained and will maintain its own resolutions and agreements;

 

(xv)                            (a)has not commingled and will not commingle its funds or assets with those of anyother Person and (b) has not participated and will not participate in any cashmanagement system with any other Person, except with respect to a custodialaccount maintained by the Manager on behalf of Affiliates of Borrower and, withrespect to funds in such custodial account, has separately accounted, and will continueto separately account for, each item of income and expense applicable to theProperty and Borrower;

 

(xvi)                         hasheld and will hold its assets in its own name;

 

(xvii)                        hasconducted and will conduct its business in its name or in a name franchised or licensedto it by an entity other than an Affiliate of Borrower;

 

(xviii)                   hasmaintained and will maintain its balance sheets, operating statements and otherentity documents separate from any other Person and has not permitted and willnot permit its assets to be listed as assets on the financial statement of anyother entity

 

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except as required or permitted by applicableaccounting principles acceptable to Lender, consistently applied; provided,however, that (i) any such consolidated financial statement shallcontain a note indicating that it maintains separate balance sheets andoperating statements for the Borrower and the Property, or (ii) if such Personis controlled by Inland Western Retail Real Estate Trust, Inc., then suchPerson may be included in the consolidated financial statement of InlandWestern Retail Real Estate Trust, Inc. provided such consolidated financialstatement contains a note indicating that it maintains separate financial recordsfor each Person controlled by Inland Western Retail Real Estate Trust, Inc.;

 

(xix)                           hasa sufficient number of employees in light of its contemplated businessoperations, which may be none;

 

(xx)                              hasobserved and will observe all partnership, corporate, limited liability companyor Delaware statutory trust formalities, as applicable;

 

(xxi)                           hasand will have no Indebtedness (including loans (whether or not such loans areevidenced by a written agreement) between Borrower and any Affiliates ofBorrower and relating to the management of funds in the custodial accountmaintained by the Manager) other than (i) the Loan, (ii) liabilities incurredin the ordinary course of business relating to the ownership and operation ofthe Property and the routine administration of Borrower, which liabilities arenot more than sixty (60) days past the date incurred (unless disputed inaccordance with applicable law), are not evidenced by a note and are paid whendue, and which amounts are normal and reasonable under the circumstances and donot, in any event, exceed $100,000 in the aggregate, and (iii) such otherliabilities that are permitted pursuant to this Agreement;

 

(xxii)                        hasnot and will not assume or guarantee or become obligated for the debts of anyother Person or hold out its credit as being available to satisfy theobligations of any other Person except as otherwise permitted pursuant to thisAgreement;

 

(xxiii)                     hasnot and will not acquire obligations or securities of its partners, members,beneficiaries or shareholders or any other Affiliate;

 

(xxiv)                    hasallocated and will allocate fairly and reasonably any overhead expenses thatare shared with any Affiliate, including, but not limited to, paying for sharedoffice space and services performed by any employee of an affiliate;

 

(xxv)                       hasnot maintained or used, and will not maintain or use, invoices and checksbearing the name of any other Person, provided, however, thatManager, on behalf of such Person, may maintain and use invoices and checksbearing Manager’s name;

 

(xxvi)                    hasnot pledged and will not pledge its assets for the benefit of any other Personexcept as permitted or required pursuant to this Agreement;

 

(xxvii)                 hasheld itself out and identified itself and will hold itself out and identifyitself as a separate and distinct entity under its own name or in a namefranchised or licensed to it by an entity other than an Affiliate of Borrowerand not as a division or part

 

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of any other Person, except for servicesrendered by Manager under the Management Agreement, so long as Manager holdsitself out as an agent of the Borrower;

 

(xxviii)              hasmaintained and will maintain its assets in such a manner that it will not becostly or difficult to segregate, ascertain or identify its individual assetsfrom those of any other Person;

 

(xxix)                      hasnot made and will not make loans to any Person or hold evidence of indebtednessissued by any other person or entity (other than cash and investment-gradesecurities issued by an entity that is not an Affiliate of or subject to commonownership with such entity);

 

(xxx)                         hasnot identified and will not identify its partners, members, beneficiaries orshareholders, or any Affiliate of any of them, as a division or part of it, andhas not identified itself and shall not identify itself as a division of anyother Person;

 

(xxxi)                      doesnot and will not have any of its obligations guaranteed by any Affiliate exceptas otherwise required in the Loan Documents;

 

(xxxii)                   hasnot entered into or been a party to, and will not enter into or be a party to,any transaction with its partners, members, beneficiaries, shareholders orAffiliates except (A) in the ordinary course of its business and on terms whichare intrinsically fair, commercially reasonable and are no less favorable to itthan would be obtained in a comparable arm’s-length transaction with anunrelated third party and (B) in connection with this Agreement; and

 

(xxxiii)                hascomplied and will comply with all of the terms and provisions contained in itsorganizational documents.  The statementof facts contained in its organizational documents are true and correct andwill remain true and correct.

 

**“State”** shallmean, with respect to the Property, the State or Commonwealth in which theProperty or any part thereof is located.

 

**“Survey”**shall mean a survey of the Property in question prepared by a surveyor licensedin the State and satisfactory to Lender and the company or companies issuingthe Title Insurance Policy, and containing a certification of such surveyorsatisfactory to Lender.

 

**“Tax and Insurance Escrow Fund”**shall have the meaning set forth in Section 7.2 hereof regardless ofwhether the funds held therein are held by Lender for the payment of Taxes orInsurance Premiums or both.

 

**“Taxes”** shallmean all real estate and personal property taxes, assessments, water rates orsewer rents, now or hereafter levied or assessed or imposed against theProperty or any part thereof.

 

**“Tenant”**shall mean any person or entity with a possessory right to all or any part ofthe Property pursuant to a Lease or other written agreement.

 

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**“Tenant Reserve Earnout Conditions”** shall mean the following with respectto each of the Lease-Up Reserve Tenants: (i) the full execution and delivery ofa lease satisfying the conditions of this Loan Agreement, (ii) the rentcommencement date under the applicable Lease-Up Reserve Tenant’s lease shallhave occurred and the tenant thereunder shall have commenced the payment offull rent, (iii) all leasing commissions and tenant improvement allowancesshall have been fully paid, (iv) a certificate of occupancy (or the local legalequivalent indicating that the applicable space may be lawfully occupied by thetenant for the conduct of its business) shall have been issued for theapplicable demised premises, (v) the applicable Lease-Up Reserve Tenant shallhave opened for business to the public for its permitted use for at least one(1) day and (vi) the applicable Lease-Up Reserve Tenant shall have delivered toLender a tenant estoppel certificate in form reasonably satisfactory to Lenderstating, *inter alia,*that alldelivery conditions have been completed and that the tenant has acceptedpossession of the demised premises.

 

**“Tenant Reserve Earnout ConditionsCertificate”** shall mean a certificate, executed by an officer or otherauthorized signatory of Borrower, duly certifying that the Tenant ReserveEarnout Conditions for a particular Lease-Up Reserve Tenant have beensatisfied.

 

**“Terrorism Insurance Guarantor”** shall have the meaning set forth in Section 6.1hereof.

 

**“Title Insurance Policy”** shall mean, with respect to theProperty, an ALTA mortgagee title insurance policy in the form (acceptable toLender) (or, if the Property is in a State which does not permit the issuanceof such ALTA policy, such form as shall be permitted in such State andacceptable to Lender) issued with respect to the Property and insuring the lienof the Mortgage encumbering the Property.

 

**“Transferee”** shall have the meaning set forth in Section 5.2.13hereof.

 

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

 

**“U.S. Obligations”** shall mean direct non-callableobligations of the United States of America as defined in Section 2(a)(16)of the Investment Company Act as amended (15 USC 80a-1) stated in REMIC Section 1.86OG-2(a)(8).

 

Section 1.2                                      Principlesof Construction.  All references tosections and schedules are to sections and schedules in or to this Agreementunless otherwise specified.  All uses ofthe word “including” shall mean “including, without limitation” unless thecontext shall indicate otherwise.  Unlessotherwise specified, the words “hereof,” “herein” and “hereunder” and words ofsimilar import when used in this Agreement shall refer to this Agreement as awhole and not to any particular provision of this Agreement.  Unless otherwise specified, all meaningsattributed to defined terms herein shall be equally applicable to both thesingular and plural forms of the terms so defined.

 

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**ARTICLE II**

 

**GENERAL TERMS**

 

Section 2.1                                      LoanCommitment; Disbursement to Borrower.

 

2.1.1                        TheLoan.  Subject to and upon the termsand conditions set forth herein, Lender hereby agrees to make and Borrowerhereby agrees to accept the Loan on the Closing Date.

 

2.1.2                        Disbursementto Borrower.  Borrower may requestand receive only one borrowing hereunder in respect of the Loan and any amountborrowed and repaid hereunder in respect of the Loan may not be reborrowed.

 

2.1.3                        TheNote, Mortgage and Loan Documents.  The Loan shall be evidenced by the Note andsecured by the Mortgage, the Assignment of Leases and the other Loan Documents.

 

2.1.4                        Useof Proceeds.  Borrower shall use theproceeds of the Loan to (a) repay and discharge any existing loans relating tothe Property, (b) pay all past-due Basic Carrying Costs, if any, in respect ofthe Property, (c) make deposits into the Reserve Funds on the Closing Date inthe amounts provided herein, (d) pay costs and expenses incurred in connectionwith the closing of the Loan, as approved by Lender, (e) fund any workingcapital requirements of the Property, and (f) distribute the balance, if any,to Borrower.

 

Section 2.2                                      Interest;Loan Payments; Late Payment Charge.

 

2.2.1                        InterestGenerally.  Interest on theoutstanding principal balance of the Loan shall accrue from the Closing Date tobut excluding the Maturity Date at the Interest Rate.

 

2.2.2                        InterestCalculation.  Interest on theoutstanding principal balance of the Loan shall be calculated on the basis of athree hundred sixty (360) day year comprised of twelve (12) months of thirty(30) days each, except that interest due and payable for a period of less than afull month shall be calculated by multiplying the actual number of days elapsedin the period for which the calculation is being made by a daily rate based ona three hundred sixty (360) day year.

 

2.2.3                        PaymentsGenerally.  Borrower shall pay toLender (a) on the Closing Date, an amount equal to interest only on theoutstanding principal balance of the Loan from the Closing Date up to but notincluding the first Payment Date following the Closing Date, and (b) on February 11,2005 and each Payment Date thereafter up to but not including the Maturity Date,an amount equal to the Monthly Debt Service Payment Amount, which shall beapplied to interest on the outstanding principal amount of the Loan for theprior calendar month at the Interest Rate.

 

2.2.4                        IntentionallyOmitted.

 

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2.2.5                        Paymenton Maturity Date.  Borrower shall payto Lender on the Maturity Date the outstanding principal balance of the Loan,all accrued and unpaid interest and all other amounts due hereunder and underthe Note, the Mortgage and other the Loan Documents.

 

2.2.6                        Paymentsafter Default.  Upon the occurrenceand during the continuance of an Event of Default, interest on the outstanding principalbalance of the Loan and, to the extent permitted by law, overdue interest andother amounts due in respect of the Loan, shall accrue at the Default Rate,calculated from the date such payment was due without regard to any grace orcure periods contained herein.  Interestat the Default Rate shall be computed from the occurrence of the Event ofDefault until the earlier of (i) in the event of a non-monetary default, thecure of such Event of Default by Borrower and acceptance of such cure by Lender,and (ii) in the event of a monetary default, the actual receipt and collectionof the Debt (or that portion thereof that is then due).  To the extent permitted by applicable law,interest at the Default Rate shall be added to the Debt, shall itself accrueinterest at the same rate as the Loan and shall be secured by the Mortgage.  This paragraph shall not be construed as anagreement or privilege to extend the date of the payment of the Debt, nor as awaiver of any other right or remedy accruing to Lender by reason of theoccurrence of any Event of Default and Lender retains its rights under the Noteand this Agreement to accelerate and to continue to demand payment of the Debtupon the happening and continuance of any Event of Default.

 

2.2.7                        LatePayment Charge.  If any principal,interest or any other sums due under the Loan Documents is not paid by Borroweron or prior to the date on which it is due, Borrower shall pay to Lender upondemand an amount equal to the lesser of five percent (5%) of such unpaid sum orthe maximum amount permitted by applicable law in order to defray the expenseincurred by Lender in handling and processing such delinquent payment and to compensateLender for the loss of the use of such delinquent payment.  Any such amount shall be secured by theMortgage and the other Loan Documents to the extent permitted by applicable law.  The foregoing late payment charge shall notapply to the payment of all outstanding principal, interest and other sums dueon the Maturity Date.

 

2.2.8                        UsurySavings.  This Agreement and the Noteare subject to the express condition that at no time shall Borrower beobligated or required to pay interest on the principal balance of the Loan at arate which could subject Lender to either civil or criminal liability as a resultof being in excess of the Maximum Legal Rate.  If, by the terms of this Agreement or the otherLoan Documents, Borrower is at any time required or obligated to pay intereston the principal balance due hereunder at a rate in excess of the Maximum LegalRate, the Interest Rate or the Default Rate, as the case may be, shall bedeemed to be immediately reduced to the Maximum Legal Rate and all previouspayments in excess of the Maximum Legal Rate shall be deemed to have beenpayments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid toLender for the use, forbearance, or detention of the sums due under the Loan,shall, to the extent permitted by applicable law, be amortized, prorated,allocated, and spread throughout the full stated term of the Loan until paymentin full so that the rate or amount of interest on account of the Loan does notexceed the Maximum Legal Rate of interest from time to time in effect andapplicable to the Loan for so long as the Loan is outstanding.

 

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Section 2.3                                      Prepayments.

 

2.3.1                        VoluntaryPrepayments.

 

(a)                                  Exceptas otherwise provided herein, Borrower shall not have the right to prepay theLoan in whole or in part on or prior to the Permitted Prepayment Date.  After the Permitted Prepayment Date, Borrowermay, provided it has given Lender prior written notice in accordance with theterms of this Agreement, prepay the unpaid principal balance of the Loan in whole,but not in part, by paying, together with the amount to be prepaid, (i)interest accrued and unpaid on the outstanding principal balance of the Loanbeing prepaid to and including the date of prepayment, (ii) unless prepaymentis tendered on a Payment Date, an amount equal to the interest that would haveaccrued on the amount being prepaid after the date of prepayment through andincluding the next Payment Date had the prepayment not been made (which amount shallconstitute additional consideration for the prepayment), (iii) all other sumsthen due under this Agreement, the Note, the Mortgage and the other LoanDocuments, and (iv) if prepayment occurs prior to the Payment Date which isthree months prior to the Maturity Date, a prepayment consideration (the **“Prepayment Consideration”**) equal to the greater of (A) onepercent (1%)  of the outstandingprincipal balance of the Loan being prepaid or (B) the excess, if any, of (1)the sum of the present values of all then-scheduled payments of principal andinterest under this Agreement including, but not limited to, principal andinterest on the Maturity Date (with each such payment discounted to its presentvalue at the date of prepayment at the rate which, when compounded monthly, isequivalent to the Prepayment Rate), over (2) the outstanding principal amountof the Loan.  Lender shall notifyBorrower of the amount and the basis of determination of the requiredprepayment consideration.

 

(b)                                 Onthe Payment Date that is three (3) months prior to the Maturity Date, and oneach day thereafter through the Maturity Date, Borrower may, at its option,prepay the Debt without payment of any Prepayment Consideration or otherpenalty or premium; provided, however, if such prepayment is notpaid on a regularly scheduled Payment Date, the Debt shall include interestthat would have accrued on such prepayment through and including the dayimmediately preceding the Maturity Date.  Borrower’s right to prepay any portion of theprincipal balance of the Loan shall be subject to (i) Borrower’s submission ofa notice to Lender setting forth the amount to be prepaid and the projecteddate of prepayment, which date shall be no less than thirty (30) days from thedate of such notice, and (ii) Borrower’s actual payment to Lender of the amountto be prepaid as set forth in such notice on the projected date set forth insuch notice or any day following such projected date occurring in the samecalendar month as such projected date.

 

2.3.2                        MandatoryPrepayments.  (a) On the next occurringPayment Date following the date on which Borrower actually receives any NetProceeds, if Lender is not obligated to make such Net Proceeds available toBorrower pursuant to this Agreement for the restoration of the Property,Borrower shall, at Lender’s option, prepay the outstanding principal balance ofthe Note in an amount equal to one hundred percent (100%) of such Net Proceeds. No Prepayment Consideration or otherpenalty or premium shall be due in connection with any prepayment made pursuantto this Section 2.3.2.  Any partialprepayment under this Section shall be applied to the last payments ofprincipal due under the Loan.

 

(b)                                 Onthe date on which Borrower tenders a Casualty/Condemnation Prepayment pursuantto Section 6.4(e) below, such tender shall include (a) all accrued and

 

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unpaid interest and the principal indebtedness being prepaid, includinginterest on the outstanding principal amount of the applicable Note through thelast day of the month within which such tender occurs; and (b) any other sumsdue hereunder relating to the applicable Note.  Except as set forth in this Section 2.3.2(b),other than following an Event of Default, no Prepayment Consideration or otherpenalty or premium shall be due in connection with any Casualty/CondemnationPrepayment.

 

2.3.3                        Prepaymentsafter Default.  Following an Event ofDefault, if Borrower or anyone on Borrower’s behalf makes a tender of paymentof all or any portion of the Debt at any time prior to a foreclosure sale(including a sale under the power of sale under the Mortgage), or during anyredemption period after foreclosure, (i) the tender of payment shall constitutean evasion of Borrower’s obligation to pay any Prepayment Consideration due underthis Agreement and such payment shall, therefore, to the maximum extentpermitted by law, include a premium equal to the Prepayment Consideration thatwould have been payable on the date of such tender had the Loan not been soaccelerated, or (ii) if at the time of such tender a prepayment of theprincipal amount of the Loan would have been prohibited under this Agreementhad the principal amount of the Loan not been so accelerated, the tender ofpayment shall constitute an evasion of such prepayment prohibition and shall,therefore, to the maximum extent permitted by law, include an amount equal tothe greater of (i) 1% of the then principal amount of the Loan (or the relevantportion thereof being prepaid) and (ii) an amount equal to the excess of (A)the sum of the present values of a series of payments payable at the times andin the amounts equal to the payments of principal and interest (including, butnot limited to the principal and interest payable on the Maturity Date) whichwould have been scheduled to be payable after the date of such tender underthis Agreement had the Loan (or the relevant portion thereof) not beenaccelerated, with each such payment discounted to its present value at the dateof such tender at the rate which when compounded monthly is equivalent to thePrepayment Rate, over (B) the then principal amount of the Loan.

 

Section 2.4                                      IntentionallyOmitted.

 

Section 2.5                                      Releaseof Property.  Except as set forth inthis Section 2.5, no repayment or prepayment of all or any portion of theLoan shall cause, give rise to a right to require, or otherwise result in, therelease of any Lien of the Mortgage on the Property.  If Borrower has elected to prepay the entireamount of the Loan pursuant to Section 2.3.1 and the requirements of this Section 2.5have been satisfied, the Property shall be released from the Lien of theMortgage.

 

2.5.1                        Releaseon Payment in Full.  Lender shall,upon the written request and at the expense of Borrower, upon payment in fullof all principal and interest on the Loan and all other amounts due and payableunder the Loan Documents in accordance with the terms and provisions of Section 2.3.1of this Loan Agreement, release the Lien of the Mortgage on the Property nottheretofore released.

 

2.5.2                        IntentionallyOmitted.

 

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Section. 2.6                                   Mannerof Making Payments.

 

2.6.1                        Makingof Payments.  Each payment byBorrower hereunder or under the Note shall be made in funds settled through theNew York Clearing House Interbank Payments System or other funds immediatelyavailable to Lender by 1:00 p.m., New York City time, on the date such paymentis due, to Lender by deposit to such account as Lender may designate by writtennotice to Borrower.  Whenever any paymenthereunder or under the Note shall be stated to be due on a day which is not aBusiness Day, such payment shall be made on the next succeeding Business Day.

 

2.6.2                        NoDeductions, Etc.  All payments madeby Borrower hereunder or under the Note or the other Loan Documents shall bemade irrespective of, and without any deduction for, any setoff, defense orcounterclaims.

 

**ARTICLE III**

 

**CONDITIONS PRECEDENT**

 

Section 3.1                                      ConditionsPrecedent to Closing.  The obligationof Lender to make the Loan hereunder is subject to the fulfillment by Borroweror waiver by Lender of the following conditions precedent no later than theClosing Date:

 

3.1.1                        Representationsand Warranties;  Compliance withConditions.  The representations andwarranties of Borrower contained in this Agreement and the other Loan Documentsshall be true and correct in all material respects on and as of the ClosingDate with the same effect as if made on and as of such date, and no Default oran Event of Default shall have occurred and be continuing; and Borrower shallbe in compliance in all material respects with all terms and conditions setforth in this Agreement and in each other Loan Document on its part to beobserved or performed.

 

3.1.2                        LoanAgreement and Note.  Lender shallhave received a copy of this Agreement and the Note, in each case, dulyexecuted and delivered on behalf of Borrower.

 

3.1.3                        Deliveryof Loan Documents; Title Insurance; Reports; Leases, Etc.

 

(a)                                  Mortgage,Assignment of Leases and other Loan Documents.  Lender shall have received from Borrowerfully executed and acknowledged counterparts of the Mortgage and the Assignmentof Leases and evidence that counterparts of the Mortgage and Assignment ofLeases have been delivered to the title company for recording, in thereasonable judgment of Lender, so as to effectively create upon such recordingvalid and enforceable first priority Liens upon the Property in favor of Lender(or such trustee as may be required under local law), subject only to thePermitted Encumbrances and such other Liens as are permitted pursuant to theLoan Documents.  Lender shall have alsoreceived from Borrower fully executed counterparts of the Assignment ofManagement Agreement and the other Loan Documents.

 

(b)                                 TitleInsurance.  Lender shall havereceived a Title Insurance Policy issued by a title company acceptable toLender and dated as of the Closing Date.  Such Title Insurance Policy shall (i) providecoverage in an amount equal to the principal amount of the

 

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Loan together with, if applicable, a “tie-in”or similar endorsement, (ii) insure Lender that the Mortgage creates a validfirst priority lien on the Property encumbered thereby, free and clear of allexceptions from coverage other than Permitted Encumbrances and standardexceptions and exclusions from coverage (as modified by the terms of anyendorsements), (iii) contain such endorsements and affirmative coverages asLender may reasonably request, and (iv) name Lender, its successors andassigns, as the insured.  The TitleInsurance Policy shall be assignable without cost to Lender.  Lender also shall have received evidence thatall premiums in respect of such Title Insurance Policy have been paid.

