**Exhibit10.439**

 

**LOAN AGREEMENT**

 

 

Dated as of December 21, 2004

 

 

Between

 

 

INLAND WESTERN PLACENTIA, L.L.C.,

as Borrower

 

 

and

 

 

BEAR STEARNS COMMERCIAL MORTGAGE, INC.,

as Lender

 

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**TABLE OF CONTENTS**

 
| **ARTICLE  I DEFINITIONS; PRINCIPLES OF CONSTRUCTION**    |   |
|-----------------------------------------------------------|--------|
| Section 1.1 Definitions                                   |   |
| Section 1.2  Principles of Construction                   |   |
| **ARTICLE II GENERAL TERMS**                              |   |
| Section  2.1 Loan Commitment; Disbursement to Borrower    |   |
| Section  2.2 Interest; Loan Payments; Late Payment Charge |   |
| Section 2.3 Prepayments                                   |   |
| Section 2.4  Intentionally Omitted                        |   |
| Section 2.5 Release of  Property                          |   |
| Section 2.6  Manner of Making Payments                    |   |
| Section 2.7  Intentionally Omitted                        |   |
| **ARTICLE III CONDITIONS PRECEDENT**                      |   |
| Section 3.1  Conditions Precedent to Closing              |   |
| **ARTICLE IV REPRESENTATIONS AND WARRANTIES**             |   |
| Section 4.1  Borrower Representations                     |   |
| Section 4.2  Survival of Representations                  |   |
| **ARTICLE V  BORROWER COVENANTS**                         |   |
| Section 5.1  Affirmative Covenants                        |   |
| Section 5.2  Negative Covenants                           |   |
| **ARTICLE  VI INSURANCE; CASUALTY; CONDEMNATION**         |   |
| Section 6.1 Insurance                                     |   |
| Section 6.2 Casualty                                      |   |
| Section 6.3 Condemnation                                  |   |
| Section 6.4 Restoration                                   |   |
| **ARTICLE VII RESERVE FUNDS**                             |   |
| Section 7.1  Required Repair Funds                        |   |
| Section  7.2 Tax and Insurance Escrow Fund                |   |
| Section  7.3 Replacements and Replacement Reserve         |   |
| Section 7.4  Intentionally Omitted                        |   |
| Section 7.5  Intentionally Omitted                        |   |
| Section 7.6  Intentionally Omitted                        |   |
| Section 7.7  Reserve Funds, Generally                     |   |
| **ARTICLE VIII DEFAULTS**                                 |   |
| Section 8.1 Event of  Default                             |   |
| Section 8.2 Remedies                                      |   |
| Section  8.3 Remedies Cumulative; Waivers                 |   |
| **ARTICLE IX SPECIAL PROVISIONS**                         |   |
| Section  9.1 Sale of Notes and Securitization             |   |
| Section 9.2  Securitization                               |   |
| Section 9.3 Rating  Surveillance                          |   |
| Section 9.4 Exculpation                                   |   |

 

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| Section 9.5  Termination of Manager                                          |   |
|------------------------------------------------------------------------------|--------|
| Section 9.6 Servicer                                                         |   |
| Section 9.7  Splitting the Loan                                              |   |
| **ARTICLE X MISCELLANEOUS**                                                  |   |
| Section 10.1 Survival                                                        |   |
| Section l0.2 Lender’s  Discretion                                       |   |
| Section 10.3 Governing  Law                                                  |   |
| Section  10.4 Modification, Waiver in Writing                                |   |
| Section 10.5 Delay  Not a Waiver                                             |   |
| Section 10.6 Notices                                                         |   |
| Section l0.7 Trial by  Jury                                                  |   |
| Section l0.8 Headings                                                        |   |
| Section 10.9 Severability                                                    |   |
| Section 10.10  Preferences                                                   |   |
| Section 10.11  Waiver of Notice                                              |   |
| Section 10.12  Remedies of Borrower                                          |   |
| Section 10.13  Expenses; Indemnity                                           |   |
| Section 10.14  Schedules Incorporated                                        |   |
| Section  10.15 Offsets, Counterclaims and Defenses                           |   |
| Section  10.16 No Joint Venture or Partnership; No Third Party Beneficiaries |   |
| Section 10.17 Publicity                                                      |   |
| Section  10.18 Waiver of Marshalling of Assets                               |   |
| Section 10.19  Waiver of Counterclaim                                        |   |
| Section  10.20 Conflict; Construction of Documents; Reliance                 |   |
| Section  10.21 Brokers and Financial Advisors                                |   |
| Section 10.22 Prior  Agreements                                              |   |
| Section 10.23  Transfer of Loan                                              |   |
| Section  10.24 Joint and Several Liability                                   |   |