 

(c)                                  Survey. Lender shall have received a titlesurvey for the Property, certified to the title company and Lender and theirsuccessors and assigns, in form and content satisfactory to Lender and preparedby a professional and properly licensed land surveyor satisfactory to Lender inaccordance with the most recent Minimum Standard Detail Requirements forALTA/ACSM Land Title Surveys.  Thefollowing additional items from the list of “Optional Survey Responsibilitiesand Specifications” (Table A) should be added to each survey: 2, 3, 4, 6, 8, 9,10, 11 and 13.  The survey shall reflectthe same legal description contained in the Title Insurance Policy relating tothe Property referred to in clause (ii) above and shall include, among otherthings, a legal description of the real property comprising part of such Propertyreasonably satisfactory to Lender.  Thesurveyor’s seal shall be affixed to each survey and the surveyor shall providea certification for each survey in form and substance acceptable to Lender.

 

(d)                                 Insurance.  Lender shall have received valid certificatesof insurance for the policies of insurance required hereunder, satisfactory toLender in its sole discretion, and evidence of the payment of all premiumspayable for the existing policy period.

 

(e)                                  EnvironmentalReports.  Lender shall have receivedan environmental report in respect of the Property, in each case reasonablysatisfactory to Lender.

 

(f)                                    Zoning.  With respect to the Property, Lender shallhave received, at Lender’s option, (i) letters or other evidence with respectto the Property from the appropriate municipal authorities (or other Persons)concerning applicable zoning and building laws, (ii) an ALTA 3.1 zoningendorsement to the Title Insurance Policy or (iii) other evidence of zoning compliance,in each case in substance reasonably satisfactory to Lender.

 

(g)                                 Encumbrances.  Borrower shall have taken or caused to betaken such actions in such a manner so that Lender has a valid and perfectedfirst Lien on the Property as of the Closing Date with respect to the Mortgage,subject only to applicable Permitted Encumbrances and such other Liens as arepermitted pursuant to the Loan Documents, and Lender shall have receivedsatisfactory evidence thereof.

 

3.1.4                        RelatedDocuments.  Each additional documentnot specifically referenced herein, but relating to the transactionscontemplated herein, shall have been duly authorized, executed and delivered byall parties thereto and Lender shall have received and approved certifiedcopies thereof.

 

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3.1.5                        Deliveryof Organizational Documents.  On orbefore the Closing Date, Borrower shall deliver or cause to be delivered toLender copies certified by Borrower of all organizational documentation relatedto Borrower and/or the formation, structure, existence, good standing and/orqualification to do business, as Lender may request in its sole discretion, including,without limitation, good standing certificates, qualifications to do businessin the appropriate jurisdictions, resolutions authorizing the entering into ofthe Loan and incumbency certificates as may be requested by Lender.

 

3.1.6                        Opinionsof Borrower’s Counsel.  Lender shallhave received opinions of Borrower’s counsel (and if applicable, Borrower’slocal counsel) with respect to due execution, authority, enforceability of theLoan Documents and such other matters as Lender may reasonably require, allsuch opinions in form, scope and substance reasonably satisfactory to Lenderand Lender’s counsel in their reasonable discretion.

 

3.1.7                        Budgets. Borrower shall have delivered, andLender shall have approved, the Annual Budget for the current Fiscal Year.

 

3.1.8                        BasicCarrying Costs.  Borrower shall havepaid all Basic Carrying Costs relating to the Property which are in arrears,including without limitation, (a) accrued but unpaid insurance premiumsrelating to the Property, (b) currently due and payable Taxes (including any inarrears) relating to the Property, and (c) currently due Other Charges relatingto the Property, which amounts shall be funded with proceeds of the Loan.

 

3.1.9                        Completionof Proceedings.  All organizationalproceedings taken or to be taken in connection with the transactionscontemplated by this Agreement and other Loan Documents and all documentsincidental thereto shall be reasonably satisfactory in form and substance toLender, and Lender shall have received all such counterpart originals orcertified copies of such documents as Lender may reasonably request.

 

3.1.10                  Payments.  All payments, deposits or escrows required tobe made or established by Borrower under this Agreement, the Note and the otherLoan Documents on or before the Closing Date shall have been paid.

 

3.1.11                  TenantEstoppels.  Borrower shall exercisereasonable commercial efforts to deliver estoppel letters from Tenantsoccupying not less than eighty percent (80%) of the gross leasable area of theProperty.

 

3.1.12                  TransactionCosts.  Borrower shall have paid orreimbursed Lender for all title insurance premiums, recording and filing feesor taxes, costs of environmental reports, Physical Conditions Reports,appraisals and other reports, the fees and costs of Lender’s counsel and allother third party out-of-pocket expenses incurred in connection with theorigination of the Loan.

 

3.1.13                  MaterialAdverse Change.  There shall havebeen no material adverse change in the financial condition or businesscondition of Borrower, Indemnitor or the Property since the date of the mostrecent financial statements delivered to Lender.  The income and expenses of the Property, theoccupancy leases thereof, and all other features of the transaction shall be asrepresented to Lender without material adverse change.  Neither Borrower, any of its

 

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constituent Persons, shall be the subject of any bankruptcy,reorganization, or insolvency proceeding.

 

3.1.14                  Leasesand Rent Roll.  Lender shall havereceived copies of all tenant leases, certified copies of any tenant leases asrequested by Lender and certified copies of all ground leases affecting theProperty.  Lender shall have received acurrent certified rent roll of the Property, reasonably satisfactory in formand substance to Lender.

 

3.1.15                  Subordinationand Attornment.  Lender shall havereceived appropriate instruments acceptable to Lender in its commerciallyreasonable discretion subordinating any Leases of record prior to the Mortgageand any Tenant occupying more than 10,000 square feet and including anagreement by such Tenants to attorn to Lender in the event of a foreclosure or deliveryof a deed in lieu thereof.

 

3.1.16                  TaxLot.  Lender shall have receivedevidence that the Property constitutes one (1) or more separate tax lots, whichevidence shall be reasonably satisfactory in form and substance to Lender.

 

3.1.17                  PhysicalConditions Reports.  Lender shallhave received Physical Conditions Reports with respect to the Property, whichreports shall be reasonably satisfactory in form and substance to Lender.

 

3.1.18                  ManagementAgreement.  Lender shall havereceived a certified copy of the Management Agreement with respect to theProperty which shall be satisfactory in form and substance to Lender.  Lender acknowledges that it has reviewed theManagement Agreement, and as drafted, such Management Agreement does not violateBorrower’s covenant that affiliated agreements be on terms which areintrinsically fair, commercially reasonable and are no less favorable to itthan would be obtained in a comparable arm’s length transaction with anunrelated third party.

 

3.1.19                  Appraisal. Lender shall have received an appraisalof the Property, which shall be satisfactory in form and substance to Lender.

 

3.1.20                  FinancialStatements.  Lender shall havereceived (a) a balance sheet with respect to the Property for the two most recentFiscal Years and statements of income and statements of cash flows with respectto the Property for the three most recent Fiscal Years, each in form andsubstance reasonably satisfactory to Lender or (b) such other financialstatements relating to the ownership and operation of the Property, in form andsubstance reasonably satisfactory to Lender.

 

3.1.21                  FurtherDocuments.  Lender or its counselshall have received such other and further approvals, opinions, documents andinformation as Lender or its counsel may have reasonably requested includingthe Loan Documents in form and substance reasonably satisfactory to Lender andits counsel.

 

3.1.22                  EnvironmentalInsurance.  If required by Lender,Borrower shall have obtained a secured creditor environmental insurance policywith respect to the Property, which shall be in form and substance satisfactoryto Lender.  Any such policy shall have aterm not less

 

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than the term of the Loan.  Borrower shall have provided to Lenderevidence that the premiums for such policy has been paid in full.

 

**ARTICLE IV**

 

**REPRESENTATIONS****AND WARRANTIES**

 

Section 4.1                                      BorrowerRepresentations.  Borrower representsand warrants as of the date hereof and as of the Closing Date that:

 

4.1.1                        Organization. Borrower has been duly organized and isvalidly existing and in good standing with requisite power and authority to ownthe Property and to transact the businesses in which it is now engaged.  Borrower is duly qualified to do business andis in good standing in each jurisdiction where it is required to be soqualified in connection with the Property, businesses and operations.  Borrower possesses all rights, licenses,permits and authorizations, governmental or otherwise, necessary to entitle itto own the Property and to transact the businesses in which it is now engaged,and the sole business of Borrower is the ownership, management and operation ofthe Property.

 

4.1.2                        Proceedings.  Borrower has taken all necessary action toauthorize the execution, delivery and performance of this Agreement and theother Loan Documents.  This Agreement andsuch other Loan Documents have been duly executed and delivered by or on behalfof Borrower and constitute legal, valid and binding obligations of Borrowerenforceable against Borrower in accordance with their respective terms, subjectonly to applicable bankruptcy, insolvency and similar laws affecting rights ofcreditors generally, and subject, as to enforceability, to general principlesof equity (regardless of whether enforcement is sought in a proceeding inequity or at law).

 

4.1.3                        NoConflicts.  The execution, deliveryand performance of this Agreement and the other Loan Documents by Borrower willnot 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 anylien, charge or encumbrance (other than pursuant to the Loan Documents) uponany of the property or assets of Borrower pursuant to the terms of anyindenture, mortgage, deed of trust, loan agreement, partnership agreement orother agreement or instrument to which Borrower is a party or by which any ofBorrower’s property or assets is subject, nor will such action result in anyviolation of the provisions of any statute or any order, rule or regulation ofany court or governmental agency or body having jurisdiction over Borrower orany of Borrower’s properties or assets, and any consent, approval,authorization, order, registration or qualification of or with any court or anysuch regulatory authority or other governmental agency or body required for theexecution, delivery and performance by Borrower of this Agreement or any otherLoan Documents has been obtained and is in full force and effect.

 

4.1.4                        Litigation.  To Borrower’s knowledge, there are noactions, suits or proceedings at law or in equity by or before any GovernmentalAuthority or other agency now pending or threatened against or affectingBorrower or the Property, which actions, suits or proceedings, if determinedagainst Borrower or the Property, might materially adversely affect

 

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the condition (financial or otherwise) orbusiness of Borrower or the condition or ownership of the Property.

 

4.1.5                        Agreements. Except such instruments and agreementsset forth as Permitted Exceptions in the Title Insurance Policy, Borrower isnot a party to any agreement or instrument or subject to any restriction whichmight materially and adversely affect Borrower or the Property, or Borrower’sbusiness, properties or assets, operations or condition, financial orotherwise.  To Borrower’s knowledge,Borrower is not in default in any material respect in the performance,observance or fulfillment of any of the obligations, covenants or conditionscontained in any agreement or instrument to which it is a party or by whichBorrower or the Property are bound.  Borrowerhas no material financial obligation under any indenture, mortgage, deed oftrust, loan agreement or other agreement or instrument to which Borrower is aparty or by which Borrower or the Property is otherwise bound, other than (a)obligations incurred in the ordinary course of the operation of the Propertyand (b) obligations under the Loan Documents.

 

4.1.6                        Title. Borrower has good and indefeasible feesimple title to the real property comprising part of the Property and goodtitle to the balance of the Property, free and clear of all Liens whatsoeverexcept the Permitted Encumbrances, such other Liens as are permitted pursuantto the Loan Documents and the Liens created by the Loan Documents.  The Mortgage, when properly recorded in theappropriate records, together with any Uniform Commercial Code financingstatements required to be filed in connection therewith, will create (a) avalid, perfected lien on the Property, subject only to Permitted Encumbrancesand the Liens created by the Loan Documents and (b) perfected securityinterests in and to, and perfected collateral assignment of, all personalty(including the Leases), all in accordance with the terms thereof, in each casesubject only to any applicable Permitted Encumbrances, such other Liens as arepermitted pursuant to the Loan Documents and the Liens created by the LoanDocuments.  There are no claims forpayment for work, labor or materials affecting the Property which are due andunpaid under the contracts pursuant to which such work or labor was performedor materials provided which are or may become a lien prior to, or of equalpriority with, the Liens created by the Loan Documents.

 

4.1.7                        Solvency:No Bankrupcy Filing.  Borrower (a)has not entered into the transaction or executed the Note, this Agreement orany other Loan Documents with the actual intent to hinder, delay or defraud anycreditor and (b) received reasonably equivalent value in exchange for itsobligations under such Loan Documents.  Givingeffect to the Loan, the fair saleable value of Borrower’s assets exceeds andwill, immediately following the making of the Loan, exceed Borrower’s totalliabilities, including, without limitation, subordinated, unliquidated,disputed and contingent liabilities.  Thefair saleable value of Borrower’s assets is and will, immediately following themaking of the Loan, be greater than Borrower’s probable liabilities, includingthe maximum amount of its contingent liabilities on its debts as such debtsbecome absolute and matured.  Borrower’sassets do not and, immediately following the making of the Loan will not,constitute unreasonably small capital to carry out its business as conducted oras proposed to be conducted.  Borrowerdoes not intend to, and does not believe that it will, incur debt andliabilities (including contingent liabilities and other commitments) beyond itsability to pay such debt and liabilities as they mature (taking into accountthe timing and amounts of cash to be received by Borrower and the amounts to bepayable on or in respect of obligations

 

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of Borrower).  Except asexpressly disclosed to Lender in writing, no petition in bankruptcy has beenfiled against Borrower, or to the best of Borrower’s knowledge, any constituentPerson in the last seven (7) years, and neither Borrower, nor to the best ofBorrower’s knowledge, any constituent Person in the last seven (7) years hasever made an assignment for the benefit of creditors or taken advantage of anyinsolvency act for the benefit of debtors.  Neither Borrower nor any of its constituentPersons are contemplating either the filing of a petition by it under any stateor federal bankruptcy or insolvency laws or the liquidation of all or a majorportion of Borrower’s assets or property, and Borrower has no knowledge of anyPerson contemplating the filing of any such petition against it or suchconstituent Persons.

 

4.1.8                        Fulland Accurate Disclosure.  To Borrower’sknowledge, no statement of fact made by Borrower in this Agreement or in any ofthe other Loan Documents contains any untrue statement of a material fact oromits to state any material fact necessary to make statements contained hereinor therein not misleading.  There is nomaterial fact presently known to Borrower which has not been disclosed toLender which adversely affects, nor as far as Borrower can foresee, mightadversely affect, the Property or the business, operations or condition(financial or otherwise) of Borrower.

 

4.1.9                        NoPlan Assets.  Borrower is not an “employeebenefit plan,” as defined in Section 3(3) of ERISA, subject to Title I ofERISA, 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 “governmentalplan” within the meaning of Section 3(32) of ERISA and (b) transactions byor with Borrower are not subject to state statutes regulating investment of,and fiduciary obligations with respect to, governmental plans similar to theprovisions of Section 406 of ERISA or Section 4975 of the Codecurrently in effect, which prohibit or otherwise restrict the transactionscontemplated by this Loan Agreement.

 

4.1.10                  Compliance.  To Borrower’s knowledge, Borrower and theProperty and the use thereof comply in all material respects with allapplicable Legal Requirements, including, without limitation, building andzoning ordinances and codes.  Borrower isnot in default or violation of any order, writ, injunction, decree or demand ofany Governmental Authority.  There hasnot been committed by Borrower or, to Borrower’s knowledge, any other Person inoccupancy of or involved with the operation or use of the Property any act oromission affording the federal government or any other Governmental Authoritythe right of forfeiture as against the Property or any part thereof or anymonies paid in performance of Borrower’s obligations under any of the LoanDocuments.

 

4.1.11                  FinancialInformation.  All financial data,including, without limitation, the statements of cash flow and income andoperating expense, that have been delivered to Lender in respect of theProperty (i) are, to the best of Borrower’s knowledge, true, complete and correctin all material respects, (ii) accurately represent the financial condition ofthe Property as of the date of such reports, and (iii) to the extent preparedor audited by an independent certified public accounting firm, have beenprepared in accordance with accounting principles reasonably acceptable toLender, consistently applied throughout the periods covered, except asdisclosed therein; provided, however, that if any financial datais delivered to Lender by any Person other than Borrower, Indemnitor or any oftheir Affiliates, or if such financial data has been prepared

 

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by or at the direction of any Person otherthan Borrower, Indemnitor or any of their Affiliates, then the foregoingrepresentations with respect to such financial data shall be to the best ofBorrower’s knowledge, after due inquiry.  Borrower does not have any contingentliabilities, liabilities for taxes, unusual forward or long-term commitments orunrealized or anticipated losses from any unfavorable commitments that areknown to Borrower and reasonably likely to have a materially adverse effect onthe Property or the operation thereof as a retail shopping center, except asreferred 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 from that set forth in said financialstatements.

 

4.1.12                  Condemnation.  No Condemnation or other proceeding has been commencedor, to Borrower’s knowledge, is contemplated with respect to all or any portionof the Property or for the relocation of roadways providing access to theProperty.

 

4.1.13                  FederalReserve Regulations.  No part of theproceeds of the Loan will be used for the purpose of purchasing or acquiringany “margin stock” within the meaning of Regulation U of the Board of Governorsof the Federal Reserve System or for any other purpose which would beinconsistent with such Regulation U or any other Regulations of such Board of Governors,or for any purposes prohibited by Legal Requirements or by the terms andconditions of this Agreement or the other Loan Documents.

 

4.1.14                  Utilitiesand Public Access.  The Property hasrights of access to public ways and is served by water, sewer, sanitary sewerand storm drain facilities adequate to service the Property for its respectiveintended uses.  All public utilitiesnecessary or convenient to the full use and enjoyment of the Property arelocated either in the public right-of-way abutting the Property (which areconnected so as to serve the Property without passing over other property) or inrecorded easements serving the Property and such easements are set forth in andinsured by the Title Insurance Policy. All roads necessary for the use of the Property for their current respectivepurposes have been completed and dedicated to public use and accepted by all GovernmentalAuthorities.

 

4.1.15                  Nota Foreign Person.  Borrower is not a “foreignperson” within the meaning of §1445(f)(3) of the Code.

 

4.1.16                  SeparateLots.  The Property is comprised ofone (1) or more parcels which constitute a separate tax lot or lots and doesnot constitute a portion of any other tax lot not a part of the Property.

 

4.1.17                  Assessments.  There are no pending, or to Borrower’sknowledge, proposed special or other assessments for public improvements orotherwise affecting the Property, nor are there any contemplated improvementsto the Property that may result in such special or other assessments.

 

4.1.18                  Enforceability. The Loan Documents are not subject toany right of rescission, set-off, counterclaim or defense by Borrower,including the defense of usury, nor would the operation of any of the terms ofthe Loan Documents, or the exercise of any right

 

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thereunder, render the Loan Documentsunenforceable, and Borrower has not asserted any right of rescission, set-off,counterclaim or defense with respect thereto.

 

4.1.19                  NoPrior Assignment.  There is no priorassignment of the Leases or any portion of the Rents by Borrower or any of itspredecessors in interest, given as collateral security which are presentlyoutstanding.

 

4.1.20                  Insurance.  Borrower has obtained and has delivered toLender certified copies of all insurance policies reflecting the insurancecoverages, amounts and other requirements set forth in this Agreement.  To the best of Borrower’s knowledge, no claimshave been made under any such policy, and no Person, including Borrower, hasdone, by act or omission, anything which would impair the coverage of any suchpolicy.

 

4.1.21                  Useof Property.  The Property is usedexclusively for retail purposes and other appurtenant and related uses.

 

4.1.22                  Certificateof Occupancy; Licenses.  Allcertifications, permits, licenses and approvals, including without limitation,certificates of completion and occupancy permits required to be obtained byBorrower for the legal use, occupancy and operation of the Property as a retailshopping center have been obtained and are in full force and effect, and to thebest of Borrower’s knowledge, after due inquiry, all certifications, permits,licenses and approvals, including without limitation, certificates ofcompletion and occupancy permits required to be obtained by any Person otherthan Borrower for the legal use, occupancy and operation of the Property as aretail shopping center, have been obtained and are in full force and effect(all of the foregoing certifications, permits, licenses and approvals arecollectively referred to as the **“Licenses”**). Borrower shall and shall cause all otherPersons to, keep and maintain all licenses necessary for the operation of theProperty as a retail shopping center.  ToBorrower’s knowledge, the use being made of the Property is in conformity withall certificates of occupancy issued for the Property.

 

4.1.23                  FloodZone.  To the best of Borrower’sknowledge, after due inquiry, no Improvements on the Property are located in anarea identified by the Federal Emergency Management Agency as an area havingspecial flood hazards.

 

4.1.24                  PhysicalCondition.  Except as disclosed inthe Physical Conditions Reports delivered to Lender in connecting with thisLoan, to Borrower’s knowledge, the Property, including, without limitation, allbuildings, improvements, parking facilities, sidewalks, storm drainage systems,roofs, plumbing systems, HVAC systems, fire protection systems, electricalsystems, equipment, elevators, exterior sidings and doors, landscaping, irrigationsystems and all structural components, are in good condition, order and repairin all material respects; there exists no structural or other material defectsor damages in the Property, whether latent or otherwise, and Borrower has notreceived notice from any insurance company or bonding company of any defects orinadequacies in the Property, or any part thereof, which would adversely affectthe insurability of the same or cause the imposition of extraordinary premiumsor charges thereon or of any termination or threatened termination of anypolicy of insurance or bond.

 

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4.1.25                  Boundaries. To the best of Borrower’s knowledge,after due inquiry, all of the improvements which were included in determiningthe appraised value of the Property lie wholly within the boundaries andbuilding restriction lines of the Property, and no improvements on adjoiningproperties encroach upon the Property, and no easements or other encumbrances uponthe Property encroach upon any of the improvements, so as to affect the valueor marketability of the Property except those which are insured against bytitle insurance.

 

4.1.26                  Leases.  The Property is not subject to any Leasesother than the Leases described on the Rent Roll attached as Schedule IVhereto and made a part hereof (and subleases permitted under the Anchor Lease,if any).  No Person has any possessory interestin the Property or right to occupy the same except under and pursuant to theprovisions of the Leases.  The currentLeases are in full force and effect and to Borrower’s knowledge after inquiry,there are no defaults thereunder by either party and there are no conditionsthat, with the passage of time or the giving of notice, or both, wouldconstitute defaults thereunder.  No Rent(including security deposits) has been paid more than one (1) month in advanceof its due date.  All work to beperformed by Borrower under each Lease has been performed as required and hasbeen accepted by the applicable tenant, and any payments, free rent, partialrent, rebate of rent or other payments, credits, allowances or abatementsrequired to be given by Borrower to any tenant has already been received bysuch tenant.  There has been no priorsale, transfer or assignment, hypothecation or pledge of any Lease or of theRents received therein which is outstanding. To Borrower’s knowledge after inquiry, except as set forth on Schedule IV,no tenant listed on Schedule IV has assigned its Lease or subletall or any portion of the premises demised thereby, no such tenant holds itsleased premises under assignment or sublease, nor does anyone except suchtenant and its employees occupy such leased premises.  No tenant under any Lease has a right oroption pursuant to such Lease or otherwise to purchase all or any part of theleased premises or the building of which the leased premises are a part.  Except as set forth in Schedule IV,no tenant under any Lease has any right or option for additional space in theImprovements except as set forth in Schedule IV.  To Borrower’s actual knowledge based on theEnvironmental Report delivered to Lender in connection herewith, no hazardouswastes or toxic substances, as defined by applicable federal, state or localstatutes, rules and regulations, have been disposed, stored or treated by anytenant under any Lease on or about the leased premises nor does Borrower haveany knowledge of any tenant’s intention to use its leased premises for any activitywhich, directly or indirectly, involves the use, generation, treatment,storage, disposal or transportation of any petroleum product or any toxic orhazardous chemical, material, substance or waste, except in either event, incompliance with applicable federal, state or local statues, rules andregulations.