 

SCHEDULES

 
| Schedule  I   | - | Intentionally  Omitted           |
|---------------|---|----------------------------------|
| Schedule  II  | - | Intentionally  Omitted           |
| Schedule III  | - | Required Repairs                 |
| Schedule IV   | - | Rent Roll                        |
| Schedule V    | - | Intentionally Omitted            |
| Schedule VI   | - | Intentionally Omitted            |
| Schedule VII  | - | Intentionally Omitted            |
| Schedule VIII | - | Intentionally Omitted            |
| Schedule IX   | - | Intentionally Omitted            |
| Schedule X    | - | Other Contract Funds  Agreements |

 

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**LOAN AGREEMENT**

 

**THIS LOAN AGREEMENT**, dated as of this 21 day of December, 2004 (as amended, restated,replaced, supplemented or otherwise modified from time to time, this “**Agreement**”), between BEAR STEARNSCOMMERCIAL MORTGAGE, INC., a New York corporation, having an address at 383Madison Avenue, New York, New York 10179 (“**Lender**”),and INLAND WESTERN PLACENTIA, L.L.C., a Delaware limited liability company,having an address at 2901 Butterfield Road, 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 Loan to Borrower, subject to and in accordancewith the terms of this Agreement and the other Loan Documents (as hereinafter defined).

 

NOW,THEREFORE, in consideration of the making of the Loan by Lender and thecovenants, agreements, representations and warranties set forth in thisAgreement, the parties hereto hereby covenant, agree, represent and warrant asfollows:

 

**ARTICLE I**

**DEFINITIONS; PRINCIPLES OF CONSTRUCTION**

 

Section1.1                                      Definitions. For all purposes of this Agreement, exceptas otherwise expressly required or unless the context clearly indicates acontrary intent:

 

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

 

“**ALTA**” shall mean American LandTitle Association, or any successor thereto.

 

“**Anchor Tenant**” shall mean,collectively, (a) Office Max North America, Inc., f.k.a. Office Max, Inc. and(b) Ross Stores, Inc., pursuant to the Anchor Tenant Lease.

 

“**Anchor Tenant Lease**” shall mean:

 

(i)                                     with respect to Office Max North America,Inc., f.k.a. Office Max, Inc. that certain Lease Agreement, dated August 27,1996, by and between Donahue Schriber, as original landlord andpredecessor-in-interest to Borrower, as landlord, and Anchor Tenant (or itspredecessor-in-interest) as tenant as the same has previously been amended andmay be further amended, restated, renewed, substituted or replaced (but only tothe extent permitted under this Agreement); and

 

(ii)                                  with respect to Ross Stores, Inc. that certainLease, dated August 16, 1993, by and between Diversified Shopping Center, asoriginal landlord and predecessor-in-interest

 

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toBorrower, as landlord, andAnchor Tenant (or its predecessor-in-interest) as tenant as the same has previouslybeen amended and may be further amended, restated, renewed, substituted orreplaced (but only to the extent permitted under this Agreement).

 

“**Annual Budget**”****shall mean the operating budget, including all planned capitalexpenditures, for the Property prepared by Borrower for the applicable FiscalYear or other period.

 

“**Assignment ofLeases**”****shall mean, with respect to the Property,that certain first priority Assignment of Leases and Rents, dated as of theClosing Date, from Borrower, as assignor, to Lender, as assignee, assigning toLender all of Borrower’s interest in and to the Leases and Rents of theProperty as security for the Loan, as the same may be amended, restated,replaced, supplemented or otherwise modified from time to time.

 

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

 

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

 

“**Basic CarryingCosts**” 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**”****shall mean Inland Western Placentia, L.L.C., together with itspermitted successors and assigns.

 

“**Business Day**”****shall mean any day other than a Saturday, Sunday or any other day on which national banks in New York, New York are notopen for business.

 

“**CapitalExpenditures**”****shall mean, for any period, the amountexpended for items capitalized under accounting principles reasonablyacceptable to Lender, consistently applied (including expenditures for buildingimprovements or major repairs, leasing commissions and tenant improvements).