 

4.1.27                  Survey.  The Survey for the Property delivered toLender in connection with this Agreement has been prepared in accordance withthe provisions of Section 3.1.3(c) hereof, and does not fail to reflectany material matter affecting the Property or the title thereto.

 

4.1.28                  Loan to Value.  The maximum principal amount of the Note doesnot exceed sixty percent (60%) of the fair market value of the Property as setforth on the appraisal of the Property delivered to Lender.

 

4.1.29                  Filing and Recording Taxes.  All transfer taxes, deed stamps, intangible taxesor other amounts in the nature of transfer taxes required to be paid by anyPerson under

 

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applicable Legal Requirementscurrently in effect in connection with the acquisition of the Property byBorrower have been paid or are simultaneously being paid.  All mortgage, mortgage recording, stamp,intangible or other similar tax required to be paid by any Person underapplicable Legal Requirements currently in effect in connection with theexecution, delivery, recordation, filing, registration, perfection or enforcementof any of the Loan Documents, including, without limitation, the Mortgage, havebeen paid, and, under current Legal Requirements, the Mortgage is enforceablein accordance with its terms by Lender (or any subsequent holder thereof).

 

4.1.30                  Special PurposeEntity/Separateness.  (a) Until theDebt has been paid in full, Borrower hereby represents, warrants and covenantsthat the Borrower is, shall be and shall continue to be a Special PurposeEntity.  If Borrower consists of morethan one Person, each such Person shall be a Special Purpose Entity.

 

(b)                               Therepresentations, warranties and covenants set forth in Section 4.1.30(a)shall survive for so long as any amount remains payable to Lender under thisAgreement or any other Loan Document.

 

4.1.31                  ManagementAgreement.  The Management Agreementis in full force and effect and, to Borrower’s knowledge, there is no defaultthereunder by any party thereto and no event has occurred that, with thepassage of time and/or the giving of notice would constitute a defaultthereunder.

 

4.1.32                  IllegalActivity.  To Borrower’s knowledge,no portion of the Property has been or will be purchased with proceeds of anyillegal activity.

 

4.1.33                  No Change in Facts orCircumstances; Disclosure.  Allinformation submitted by Borrower to Lender and in all financial statements,rent rolls, reports, certificates and other documents submitted in connectionwith the Loan or in satisfaction of the terms thereof and all statements offact made by Borrower in this Agreement or in any other Loan Document, areaccurate, complete and correct in all material respects, provided, however,that if such information was provided to Borrower by non-affiliated thirdparties, Borrower represents that such information is, to the best of itsknowledge after due inquiry, accurate, complete and correct in all materialrespects.  There has been no materialadverse change in any condition, fact, circumstance or event that would makeany such information inaccurate, incomplete or otherwise misleading in anymaterial respect or that otherwise materially and adversely affects or mightmaterially and adversely affect the Property or the business operations or thefinancial condition of Borrower.  Borrowerhas disclosed to Lender all material facts and has not failed to disclose anymaterial fact that could cause any representation or warranty made herein to bematerially misleading.

 

4.1.34                  Investment Company Act.  Borrower is not (a) an “investment company” ora company “controlled” by an “investment company,” within the meaning of theInvestment Company Act of 1940, as amended; (b) a “holding company” or a “subsidiarycompany” of a “holding company” or an “affiliate” of either a “holding company”or a “subsidiary company” within the meaning of the Public Utility HoldingCompany Act of 1935, as amended; or (c)

 

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subject to anyother federal or state law or regulation which purports to restrict or regulateits ability to borrow money.

 

4.1.35                  Principal Place of Business andOrganization.  Borrower shall notchange its principal place of business set forth in the introductory paragraphof this Agreement without first giving Lender thirty (30) days prior writtennotice.  Borrower shall not change theplace of its organization as set forth in the introductory paragraph of thisAgreement without the consent of Lender, which consent shall not beunreasonably withheld, conditioned or delayed. Upon Lender’s request, Borrower shall execute and deliver additionalfinancing statements, security agreements and other instruments which may benecessary to effectively evidence or perfect Lender’s security interest in theProperty as a result of such change of principal place of business or place oforganization.

 

4.1.36                  Service and Maintenance Contracts.  Borrower has delivered to Lender a true andcomplete copy of all material service, maintenance or similar type contracts oragreements affecting or pertaining to the Property or its operation, or anyportion thereof.

 

Section 4.2                                      Survivalof Representations.  Borrower agreesthat all of the representations and warranties of Borrower set forth in Section 4.1and elsewhere in this Agreement and in the other Loan Documents shall survivefor so long as any amount remains owing to Lender under this Agreement or anyof the other Loan Documents by Borrower.  All representations, warranties, covenants andagreements made in this Agreement or in the other Loan Documents by Borrowershall be deemed to have been relied upon by Lender notwithstanding anyinvestigation heretofore or hereafter made by Lender or on its behalf.

 

**ARTICLE V**

 

**BORROWER****COVENANTS**

 

Section 5.1                                      AffirmativeCovenants.  From the Closing Date anduntil payment and performance in full of all obligations of Borrower under theLoan Documents or the earlier release of the Lien of the Mortgage encumberingthe Property (and all related obligations) in accordance with the terms of thisAgreement and the other Loan Documents, Borrower hereby covenants and agreeswith Lender that:

 

5.1.1                        Existence;Compliance with Legal Requirements; Insurance.  Borrower shall do or cause to be done allthings necessary to preserve, renew and keep in full force and effect itsexistence, rights, licenses, permits and franchises and comply with all LegalRequirements applicable to it and the Property.  Borrower shall not commit, nor shall Borrowerpermit any other Person in occupancy of or involved with the operation or useof the Property to commit, any act or omission affording the federal governmentor any state or local government the right of forfeiture as against theProperty or any part thereof or any monies paid in performance of Borrower’sobligations under any of the Loan Documents. Borrower hereby covenants and agrees not to commit, permit or suffer toexist any act or omission affording such right of forfeiture.  Borrower shall at all times maintain,preserve and protect all its franchises and trade names and preserve all theremainder of its property used or useful in the conduct of its business andshall keep the Property in good working order and repair, and from time to time

 

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make, or causeto be made, all reasonably necessary repairs, renewals, replacements,betterments and improvements thereto, all as more fully provided in theMortgage.  Borrower shall keep theProperty insured at all times by financially sound and reputable insurers, tosuch extent and against such risks, and maintain liability and such otherinsurance, as is more fully provided in this Agreement.  Borrower shall operate, or cause the tenantto operate, any Property that is the subject of an O&M Agreement (if any)in accordance with the terms and provisions thereof in all material respects.  After prior written notice to Lender,Borrower, at its own expense, may contest by appropriate legal proceedingpromptly initiated and conducted in good faith and with due diligence, thevalidity of any Legal Requirement, the applicability of any Legal Requirementto Borrower or the Property or any alleged violation of any Legal Requirement,provided that (i) no Event of Default has occurred and remains uncured; (ii)intentionally omitted; (iii) such proceeding shall be permitted under and beconducted in accordance with the provisions of any instrument to which Borroweris subject and shall not constitute a default thereunder and such proceedingshall be conducted in accordance with all applicable statutes, laws andordinances; (iv) the Property or any part thereof or interest therein will notbe in danger of being sold, forfeited, terminated, cancelled or lost; (v)Borrower shall promptly upon final determination thereof comply with any suchLegal Requirement determined to be valid or applicable or cure any violation ofany Legal Requirement; (vi) such proceeding shall suspend the enforcement ofthe contested Legal Requirement against Borrower or the Property; and (vii)Borrower shall furnish such security as may be required in the proceeding, oras may be requested by Lender, to insure compliance with such LegalRequirement, together with all interest and penalties payable in connectiontherewith.  Lender may apply any suchsecurity, as necessary to cause compliance with such Legal Requirement at anytime when, in the reasonable judgment of Lender, the validity, applicability orviolation of such Legal Requirement is finally established or the Property (orany part thereof or interest therein) shall be in danger of being sold,forfeited, terminated, cancelled or lost.

 

5.1.2                        Taxesand Other Charges.  Borrower shallpay or cause to be paid all Taxes and Other Charges now or hereafter levied orassessed or imposed against the Property or any part thereof as the same becomedue and payable; provided, however, Borrower’s obligation todirectly pay to the appropriate taxing authority Taxes shall be suspended forso long as Borrower complies with the terms and provisions of Section 7.2hereof.  Borrower will deliver to Lenderreceipts for payment or other evidence satisfactory to Lender that the Taxesand Other Charges have been so paid or are not then delinquent no later thanten (10) days prior to the date on which the Taxes and/or Other Charges wouldotherwise be delinquent if not paid (provided, however, thatBorrower is not required to furnish such receipts for payment of Taxes in theevent that such Taxes have been paid by Lender pursuant to Section 7.2hereof).  If Borrower pays or causes tobe paid all Taxes and Other Charges and provides a copy of the receiptevidencing the payment thereof to Lender, then Lender shall reimburse Borrower,provided that there are then sufficient proceeds in the Tax and InsuranceEscrow Fund and provided that the Taxes are being paid pursuant to Section 7.2.  Upon written request of Borrower, if Lenderhas paid such Taxes pursuant to Section 7.2 hereof, Lender shall provideBorrower with evidence that such Taxes have been paid.  Borrower shall not suffer and shall promptlycause to be paid and discharged any Lien or charge whatsoever which may be orbecome a Lien or charge against the Property, and shall promptly pay for allutility services provided to the Property. After prior written notice to Lender, Borrower, at its own expense, maycontest by appropriate legal proceeding, promptly initiated and conducted ingood faith and with due diligence, the amount or validity or

 

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application in whole or in part of any Taxesor Other Charges, provided that (i) Borrower is permitted to do so under theprovisions of any mortgage or deed of trust superior in lien to the Mortgage;(ii) such proceeding shall be permitted under and be conducted in accordancewith the provisions of any other instrument to which Borrower is subject andshall not constitute a default thereunder and such proceeding shall beconducted in accordance with all applicable statutes, laws and ordinances;(iii) the Property nor any part thereof or interest therein will be in dangerof being sold, forfeited, terminated, cancelled or lost; (iv) Borrower shallpromptly upon final determination thereof pay the amount of any such Taxes orOther Charges, together with all costs, interest and penalties which may bepayable in connection therewith; (v) such proceeding shall suspend thecollection of such contested Taxes or Other Charges from the Property; and (vi)Borrower shall furnish such security as may be required in the proceeding, oras may be reasonably requested by Lender, to insure the payment of any suchTaxes or Other Charges, together with all interest and penalties thereon.  Lender may pay over any such cash deposit orpart thereof held by Lender to the claimant entitled thereto at any time when,in the reasonable judgment of Lender, the entitlement of such claimant isestablished.

 

5.1.3                        Litigation.  Borrower shall give prompt written notice toLender of any litigation or governmental proceedings pending or threatenedagainst Borrower which might materially adversely affect Borrower’s condition(financial or otherwise) or business or the Property.

 

5.1.4                        Accessto Property.  Borrower shall permitagents, representatives and employees of Lender to inspect the Property or anypart thereof at reasonable hours upon reasonable advance notice, subject to therights of Tenants under their respective Leases.

 

5.1.5                        Noticeof Default.  Borrower shall promptlyadvise Lender of any material adverse change in Borrower’s condition, financialor otherwise, or of the occurrence of any Default or Event of Default of whichBorrower has knowledge.

 

5.1.6                        Cooperatein Legal Proceedings.  Borrower shallcooperate fully with Lender with respect to any proceedings before any court,board or other Governmental Authority which may in any way affect the rights ofLender hereunder or any rights obtained by Lender under any of the other LoanDocuments and, in connection therewith, permit Lender, at its election, toparticipate in any such proceedings.

 

5.1.7                        PerformLoan Documents.  Borrower shallobserve, perform and satisfy all the terms, provisions, covenants andconditions of, and shall pay when due all costs, fees and expenses to theextent required under the Loan Documents executed and delivered by, or applicableto, Borrower.

 

5.1.8                        InsuranceBenefits.  Borrower shall cooperatewith Lender in obtaining for Lender the benefits of any Insurance Proceedslawfully or equitably payable in connection with the Property, and Lender shallbe reimbursed for any expenses incurred in connection therewith (includingreasonable attorneys’ fees and disbursements, and the payment by Borrower ofthe expense of an appraisal on behalf of Lender in case of a fire or othercasualty affecting the Property or any part thereof) out of such InsuranceProceeds.

 

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5.1.9                        FurtherAssurances.  Borrower shall, atBorrower’s sole cost and expense:

 

(a)                                  furnishto Lender all instruments, documents, boundary surveys, footing or foundationsurveys, certificates, plans and specifications, appraisals, title and otherinsurance reports and agreements, and each and every other document,certificate, agreement and instrument required to be furnished by Borrowerpursuant to the terms of the Loan Documents or reasonably requested by Lenderin connection therewith;

 

(b)                                 executeand deliver to Lender such documents, instruments, certificates, assignmentsand other writings, and do such other acts necessary or desirable, to evidence,preserve and/or protect the collateral at any time securing or intended tosecure the obligations of Borrower under the Loan Documents, as Lender mayreasonably require; and

 

(c)                                  doand execute all and such further lawful and reasonable acts, conveyances andassurances for the better and more effective carrying out of the intents and purposesof this Agreement and the other Loan Documents, as Lender shall reasonablyrequire from time to time.

 

5.1.10                  IntentionallyOmitted.

 

5.1.11                  FinancialReporting. (a)  Borrower will keepand maintain or will cause to be kept and maintained on a Fiscal Year basis, inaccordance with the requirements for a Special Purpose Entity set forth above,proper and accurate books, records and accounts reflecting all of the financialaffairs of Borrower and all items of income and expense in connection with the operationon an individual basis of the Property. Lender shall have the right from time to time at all times during normalbusiness hours upon reasonable notice to examine such books, records andaccounts at the office of Borrower or other Person maintaining such books,records and accounts and to make such copies or extracts thereof as Lendershall desire.  After the occurrence andduring the continuance of an Event of Default, Borrower shall pay any costs andexpenses incurred by Lender to examine Borrower’s accounting records withrespect to the Property, as Lender shall reasonably determine to be necessaryor appropriate in the protection of Lender’s interest.

 

(b)                                 Borrowerwill furnish to Lender annually, within ninety (90) days following the end ofeach Fiscal Year of Borrower, either (i) a complete copy of Borrower’s annualfinancial statements audited by an accounting firm or other independentcertified public accountant reasonably acceptable to Lender in accordance withthe requirements for a Special Purpose Entity set forth above, or (ii) aconsolidated and annotated financial statement of Borrower and Sole Member (asapplicable), audited by an accounting firm or other independent certifiedpublic accountant reasonably acceptable to Lender in accordance with therequirements for a Special Purpose Entity set forth above, together withunaudited financial statements relating to the Borrower and the Property.  Such financial statements for the Propertyfor such Fiscal Year and shall contain statements of profit and loss forBorrower and the Property and a balance sheet for Borrower.  Such statements shall set forth the financialcondition and the results of operations for the Property for such Fiscal Year,and shall include, but not be limited to, amounts representing annual Net CashFlow, Net Operating Income, Gross Income from Operations and Operating Expenses.  Borrower’s annual financial statements shallbe accompanied by (i) a comparison of

 

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the budgeted income and expenses and theactual income and expenses for the prior Fiscal Year, (ii) a certificateexecuted by the chief financial officer of Borrower or Sole Member, asapplicable, stating that each such annual financial statement presents fairlythe financial condition and the results of operations of Borrower and theProperty being reported upon and has been prepared in accordance withaccounting principles reasonably acceptable to Lender, consistently applied,(iii) an unqualified opinion of an accounting firm or other independentcertified public accountant reasonably acceptable to Lender, (iv) a certifiedrent roll containing current rent, lease expiration dates and the squarefootage occupied by each tenant; (v) a schedule audited by suchindependent certified public accountant reconciling Net Operating Income to NetCash Flow (the **“Net Cash Flow Schedule”**), which shall itemize all adjustments made to Net OperatingIncome to arrive at Net Cash Flow deemed material by such independent certifiedpublic accountant.  Together withBorrower’s annual financial statements, Borrower shall furnish to Lender anOfficer’s Certificate certifying as of the date thereof whether there exists anevent or circumstance which constitutes a Default or Event of Default under theLoan Documents executed and delivered by, or applicable to, Borrower, and ifsuch Default or Event of Default exists, the nature thereof, the period of timeit has existed and the action then being taken to remedy the same.

 

(c)                                  Borrowerwill furnish, or cause to be furnished, to Lender on or before ninety (90) daysafter the end of each calendar quarter the following items, accompanied by acertificate of the chief financial officer of Borrower or Sole Member, asapplicable, stating that such items are true, correct, accurate, and completeand fairly present the financial condition and results of the operations ofBorrower and the Property (subject to normal year-end adjustments) asapplicable: (i) a rent roll for the subject month accompanied by an Officer’sCertificate with respect thereto; (ii) quarterly and year-to-date operatingstatements (including Capital Expenditures) prepared for each calendar quarter,noting Net Operating Income, Gross Income from Operations, and OperatingExpenses (not including any contributions to the Replacement Reserve Fund, and otherinformation necessary and sufficient to fairly represent the financial positionand results of operation of the Property during such calendar month, andcontaining a comparison of budgeted income and expenses and the actual incomeand expenses together with a detailed explanation of any variances of fivepercent (5%) or more between budgeted and actual amounts for such periods, allin form satisfactory to Lender; (iii) a calculation reflecting the annual DebtService Coverage Ratio for the immediately preceding twelve (12) month periodas of the last day of such month accompanied by an Officer’s Certificate withrespect thereto; and (iv) a Net Cash Flow Schedule (such Net Cash Flow forthe Borrower may be unaudited if it is certified by an officer of theBorrower).  In addition, such certificateshall also be accompanied by a certificate of the chief financial officer ofBorrower or Sole Member stating that the representations and warranties ofBorrower set forth in Section 4.1.30(a) are true and correct as of thedate of such certificate.

 

(d)                                 Forthe partial year period commencing on the Closing Date, and for each Fiscal Yearthereafter, Borrower shall submit to Lender an Annual Budget not later thanthirty (30) days after the commencement of such period or Fiscal Year in formreasonably satisfactory to Lender.

 

(e)                                  Borrowershall furnish to Lender, within ten (10) Business Days after request (or assoon thereafter as may be reasonably possible), such further detailedinformation with respect

 

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to the operation of the Property and thefinancial affairs of Borrower as may be reasonably requested by Lender.

 

(f)                                    Borrowershall furnish to Lender, within ten (10) Business Days after Lender’s request(or as soon thereafter as may be reasonably possible), financial and salesinformation from any Tenant designated by Lender (to the extent such financialand sales information is required to be provided under the applicable Lease andsame is received by Borrower after request therefor).

 

(g)                                 Borrowerwill cause Indemnitor to furnish to Lender annually, within one hundred twenty(120) days following the end of each Fiscal Year of Indemnitor, financialstatements audited by an independent certified public accountant, which shallinclude an annual balance sheet and profit and loss statement of Indemnitor, inthe form reasonably required by Lender.

 

(h)                                 Anyreports, statements or other information required to be delivered under this Agreementshall be delivered (i) in paper form, (ii) on a diskette, and (iii) ifrequested by Lender and within the capabilities of Borrower’s data systemswithout change or modification thereto, in electronic form and prepared using aMicrosoft Word for Windows or WordPerfect for Windows files (which files may beprepared using a spreadsheet program and saved as word processing files).

 

5.1.12                  Business and Operations.  Borrower will continue to engage in the businessespresently conducted by it as and to the extent the same are necessary for the ownership,maintenance, management and operation of the Property.  Borrower will qualify to do business and willremain in good standing under the laws of each jurisdiction as and to the extentthe same are required for the ownership, maintenance, management and operationof the Property.

 

5.1.13                  Title to the Property.  Borrower will warrant and defend (a) the titleto the Property and every part thereof, subject only to Liens permittedhereunder (including Permitted Encumbrances) and (b) the validity and priorityof the Liens of the Mortgage and the Assignment of Leases on the Property,subject only to Liens permitted hereunder (including Permitted Encumbrances),in each case against the claims of all Persons whomsoever.  Borrower shall reimburse Lender for anylosses, costs, damages or expenses (including reasonable attorneys’ fees andcourt costs) incurred by Lender if an interest in the Property, other than aspermitted hereunder, is claimed by another Person.

 

5.1.14                  Costs of Enforcement.  In the event (a) that the Mortgage encumberingthe Property is foreclosed in whole or in part or that the Mortgage is put intothe hands of an attorney for collection, suit, action or foreclosure, (b) ofthe foreclosure of any mortgage prior to or subsequent to the Mortgageencumbering the Property in which proceeding Lender is made a party, or (c) ofthe bankruptcy, insolvency, rehabilitation or other similar proceeding inrespect of Borrower or any of its constituent Persons or an assignment byBorrower or any of its constituent Persons for the benefit of its creditors,Borrower, its successors or assigns, shall be chargeable with and agrees to payall costs of collection and defense, including reasonable attorneys’ fees andcosts, incurred by Lender or Borrower in connection therewith and in

 

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connection with anyappellate proceeding or post-judgment action involved therein, together withall required service or use taxes.

 

5.1.15                  Estoppel Statement.  (a)  After request by Lender, Borrower shallwithin ten (10) days furnish Lender with a statement, duly acknowledged andcertified, setting forth (i) the amount of the original principal amount of theNote, (ii) the unpaid principal amount of the Note, (iii) the applicableinterest rate of the Note, (iv) the date installments of interest and/or principalwere 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 Documentsare valid, legal and binding obligations and have not been modified or ifmodified, giving particulars of such modification.

 

(b)                                 Borrower shall use commercially reasonableefforts to deliver to Lender upon request, tenant estoppel certificates from eachcommercial tenant leasing space at the Property in form and substancereasonably satisfactory to Lender provided that Borrower shall not be requiredto deliver such certificates more frequently than one (1) time in any calendaryear.

 

(c)                                  Within thirty (30) days of request byBorrower, Lender shall deliver to Borrower a statement setting forth the itemsdescribed at (a)(i), (ii), (iii) and (iv) of this Section 5.1.15.

 

5.1.16                  Loan Proceeds. Borrower shall use the proceeds of the Loan received by it on theClosing Date only for the purposes set forth in Section 2.1.4.