 

“**Cash Expenses**”****shall mean, for any period, the operating expenses for the operation ofthe Property as set forth in an Approved Annual Budget to the extent that suchexpenses are actually incurred by Borrower minus any payments into the Tax andInsurance Escrow Fund.

 

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

 

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

 

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

 

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

 

“**Closing Date**” shall mean the datehereof.

 

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

 

“**Condemnation**” shall mean atemporary or permanent taking by any Governmental Authority as the result or inlieu or in anticipation of the exercise of the right of condemnation or eminentdomain, of all or any part of the Property, or any interest therein or rightaccruing thereto, including any right of access thereto or any change of gradeaffecting the Property or any part thereof.

 

“**Debt**” shall mean the outstandingprincipal amount set forth in, and evidenced by, this Agreement and the Notetogether with all interest accrued and unpaid thereon and all other sums(including the Prepayment Consideration) due to Lender in respect of the Loanunderthe Note, thisAgreement, the Mortgage or any other Loan Document.

 

“**Debt Service**” shall mean, withrespect to any particular period of time, scheduled interest payments under theNote.

 

“**Debt Service Coverage Ratio**” shallmean a ratio for the applicable period inwhich:

 

(b)                                 the numerator is the Net Operating Income(excluding interest on credit accounts) for such period as set forth in thestatements required hereunder, without deduction for (i) actual management feesincurred in connection with the operation of the Property, (ii) amounts paid tothe Reserve Funds, less (A) management fees equal to the greater of (1) assumedmanagement fees of four percent (4.0%) of Gross Income from Operations or (2)the actual management fees incurred, (B) assumed Replacement Reserve Fundcontributions equal to $0.15 per square foot of gross leaseable area at theProperty; and (C) assumed reserves for tenant improvements and leasingcommissions equal to $0.28 per square foot of gross leaseable area at the Property;and

 

(c)                                  the denominator is the aggregate amount ofinterest due and payable on the Note for such applicable period.

 

“**Default**” shall mean the occurrenceof any event hereunder or under any other Loan Document which, but for thegiving of notice or passage of time, or both, would be an Event of Default.

 

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

 

“**DisclosureDocument**”****shall have the meaning set forth in Section9.2 hereof.

 

“**EligibleAccount**”****shall mean a separate and identifiableaccount from all other funds held by the holding institution that is either (a)an account or accounts maintained with a federal or state-chartered depositoryinstitution or trust company which complies with the definition of EligibleInstitution or (b) a segregated trust account or accounts maintained with afederal or state chartered depository institution or trust company acting inits fiduciary capacity which, in the case of a state chartered depositoryinstitution or trust company, is subject to regulations substantially similarto 12 C.F.R. §9.10(b), having in either case a combined capital and surplus ofat least $50,000,000 and subject to supervision or examination by federal andstate authority. An Eligible Account will not be evidenced by a certificate ofdeposit, passbook or other instrument.

 

“**EligibleInstitution**”****shall mean a depository institution or trustcompany insured by the Federal Deposit Insurance Corporation the short termunsecured debt obligations or commercial paper of which are rated at least A-lby Standard & Poor’s Ratings Services, P-l by Moody’s Investors Service,Inc., and F-1+ by Fitch, Inc. in the case of accounts in which funds are heldfor 30 days or less (or, in the case of accounts in which funds are held formore than 30 days, the long term unsecured debt obligations of which are ratedat least “AA” by Fitch and S&P and “Aa” by Moody’s).

 

“**EnvironmentalIndemnity**”****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.

 

“**EnvironmentalReport**”****shall have the meaning as defined in theEnvironmental Indemnity executed by the Borrower.

** **

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

 

“**Event ofDefault**”****shall have the meaning set forth in Section8.1(a) hereof.

 

“**Exchange****Act**” shall have the meaning set forth in Section9.2 hereof.

 

“**Fiscal Year**”****shall mean each twelve (12) month period commencing on January 1 andending on December 31 during each year of the term of the Loan.

 

“**GovernmentalAuthority**”****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.