 

5.1.17                  Performance by Borrower.  Borrowershall in a timely manner observe, perform and fulfill each and every covenant,term and provision of each Loan Document executed and delivered by, orapplicable to, Borrower, and shall not enter into or otherwise suffer or permitany amendment, waiver, supplement, termination or other modification of anyLoan Document executed and delivered by, or applicable to, Borrower without theprior written consent of Lender.

 

5.1.18                  Confirmation of Representations.  Borrowershall deliver, in connection with any Securitization, (a) one or more Officer’sCertificates certifying as to the accuracy of all representations made byBorrower in the Loan Documents as of the date of the closing of suchSecuritization, and (b) certificates of the relevant Governmental Authoritiesin all relevant jurisdictions indicating the good standing and qualification ofBorrower and its member as of the date of the Securitization.

 

5.1.19                  No Joint Assessment.  Borrowershall not suffer, permit or initiate the joint assessment of the Property (a)with any other real property constituting a tax lot separate from the Property,and (b) which constitutes real property with any portion of the Property whichmay be deemed to constitute personal property, or any other procedure wherebythe lien of any taxes which may be levied against such personal property shallbe assessed or levied or charged to such real property portion of the Property.

 

5.1.20                  Leasing Matters.  AnyLeases with respect to the Property written after the Closing Date for morethan the smallest of the Relevant Leasing Threshold square footage shall besubject to the prior written approval of Lender, which approval may be given orwithheld in the sole discretion of Lender. Lender shall approve or disapprove any such Lease within ten (10)

 

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Business Daysof Lender’s receipt of a final execution draft of such Lease (including allexhibits, schedules, supplements, addenda or other agreements relating thereto)and a written notice from Borrower requesting Lender’s approval to such Lease,and such Lease shall be deemed approved, if Lender does not disapprove suchLease within said ten (10) Business Day period *provided*such written notice conspicuously states, in large bold type, that **“PURSUANT TO SECTION ****5.1.20 OF THE LOANAGREEMENT, THE LEASE SHALL BEDEEMED APPROVED IF LENDER DOES NOT RESPOND TO THE CONTRARY WITHIN TEN(10) BUSINESS DAYS OF LENDER’S RECEIPTOF SUCH LEASE AND WRITTEN NOTICE”. **Borrower shall furnish Lender withexecuted copies of all Leases.  Allrenewals of Leases and all proposed Leases shall provide for rental ratescomparable to existing local market rates (unless such rental rates areotherwise set forth in the Leases executed prior to the Closing Date).  All proposed Leases shall be on commerciallyreasonable terms and shall not contain any terms which would materially affectLender’s rights under the Loan Documents. All Leases executed after the Closing Date shall provide that they aresubordinate to the Mortgage encumbering the Property and that the tenantthereunder agrees to attorn to Lender or any purchaser at a sale by foreclosureor power of sale.  Borrower (i) shallobserve and perform the obligations imposed upon the lessor under the Leases ina commercially reasonable manner; (ii) shall enforce the terms, covenants andconditions contained in the Leases upon the part of the tenant thereunder to beobserved or performed in a commercially reasonable manner and in a manner notto impair the value of the Property involved except that no termination byBorrower or acceptance of surrender by a tenant of any Lease shall be permittedunless by reason of a tenant default and then only in a**commerciallyreasonable manner to preserve and protect the Property provided, however,that no such termination or surrender of any Lease covering more than thesmallest Relevant Leasing Threshold will be permitted without the writtenconsent of Lender which consent may be withheld in the sole discretion ofLender; (iii) shall not collect any of the rents more than one (1) month inadvance (other than security deposits); (iv) shall not execute any otherassignment of lessor’s interest in the Leases or the Rents (except ascontemplated by the Loan Documents); (v) shall not alter, modify or change theterms of the Leases in a manner inconsistent with the provisions of the LoanDocuments without the prior written consent of Lender, which consent may bewithheld in the sole discretion of Lender; and (vi) shall execute and deliverat the request of Lender all such further assurances, confirmations andassignment in connection with the Leases as Lender shall from time to timereasonably require.  Notwithstanding theforegoing, Borrower may, without the prior written consent of Lender, terminateany Lease which demises less than the smallest of the Relevant LeasingThreshold under any of the following circumstances: (i) the tenant under saidLease is in default beyond any applicable grace and cure period, and Borrowerhas the right to terminate such Lease; (ii) such termination is permitted bythe terms of the Lease in question and Borrower has secured an obligation froma third party to lease the space under the Lease to be terminated at a rentalequal to or higher than the rental due under the Lease to be terminated; and(iii) if the tenant under the Lease to be terminated, has executed a rightunder said Lease to terminate its lease upon payment of a termination fee toBorrower, and has in fact terminated its lease and paid said fee, Borrower mayaccept said termination.

 

5.1.21                  Alterations. Subject to the rights of tenants to makealterations pursuant to the terms of their respective Leases, Borrower shallobtain Lender’s prior written consent to any alterations to any Improvements,which consent shall not be unreasonably withheld or delayed except with respectto alterations that may have a material adverse effect on Borrower’s financial

 

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condition, the value of the Property or theNet Operating Income.  Notwithstandingthe foregoing, Lender’s consent shall not be required in connection with anyalterations that will not have a material adverse effect on Borrower’sfinancial condition, the value of the Property or the Net Operating Income,provided that such alterations are made in connection with (a) tenantimprovement work performed pursuant to the terms of any Lease executed on or beforethe Closing Date, (b) tenant improvement work performed pursuant to the termsand provisions of a Lease and not adversely affecting any structural componentof any Improvements, any utility or HVAC system contained in any Improvementsor the exterior of any building constituting a part of any Improvements, (c)alterations performed in connection with the restoration of the Property afterthe occurrence of a casualty in accordance with the terms and provisions ofthis Agreement or (d) any structural alteration which costs less than$50,000.00 in the aggregate for all components thereof which constitute suchalteration or any non-structural alteration which costs less than $100,000.00in the aggregate for all components thereof which constitute such alteration.  If the total unpaid amounts due and payablewith respect to alterations to the Improvements at the Property (other thansuch amounts to be paid or reimbursed by tenants under the Leases) shall at anytime equal or exceed $350,000.00 (the **“Threshold Amount”**),Borrower, upon Lender’s request, shall promptly deliver to Lender as securityfor the payment of such amounts and as additional security for Borrower’sobligations under the Loan Documents any of the following: (A) cash, (B) U.S.  Obligations, (C) other securities having arating acceptable to Lender and that the applicable Rating Agencies haveconfirmed in writing will not, in and of itself, result in a downgrade,withdrawal or qualification of the initial, or, if higher, then current ratingsassigned in connection with any Securitization, or (D) a completion bond orletter of credit issued by a financial institution having a rating by Standard& Poor’s Ratings Group of not less than A-1+ if the term of such bond orletter of credit is no longer than three (3) months or, if such term is inexcess of three (3) months, issued by a financial institution having a ratingthat is acceptable to Lender and that the applicable Rating Agencies haveconfirmed in writing will not, in and of itself, result in a downgrade,withdrawal or qualification of the initial, or, if higher, then current ratingsassigned in connection with any Securitization. Such security shall be in an amount equal to the excess of the totalunpaid amounts with respect to alterations to the Improvements on the Property(other than such amounts to be paid or reimbursed by tenants under the Leases)over the Threshold Amount and, if cash, may be applied from time to time, atthe option of Borrower, to pay for such alterations.  At the option of Lender, following theoccurrence and during the continuance of an Event of Default, Lender mayterminate any of the alterations and use the deposit to restore the Property tothe extent necessary to prevent any material adverse effect on the value of theProperty.

 

Section 5.2                                      NegativeCovenants.  From the Closing Dateuntil payment and performance in full of all obligations of Borrower under theLoan Documents or the earlier release of the Lien of the Mortgage encumberingthe Property in accordance with the terms of this Agreement and the other LoanDocuments, Borrower covenants and agrees with Lender that it will not do,directly or indirectly, any of the following:

 

5.2.1                         Operationof Property.  Borrower shall not,without the prior consent of Lender, terminate the Management Agreement orotherwise replace the Manager or enter into any other management agreement withrespect to the Property unless the Manager is in default thereunder beyond anyapplicable grace or cure period, in which event no consent by Lender shall berequired.  Lender agrees that its consentwill not be unreasonably withheld, delayed or

 

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conditionedprovided that the Person chosen by Borrower as the replacement Manager is aQualifying Manager and provided further that Borrower shall deliver anacceptable non-consolidation opinion covering such replacement Manager if suchPerson was not covered by such opinion delivered at the closing of the Loan.

 

5.2.2                        Liens.  Borrower shall not, without the prior writtenconsent of Lender, create, incur, assume or suffer to exist any Lien on anyportion of the Property or permit any such action to be taken, except:

 

(i)                                     PermittedEncumbrances;

 

(ii)                                 Lienscreated by or related to Indebtedness permitted pursuant to the Loan Documents;and

 

(iii)                              Liensfor Taxes or Other Charges not yet due (or that Borrower is contesting inaccordance with the terms of Section 5.1.2 hereof).

 

5.2.3                        Dissolution. Borrower shall not (a) engage in anydissolution, liquidation or consolidation or merger with or into any otherbusiness entity, (b) engage in any business activity not related to theownership and operation of the Property, (c) transfer, lease or sell, in onetransaction or any combination of transactions, the assets or all orsubstantially all of the properties or assets of Borrower except to the extentpermitted by the Loan Documents, (d) modify, amend, waive or terminate itsorganizational documents or its qualification and good standing in anyjurisdiction or (e) cause the Sole Member to (i) dissolve, wind up or liquidateor take any action, or omit to take an action, as a result of which the SoleMember would be dissolved, wound up or liquidated in whole or in part, or (ii)amend, modify, waive or terminate the certificate of limited partnership orpartnership agreement of the Sole Member, in each case, without obtaining theprior written consent of Lender or Lender’s designee.

 

5.2.4                        Change in Business.  Borrower shall not enter into any line ofbusiness other than the ownership and operation of the Property, or make anymaterial change in the scope or nature of its business objectives, purposes oroperations, or undertake or participate in activities other than thecontinuance of its present business.

 

5.2.5                        Debt Cancellation.  Borrower shall not cancel or otherwiseforgive or release any claim or debt (other than termination of Leases inaccordance herewith) owed to Borrower by any Person, except for adequateconsideration and in the ordinary course of Borrower’s business.

 

5.2.6                        Affiliate Transactions.  Borrower shall not enter into, or be a partyto, any transaction with an Affiliate of Borrower or any of the partners ofBorrower except in the ordinary course of business and on terms which are fullydisclosed to Lender in advance and are no less favorable to Borrower or suchAffiliate than would be obtained in a comparable arm’s-length transaction withan unrelated third party.

 

5.2.7                        Zoning.  Borrower shall not initiate or consent to anyzoning reclassification of any portion of the Property or seek any varianceunder any existing zoning ordinance or use or permit the use of any portion ofthe Property in any manner that could result

 

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in such usebecoming a non-conforming use under any zoning ordinance or any otherapplicable land use law, rule or regulation, without the prior consent ofLender.

 

5.2.8                        Assets.  Borrower shall not purchase or own anyproperties other than the Property owned by Borrower as of the Closing Date asreflected in the applicable Title Insurance Policy.

 

5.2.9                        Debt.  Borrower shall not create, incur or assumeany Indebtedness other than the Debt except to the extent expressly permittedhereby.

 

5.2.10                  No Joint Assessment.  Borrower shall not suffer, permit or initiatethe joint assessment of the Property with (a) any other real propertyconstituting a tax lot separate from the Property, or (b) any portion of theProperty which may be deemed to constitute personal property, or any otherprocedure whereby the Lien of any taxes which may be levied against suchpersonal property shall be assessed or levied or charged to the Property.

 

5.2.11                  Intentionally Omitted.

 

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

 

(b)                          Borrowerfurther covenants and agrees to deliver to Lender such certifications or otherevidence from time to time throughout the term of the Loan, as requested byLender in its sole discretion, that (A) Borrower is not and does not maintainan “employee benefit plan” as defined in Section 3(3) of ERISA, which issubject to Title I of ERISA, or a “governmental plan” within the meaning of Section 3(3)of ERISA; (B) Borrower is not subject to state statutes regulating investmentsand fiduciary obligations with respect to governmental plans; and (C) one ormore of the following circumstances is true:

 

(i)                                     Equityinterests in Borrower are publicly offered securities, within the meaning of 29C.F.R. §25l0.3-101(b)(2);

 

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

 

(iii)                               Borrowerqualifies as an “operating company” or a “real estate operating company” withinthe meaning of 29 C.F.R. §2510.3-10l(c) or (e).

 

5.2.13                  Transfers.  Unless such action is permitted by theprovisions of this Section 5.2.13, Borrower agrees that it will not (i)sell, assign, convey, transfer or otherwise dispose of its interests in theProperty or any part thereof, (ii) permit any owner, directly or indirectly, ofan ownership interest in the Property, to transfer such interest, whether bytransfer of stock or other interest in Borrower or any entity, or otherwise, (iii)incur Indebtedness (other than the Indebtedness permitted pursuant to the termsof this Agreement), (iv) mortgage, hypothecate or otherwise encumber or grant asecurity interest in the Property or any part

 

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thereof, (v) sell, assign, convey, transfer,mortgage, encumber, grant a security interest in, or otherwise dispose of anydirect or indirect ownership interest in Borrower, or permit any owner of aninterest in Borrower to do the same, or (vi) file a declaration of condominiumwith respect to the Property (any of the foregoing transactions, a **“Transfer”**).  Forpurposes hereof, a “Transfer” shall not include (A) any issuance, sale ortransfer of interests in Inland Western Retail Real Estate Trust, Inc., (B)transfer by devise or descent or by operation of law upon the death of a memberof Borrower, and (C) a sale, transfer or hypothecation of a membership interestin Borrower, whichever the case may be, by the current member(s), asapplicable, to an immediate family member (i.e., parents, spouses, siblings,children or grandchildren) of such member (or a trust for the benefit of anysuch persons).

 

(a)                                  Onand after the date that is twelve (12) months following the Closing Date,Lender shall not withhold its consent to a Transfer of the Property, providedthat the following conditions are satisfied:

 

(1)                                  the transferee of theProperty shall be a Special Purpose Entity (the **“Transferee”**)which at the time of such transfer will be in compliance with the covenantscontained in Section 5.1.1 and the representations contained in 4.1.30hereof and which shall have assumed in writing (subject to the terms of Section 9.4hereof) and agreed to comply with all the terms, covenants and conditions setforth in this Loan Agreement and the other Loan Documents, expressly includingthe covenants contained in Section 5.1.1 and the representations containedin 4.1.30 hereof;

 

(2)                                  if requested byLender, Borrower shall deliver confirmation in writing from the Rating Agenciesthat such proposed Transfer will not cause a downgrading, withdrawal orqualification of the then current rating of any securities issued pursuant tosuch Securitization;

 

(3)                                  if Manager does notact as manager of the transferred Property then the manager of the Propertymust be a Qualifying Manager;

 

(4)                                  no Event of Defaultshall have occurred and be continuing;

 

(5)                                  if required orrequested by any of the Rating Agencies, Borrower shall have caused counsel torender a substantive non-consolidation opinion which in each case may be reliedupon by the holder of the Note, the Ratings Agencies and their respectivecounsel, agents and representatives with respect to the proposed transaction,including the Transferee, which opinion shall be acceptable to Lender in itsreasonable discretion;

 

(6)                                  Borrower shall havepaid (A) an assumption fee equal to one percent (1.0%) of the then outstandingprincipal balance of the Loan, and (B) the reasonable and customary third-partyexpenses (including reasonable attorneys’ fees and disbursements) actuallyincurred by Lender in connection with such Transfer; provided, however,no assumption fee shall be required for a Transfer of the Property to aTransferee acceptable

 

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to Lender in**connection with a joint venture betweenInland Western Retail Real Estate Trust, Inc. or Inland Western Retail RealEstate Limited Partnership and an institution acceptable to Lender providedInland Western Retail Real Estate Trust, Inc., or an Affiliate wholly-owned(directly or indirectly) by Inland Western Retail Real Estate Trust, Inc., ownsat least twenty percent (20%) of the ownership interests in such Transferee(which shall include the right to receive material economic benefits from the operationof the Property) and for which Inland Western Retail Real Estate Trust, Inc.,or an Affiliate wholly-owned (directly or indirectly) by Inland Western RetailReal Estate Trust, Inc., is the managing entity and otherwise maintainsoperational and managerial control of such Transferee, provided that Borrowershall pay all of Lender’s reasonable and customary third-party expenses(including reasonable attorneys’ fees and disbursements) actually incurred byLender in connection with such Transfer and a processing fee of $5,000.

 

Lender shall approve or disapprove anyproposed Transfer governed by this Section 5.2.l3(a) within thirty (30)days of Lender’s receipt of a written notice from Borrower requesting Lender’sapproval, provided such notice includes all information necessary to make suchdecision, and further provided that such written notice from Borrower shallconspicuously state, in large bold type, that **“PURSUANTTO SECTION ****5.2.13 OF THE LOAN AGREEMENT, A RESPONSE IS REQUIRED WITHIN THIRTY (30)DAYS OF LENDER’S RECEIPT OF THISWRITTEN NOTICE”. **If Lenderfails to disapprove any such matter within such period, Borrower shall providea second written notice requesting approval, which written notice shallconspicuously state, in large bold type, that **“PURSUANTTO SECTION 5.2.13 OF THE LOAN AGREEMENT, THE MATTER DESCRIBED HEREIN SHALLBE DEEMED APPROVED IF LENDER DOES NOT RESPOND TO THE CONTRARY WITHIN TEN (10)DAYS OF LENDER’S RECEIPT OF****THIS WRITTEN NOTICE”. **Thereafter, if Lender does not disapprove such matter withinsaid ten (10) day period such matter shall be deemed approved.

 

(b)                                 Onand after the date that is twelve (12) months following the Closing Date,Lender shall not withhold its consent to, and shall not charge an assumptionfee in connection with, (1) a Transfer of up to, in the aggregate, forty-ninepercent (49%) of the direct or indirect ownership interests in Borrower, or (2)a Transfer of greater than forty-nine percent (49%) of the direct or indirectownership interest in Borrower, provided that (A) such transfer is to aQualified Entity (as defined below), and (B) Borrower shall pay all of Lender’sreasonable and customary third-party expenses (including reasonable attorneys’fees and disbursements) actually incurred by Lender in connection with suchTransfer and a processing fee of $5,000. For purposes of this Agreement, a**“Qualified Entity”**shallmean an entity (x) with a net worth of $200,000,000 or more, (y) withsufficient experience (determined by Lender in its reasonable discretion) inthe ownership and management of properties similar to the Property, and (z)which owns or manages retail properties containing at least 1,000,000 squarefeet of gross leasable area.  If requiredor requested by any of the Rating Agencies, Borrower shall deliver asubstantive non-consolidation opinion with respect to any party not now owningmore than 49% of the ownership interests in Borrower acquiring more than 49% ofthe ownership interests in Borrower.

 

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(c)                                  Notwithstandinganything in this Section 5.2.13 to the contrary, on or after the date thatis twelve (12) months after the Closing Date, Borrower shall be permitted toTransfer the entire Property in a single transaction to one newly-formed SpecialPurpose Entity which shall be wholly-owned subsidiary of Inland Western RetailReal Estate Trust, Inc. (**“Permitted AffiliateTransferee”**) which shall be approved by Lender in its reasonablediscretion (**“Permitted Affiliate Transfer”**),provided (1) no Event of Default shall have occurred and be continuing, (2) thecreditworthiness of Inland Western Retail Real Estate Trust, Inc., as applicable,has not deteriorated, in the sole discretion of Lender, from the Closing Dateto the date of the proposed Transfer, and (3) Borrower shall have paid allreasonable and customary third party expenses (including reasonable attorneys’fees and disbursements) actually incurred by Lender in connection with suchTransfer (but not any assumption or processing fee).

 

(d)                                 Borrower, without theconsent of Lender, may grant easements, restrictions, covenants, reservationsand rights of way in the ordinary course of business for access, parking, waterand sewer lines, telephone and telegraph lines, electric lines and other utilitiesor for other similar purposes, provided that no transfer, conveyance orencumbrance shall materially impair the utility and operation of the Propertyor materially adversely affect the value of the Property or the Net OperatingIncome of the Property.  If Borrowershall receive any consideration in connection with any of said describedtransfers or conveyances, Borrower shall have the right to use any suchproceeds in connection with any alterations performed in connection therewith,or required thereby.  In connection withany transfer, conveyance or encumbrance permitted above, the Lender shallexecute and deliver any instrument reasonably necessary or appropriate to evidenceits consent to said action or to subordinate the Lien of the Mortgage to sucheasements, restrictions, covenants, reservations and rights of way or othersimilar grants upon receipt by the Lender of: (A) a copy of the instrument oftransfer; and (B) an Officer’s Certificate stating with respect to any transferdescribed above, that such transfer does not materially impair the utility andoperation of the Property or materially reduce the value of the Property or theNet Operating Income of the Property.

 

**ARTICLE VI**

 

**INSURANCE;CASUALTY; CONDEMNATION**

 

Section 6.1                                      Insurance.  (a) Borrower shall obtain and maintaininsurance for Borrower and the Property providing at least the followingcoverages:

 

(i)                                     comprehensiveall risk insurance on the Improvements and the Personal Property, includingcontingent liability from Operation of Building Laws, Demolition Costs andIncreased Cost of Construction Endorsements, in each case (A) in an amountequal to one hundred percent (100%) of the “Full Replacement Cost,” which forpurposes of this Agreement shall mean actual replacement value (exclusive ofcosts of excavations, foundations, underground utilities and footings) with awaiver of depreciation; (B) containing an agreed amount endorsement withrespect to the Improvements and Personal Property waiving all co-insuranceprovisions; (C) providing for no deductible in excess of Ten Thousand andNo/100 Dollars ($10,000) for all such insurance coverage; and (D) containing an“Ordinance or Law Coverage” or “Enforcement” endorsement if any of theImprovements or the use of the Property shall at any time constitute legal 

 

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non-conformingstructures or uses.  In addition,Borrower shall obtain: (y) if any portion of the Improvements is currently orat any time in the future located in a federally designated “special floodhazard area”, flood hazard insurance in an amount equal to the lesser of (1)the outstanding principal balance of the Note or (2) the maximum amount of suchinsurance available under the National Flood Insurance Act of 1968, the FloodDisaster Protection Act of 1973 or the National Flood Insurance Reform Act of1994, as each may be amended or such greater amount as Lender shall require;and (z) earthquake insurance in amounts and in form and substance satisfactoryto Lender in the event the Property is located in an area with a high degree ofseismic activity, provided that the insurance pursuant to clauses (y) and (z)hereof shall be on terms consistent with the comprehensive all risk insurancepolicy required under this subsection (i).

 

(ii)                                  commercialgeneral liability insurance against claims for personal injury, bodily injury,death or property damage occurring upon, in or about the Property, suchinsurance (A) to be on the so-called “occurrence” form with a combined limit,including umbrella coverage, of not less than Five Million and No/100 Dollars($5,000,000.00); (B) to continue at not less than the aforesaid limit untilrequired to be changed by Lender in writing by reason of changed economicconditions making such protection inadequate; and (C) to cover at least thefollowing hazards: (1) premises and operations; (2) products and completedoperations on an “if any” basis; (3) independent contractors; (4) blanketcontractual liability for all legal contracts; and (5) contractual liabilitycovering the indemnities contained in Article 9 of the Mortgage to theextent the same is available;

 

(iii)                               businessincome insurance (A) with loss payable to Lender; (B) covering all risksrequired to be covered by the insurance provided for in subsection (i)above; (C) covering rental losses or business interruption, as may beapplicable, for a period of at least twelve (12) months after the date of thecasualty; and (D) in an annual amount equal to (100%) of the rents or estimatedgross revenues from the operation of the Property (as reduced to reflectexpenses not incurred during a period of Restoration).  The amount of such business income insuranceshall be determined prior to the date hereof and at least once each yearthereafter based on Borrower’s reasonable estimate of the gross income from theProperty for the succeeding twelve (12) month period.  All proceeds payable to Lender pursuant tothis subsection shall be held by Lender and shall be applied to theobligations secured by the Loan Documents from time to time due and payablehereunder and under the Note; provided, however, that nothingherein contained shall be deemed to relieve Borrower of its obligations to paythe obligations secured by the Loan Documents on the respective dates ofpayment provided for in the Note and the other Loan Documents except to theextent such amounts are actually paid out of the proceeds of such businessincome insurance;

 

(iv)                              atall times during which structural construction, repairs or alterations are beingmade with respect to the Improvements, and only if the Property coverage formdoes not otherwise apply, (A) owner’s contingent or protective liabilityinsurance covering claims not covered by or under the terms or provisions ofthe above mentioned commercial general liability insurance policy; and (B) theinsurance provided for in subsection (i) above written in a so-calledbuilder’s risk completed value form (1) on a non-reporting basis, (2) againstall risks insured against pursuant to subsection (i) above,

 

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(3) includingpermission to occupy the Property, and (4) with an agreed amount endorsementwaiving co-insurance provisions;

 

(v)                                 workers’compensation, subject to the statutory limits of the State;

 

(vi)                              comprehensiveboiler and machinery insurance, if applicable, in amounts as shall bereasonably required by Lender on terms consistent with the commercial propertyinsurance policy required under subsection (i) above;

 

(vii)                           umbrellaliability insurance in an amount not less than Five Million and No/100 Dollars($5,000,000.00) per occurrence on terms consistent with the commercial generalliability insurance policy required under subsection (ii) above;

 

(viii)                        if any ofthe policies of insurance covering the risks required to be covered undersubsections (i) through (vii) above contains an exclusion from coverage foracts of terrorism, Borrower shall obtain and maintain a separate policyproviding such coverages in the event of any act of terrorism, provided suchcoverage is commercially available for properties similar to the Property andlocated in or around the region in which the Property is located.  Notwithstanding the foregoing, Borrower shallnot be required to obtain such a policy, provided (I) Borrower confirms toLender, in writing, that it shall protect and hold Lender harmless from anylosses associated with such risks by, among other things, either (A) depositingwith Lender sums sufficient to pay for all uninsured costs related to a Restorationof the Property following any act of terrorism (which sum shall be treated as aNet Proceeds Deficiency), or (B) provided such act of terrorism occurs on orafter the Permitted Prepayment Date, prepaying the Loan in accordance with theterms hereof;  (II) Inland Western RetailReal Estate Trust, Inc. (**“Terrorism InsuranceGuarantor”**) executes a guaranty, in form and substancesatisfactory to Lender, guaranteeing in the event of any act of terrorism,payment to Lender of any sums that Borrower is obligated to pay to Lender underclause (I) above (which shall be applied in accordance with Section 6.4hereof) and (III) Terrorism Insurance Guarantor maintains a net worth of atleast $300,000,000 (as determined by such entity’s most recent audited financialstatements), such entity maintains a direct or indirect ownership interest inBorrower, and the aggregate loan-to-value ratio (as determined by Lender) (“LTV”)for all properties on which such entity has a direct or indirect ownershipinterest shall not exceed 60%, however, Terrorism Insurance Guarantor mayexceed the 60% LTV for a period not to exceed six (6) months out of any twelve(12) month period either 1) during the time period when Terrorism InsuranceGuarantor is offering securities to the public, or 2) when in the businessjudgement of Terrorism Insurance Guarantor, exceeding an LTV of 60% isnecessary given existing circumstances of the credit environment, but in noevent shall the LTV exceed 65% if Terrorism Insurance Guarantor maintains a networth greater than or equal to $300,000,000, but less than $400,000,000, or 70%if Terrorism Insurance Guarantor maintains a net worth of at least$400,000,000.

 

(ix)                                uponsixty (60) days’ written notice, such other reasonable insurance and in suchreasonable amounts as Lender from time to time may reasonably request againstsuch other insurable hazards which at the time are commonly insured against forproperty similar to the Property located in or around the region in which theProperty is located.

 

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(b)                                 All insurance providedfor in Section 6.1(a) shall be obtained under valid and enforceablepolicies (collectively, the **“Policies”**or in the singular, the **“Policy”**), and shall be subject to theapproval of Lender as to insurance companies, amounts, deductibles, loss payeesand insureds.  The Policies shall beissued by financially sound and responsible insurance companies authorized todo business in the State and having a rating of “A:X” or better in the currentBest’s Insurance Reports and a claims paying ability rating of “AA” or betterby at least two (2) of the Rating Agencies including, (i) Standard & Poor’sRatings Group, and (ii) Moody’s Investors Services, Inc. if Moody’s InvestorsService, Inc. is rating the Securities. The Policies described in Section 6.1 (other than those strictlylimited to liability protection) shall designate Lender as loss payee.  Not less than thirty (30) days prior to theexpiration dates of the Policies theretofore furnished to Lender, certificatesof insurance evidencing the Policies accompanied by evidence satisfactory toLender of payment of the premiums due thereunder (the **“InsurancePremiums”**), shall be delivered by Borrower to Lender.

 

(c)                                  Any blanket insurancePolicy shall specifically allocate to the Property the amount of coverage fromtime to time required hereunder and shall otherwise provide the same protectionas would a separate Policy insuring only the Property in compliance with the provisionsof Section 6.1(a).

 

(d)                                 All Policies ofinsurance provided for or contemplated by Section 6.1(a), except for thePolicy referenced in Section 6.1(a)(v), shall name Borrower, or theTenant, as the insured and Lender as the additional insured, as its interestsmay appear, and in the case of property damage, boiler and machinery, flood andearthquake insurance, shall contain a so-called New York standardnon-contributing mortgagee clause in favor of Lender providing that the loss thereundershall be payable to Lender.

 

(e)                                  All Policies ofinsurance provided for in Section 6.1(a) shall contain clauses orendorsements to the effect that:

 

(i)                                     noact or negligence of Borrower, or anyone acting for Borrower, or of any Tenantor other occupant, or failure to comply with the provisions of any Policy,which might otherwise result in a forfeiture of the insurance or any partthereof, shall in any way affect the validity or enforceability of theinsurance insofar as Lender is concerned;

 

(ii)                                  thePolicy shall not be materially changed (other than to increase the coverageprovided thereby) or canceled without at least thirty (30) days’ written noticeto Lender and any other party named therein as an additional insured;

 

(iii)                               theissuers thereof shall give written notice to Lender if the Policy has not beenrenewed fifteen (15) days prior to its expiration; and

 

(iv)                              Lendershall not be liable for any Insurance Premiums thereon or subject to anyassessments thereunder.

 

(f)                                    Ifat any time Lender is not in receipt of written evidence that all insurance requiredhereunder is in full force and effect, Lender shall have the right, after ten(10) Business Days written notice to Borrower, to take such action as Lenderdeems necessary to protect its

 

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interest in the Property, including, withoutlimitation, the obtaining of such insurance coverage as Lender in its solediscretion deems appropriate.  Allpremiums incurred by Lender in connection with such action or in obtaining suchinsurance and keeping it in effect shall be paid by Borrower to Lender upondemand and, until paid, shall be secured by the Mortgage and shall bearinterest at the Default Rate.  IfBorrower fails in so insuring the Property or in so assigning and deliveringthe Policies, Lender may, at its option, obtain such insurance using suchcarriers and agencies as Lender shall elect from year to year and pay thepremiums therefor, and Borrower will reimburse Lender for any premium so paid,with interest thereon as stated in the Note from the time of payment, ondemand, and the amount so owning to Lender shall be secured by the Mortgage.  The insurance obtained by Lender may, butneed not, protect Borrower’s interest and the coverage that Lender purchasesmay not pay any claim that Borrower makes or any claim that is made againstBorrower in connection with the Property.

 

Section 6.2                                      Casualty. If the Property shall be damaged ordestroyed, in whole or in part, by fire or other casualty (a **“Casualty”**), Borrower (a) shall give to Lender prompt noticeof such damage reasonably estimated by Borrower to cost more than One HundredThousand Dollars ($100,000.00) to repair, and (b) shall promptly commence anddiligently prosecute the completion of the repair and restoration of the Propertyas nearly as possible to the condition the Property was in immediately prior tosuch fire or other casualty, with such alterations as may be reasonablyapproved by Lender (a **“Restoration”**)and otherwise in accordance with Section 6.4.  Borrower shall pay all costs of suchRestoration whether or not such costs are covered by insurance.  Lender may, but shall not be obligated tomake proof of loss if not made promptly by Borrower.

 

Section 6.3                                      Condemnation. Borrower shall promptly give Lendernotice of the actual or threatened commencement of any proceeding for theCondemnation of the Property and shall deliver to Lender copies of any and allpapers served in connection with such proceedings.  Lender may participate in any suchproceedings, and Borrower shall from time to time deliver to Lender allinstruments requested by it to permit such participation.  Borrower shall, at its expense, diligentlyprosecute any such proceedings, and shall consult with Lender, its attorneysand experts, and cooperate with them in the carrying on or defense of any suchproceedings.  Notwithstanding any takingby any public or quasi-public authority through Condemnation or otherwise(including but not limited to any transfer made in lieu of or in anticipationof the exercise of such taking), Borrower shall continue to pay the Debt at thetime and in the manner provided for its payment in the Note and in thisAgreement and the Debt shall not be reduced until any Award shall have beenactually received and applied by Lender, after the deduction of expenses ofcollection, to the reduction or discharge of the Debt.  Lender shall not be limited to the interestpaid on the Award by the condemning authority but shall be entitled to receiveout of the Award interest at the rate or rates provided herein or in the Note.  If the Property or any portion thereof istaken by a condemning authority, Borrower shall promptly commence anddiligently prosecute the Restoration of the Property and otherwise comply withthe provisions of Section 6.4.  Ifthe Property is sold, through foreclosure or otherwise, prior to the receipt byLender of the Award, Lender shall have the right, whether or not a deficiencyjudgment on the Note shall have been sought, recovered or denied, to receivethe Award, or a portion thereof sufficient to pay the Debt.

 

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Section 6.4                                      Restoration.  The following provisions shallapply in connection with the Restoration of the Property:

 

(a)                                  If the Net Proceeds shall be less than RelevantRestoration Threshold and the costs of completing the Restoration shall be lessthan the Relevant Restoration Threshold, the Net Proceeds will be disbursed byLender to Borrower upon receipt, provided that all of the conditions set forthin clauses (A), (E), (F), (G), (H), (J) and (L) of Section 6.4(b)(i) beloware met and Borrower delivers to Lender a written undertaking to expeditiouslycommence and to satisfactorily complete with due diligence the Restoration inaccordance with the terms of this Agreement.

 

(b)                                 If the Net Proceeds are equal to or greaterthan the Relevant Restoration Threshold or the costs of completing theRestoration is equal to or greater than the Relevant Restoration Threshold,then in either case, Lender shall make the Net Proceeds available for the Restorationin accordance with the provisions of this Section 6.4(b).  The term **“Net Proceeds”**for purposes of this Section 6.4 shall mean; (x) the net amount of allinsurance proceeds received by Lender pursuant to Section 6.1 (a)(i),(iv), (vi) and (viii) as a result of such damage or destruction, afterdeduction of its reasonable costs and expenses (including, but not limited to, reasonablecounsel fees), if any, in collecting same (**“Insurance Proceeds”**),or (y) the net amount of the Award, after deduction of its reasonable costs andexpenses (including, but not limited to, reasonable counsel fees), if any, incollecting same (**“Condemnation Proceeds”**), whicheverthe case may be.

 

(i)                                     The Net Proceeds shall be made available toBorrower for Restoration provided that each of the following conditions aremet:

 

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

 

(B)                                (1) in the event the Net Proceeds are Insurance Proceeds, and (x) lessthan twenty-five percent (25%) of the total floor area of the Improvements onthe Property has been damaged, destroyed or rendered unusable as a result ofsuch fire or other casualty, or (y) Borrower is required under a Leaseexceeding the smallest of the Relevant Leasing Threshold to use the NetProceeds for the restoration of the Property, or (2) in the event the NetProceeds are Condemnation Proceeds, and (x) less than ten percent (10%) of theland constituting the Property is taken, and such land is located along theperimeter or periphery of the Property, and no portion of the Improvements islocated on such land, or (y) Borrower is required under a Lease exceeding thesmallest of the Relevant Leasing Threshold to use the Net Proceeds for therestoration of the Property;

 

(C)                                Leases demising in the aggregate a percentage amount equal to orgreater than the Rentable Space Percentage of the total rentable space in theProperty which has been demised under executed and delivered Leases in effectas of the date of the occurrence of such fire or other casualty or taking,whichever the case may be, shall remain in full force and effect during andafter the completion of the Restoration,

 

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notwithstandingthe occurrence of any such fire or other casualty or taking, whichever the casemay be, and will make all necessary repairs and restorations thereto at theirsole cost and expense.  The term **“Rentable Space Percentage”**shallmean (x) in the event the Net Proceeds are Insurance Proceeds, a percentage amountequal to fifty percent (50%) and (y) in the event the Net Proceeds areCondemnation Proceeds, a percentage amount equal to fifty percent (50%);

 

(D)                               Borrowershall commence the Restoration as soon as reasonably practicable (but in noevent later than ninety (90) days after such damage or destruction or taking,whichever the case may be, occurs) and shall diligently pursue the same tosatisfactory completion;

 

(E)                                 Lendershall be satisfied that any operating deficits, including all scheduledpayments of principal and interest under the Note, which will be incurred withrespect to the Property as a result of the occurrence of any such fire or othercasualty or taking, whichever the case may be, will be covered out of (1) the NetProceeds, (2) the insurance coverage referred to in Section 6.1(a)(iii),if applicable, or (3) by other funds of Borrower;

 

(F)                                 Lendershall be satisfied that the Restoration will be completed on or before theearliest to occur of (1) the Maturity Date, (2) the earliest date required forsuch completion under the terms of any Leases, (3) such time as may be requiredunder applicable zoning law, ordinance, rule or regulation in order to repairand restore the Property to the condition it was in immediately prior to suchfire or other casualty or to as nearly as possible the condition it was inimmediately prior to such taking, as applicable or (4) the expiration of theinsurance coverage referred to in Section 6.1(a)(iii);

 

(G)                                theProperty and the use thereof after the Restoration will be in compliance withand permitted under all applicable zoning laws, ordinances, rules andregulations provided, however, that compliance with such zoning laws,ordinances, rules and regulations (including, without limitation, parkingrequirements)  will not requirerestoration of the Improvements or the Property to a size, condition, orconfiguration materially different than that which existed immediately prior tosuch Casualty or taking;

 

(H)                               theRestoration shall be done and completed by Borrower in an expeditious anddiligent fashion and in compliance with all applicable governmental laws, rulesand regulations (including, without limitation, all applicable environmentallaws);

 

(I)                                    suchfire or other casualty or taking, as applicable, does not result in the loss ofaccess to the Property or the related Improvements;

 

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(J)                                   theDebt Service Coverage Ratio, after giving effect to the Restoration, shall beequal to or greater than 2.10:1.0;

 

(K)                               Borrowershall deliver or cause to be delivered to Lender a signed detailed budgetapproved in writing by Borrower’s architect or engineer stating the entire costof completing the Restoration, which budget should be consistent withrestoration budgets of similar retail properties then owned and operated bynationally recognized owners and operators of retail properties located in theareas in which the Property is located; and

 

(L)                                 theNet Proceeds together with any cash or cash equivalent deposited by Borrower withLender are sufficient in Lender’s discretion to cover the cost of theRestoration.

 

(ii)                                  TheNet Proceeds shall be held by Lender in an interest bearing account and, untildisbursed in accordance with the provisions of this Section 6.4(b), shallconstitute additional security for the Debt and other obligations under theLoan Documents.  The Net Proceeds shallbe disbursed by Lender to, or as directed by, Borrower from time to time duringthe course of the Restoration, upon receipt of evidence satisfactory to Lenderthat (A) all materials installed and work and labor performed to be paid forout of the requested disbursement in connection with the Restoration have beenperformed, and (B) there exist no notices of pendency, stop orders, mechanic’sor materialman’s liens or notices of intention to file same, or any other liensor encumbrances of any nature whatsoever on the Property which have not eitherbeen fully bonded to the satisfaction of Lender and discharged of record or inthe alternative fully insured to the satisfaction of Lender by the titlecompany issuing the Title Insurance Policy.

 

(iii)                               Allplans and specifications required in connection with the Restoration shall besubject to prior review and acceptance in all respects by Lender and by an independentconsulting engineer selected by Lender (the **“CasualtyConsultant”**), such review and acceptance not to be unreasonablywithheld or delayed.  Lender shall havethe use of the plans and specifications and all permits, licenses and approvalsrequired or obtained in connection with the Restoration.  The identity of the contractors,subcontractors and materialmen engaged in the Restoration, as well as thecontracts under which they have been engaged, shall be subject to prior reviewand acceptance by Lender and the Casualty Consultant, such review andacceptance not to be unreasonably withheld or delayed.  All costs and expenses incurred by Lender inconnection with making the Net Proceeds available for the Restorationincluding, without limitation, reasonable counsel fees and disbursements andthe Casualty Consultant’s fees, shall be paid by Borrower.

 

(iv)                              Inno event shall Lender be obligated to make disbursements of the Net Proceeds inexcess of an amount equal to the costs actually incurred from time to time forwork in place as part of the Restoration, as certified by the CasualtyConsultant, minus the Casualty Retainage.  The term **“Casualty Retainage”**shall mean an amount equal to

 

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ten percent (10%)of the costs actually incurred for work in place as part of the Restoration, ascertified by the Casualty Consultant, until the Restoration has been completed.  The Casualty Retainage shall in no event, andnotwithstanding anything to the contrary set forth above in this Section 6.4(b),be less than the amount actually held back by Borrower from contractors,subcontractors and materialmen engaged in the Restoration.  The Casualty Retainage shall not be releaseduntil the Casualty Consultant certifies to Lender that the Restoration has beencompleted in accordance with the provisions of this Section 6.4(b) andthat all approvals necessary for the re-occupancy and use of the Property havebeen obtained from all appropriate governmental and quasi-governmentalauthorities, and Lender receives evidence satisfactory to Lender that the costsof the Restoration have been paid in full or will be paid in full out of theCasualty Retainage; provided, however, that Lender will releasethe portion of the Casualty Retainage being held with respect to anycontractor, subcontractor or materialman engaged in the Restoration as of thedate upon which the Casualty Consultant certifies to Lender that thecontractor, subcontractor or materialman has satisfactorily completed all workand has supplied all materials in accordance with the provisions of thecontractor’s, subcontractor’s or materialman’s contract, the contractor,subcontractor or materialman delivers the lien waivers and evidence of paymentin full of all sums due to the contractor, subcontractor or materialman as maybe reasonably requested by Lender or by the title company issuing the TitleInsurance Policy, and Lender receives an endorsement to the Title InsurancePolicy insuring the continued priority of the lien of the Mortgage and evidenceof payment of any premium payable for such endorsement.  If required by Lender, the release of anysuch portion of the Casualty Retainage shall be approved by the surety company,if any, which has issued a payment or performance bond with respect to thecontractor, subcontractor or materialman.

 

(v)                                 Lendershall not be obligated to make disbursements of the Net Proceeds morefrequently than once every calendar month.

 

(vi)                              Ifat any time the Net Proceeds or the undisbursed balance thereof shall not, inthe reasonable opinion of Lender in consultation with the Casualty Consultant,be sufficient to pay in full the balance of the costs which are estimated bythe Casualty Consultant to be incurred in connection with the completion of theRestoration, Borrower shall deposit the deficiency (the **“NetProceeds Deficiency”**) with Lender before any furtherdisbursement of the Net Proceeds shall be made. The Net Proceeds Deficiency deposited with Lender shall be held byLender and shall be disbursed for costs actually incurred in connection withthe Restoration on the same conditions applicable to the disbursement of theNet Proceeds, and until so disbursed pursuant to this Section 6.4(b) shallconstitute additional security for the Debt and other obligations under theLoan Documents.

 

(vii)                           Theexcess, if any, of the Net Proceeds and the remaining balance, if any, of theNet Proceeds Deficiency deposited with Lender after the Casualty Consultantcertifies to Lender that the Restoration has been completed in accordance withthe provisions of this Section 6.4(b), and the receipt by Lender ofevidence satisfactory to Lender that all costs incurred in connection with theRestoration have been paid in full, shall be remitted by Lender to Borrower,provided no Event of Default shall have

 

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occurred andshall be continuing under the Note, this Agreement or any of the other LoanDocuments.

 

(c)                                  AllNet 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 6.4(b)(vii)may be retained and applied by Lender toward the payment of the Debt whether ornot then due and payable in such order, priority and proportions as Lender inits sole discretion shall deem proper (provided no Event of Default exists,such Borrower shall not be required to pay any Prepayment Consideration inconnection with such payment), or, at the discretion of Lender, the same may bepaid, either in whole or in part, to Borrower for such purposes as Lender shalldesignate, in its discretion.

 

(d)                                 In the event offoreclosure of the Mortgage with respect to the Property, or other transfer oftitle to the Property in extinguishment in whole or in part of the Debt allright, title and interest of Borrower in and to the Policies that are notblanket Policies then in force concerning the Property and all proceeds payablethereunder shall thereupon vest in the purchaser at such foreclosure or Lenderor other transferee in the event of such other transfer of title.