 

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“**Gross Incomefrom Operations**”****shall mean all sustainable income as reportedon the financial statements delivered by the Borrower in accordance with thisAgreement, computed in accordance with accounting principles reasonablyacceptable to Lender, consistently applied, derived from the ownership andoperation of the Property from whatever source, *including,* butnot limited to, (i) Rents from Tenants that are in occupancy, open for businessand paying unabated Rent, (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 thatare subject to any bankruptcy proceeding (unless such Tenant has affirmed itsLease or Inland Western Retail Real Estate Trust, Inc. has master leased suchTenant’s premises for full contract rent for a period not less than threeyears, and the net worth of Inland Western Retail Real Estate Trust, Inc. (asdetermined by Lender) is not less than such entity’s net worth as of September30, 2003), or are not in occupancy, open for business or paying unabated Rent,(ii) sales, use and occupancy or other taxes on receipts required to beaccounted for by Borrower to any Governmental Authority, (iii) refunds anduncollectible accounts, (iv) sales of furniture, fixtures and equipment, (v)Insurance Proceeds (other than business interruption or other loss of incomeinsurance), (vi) Awards, (vii) unforfeited security deposits, (viii) utilityand other similar deposits and (ix) any disbursements to Borrower from theReserve Funds. Gross income shall not be diminished as a result of the Mortgageor the creation of any intervening estate or interest in the Property or anypart thereof.

 

“**Improvements**”****shall have the meaning set forth in the granting clause of the Mortgagewith respect to the Property.

 

“**Indebtedness**”****of a Person, at a particular date, means the sum (without duplication)at such date of (a) indebtedness or liability for borrowed money; (b)obligations evidenced by bonds, debentures, notes, or other similarinstruments; (c) obligations for the deferred purchase price of property orservices (including trade obligations); (d) obligations under letters ofcredit; (e) obligations under acceptance facilities; (f) all guaranties,endorsements (other than for collection or deposit in the ordinary course ofbusiness) and other contingent obligations to purchase, to provide funds forpayment, to supply funds, to invest in any Person or entity, or otherwise toassure a creditor against loss; and (g) obligations secured by any Liens,whether or not the obligations have been assumed.

 

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

 

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

 

“**Inland WesternRetail Real Estate Trust, Inc.**”****shall meanInland Western Retail Real Estate Trust, Inc., a Maryland corporation.

 

‘‘**InsurancePremiums**”****shall have the meaning set forth in Section6.1(b) hereof.

 

“**InsuranceProceeds**”****shall have the meaning set forth in Section6.4(b) hereof. 

 

“**Interest Rate**”****shall mean four and 597/1000 percent (4.597%) per annum.

 

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“**Lease**” shall mean any lease,sublease or subsublease, letting, license, concession or other agreement(whether written or oral and whether now or hereafter in effect) pursuant towhich any Person is granted a possessory interest in, or right to use or occupyall or any portion of any space in the Property of Borrower, and everymodification, amendment or other agreement relating to such lease, sublease,subsublease, or other agreement entered into in connection with such lease,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.

 

“**Legal Requirements**” shall mean,with respect to the Property, all federal, state, county, municipal and othergovernmental statutes, laws, rules, orders, regulations, ordinances, judgments,decrees and injunctions of Governmental Authorities affecting the Property orany part thereof, or the construction, use, alteration or operation thereof, orany part thereof, whether now or hereafter enacted and in force, and allpermits, licenses and authorizations and regulations relating thereto, and allcovenants, agreements, restrictions and encumbrances contained in anyinstruments, either of record or known to Borrower, at any time in forceaffecting the Property or any part thereof, including, without limitation, anywhich may (a) require repairs, modifications or alterations in or to theProperty or any part thereof, or (b) in any way limit the use and enjoymentthereof.

 

“**Lender**” shall mean Bear StearnsCommercial Mortgage, Inc., together with its successors and assigns.

 

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

 

“**Lien**” shall mean, with respect tothe Property, 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 byLender to Borrower pursuant to this Agreement and evidenced by the Note.

 

“**Loan Documents**” shall mean,collectively, this Agreement, the Note, the Mortgage, the Assignment of Leasesand Rents, the Environmental Indemnity, the Assignment of Management Agreement,the Indemnity Agreement and all other documents executed and/or delivered inconnection with the Loan.

 

“**Management Agreement**” shall mean,with respect to the Property, the management agreement entered into by andbetween Borrower and the Manager, pursuant to which the Manager is to providemanagement and other services with respect to the Property.

 

“**Manager**” shall mean Inland PacificManagement LLC.

 

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“**Maturity Date**” shall mean January1, 2010, or such other date on which the final payment of principal of the Notebecomes due and payable as therein or herein provided, whether at such statedmaturity date, by declaration of acceleration, or otherwise.