 

(e)                                  Lender shall withreasonable promptness following any Casualty or Condemnation notify Borrowerwhether or not Net Proceeds are required to be made available to Borrower forrestoration pursuant to this Section 6.4.  All Net Proceeds not required to be made availablefor Restoration shall be retained and applied by Lender in accordance with Section 2.3.2(a)hereof (a **“Net Proceeds Prepayment”**).  If such Net Proceeds Prepayment shall be equalto or greater than One Million Two Hundred Twenty-Five Thousand and No/100Dollars ($1,225,000.00), Borrower shall have the right to elect to prepay theremaining outstanding principal balance of the Note (a **“Casualty/CondemnationPrepayment”**) in accordance with Section 2.3.2(b)hereof upon satisfaction of the following conditions: (i) within thirty (30)days following the date of the Net Proceeds Prepayment, Borrower shall provideLender with written notice of Borrower’s intention to pay the Note in full,(ii) Borrower shall prepay the Note in accordance with Section 2.3.2(b)hereof on or before the second Payment Date occurring following the date of theNet Proceeds Prepayment, and (iii) no Event of Default shall exist on the dateof such Casualty/Condemnation Prepayment. Notwithstanding anything in Section 6.2 or Section 6.3 to thecontrary, Borrower shall have no obligation to commence Restoration of the Propertyupon delivery of the written notice set forth in clause (i) of the precedingsentence (unless Borrower subsequently shall fail to satisfy the requirement ofclause (ii) of the preceding sentence).

 

**ARTICLE VII**

 

**RESERVEFUNDS**

 

Section 7.1                                      RequiredRepair Funds.

 

7.1.1                        Deposits. Borrower shall perform the repairs atthe Property, if any, as more particularly set forth on Schedule IIIhereto (such repairs hereinafter referred to as **“RequiredRepairs”**) within nine (9) months from the Closing Date, or suchearlier time as

 

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specified on Schedule III.  If Borrower has not delivered to Lenderevidence reasonably satisfactory to Lender that it has completed all RequiredRepairs on or before the date that is nine (9) months from the Closing Date, orsuch earlier time as specified on Schedule III,  Borrower shall deposit with Lender the amountfor the Property set forth on such Schedule III hereto, if any(less the amount allocated to the performance of Required Repairs for whichevidence of completion has been delivered to Lender), to perform the RequiredRepairs for the Property.  Amounts sodeposited with Lender, if any, shall be held by Lender in an interest bearingaccount.  Amounts so deposited, if any,shall hereinafter be referred to as Borrower’s **“RequiredRepair Fund”** and the account, if any, in which such amounts areheld shall hereinafter be referred to as Borrower’s **“RequiredRepair Account”**.  It shall be an Event of Default under thisAgreement if Borrower does not either (i) does not deposit with Lender theRequired Repair Fund as set forth above, or (ii) complete the Required Repairsat the Property within nine (9) months from the Closing Date.  Upon the occurrence of such an Event ofDefault, Lender, at its option, may withdraw all Required Repair Funds from theRequired Repair Account and Lender may apply such funds either to completion ofthe Required Repairs at the Property or toward payment of the Debt in suchorder, proportion and priority as Lender may determine in its sole discretion.  Lender’s right to withdraw and apply RequiredRepair Funds shall be in addition to all other rights and remedies provided toLender under this Agreement and the other Loan Documents.

 

7.1.2                        Releaseof Required Repair Funds.  Lendershall disburse to Borrower the Required Repair Funds from the Required RepairAccount from time to time upon satisfaction by Borrower of each of thefollowing conditions: (i) Borrower shall submit a written request for paymentto Lender at least fifteen (15) days prior to the date on which Borrowerrequests such payment be made and specifies the Required Repairs to be paid,(ii) on the date such request is received by Lender and on the date suchpayment is to be made, no Default or Event of Default shall exist and remainuncured, (iii) Lender shall have received a certificate from Borrower (A)stating that all Required Repairs at the Property to be funded by the requesteddisbursement have been completed in good and workmanlike manner and inaccordance with all applicable federal, state and local laws, rules andregulations, such certificate to be accompanied by a copy of any license,permit or other approval by any Governmental Authority required to commenceand/or complete the Required Repairs, (B) identifying each Person that suppliedmaterials or labor in connection with the Required Repairs performed at theProperty to be funded by the requested disbursement under a contract in excessof $50,000, and (C) stating that each Person who has supplied materials orlabor in connection with the Required Repairs to be funded by the requested disbursementhas been paid in full or will be paid in full upon such disbursement, suchcertificate to be accompanied by lien waivers or other evidence of paymentsatisfactory to Lender, (iv) at Lender’s option, a title search for theProperty indicating that the Property is free from all liens, claims and otherencumbrances not previously approved by Lender, and (v) Lender shall havereceived such other evidence as Lender shall reasonably request that theRequired Repairs at the Property to be funded by the requested disbursementhave been completed and are paid for or will be paid upon such disbursement toBorrower.  Lender shall not be requiredto make disbursements from the Required Repair Account with respect to theProperty more than once each calendar month and such disbursement shall be madeonly upon satisfaction of each condition contained in this Section 7.1.2.

 

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Section 7.2                                      Taxand Insurance Escrow Fund.

 

Borrower shall pay to Lenderon each Payment Date (a) one-twelfth of the Taxes that Lender estimates will bepayable during the next ensuing twelve (12) months in order to accumulate withLender sufficient funds to pay all such Taxes at least thirty (30) days priorto their respective due dates and (b) one-twelfth of the Insurance Premiumsthat Lender estimates will be payable for the renewal of the coverage affordedby the Policies upon the expiration thereof in order to accumulate with Lendersufficient funds to pay all such Insurance Premiums at least thirty (30) daysprior to the expiration of the Policies, (said amounts in (a) and (b) above arehereinafter called the **“Tax and Insurance****Escrow Fund”**).  The Tax and Insurance Escrow Fund and thepayments of interest or principal or both, payable pursuant to the Note, shallbe added together and shall be paid as an aggregate sum by Borrower to Lender.  Lender will apply the Tax and InsuranceEscrow Fund to payments of Taxes and Insurance Premiums required to be made byBorrower pursuant to this Agreement and under the Mortgage.  In making any payment relating to the Tax andInsurance Escrow Fund, Lender may do so according to any bill, statement orestimate procured from the appropriate public office (with respect to Taxes) orinsurer or agent (with respect to Insurance Premiums) or from Borrower withoutinquiry into the accuracy of such bill, statement or estimate or into thevalidity of any tax, assessment, sale, forfeiture, tax lien or title or claimthereof, provided, however, Lender shall use reasonable efforts to pay suchreal property taxes sufficiently early to obtain the benefit of any availablediscounts of which it has knowledge.  Ifthe amount of the Tax and Insurance Escrow Fund shall exceed the amounts duefor Taxes and Insurance Premiums, Lender shall, in its sole discretion, returnany excess to Borrower or credit such excess against future payments to be madeto the Tax and Insurance Escrow Fund.  TheTax and Insurance Escrow Fund shall be held by Lender in an interest-bearingaccount and shall at Lender’s option be held in Eligible Account at an EligibleInstitution.  Any interest earned on saidaccount shall accrue in said account for the benefit of Borrower, but shallremain in and constitute part of the Tax and Insurance Escrow Fund, and shallbe disbursed in accordance with the terms hereof.  Any amount remaining in the Tax and InsuranceEscrow Fund after the Debt has been paid in full shall be returned to Borrower.  In allocating such excess, Lender may dealwith the Person shown on the records of Lender to be the owner of the Property.  If at any time Lender reasonably determinesthat the Tax and Insurance Escrow Fund is not or will not be sufficient to payTaxes or Insurance Premiums by the dates set forth above, Lender shall notifyBorrower of such determination and Borrower shall increase its monthly paymentsto Lender by the amount that Lender estimates is sufficient to make up thedeficiency at least thirty (30) days prior to delinquency of the Taxes orInsurance Premiums.

 

Notwithstanding anything tothe contrary hereinbefore contained, in the event that Borrower provides (1)evidence satisfactory to Lender that the Property is insured in accordance withSection 6.1 of this Agreement and (2) evidence satisfactory toLender that the Taxes for the Property have been paid in accordance with therequirements set forth in this Agreement, Lender will waive the requirement setforth herein for Borrower to make deposits into the Tax and Insurance EscrowFund for the payment of Insurance Premiums and for payment of such Taxes,provided, however, Lender expressly reserves the right to require Borrower tomake deposits to the Tax and Insurance Escrow Fund for the payment of InsurancePremiums if at any time the Property is not insured in accordance with Section 6.1of this Agreement or Taxes are not paid in accordance with the requirements ofthis Agreement.

 

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Section 7.3                                      Replacements and Replacement Reserve.

 

Section 7.3.1                             ReplacementReserve Fund.  Borrower shall pay toLender on the Closing Date and on each Payment Date one twelfth of the amount(the **“Replacement Reserve Monthly Deposit”**)reasonably estimated by Lender in its sole discretion to be due forreplacements and repairs required to be made to the Property during thecalendar year (collectively, the **“Replacements”**),which Replacement Reserve Monthly Deposit shall be in an amount equal to noless than $0.15 per year per square foot of gross leasable area.  Amounts so deposited shall hereinafter bereferred to as Borrower’s **“Replacement ReserveFund”** and the account in which such amounts are held shallhereinafter be referred to as Borrower’s **“Replacement ReserveAccount”.** Lender mayreassess its estimate of the amount necessary for the Replacement Reserve Fundfrom time to time, and may increase the monthly amounts required to bedeposited into the Replacement Reserve Fund upon thirty (30) days notice toBorrower if Lender determines in its reasonable discretion that an increase isnecessary to maintain the proper maintenance and operation of the Property.  Any amount held in the Replacement ReserveAccount and allocated for the Property shall be retained by Lender in aninterest bearing account, or, at the option of Lender, in an Eligible Accountat an Eligible Institution; provided, however, that, any interestearned on said account shall accrue in said account for the benefit ofBorrower, but shall remain in and constitute part of the Replacement ReserveFund, and shall be disbursed in accordance with the terms hereof.

 

Notwithstandinganything to the contrary in this Section 7.3, Borrower shall not berequired to make Replacement Reserve Monthly Deposits, provided that: (i) noEvent of Default shall have occurred; and (ii) Borrower makes all necessaryReplacements and otherwise maintains the Property to Lender’s satisfaction.  Upon notice from Lender following: (a) anEvent of Default; or (b) the failure of Borrower to make necessary Replacementsor otherwise maintain the Property to Lender’s satisfaction, Borrower shallbegin to deposit the Replacement Reserve Monthly Deposit into the ReplacementReserve Fund beginning on the Payment Date (as defined herein) immediatelyfollowing the date of such notice.

 

Section 7.3.2                             Disbursementsfrom Replacement Reserve Account.

 

(a)                                  Lender shall makedisbursements from the Replacement Reserve Account to pay Borrower only for thecosts of the Replacements.  Lender shallnot be obligated to make disbursements from the Replacement Reserve Account toreimburse Borrower for the costs of routine maintenance to the Property or forcosts which are to be reimbursed from the Required Repair Fund (if any).

 

(b)                                 Lender shall, uponwritten request from Borrower and satisfaction of the requirements set forth inthis Section 7.3.2, disburse to Borrower amounts from the Replacement ReserveAccount necessary to pay for the actual approved costs of Replacements or toreimburse Borrower therefor, upon completion of such Replacements (or, uponpartial completion in the case of Replacements made pursuant to Section 7.3.2(f))as determined by Lender.  In no event shallLender be obligated to disburse funds from the Replacement Reserve Account if aDefault or an Event of Default exists.

 

(c)                                  Each request fordisbursement from the Replacement Reserve Account shall be in a form specifiedor approved by Lender and shall specify (i) the specific Replacements for whichthe disbursement is requested, (ii) the quantity and price of each item

 

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purchased, if the Replacement includes thepurchase or replacement of specific items, (iii) the price of all materials(grouped by type or category) used in any Replacement other than the purchaseor replacement of specific items, and (iv) the cost of all contracted labor orother services applicable to each Replacement for which such request fordisbursement is made.  With each requestBorrower shall certify that all Replacements have been made in accordance withall applicable Legal Requirements of any Governmental Authority havingjurisdiction over the Property to which the Replacements are being providedand, unless Lender has agreed to issue joint checks as described below, eachrequest shall include evidence of payment of all such amounts.  Each request for disbursement shall includecopies of invoices for all items or materials purchased and all contractedlabor or services provided.  Except asprovided in Section 7.3.2(e), each request for disbursement from theReplacement.  Reserve Account shall bemade only after completion of the Replacement for which disbursement isrequested.  Borrower shall provide Lenderevidence of completion satisfactory to Lender in its reasonable judgment.

 

(d)                                 Borrower shall pay allinvoices in connection with the Replacements with respect to which adisbursement is requested prior to submitting such request for disbursement fromthe Replacement Reserve Account or, at the request of Borrower, Lender willissue joint checks, payable to Borrower and the contractor, supplier, materialman,mechanic, subcontractor or other party to whom payment is due in connectionwith a Replacement.  In the case of paymentsmade by joint check, Lender may require a waiver of lien from each Personreceiving payment prior to Lender’s disbursement from the Replacement ReserveAccount.  In addition, as a condition toany disbursement, Lender may require Borrower to obtain lien waivers from each contractor,supplier, materialman, mechanic or subcontractor who receives payment in an amountequal to or greater than $100,000 for completion of its work or delivery of itsmaterials.  Any lien waiver deliveredhereunder shall conform to the requirements of applicable law and shall coverall work performed and materials supplied (including equipment and fixtures)for the Property by that contractor, supplier, subcontractor, mechanic ormaterialman through the date covered by the current reimbursement request (or,in the event that payment to such contractor, supplier, subcontractor, mechanicor materialmen is to be made by a joint check, the release of lien shall beeffective through the date covered by the previous release of funds request).

 

(e)                                  If (i) the cost of aReplacement exceeds $100,000, (ii) the contractor performing such Replacementrequires periodic payments pursuant to terms of a written contract, and (iii)Lender has approved in writing in advance such periodic payments, a request forreimbursement from the Replacement Reserve Account may be made after completionof a portion of the work under such contract, provided (A) such contractrequires payment upon completion of such portion of the work, (B) the materialsfor which the request is made are on site at the Property and are properlysecured or have been installed in the Property, (C) all other conditions inthis Agreement for disbursement have been satisfied, (D) funds remaining in theReplacement Reserve Account are, in Lender’s judgment, sufficient to completesuch Replacement and other Replacements when required, and (E) if required byLender, each contractor or subcontractor receiving payments under such contractshall provide a waiver of lien with respect to amounts which have been paid tothat contractor or subcontractor.

 

(f)                                    Borrower shall notmake a request for disbursement from the Replacement Reserve Account morefrequently than once in any calendar month and (except in connection

 

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with the finaldisbursement) the total cost of all Replacements in any request shall not be lessthan $5,000.00.

 

Section 7.3.3                             Performanceof Replacements.

 

(a)                                  Borrower shall makeReplacements when required in order to keep the Property in condition andrepair consistent with other first class, full service retail properties in thesame market segment in the metropolitan area in which the Property is located,and to keep the Properly or any portion thereof from deteriorating.  Borrower shall complete all Replacements in agood and workmanlike manner as soon as practicable following the commencementof making each such Replacement.

 

(b)                                 Lender reserves theright, at its option, to approve all contracts or work orders with materialmen,mechanics, suppliers, subcontractors, contractors or other parties providinglabor or materials under contracts for an amount in excess of $100,000 inconnection with the Replacements performed by Borrower.  Upon Lender’s request, Borrower shall assign anycontract or subcontract to Lender.

 

(c)                                  In the event Lenderdetermines in its reasonable discretion that any Replacement is not beingperformed in a workmanlike or timely manner or that any Replacement has notbeen completed in a workmanlike or timely manner, and such failure continues toexist for more than thirty (30) days after notice from Lender to Borrower, Lendershall have the option to withhold disbursement for such unsatisfactoryReplacement and to proceed under existing contracts or to contract with thirdparties to complete such Replacement and to apply the Replacement Reserve Fundtoward the labor and materials necessary to complete such Replacement, withoutproviding any prior notice to Borrower and to exercise any and all other remediesavailable to Lender upon an Event of Default hereunder.

 

(d)                                 Inorder to facilitate Lender’s completion or making of the Replacements pursuantto Section 7.3.3(c) above, Borrower grants Lender the right to enter ontothe Property and perform any and all work and labor necessary to complete ormake the Replacements and/or employ watchmen to protect the Property fromdamage, subject to the rights of Tenants. All sums so expended by Lender, to the extent not from the ReplacementReserve Fund, shall be deemed to have been advanced under the Loan to Borrowerand secured by the Mortgage.  For thispurpose Borrower constitutes and appoints Lender its true and lawfulattorney-in-fact with full power of substitution to complete or undertake theReplacements in the name of Borrower.  Suchpower of attorney shall be deemed to be a power coupled with an interest andcannot be revoked but shall only be effective following an Event of Default.  Borrower empowers said attorney-in-fact asfollows: (i) to use any funds in the Replacement Reserve Account for the purposeof making or completing the Replacements; (ii) to make such additions, changesand corrections to the Replacements as shall be necessary or desirable tocomplete the Replacements; (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 maybecome Liens against the Property, or as may be necessary or desirable for the completionof the Replacements, or for clearance of title; (v) to execute all applicationsand certificates in the name of Borrower which may be required by any of thecontract documents; (vi) to prosecute and defend all actions or proceedings inconnection with the Property or the

 

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rehabilitation and repair of the Property;and (vii) to do any and every act which Borrower might do in its own behalf tofulfill the terms of this Agreement.

 

(e)                                  Nothing in this Section 7.3.3shall:  (i) make Lender responsible for makingor completing the Replacements; (ii) require Lender to expend funds in additionto the Replacement Reserve Fund to make or complete any Replacement; (iii)obligate Lender to proceed with the Replacements; or (iv) obligate Lender todemand from Borrower additional sums to make or complete any Replacement.

 

(f)                                    Borrower shallpermit Lender and Lender’s agents and representatives (including, withoutlimitation, Lender’s engineer, architect, or inspector) or third parties makingReplacements pursuant to this Section 7.3.3 to enter onto the Propertyduring normal business hours (subject to the rights of tenants under theirLeases) to inspect the progress of any Replacements and all materials beingused in connection therewith, to examine all plans and shop drawings relatingto such Replacements which are or may be kept at the Property, and to completeany Replacements made pursuant to this Section 7.3.3.  Borrower shall cause all contractors andsubcontractors to cooperate with Lender or Lender’s representatives or such otherpersons described above in connection with inspections described in this Section 7.3.3(f)or the completion of Replacements pursuant to this Section 7.3.3.

 

(g)                                 Lender may require aninspection of the Property at Borrower’s expense prior to making a monthlydisbursement in excess of $10,000 from the Replacement Reserve Account in orderto verify completion of the Replacements for which reimbursement is sought.  Lender may require that such inspection beconducted by an appropriate independent qualified professional selected byLender and/or may require a copy of a certificate of completion by an independentqualified professional acceptable to Lender prior to the disbursement of any amountsfrom the Replacement Reserve Account.  Borrower shall pay the expense of the inspectionas required hereunder, whether such inspection is conducted by Lender or by an independentqualified professional.

 

(h)                                 TheReplacements and all materials, equipment, fixtures, or any other itemcomprising a part of any Replacement shall be constructed, installed orcompleted, as applicable, free and clear of all mechanic’s, materialman’s orother liens (except for those Liens existing on the date of this Agreementwhich have been approved in writing by Lender).

 

(i)                                     Beforeeach disbursement from the Replacement Reserve Account, Lender may requireBorrower to provide Lender with a search of title to the Property effective tothe date of the disbursement, which search shows that no mechanic’s ormaterialmen’s liens or other liens of any nature have been placed against theProperty since the date of recordation of the Mortgage and that title to theProperty is free and clear of all Liens (other than the lien of the Mortgageand any other Liens previously approved in writing by Lender, if any).

 

(j)                                     AllReplacements shall comply with all applicable Legal Requirements of allGovernmental Authorities having jurisdiction over the Property and applicableinsurance requirements including, without limitation, applicable buildingcodes, special use permits, environmental regulations, and requirements ofinsurance underwriters.

 

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(k)                                  In addition to anyinsurance required under the Loan Documents, Borrower shall provide or cause tobe provided workmen’s compensation insurance, builder’s risk, and publicliability insurance and other insurance to the extent required under applicablelaw in connection with a particular Replacement.  All such policies shall be in form and amountreasonably satisfactory to Lender.  Allsuch policies which can be endorsed with standard mortgagee clauses making losspayable to Lender or its assigns shall be so endorsed.  Certified copies of such policies shall bedelivered to Lender.

 

Section 7.3.4                             Failureto Make Replacements.  (a) It shallbe an Event of Default under this Agreement if Borrower fails to comply withany provision of this Section 7.3 and such failure is not cured withinthirty (30) days after notice from Lender; provided, however, ifsuch failure is not capable of being cured within said thirty (30) day period,then provided that Borrower commences action to complete such cure andthereafter diligently proceeds to complete such cure, such thirty (30) dayperiod shall be extended for such time as is reasonably necessary for Borrower,in the exercise of due diligence, to cure such failure, but such additionalperiod of time shall not exceed sixty (60) days.  Upon the occurrence of such an Event ofDefault, Lender may use the Replacement Reserve Fund (or any portion thereof)for any purpose, including but not limited to completion of the Replacements asprovided in Section 7.3.3, or for any other repair or replacement to theProperty or toward payment of the Debt in such order, proportion and priorityas Lender may determine in its sole discretion. Lender’s right to withdraw and apply the Replacement Reserve Funds shallbe in addition to all other rights and remedies provided to Lender under thisAgreement and the other Loan Documents.

 

                (b)     Nothingin this Agreement shall obligate Lender to apply all or any portion of theReplacement Reserve Fund on account of an Event of Default to payment of theDebt or in any specific order or priority.

 

Section 7.3.5                             Balancein the Replacement Reserve Account.  The insufficiency of any balance in theReplacement Reserve Account shall not relieve Borrower from its obligation tofulfill all preservation and maintenance covenants in the Loan Documents.

 

Section 7.3.6                             Indemnification. Borrower shall indemnify Lender and holdLender harmless from and against any and all actions, suits, claims, demands,liabilities, losses, damages, obligations and costs and expenses (includinglitigation costs and reasonable attorneys fees and expenses) arising from or inany way connected with the performance of the Replacements unless the same aresolely due to gross negligence or willful misconduct of Lender.  Borrower shall assign to Lender all rightsand claims Borrower may have against all persons or entities supplying labor ormaterials in connection with the Replacements; provided, however,that Lender may not pursue any such right or claim unless an Event of Defaulthas occurred and remains uncured.

 

Section 7.4                                      Lease-UpReserve Letter of Credit.

 

As additionalsecurity for the Loan, Borrower has contemporaneously herewith delivered toLender a clean, unconditional and irrevocable “evergreen” letter of credit inthe amount of $3,429,884.00 (the **“Letter of Credit”**),which Letter of Credit is equal to 55% of the contract earnout reserve establishedunder the Borrower’s Agreement of Sale dated April 3, 2004, as

 

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amended byAmendment to Agreement of Sale dated November 8, 2004, in respect ofcertain spaces at the Property currently leased to the Lease-Up Reserve Tenants.  The Letter of Credit has a stated expirationof not earlier than one (1) year after the date hereof and has an “evergreen”feature, whereby the Letter of Credit is automatically renewed for additionalone-year periods unless the issuer gives to Lender not less than sixty (60)days prior notice that it shall not renew the Letter of Credit.