 

“**Maximum Legal Rate**” shall mean themaximum nonusurious interest rate, if any, that at any time or from time totime may be contracted for, taken, reserved, charged or received on theindebtedness evidenced by the Note and as provided for herein or the other LoanDocuments, under the laws of such state or states whose laws are held by anycourt of competent jurisdiction to govern the interest rate provisions of theLoan.

 

“**Monthly Debt Service Payment Amount**”shall mean an amount equal to $52,463.26.

 

“**Mortgage**” shall mean, with respectto the Property, that certain first priority Deed of Trust, Assignment ofLeases and Rents, Security Agreement and Fixture Filing, dated the ClosingDate, executed and delivered by Borrower as security for the Loan andencumbering the Property, as the same may be amended, restated, replaced,supplemented or otherwise modified from time to time.

 

“**Net Cash Flow**” shall mean, withrespect to the Property for any period, the amount obtained by subtractingOperating Expenses and Capital Expenditures for such period from Gross Incomefrom 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 havethe meaning set forth in Section 5.1.1l (b) hereof.

 

“**Net Operating Income**” shall meanthe 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 4.36%, less actual vacancy. Notwithstanding theforegoing, if actual vacancy exceeds market vacancy and underwritten vacancy,then there shall be no adjustment for a vacancy allowance.

 

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

 

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

 

“**Net Proceeds Prepayment**” shall havethe meaning set forth in Section 6.4(e) hereof.

 

“**Note**” shall mean that certainPromissory Note of even date herewith in the principal amount of ThirteenMillion Six Hundred Ninety Five Thousand and NO/100 Dollars

 

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($13,695,000.00), made byBorrower in favor of Lender, as the same may be amended, restated, replaced,supplemented or otherwise modified from time to time.

 

“**Officers’Certificate**”****shall mean a certificate delivered to Lenderby Borrower which is signed by the Sole Member.

 

“**OperatingExpenses**”****shall mean the total of all expenditures,computed in accordance with accounting principles reasonably acceptable toLender, consistently applied, of whatever kind relating to the operation,maintenance and management of the Property that are incurred on a regularmonthly or other periodic basis, including without limitation, utilities,ordinary repairs and maintenance, insurance, license fees, property taxes andassessments, advertising expenses, management fees, payroll and related taxes,computer processing charges, operational equipment or other lease payments asapproved by Lender, and other similar costs, but excluding depreciation, DebtService, Capital Expenditures and contributions to the Reserve Funds.

 

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

 

“**Other ContractFunds**”****shall mean any payment due to Borrower underany of the agreements described on Schedule X.

 

“**Payment Date**”****shall mean the first (1st) day of each calendar month during the termof the Loan or, if such day is not a Business Day, the immediately succeedingBusiness Day.

 

“**PermittedEncumbrances**”****shall mean, with respect to the Property,collectively, (a) the Liens and security interests created by the LoanDocuments, (b) all Liens, encumbrances and other matters disclosed in the TitleInsurance Policy relating to the Property or any part thereof, (c) Liens, ifany, for Taxes imposed by any Governmental Authority not yet due or delinquent,and (d) such other title and survey exceptions as Lender has approved or mayapprove in writing in Lender’s reasonable discretion, which PermittedEncumbrances in the aggregate do not materially adversely affect the value oruse of the Property or Borrower’s ability to repay the Loan.

 

“**PermittedInvestments**”****shall mean any one or more of the followingobligations or securities acquired at a purchase price of not greater than par,including those issued by Servicer, the trustee under any Securitization or anyof their respective Affiliates, payable on demand or having a maturity date notlater than the Business Day immediately prior to the first Payment Datefollowing the date of acquiring such investment and meeting one of theappropriate standards set forth below:

 

(i)                                     obligations of, or obligations fullyguaranteed as to payment of principal and interest by, the United States or anyagency or instrumentality thereof provided such obligations are backed by thefull faith and credit of the United States of America including, withoutlimitation, obligations of: the U.S. Treasury (all direct or fully

 

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guaranteedobligations), the Farmers Home Administration (certificates of beneficialownership), the General Services Administration (participation certificates),the U.S. Maritime Administration (guaranteed Title XI financing), the SmallBusiness Administration (guaranteed participation certificates and guaranteedpool certificates), the U.S. Department of Housing and Urban Development (localauthority bonds) and the Washington Metropolitan Area Transit Authority(guaranteed transit bonds); 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 rating, (C) if suchinvestments have a variable rate of interest, such interest rate must be tiedto a single interest rate index plus a fixed spread (if any) and must moveproportionately with that index, and (D) such investments must not be subjectto liquidation prior to their maturity;