 

The partiesagree that (i) if an Event of Default shall occur hereunder, or (ii) if, withinthe 30 day period preceding the expiration date of the Letter of Credit (as thesame may have been reduced, modified, amended or renewed as permittedhereunder), an amendment, replacement or renewal of such letter of creditsatisfactory in all respects to Lender in its sole discretion has not been deliveredto Lender( the preceding items (i) and (ii) above being referred to herein asthe **“Letter of Credit Drawdown Conditions”**), then Lender shall be entitled, inits sole discretion, to (A) draw down the Letter of Credit without notice toBorrower, and apply the proceeds thereof to the prepayment of the Debt inwhatever order Lender directs or (B) continue to hold the Letter of Credit asadditional collateral security for the Loan; provided, however, if the Event ofDefault results from Borrower’s failure to timely remit any installment of theMonthly Debt Service Payment Amount as and when due, then Lender shall not drawdown the Letter of Credit until the expiration of three (3) days followingBorrower’s receipt of written notice of such Event of Default.  If Lender elects to draw down the Letter ofCredit and apply the proceeds thereof toward the prepayment of the Debt,Borrower shall, upon demand, pay to Lender (in addition to the amount of theletter of credit so drawn and applied) a Prepayment Consideration in an amountcalculated pursuant to Section 2.3.1 (a) hereof and based on the amount ofthe letter of credit so drawn down and applied. Borrower’s failure to pay the foregoing Prepayment Consideration shallbe an Event of Default hereunder.

 

Borrower may,from time to time, reduce the amount of the Letter of Credit as follows:

 

(i) During theContract of Sale Earnout Period, Borrower may submit to Lender, not morefrequently than once in any calendar month, a Tenant Reserve Earnout ConditionsCertificate certifying (A) that the Tenant Reserve Earnout Conditions for aparticular Lease-Up Reserve Tenant have been satisfied and (B) the purchaseprice attributable to the applicable Lease-Up Reserve Tenant’s Space, suchpurchase price to be reasonably determined by Borrower based upon acapitalization rate tied to the rental income derived from the applicable lease.  Lender shall, within ten (10) business daysfollowing its receipt of such Tenant Reserve Earnout Conditions Certificate andcertification regarding the purchase price, either (A) forward to Borrower awritten consent authorizing the reduction of the Letter of Credit by an amountequal to fifty five percent (55%) of the purchase price as certified byBorrower as attributable to the applicable Lease-Up Reserve Tenant’s space or(B) forward to Borrower a written explanation substantiating its refusal topermit the aforesaid reduction together, if applicable, with a request for suchadditional documentation and/or information as Lender shall require to renewits review of the Tenant Reserve Earnout Conditions Certificate.  As a condition to Lender’s consent to theaforesaid fifty five percent (55%) reduction in the Letter of Credit, Borrowershall furnish Lender with documentation evidencing that the purchase price forthe applicable Lease-Up Reserve Tenant’s space has actually been paid by theBorrower.

 

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(ii) Followingthe expiration of the Contract of Sale Earnout Period, Borrower may submit toLender, not more frequently than once in any calendar month, a Tenant ReserveEarnout Conditions Certificate certifying (A) that the Tenant Reserve EarnoutConditions for a particular Lease-Up Reserve Tenant have been satisfied and (B)the annual base rent for the applicable Lease-Up Reserve Tenant’s space.  Lender shall, within ten (10) business daysfollowing its receipt of such Tenant Reserve Earnout Conditions Certificate andstatement regarding annual base rent, either (A) forward to Borrower a writtenconsent authorizing the reduction of the Letter of Credit by an amount equal tofifty five percent (55%) of the annual base rent for the applicable Lease-UpReserve Tenant’s space divided by .079296 or (B) forward to Borrower a writtenexplanation substantiating its refusal to permit the aforesaid reductiontogether, if applicable, with a request for such additional documentation and/orinformation as Lender shall require to renew its review of the Tenant ReserveEarnout Conditions Certificate.

 

The Letter ofCredit, as the same may have been reduced, amended, renewed or modified aspermitted hereunder, shall at all times be acceptable in form to Lender andissued by a bank with a rating of not less than “A” by Standard & Poor’sRatings Services.

 

Section 7.5                                      IntentionallyOmitted.

 

Section 7.6                                      IntentionallyOmitted.

 

Section 7.7                                      ReserveFunds. Generally.

 

7.7.1                        Borrower grants to Lender afirst-priority perfected security interest in each of the Reserve Funds and anyand all monies now or hereafter deposited in each Reserve Fund as additionalsecurity for payment of the Debt.  Untilexpended or applied in accordance herewith, the Reserve Funds shall constituteadditional security for the Debt.

 

7.7.2                        Upon the occurrence of an Eventof Default, Lender may, in addition to any and all other rights and remediesavailable to Lender, apply any sums then present in any or all of the ReserveFunds to the payment of the Debt in any order in its sole discretion.

 

7.7.3                        The Reserve Funds shall not constitutetrust funds and may be commingled with other monies held by Lender.

 

7.7.4                        Intentionally omitted.

 

7.7.5                        Borrower shall not, withoutobtaining the prior written consent of Lender, further pledge, assign or grantany security interest in any Reserve Fund or the monies deposited therein orpermit any lien or encumbrance to attach thereto, or any levy to be madethereon, or any UCC-1 Financing Statements, except those naming Lender as thesecured party, to be filed with respect thereto.

 

7.7.6                        Lender shall not be liable for anyloss sustained on the investment of any funds constituting the Reserve Fundsunless occasioned by the gross negligence or willful misconduct of Lender.

 

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7.7.7                        Upon payment in full of theDebt and performance of all other obligations under this Agreement and theother Loan Documents, Lender shall disburse to Borrower all remaining ReserveFunds.

 

**ARTICLE VIII**

 

**DEFAULTS**

 

Section 8.l                                         Eventof Default.  (a) Each of thefollowing events shall constitute an event of default hereunder (an **“Event****of Default”**):

 

(i)                                     ifany portion of the Debt is not paid on the applicable due date;

 

(ii)                                  ifany of the Taxes or Other Charges are not paid prior to the date when the samebecome delinquent, except to the extent that Borrower is contesting same inaccordance with the terms of Section 5.1.2 hereof, or there are sufficientfunds in the Tax and Insurance Escrow Fund to pay such Taxes or Other Chargesand Lender fails to or refuses to release the same from the Tax and InsuranceEscrow Fund;

 

(iii)                               ifthe Policies are not kept in full force and effect, or if certified copies ofthe Policies are not delivered to Lender within ten (10) days of request;

 

(iv)                              ifBorrower transfers or encumbers any portion of the Property without Lender’sprior written consent (to extent such consent is required) or otherwiseviolates the provisions of Section 5.2.13 of this Loan Agreement;

 

(v)                                 ifany material representation or warranty made by Borrower herein or in any otherLoan Document, or in any report, certificate, financial statement or otherinstrument, agreement or document furnished to Lender shall have been false ormisleading in any material respect as of the date the representation orwarranty was made;

 

(vi)                              ifBorrower or indemnitor or any guarantor under any guaranty or indemnity issuedin connection with the Loan shall make an assignment for the benefit ofcreditors;

 

(vii)                           if areceiver, liquidator or trustee shall be appointed for Borrower or anyguarantor or indemnitor under any guarantee or indemnity issued in connectionwith the Loan or if Borrower or such guarantor or indemnitor shall beadjudicated a bankrupt or insolvent, or if any petition for bankruptcy,reorganization or arrangement pursuant to federal bankruptcy law, or anysimilar federal or state law, shall be filed by or against, consented to, oracquiesced in by, Borrower or such guarantor or indemnitor, or if anyproceeding for the dissolution or liquidation of Borrower or such guarantor orindemnitor shall be instituted; provided, however, if suchappointment, adjudication, petition or proceeding was involuntary and notconsented to by Borrower or such guarantor or indemnitor, upon the same notbeing discharged, stayed or dismissed within one hundred eighty (180) days;

 

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(viii)                        ifBorrower attempts to assign its rights under this Agreement or any of the otherLoan Documents or any interest herein or therein in contravention of the LoanDocuments;

 

(ix)                                ifBorrower breaches any of its respective negative covenants contained in Section 5.2or any covenant contained in Section 4.1.30 hereof;

 

(x)                                   withrespect to any term, covenant or provision set forth herein which specificallycontains a notice requirement or grace period, if Borrower shall be in defaultunder such term, covenant or condition after the giving of such notice or theexpiration of such grace period;

 

(xi)                                ifany of the assumptions contained in any substantive non-consolidation opinionrequired to be delivered in connection herewith are or shall become untrue inany material respect;

 

(xii)                             ifBorrower shall continue to be in Default under any of the other terms,covenants or conditions of this Agreement not specified in subsections (i) to(xi) above, for ten (10) days after notice to Borrower from Lender, in the caseof any Default which can be cured by the payment of a sum of money, or forthirty (30) days after notice from Lender in the case of any other Default; provided,however, that if such non-monetary Default is susceptible of cure butcannot reasonably be cured within such 30-day period and provided further thatBorrower shall have commenced to cure such Default within such 30-day periodand thereafter diligently and expeditiously proceeds to cure the same, such30-day period shall be extended for such time as is reasonably necessary forBorrower in the exercise of due diligence to cure such Default, such additionalperiod not to exceed one hundred eighty (180) days; or

 

(xiii)                          if thereshall be default under any of the other Loan Documents beyond any applicablecure periods contained in such documents, whether as to Borrower or theProperty, or if any other such event shall occur or condition shall exist, ifthe effect of such event or condition is to accelerate the maturity of anyportion of the Debt or to permit Lender to accelerate the maturity of all orany portion of the Debt.

 

(b)                                 Uponthe occurrence of an Event of Default (other than an Event of Default describedin clauses (vi), (vii) or (viii) above) and at any time thereafter Lender may,in addition to any other rights or remedies available to it pursuant to thisAgreement and the other Loan Documents or at law or in equity, Lender may takesuch action, without notice or demand, that Lender deems advisable to protectand enforce its rights against Borrower and in the Property, including, withoutlimitation, declaring the Debt to be immediately due and payable, and Lendermay enforce or avail itself of any or all rights or remedies provided in theLoan Documents against Borrower and the Property, including, withoutlimitation, all rights or remedies available at law or in equity; and upon anyEvent of Default described in clauses (vi), (vii) or (viii) above, the Debt andall other obligations of Borrower hereunder and under the other Loan Documentsshall immediately and automatically become due and payable, without notice ordemand, and Borrower hereby expressly waives any such notice or demand,anything contained herein or in any other Loan Document to the contrarynotwithstanding.

 

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Section 8.2                                      Remedies. (a) Upon the occurrence of an Event ofDefault, all or any one or more of the rights, powers, privileges and otherremedies available to Lender against Borrower under this Agreement or any ofthe other Loan Documents executed and delivered by, or applicable to, Borroweror at law or in equity may be exercised by Lender at any time and from time totime, 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 orother action for the enforcement of its rights and remedies under any of theLoan Documents with respect to the Property. Any such actions taken by Lender shall be cumulative and concurrent andmay be pursued independently, singly, successively, together or otherwise, atsuch time and in such order as Lender may determine in its sole discretion, tothe fullest extent permitted by law, without impairing or otherwise affectingthe other rights and remedies of Lender permitted by law, equity or contract oras set forth herein or in the other Loan Documents.  Without limiting the generality of theforegoing, Borrower agrees that if an Event of Default is continuing (i) Lenderis not subject to any “one action” or “election of remedies” law or rule, and(ii) all liens and other rights, remedies or privileges provided to Lendershall remain in full force and effect until Lender has exhausted all of itsremedies against the Property and the Mortgage has been foreclosed, sold and/orotherwise realized upon in satisfaction of the Debt or the Debt has been paidin full.

 

(b)                                 Lender shall have theright from time to time to partially foreclose the Mortgage in any manner andfor any amounts secured by the Mortgage then due and payable as determined byLender in its sole discretion including, without limitation, the followingcircumstances: (i) in the event Borrower defaults beyond any applicable graceperiod in the payment of one or more scheduled payments of principal andinterest, Lender may foreclose the Mortgage to recover such delinquentpayments, or (ii) in the event Lender elects to accelerate less than the entireoutstanding principal balance of the Loan, Lender may foreclose the Mortgage torecover so much of the principal balance of the Loan as Lender may accelerateand such other sums secured by the Mortgage as Lender may elect.  Notwithstanding one or more partialforeclosures, the Property shall remain subject to the Mortgage to securepayment of sums secured by the Mortgage and not previously recovered.

 

(c)                                  Lender shall have theright from time to time to sever the Note and the other Loan Documents into oneor more separate notes, mortgages and other security documents (the **“Severed Loan Documents”**) in such denominations as Lender shall determine in its sole discretionfor purposes of evidencing and enforcing its rights and remedies providedhereunder.  Borrower shall execute anddeliver to Lender from time to time, promptly after the request of Lender, aseverance agreement and such other documents as Lender shall request in orderto effect the severance described in the preceding sentence, all in form andsubstance reasonably satisfactory to Lender. Borrower hereby absolutely and irrevocably appoints Lender following theoccurrence of an Event of Default as its true and lawful attorney, coupled withan interest, in its name and stead to make and execute all documents necessaryor desirable to effect the aforesaid severance, Borrower ratifying all that itssaid attorney shall do by virtue thereof; provided, however, Lendershall not make or execute any such documents under such power until three (3)days after notice has been given to Borrower by Lender of Lender’s intent to exerciseits rights under such power.  Borrowershall not be obligated to pay any costs or expenses incurred in connection withthe preparation, execution, recording or filing of the Severed Loan Documents,and the Severed Loan Documents shall not contain any

 

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representations,warranties or covenants not contained in the Loan Documents and any suchrepresentations and warranties contained in the Severed Loan Documents will begiven by Borrower only as of the Closing Date.

 

(d)                                 Asused in this Section 8.2, a “foreclosure” shall include any sale by powerof sale.

 

Section 8.3                                      RemediesCumulative; Waivers.  The rights,powers and remedies of Lender under this Agreement shall be cumulative and notexclusive of any other right, power or remedy which Lender may have againstBorrower pursuant to this Agreement or the other Loan Documents, or existing atlaw or in equity or otherwise.  Lender’srights, powers and remedies may be pursued singly, concurrently or otherwise,at such time and in such order as Lender may determine in Lender’s solediscretion.  No delay or omission toexercise any remedy, right or power accruing upon an Event of Default shallimpair any such remedy, right or power or shall be construed as a waiverthereof, but any such remedy, right or power may be exercised from time to timeand as often as may be deemed expedient. A waiver of one Default or Event of Default with respect to Borrowershall not be construed to be a waiver of any subsequent Default or Event ofDefault by Borrower or to impair any remedy, right or power consequent thereon.

 

**ARTICLE IX**

 

**SPECIAL PROVISIONS**

 

Section 9.1                                      Saleof Notes and Securitization.  At therequest of the holder of the Note and, to the extent not already required to beprovided by Borrower under this Agreement, Borrower shall cooperate with Lenderto allow Lender to satisfy the market standards to which the holder of the Notecustomarily adheres or which may be reasonably required in the marketplace orby the Rating Agencies in connection with the sale of the Note orparticipations therein or the first successful securitization (such sale and/orsecuritization, the **“Securitization”**)of rated single or multi-class securities (the **“Securities”**)secured by or evidencing ownership interests in the Note and the Mortgage.  In this regard Borrower shall:

 

(a)                                  (i)                                     provide suchfinancial and other information with respect to the Property, Borrower and theManager, (ii) provide budgets relating to the Property and (iii) to perform orpermit or cause to be performed or permitted such site inspection, appraisals,market studies, environmental reviews and reports (Phase I’s and, ifappropriate, Phase II’s), engineering reports and other due diligence investigationsof the Property, as may be reasonably requested by the holder of the Note orthe Rating Agencies or as may be necessary or appropriate in connection withthe Securitization (the **“Provided Information”**),together, if customary, with appropriate verification and/or consents of theProvided Information through letters of auditors or opinions of counsel ofindependent attorneys acceptable to Lender and the Rating Agencies;

 

(b)                                 cause counsel torender opinions, which may be relied upon by the holder of the Note, the RatingAgencies and their respective counsel, agents and representatives, as to non-consolidation,fraudulent conveyance, and true sale and/or lease or any other opinion

 

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customary in securitization transactions,which counsel and opinions shall be reasonably satisfactory to the holder ofthe Note and the Rating Agencies;

 

(c)                                  make suchrepresentations and warranties as of the closing date of the Securitizationwith respect to the Property, Borrower, and the Loan Documents as areconsistent with the representations and warranties made in the Loan Documents;and

 

(d)                                 execute suchamendments to the Loan Documents and organizational documents as may bereasonably requested by the holder of the Note or the Rating Agencies or otherwiseto effect the Securitization; provided, however, that Borrowershall not be required to modify or amend any Loan Document if such modificationor amendment would (i) change the interest rate, the stated maturity or theamortization of principal set forth in the Note, or (ii) modify or amend anyother material economic term of the Loan.

 

All materialout-of-pocket third party costs and expenses incurred by Borrower in connectionwith complying with requests made under this Section 9.1 shall be paid byLender.

 

Section 9.2                                      Securitization. Borrower understands that certain of theProvided Information may be included in disclosure documents in connection withthe Securitization, including, without limitation, a prospectus, prospectussupplement or private placement memorandum (each, a **“Disclosure Document”**)and may also be included in filings with the Securities and ExchangeCommission pursuant to the Securities Act of 1933, as amended (the **“Securities****Act”**),or the Securities and Exchange Act of 1934, as amended (the **“Exchange****Act”**),or provided or made available to investors or prospective investors in theSecurities, the Rating Agencies, and service providers relating to theSecuritization.  In the event that theDisclosure Document is required to be revised prior to the sale of allSecurities, Borrower will cooperate with the holder of the Note in updating theDisclosure Document by providing all current information necessary to keep theDisclosure Document accurate and complete in all material respects.

 

Section 9.3                                      RatingSurveillance.  Lender, at its option,may retain the Rating Agencies to provide rating surveillance services on anycertificates issued in a Securitization. Such rating surveillance will be at the expense of Lender (the **“Rating Surveillance****Charge”**).

 

Section 9.4                                      Exculpation. Subject to the qualifications below,Lender shall not enforce the liability and obligation of Borrower to performand observe the obligations contained in the Note, this Agreement, the Mortgageor the other Loan Documents by any action or proceeding wherein a moneyjudgment shall be sought against Borrower, except that Lender may bring aforeclosure action, an action for specific performance or any other appropriateaction or proceeding to enable Lender to enforce and realize upon its interestunder the Note, this Agreement, the Mortgage and the other Loan Documents, orin the Property, the Rents following an Event of Default, or any othercollateral given to Lender pursuant to the Loan Documents; provided, however,that, except as specifically provided herein, any judgment in any such actionor proceeding shall be enforceable against Borrower only to the extent ofBorrower’s interest in the Property, in the Rents following an Event of Defaultand in any other collateral given to Lender, and Lender, by accepting the Note,this Agreement, the Mortgage and the other Loan Documents, agrees that it shallnot sue for, seek or demand any deficiency judgment against

 

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Borrower in any such action or proceedingunder or by reason of or under or in connection with the Note, this Agreement,the Mortgage or the other Loan Documents.  The provisions of this section shall not,however, (a) constitute a waiver, release or impairment of any obligationevidenced or secured by any of the Loan Documents; (b) impair the right ofLender to name Borrower as a party defendant in any action or suit forforeclosure and sale under any of the Mortgage; (c) affect the validity orenforceability of or any guaranty made in connection with the Loan or any ofthe rights and remedies of Lender thereunder; (d) impair the right of Lender toobtain the appointment of a receiver; (e) impair the enforcement of any of the Assignmentof Leases following an Event of Default; (f) constitute a prohibition againstLender commencing any other appropriate action or proceeding in order forLender to exercise its remedies against the Property; or (g) constitute awaiver of the right of Lender to enforce the liability and obligation ofBorrower, by money judgment or otherwise, to the extent of any loss, damage,cost, expense, liability, claim or other obligation incurred by Lender(including attorneys’ fees and costs reasonably incurred) arising out of or inconnection with the following:

 

(i)                                     fraudor intentional misrepresentation by Borrower or any guarantor in connectionwith the Loan;

 

(ii)                                  thegross negligence or willful misconduct of Borrower;

 

(iii)                               materialphysical waste of the Property;

 

(iv)                              thebreach of any representation, warranty, covenant or indemnification provisionin the Environmental Indemnity or in the Mortgage concerning environmentallaws, hazardous substances and asbestos and any indemnification of Lender withrespect thereto in either document;

 

(v)                                 theremoval or disposal of any portion of the Property after an Event of Default;

 

(vi)                              themisapplication or conversion by Borrower of (A) any insurance proceeds paid byreason of any loss, damage or destruction to the Property which are not appliedby Borrower in accordance with this Agreement, (B) any awards or other amountsreceived in connection with the condemnation of all or a portion of theProperty which are not applied by Borrower in accordance with this Agreement,or (C) any Rents following an Event of Default;

 

(vii)                           failureto pay charges for labor or materials or other charges that can create liens onany portion of the Property;

 

(viii)                        anysecurity deposits, advance deposits or any other deposits collected withrespect to the Property which are not delivered to Lender upon a foreclosure ofthe Property or action in lieu thereof, except to the extent any such securitydeposits were applied in accordance with the terms and conditions of any of theLeases prior to the occurrence of the Event of Default that gave rise to suchforeclosure or action in lieu thereof;

 

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(ix)                                obligationsimposed pursuant to that certain Development Agreement dated as of August 10,2004 among Kimco Tampa, L.P., Pasco County, Florida, Northwood Centers, LLP,MJG Ventures, Ltd. and Spanos Corporation for the Northwood Development ofRegional Impact No. 119, and that certain Resolution (04-205) Amending theDevelopment Order for the Northwood Development of Regional Impact (86-17).

 

Notwithstandinganything to the contrary in this Agreement, the Note or any of the LoanDocuments, (A) the Debt shall be fully recourse to the Borrower and (B) Lendershall not be deemed to have waived any right which Lender may have under Section 506(a),506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to file aclaim for the full amount of the Debt secured by the Mortgage or to requirethat all collateral shall continue to secure all of the Debt owing to Lender inaccordance with the Loan Documents in the event that the (1) first full monthlypayment under the Note is not paid within five (5) days of notice that suchpayment is late (provided, however, that such grace period relates only to therecourse trigger described in this paragraph), or (II) failure of Borrower topermit on-site inspections of the Property subject to the rights of Tenants andany applicable cure period set forth in the Loan Documents, to providefinancial information as required under the Loan Documents subject to anyapplicable cure period (except for financial information required to bedelivered by a tenant pursuant to the applicable Lease that has not beendelivered to Borrower, provided Borrower has requested such financialinformation from such tenant), or to comply with Section 4.1.30 hereof, or(III) failure of Borrower to obtain Lender’s prior written consent (to extentsuch consent is required) to any subordinate financing or other voluntary lienencumbering the Property, or (IV) failure of Borrower to obtain Lender’s priorwritten consent to any assignment, transfer or conveyance of the Property, orany portion thereof, or any interest therein as required by this Agreement.  Notwithstanding the provision set forth inclause (III) of this paragraph, a voluntary lien otherthan a liensecuring an extension of credit filed against the Property shall not constitutea recourse trigger for purposes of this paragraph provided such lien (A) isfully bonded to the satisfaction of Lender and discharged of record withinninety (90) days of filing, or (B) within such ninety (90) day period, Lenderreceives affirmative title insurance from the title insurance company insuringthe lien of the Mortgage that such lien is subject and subordinate to the lienof the Mortgage and no enforcement action is commenced by the applicable lienholder.

 

Section 9.5                                      Terminationof Manager.  If (a) the amountsevidenced by the Note have been accelerated pursuant to Section 8.1(b)hereof, (b) the Manager shall become insolvent, (c) the Manager is in defaultunder the terms of the Management Agreement beyond any applicable grace or cureperiod, (d) Manager is not managing the Property in accordance with themanagement practices of nationally recognized management companies managingsimilar properties in locations comparable to those of the Property or the DebtService Coverage Ratio for the Property for the preceeding twelve month periodis less than or equal to 2.10  to 1.0, or(e) if Manager shall assign the Management Agreement without Lender’s consent(if such consent is required pursuant to the Assignment and Subordination ofManagement Agreement between Manager, Lender and Borrower) then, in the case of(a), (b), (c), (d) or (e), Borrower shall, at the request of Lender, terminatethe Management Agreement and replace the Manager with a manager reasonablyapproved by Lender on terms and conditions reasonably satisfactory to Lender,it being understood and agreed that the management fee for such replacementmanager shall not exceed then prevailing market rates.  In addition and without limiting the rightsof

 

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Lender hereunder or under any of the otherLoan Documents, in the event that (i) the Management Agreement is terminated,(ii) the Manager no longer manages the Property, or (iii) a receiver,liquidator or trustee shall be appointed for Manager or if Manager shall beadjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganizationor arrangement pursuant to federal bankruptcy law, or any similar federal orstate law, shall be filed by or against, consented to, or acquiesced in by,Manager, or if any proceeding for the dissolution or liquidation of Managershall be instituted, then Borrower (at Borrower’s sole cost and expense) shallimmediately, in its name, establish new deposit accounts separate from anyother Person with a depository satisfactory to Lender into which all Rents andother income from the Property shall be deposited and shall grant Lender afirst priority security interest in such account pursuant to documentationsatisfactory in form and substance to Lender.

 

Section 9.6                                      Servicer. At the option of Lender, the Loan may beserviced by a servicer/trustee (the **“Servicer”**)selected by Lender and Lender may delegate all or any portion of itsresponsibilities under this Agreement and the other Loan Documents to theServicer pursuant to a servicing agreement (the **“ServicingAgreement”**) between Lender and Servicer.  Lender shall be responsible for any set-upfees or any other costs relating to or arising under the Servicing Agreement.

 

Section 9.7                                      Splittingthe Loan.  At the election of Lenderin its sole discretion, the Loan or any individual Note making up the Loanshall be split and severed into two or more loans which, at Lender’s election,shall not be cross-collateralized or cross-defaulted with each other.  Borrower hereby agrees to deliver to Lenderto effectuate such severing of the Loan or any individual Note, as the case maybe, as reasonably requested by Lender, (a) additional executed documents, oramendments and modifications to the applicable Loan Documents, (b) new opinionsor updates to the opinions delivered to Lender in connection with the closing ofthe Loan, (c) endorsements and/or updates to the title insurance policiesdelivered to Lender in connection with the closing of the Loan, and (d) anyother certificates, instruments and documentation reasonably determined byLender as necessary or appropriate to such severance (the items described insubsections (a) through (d) collectively hereinafter shall be referred to as “SeveringDocumentation”), which Severing Documentation shall be acceptable to Lender inform and substance in its reasonable discretion.  Lender hereby agrees to be responsible forall reasonable third-party expenses incurred in connection with the preparationand delivery of the Severing Documentation and the effectuation of theuncrossing of the Loan from the additional Loans.  Borrower hereby acknowledges and agrees thatupon such severing of the Loan, Lender may effect, in its sole discretion, oneor more Securitizations of which the severed loans may be a part.

 

**ARTICLE X**

 

**MISCELLANEOUS**

 

Section 10.1                                Survival. This Agreement and all covenants,agreements, representations and warranties made herein and in the certificatesdelivered pursuant hereto shall survive the making by Lender of the Loan andthe execution and delivery to Lender of the Note, and shall continue in fullforce and effect so long as all or any of the Debt is outstanding and unpaidunless a longer period is expressly set forth herein or in the other LoanDocuments.

 

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Whenever inthis Agreement any of the parties hereto is referred to, such reference shallbe deemed to include the legal representatives, successors and assigns of suchparty.  All covenants, promises andagreements in this Agreement, by or on behalf of Borrower, shall inure to thebenefit of the legal representatives, successors and assigns of Lender.

 

Section 10.2                                Lender’sDiscretion.  Whenever pursuant tothis Agreement, Lender exercises any right given to it to approve ordisapprove, or any arrangement or term is to be satisfactory to Lender, thedecision of Lender to approve or disapprove or to decide whether arrangementsor terms are satisfactory or not satisfactory shall (except as is otherwisespecifically herein provided) be in the sole discretion of Lender and shall befinal and conclusive.

 

Section 10.3                                Governing Law.  **THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT ENTERED INTOPURSUANT TO THE LAWS OF THE STATEIN WHICH THE PROPERTY IS LOCATED AND SHALLIN ALL RESPECTS BE GOVERNED, CONSTRUED, APPLIED AND ENFORCED INACCORDANCE WITH THE LAWS OF THE STATEIN WHICH THE PROPERTY IS LOCATED ANDAPPLICABLE FEDERAL LAWS.**

 

Section 10.4                                Modification,Waiver in Writing.  No modification,amendment, extension, discharge, termination or waiver of any provision of thisAgreement, or of the Note, or of any other Loan Document, nor consent to anydeparture by Borrower therefrom, shall in any event be effective unless thesame shall be in a writing signed by the party against whom enforcement issought, and then such waiver or consent shall be effective only in the specificinstance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demandon Borrower, shall entitle Borrower to any other or future notice or demand inthe same, similar or other circumstances.

 

Section 10.5                                DelayNot a Waiver.  Neither any failurenor any delay on the part of Lender in insisting upon strict performance of anyterm, condition, covenant or agreement, or exercising any right, power, remedyor privilege hereunder, or under the Note or under any other Loan Document, orany other instrument given as security therefor, shall operate as or constitutea waiver thereof, nor shall a single or partial exercise thereof preclude anyother future exercise, or the exercise of any other right, power, remedy orprivilege.  In particular, and not by wayof limitation, by accepting payment after the due date of any amount payableunder this Agreement, the Note or any other Loan Document, Lender shall not bedeemed to have waived any right either to require prompt payment when due ofall other amounts due under this Agreement, the Note or the other LoanDocuments, or to declare a default for failure to effect prompt payment of anysuch other amount.

 

Section 10.6                                Notices. All notices, consents, approvals andrequests required or permitted hereunder or under any other Loan Document shallbe given in writing and shall be effective for all purposes if hand deliveredor sent by (a) certified or registered United States mail, postage prepaid,return receipt requested or (b) expedited prepaid delivery service, eithercommercial or United States Postal Service, with proof of attempted delivery,and by telecopier (with answer back acknowledged), addressed as follows (or atsuch other address and Person as shall be designated from time to time by anyparty hereto, as the case may be, in a written notice to the other partieshereto in the manner provided for in this Section):

 

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If to Lender:

 

Nomura Credit & Capital Inc.

Two World Financial Center

Building B

New York, New York 10281

 

with a copy to:

 

ArCap Servicing, Inc.

5605 N. MacArthur Blvd.

Suite 950

Irving TX 75038

Attn:  Clyde Greenhouse

 

or any other servicer of theLoan

 

If to Borrower:

 

**INLAND WESTERN****WESLEY CHAPEL NORTHWOODS,L.L.C.**

2901 Butterfield Road, OakBrook, Illinois 60523

 

with a copy to:

 

The Inland Real EstateGroup, Inc.

2901 Butterfield Road

Oak Brook, IL 60523

Attention: Robert Baum

 

and with a copy to:

 

Inland Retail Real EstateTrust, Inc.

2901 Butterfield Road

Oak Brook, IL 60523

Attention: Roberta Matlin

 

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

 

Section 10.7                                Trial by Jury.  **BORROWER AND LENDER HEREBY AGREE NOT TO ELECT A TRIALBY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BYJURY FULLY TO THE****EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTEREXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR**

 

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**OTHER ACTION ARISING INCONNECTION THEREWITH.  THIS WAIVER OFRIGHT TO TRIAL BY JURY IS****GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER ANDLENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  LENDER IS HEREBY AUTHORIZED TO FILE A COPY OFTHIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BYBORROWER AND LENDER.**

 

Section 10.8                                Headings. The Article and/or Section headingsand the Table of Contents in this Agreement are included herein for convenienceof reference only and shall not constitute apart of this Agreement for anyother purpose.

 

Section 10.9                                Severability.  Wherever possible, each provision of thisAgreement shall be interpreted in such manner as to be effective and validunder applicable law, but if any provision of this Agreement shall beprohibited by or invalid under applicable law, such provision shall beineffective to the extent of such prohibition or invalidity, withoutinvalidating the remainder of such provision or the remaining provisions ofthis Agreement.

 

Section 10.10         Preferences.  Lender shall have the continuing andexclusive right to apply or reverse and reapply any and all payments byBorrower to any portion of the obligations of Borrower hereunder.  To the extent Borrower makes a payment orpayments to Lender, which payment or proceeds or any part thereof aresubsequently invalidated, declared to be fraudulent or preferential, set asideor required to be repaid to a trustee, receiver or any other party under anybankruptcy law, state or federal law, common law or equitable cause, then, tothe extent of such payment or proceeds received, the obligations hereunder orpart thereof intended to be satisfied shall be revived and continue in fullforce and effect, as if such payment or proceeds had not been received byLender.

 

Section 10.11         Waiver of Notice.  Borrower shall not be entitled to any noticesof any nature whatsoever from Lender except with respect to matters for whichthis Agreement or the other Loan Documents specifically and expressly providefor the giving of notice by Lender to Borrower and except with respect tomatters 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 fromLender with respect to any matter for which this Agreement or the other LoanDocuments do not specifically and expressly provide for the giving of notice byLender to Borrower.

 

Section 10.12         Remedies of Borrower.  In the event that a claim or adjudication ismade that Lender or its agents have acted unreasonably or unreasonably delayedacting in any case where by law or under this Agreement or the other LoanDocuments, Lender or such agent, as the case may be, has an obligation to actreasonably or promptly, Borrower agrees that neither Lender nor its agentsshall be liable for any monetary damages, and Borrower’s sole remedies shall belimited to commencing an action seeking injunctive relief or declaratoryjudgment.  The parties hereto agree thatany action or proceeding to determine whether Lender has acted reasonably shallbe determined by an action seeking declaratory judgment.

 

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Section 10.13         Expenses; Indemnity.

 

(a)                                  Borrower covenants and agrees to pay or, ifBorrower fails to pay, to reimburse, Lender upon receipt of written notice fromLender for all reasonable costs and expenses (including reasonable attorneys’  fees and disbursements) incurred by Lender inconnection with (i) the preparation, negotiation, execution and delivery ofthis Agreement and the other Loan Documents and the consummation of thetransactions contemplated hereby and thereby and all the costs of furnishingall opinions by counsel for Borrower (including without limitation any opinionsrequested by Lender as to any legal matters arising under this Agreement or theother Loan Documents with respect to the Property); (ii) Borrower’s ongoingperformance of and compliance with Borrower’s respective agreements andcovenants contained in this Agreement and the other Loan Documents on its partto be performed or complied with after the Closing Date, including, withoutlimitation, confirming compliance with environmental and insurancerequirements; (iii) Lender’s ongoing performance and compliance with allagreements and conditions contained in this Agreement and the other LoanDocuments on its part to be performed or complied with after the Closing Date;(iv) except as otherwise provided in this Agreement, the negotiation,preparation, execution, delivery and administration of any consents,amendments, waivers or other modifications to this Agreement and the other LoanDocuments and any other documents or matters reasonably requested by Lender;(v) securing Borrower’s compliance with any requests made pursuant to theprovisions of this Agreement; (vi) the filing and recording fees and expenses,title insurance and reasonable fees and expenses of counsel for providing toLender all required legal opinions, and other similar expenses incurred increating and perfecting the Liens in favor of Lender pursuant to this Agreementand the other Loan Documents; (vii) enforcing or preserving any rights, inresponse to third party claims or the prosecuting or defending of any action orproceeding or other litigation, in each case against, under or affectingBorrower, this Agreement, the other Loan Documents, the Property, or any othersecurity given for the Loan; and (viii) enforcing any obligations of orcollecting any payments due from Borrower under this Agreement, the other LoanDocuments or with respect to the Property or in connection with any refinancingor restructuring of the credit arrangements provided under this Agreement inthe nature of a “work-out” or of any insolvency or bankruptcy proceedings;provided, however, that Borrower shall not be liable for the payment of anysuch costs and expenses to the extent the same arise by reason of the grossnegligence, illegal acts, fraud or willful misconduct of Lender.

 

(b)                                 Borrower shall indemnify, defend and holdharmless Lender from and against any and all other liabilities, obligations,losses, damages, penalties, actions, judgments, suits, claims, costs, expensesand disbursements of any kind or nature whatsoever (including, withoutlimitation, the reasonable fees and disbursements of counsel for Lender inconnection with any investigative, administrative or judicial proceedingcommenced or threatened, whether or not Lender shall be designated a partythereto), that may be imposed on, incurred by, or asserted against Lender inany manner relating to or arising out of (i) any breach by Borrower of itsobligations under, or any material misrepresentation by Borrower contained in,this Agreement or the other Loan Documents, or (ii) the use or intended use ofthe proceeds of the Loan (collectively, the **“IndemnifiedLiabilities”**); provided, however, that Borrowershall not have any obligation to Lender hereunder to the extent that suchIndemnified Liabilities arise from the gross negligence, illegal acts, fraud orwillful misconduct of Lender.  To theextent that the undertaking to indemnify, defend and hold harmless set forth inthe preceding sentence may

 

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be unenforceable because it violates any lawor public policy, Borrower shall pay the maximum portion that it is permittedto pay and satisfy under applicable law to the payment and satisfaction of allIndemnified Liabilities incurred by Lender.

 

Section 10.14                          SchedulesIncorporated.  The Schedules annexedhereto are hereby incorporated herein as a part of this Agreement with the sameeffect as if set forth in the body hereof.

 

Section 10.15                          Offsets,Counterclaims and Defenses.  Anyassignee of Lender’s interest in and to this Agreement, the Note and the otherLoan Documents shall take the same free and clear of all offsets, counterclaimsor defenses which are unrelated to such documents which Borrower may otherwisehave against any assignor of such documents, and no such unrelated counterclaimor defense shall be interposed or asserted by Borrower in any action orproceeding brought by any such assignee upon such documents and any such rightto interpose or assert any such unrelated offset, counterclaim or defense inany such action or proceeding is hereby expressly waived by Borrower.

 

Section 10.16                          NoJoint Venture or Partnership; No Third Party Beneficiaries.

 

(a)                                  Borrower and Lenderintend that the relationships created hereunder and under the other LoanDocuments be solely that of borrower and lender.  Nothing herein or therein is intended tocreate a joint venture, partnership, tenancy-in-common, or joint tenancy relationshipbetween Borrower and Lender nor to grant Lender any interest in the Propertyother than that of mortgagee, beneficiary or lender.

 

(b)                                 This Agreement and theother Loan Documents are solely for the benefit of Lender and Borrower andnothing contained in this Agreement or the other Loan Documents shall be deemedto confer upon anyone other than Lender and Borrower any right to insist upon orto enforce the performance or observance of any of the obligations containedherein or therein.  All conditions to theobligations of Lender to make the Loan hereunder are imposed solely and exclusivelyfor the benefit of Lender and no other Person shall have standing to require satisfactionof such conditions in accordance with their terms or be entitled to assume thatLender will refuse to make the Loan in the absence of strict compliance withany or all thereof and no other Person shall under any circumstances be deemedto be a beneficiary of such conditions, any or all of which may be freelywaived in whole or in part by Lender if, in Lender’s sole discretion.  Lender deems it advisable or desirable to doso.

 

Section 10.17                          Publicity. All news releases, publicity oradvertising by Borrower or their Affiliates through any media intended to reachthe general public which refers to the Loan Documents or the financingevidenced by the Loan Documents, to Lender, Nomura Credit & Captial Inc.,or any of their Affiliates shall be subject to the prior written approval ofLender.  All news releases, publicity oradvertising by Lender through any media intended to reach the general publicwhich refers solely to the Borrower or to the Loan made by the Lender to theBorrower shall be subject to the prior written approval of Borrower, providedhowever, the foregoing shall not apply to Provided Information included indisclosure documents in connection with a Securitization.

 

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Section 10.18                          Waiverof Marshalling of Assets.  To thefullest extent permitted by law, Borrower, for itself and its successors andassigns, waives all rights to a marshalling of the assets of Borrower, Borrower’spartners and others with interests in Borrower, and of the Property, or to asale in inverse order of alienation in the event of foreclosure of the Mortgageor sale of the Property by power of sale, and agrees not to assert any rightunder any laws pertaining to the marshalling of assets, the sale in inverseorder of alienation, homestead exemption, the administration of estates ofdecedents, or any other matters whatsoever to defeat, reduce or affect theright of Lender under the Loan Documents to a sale of the Property for thecollection of the Debt without any prior or different resort for collection orof the right of Lender to the payment of the Debt out of the net proceeds ofthe Property in preference to every other claimant whatsoever.

 

Section 10.19                          Waiverof Counterclaim.  Borrower herebywaives the right to assert a counterclaim, other than a compulsorycounterclaim, in any action or proceeding brought against it by Lender or itsagents.

 

Section 10.20                          Conflict;Construction of Documents; Reliance.  In the event of any conflict between theprovisions of this Loan Agreement and any of the other Loan Documents, theprovisions of this Loan Agreement shall control.  The parties hereto acknowledge that they wererepresented by competent counsel in connection with the negotiation, draftingand execution of the Loan Documents and that such Loan Documents shall not besubject to the principle of construing their meaning against the party whichdrafted same.  Borrower acknowledgesthat, with respect to the Loan, Borrower shall rely solely on its own judgmentand advisors in entering into the Loan without relying in any manner on anystatements, representations or recommendations of Lender or any parent,subsidiary or Affiliate of Lender.  Lendershall not be subject to any limitation whatsoever in the exercise of any rightsor remedies available to it under any of the Loan Documents or any otheragreements or instruments which govern the Loan by virtue of the ownership by itor any parent, subsidiary or Affiliate of Lender of any equity interest any ofthem may acquire in Borrower, and Borrower hereby irrevocably waives the rightto raise any defense or take any action on the basis of the foregoing withrespect to Lender’s exercise of any such rights or remedies.  Borrower acknowledges that Lender engages inthe business of real estate financings and other real estate transactions andinvestments which may be viewed as adverse to or competitive with the businessof Borrower or its Affiliates.

 

Section 10.21                          Brokersand Financial Advisors.  Borrowerhereby represents that it has dealt with no financial advisors, brokers,underwriters, placement agents, agents or finders in connection with thetransactions contemplated by this Agreement other than Inland Mortgage Corp.  Borrower hereby agrees to indemnify, defendand hold Lender harmless from and against any and all claims, liabilities,costs and expenses of any kind (including Lender’s reasonable attorneys’ feesand expenses) in any way relating to or arising from a claim by any Person thatsuch Person acted on behalf of Borrower or Lender in connection with thetransactions contemplated herein.  Theprovisions of this Section 10.21 shall survive the expiration andtermination of this Agreement and the payment of the Debt.

 

Section 10.22                          PriorAgreements.  This Agreement and theother Loan Documents contain the entire agreement of the parties hereto andthereto in respect of the transactions

 

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contemplated hereby and thereby, and all prioragreements or understandings among or between such parties, whether oral orwritten, are superseded by the terms of this Agreement and the other LoanDocuments and unless specifically set forth in a writing contemporaneousherewith the terms, conditions and provisions of such prior agreement do notsurvive execution of this Agreement.

 

Section 10.23                        Transfer of Loan.  Inthe event that Lender transfers the Loan, Borrower shall continue to make paymentsat the place set forth in the Note until such time that Borrower is notified inwriting by Lender that payments are to be made at another place.

 

Section 10.24                       Joint and Several Liability.  IfBorrower consists of more than one person or party, the obligations andliabilities of each person or party shall be joint and several.

 

(THE BALANCE OF THIS PAGEHAS BEEN INTENTIONALLY LEFT BLANK)

 

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IN WITNESSWHEREOF, the parties hereto have caused this Agreement to be duly executed bytheir duly authorized representatives, all as of the day and year first abovewritten.

 
|       | **BORROWER:**                                                     |
|------------|-------------------------------------------------------------------|
|       |                                                              |
| ** ** | **INLAND****WESTERN****WESLEY****CHAPEL****NORTHWOODS,  L.L.C.,** |
|       | a Delaware limited liability company                              |
|       |                                                              |
|       |                                                              | By: | Inland  Western Retail Real Estate Trust,  Inc., a Maryland corporation |
|       |                                                              |   |   |
|       |                                                              |   |   |
|       |                                                              |   | By: |   | /s/ Valerie  Medina |   |
|       |                                                              |   | Name: | Valerie  Medina |
|       |                                                              |   | Title: | Asst.  Secretary |
|       |                                                              |
|       |                                                              |
|       | **LENDER:**                                                       |
|       |                                                              |
|       | **NOMURA CREDIT & CAPITAL INC.,**                             |
|       | a Delaware corporation                                            |
|       |                                                              |
|       |                                                              |
|       | By:                                                               |   |
|       | Name:                                                             |   |
|       | Its:                                                              |   |
|            |                                                                   |  |  |  |  |  |  |  |

 

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**SCHEDULE I**

 

Intentionallyomitted

 

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**SCHEDULE II**

 

Intentionallyomitted.

 

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**SCHEDULE III**

 

**REQUIREDREPAIRS**

 

1.  Confirmsinkhole recess

2.  Repairasphalt concrete distress

3.  Installlock at unsecured ladder and make related repairs

4.  Applywaterproofing sealant to Marshall’s walls.

 

As each of such items is more particularly describedin that certain Property Conditions Assessment prepared by RCI Consulting datedNovember 10, 2004.

 

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**SCHEDULE IV**

 

**RENT ROLL**

 

[exhibitfollows this page]

 

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