 

(ii)                                  Federal Housing Administration debentures;

 

(iii)                               obligations of the following United Statesgovernment sponsored agencies: Federal Home Loan Mortgage Corp. (debtobligations), the Farm Credit System (consolidated systemwide bonds and notes),the Federal Home Loan Banks (consolidated debt obligations), the FederalNational Mortgage Association (debt obligations), the Student Loan MarketingAssociation (debt obligations), the Financing Corp. (debt obligations), and theResolution Funding Corp. (debt obligations); provided, however, thatthe investments described in this clause must (A) have a predetermined fixeddollar of principal due at maturity that cannot vary or change, (B) if rated byS&P, must not have an “r” highlighter affixed to their rating, (C) if suchinvestments have a variable rate of interest, such interest rate must be tiedto a single interest rate index plus a fixed spread (if any) and must moveproportionately with that index, and (D) such investments must not be subjectto liquidation prior to their maturity;

 

(iv)                              federal funds, unsecured certificates ofdeposit, time deposits, bankers’ acceptances and repurchase agreements withmaturities of not more than 365 days of any bank, the short term obligations ofwhich at all times are rated in the highest short term rating category by eachRating Agency (or, if not rated by all Rating Agencies, rated by at least oneRating Agency in the highest short term rating category 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); provided, however, that the investments described inthis clause must (A) have a predetermined fixed dollar of principal due atmaturity that 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;

 

(v)                                 fully Federal Deposit InsuranceCorporation-insured demand and time deposits in, or certificates of deposit of,or bankers’ acceptances issued by, any bank or trust company, savings and loanassociation or savings bank, the short term obligations of which at all times arerated in the highest short term rating category by each Rating

 

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Agency(or, if not rated by all Rating Agencies, rated by at least one Rating Agencyin the highest short term rating category and otherwise acceptable to eachother Rating Agency, as confirmed in writing that such investment would not, inand of itself, result in a downgrade, qualification or withdrawal of theinitial, or, if higher, then current ratings assigned to the Securities); 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;

 

(vi)                              debt obligations with maturities of not morethan 365 days and at all times rated by each Rating Agency (or, if not rated byall 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) in its highest long-term unsecured rating category; 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;

 

(vii)                           commercial paper (including bothnon-interest-bearing discount obligations and interest-bearing obligationspayable on demand or on a specified date not more than one year after the dateof issuance thereof) with maturities of not more than 365 days and that at alltimes is rated by each Rating Agency (or, if not rated by all Rating Agencies,rated by at least one Rating Agency and otherwise acceptable to each otherRating Agency, as confirmed in writing that such investment would not, in andof itself, result in a downgrade, qualification or withdrawal of the initial,or, if higher, then current ratings assigned to the Securities) in its highestshort-term unsecured debt rating; 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 rating, (C) if suchinvestments have a variable rate of interest, such interest rate must be tiedto a single interest rate index plus a fixed spread (if any) and must moveproportionately with that index, and (D) such investments must not be subjectto liquidation prior to their maturity;

 

(viii)                        units of taxable money market funds, whichfunds are regulated investment companies, seek to maintain a constant net assetvalue per share and invest solely in obligations backed by the full faith andcredit of the United States, which funds have the highest rating available fromeach 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,

 

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result ina downgrade, qualification or withdrawal of the initial, or, if higher, thencurrent ratings assigned to the Securities) for money market funds; and

 

(ix)                                any other security, obligation or investmentwhich has been approved as a Permitted Investment in writing by (a) Lender and(b) each Rating Agency, as evidenced by a written confirmation that thedesignation of such security, obligation or investment as a Permitted Investmentwill not, in and of itself, result in a downgrade, qualification or withdrawalof the initial, or, if higher, then current ratings assigned to the Securitiesby such Rating Agency;

 

provided, however, that no obligation orsecurity shall be a Permitted Investment if (A) such obligation or securityevidences a right to receive only interest payments or (B) the right to receiveprincipal and interest payments on such obligation or security are derived froman underlying investment that provides a yield to maturity in excess of 120% ofthe yield to maturity at par of such underlying investment.

 

“**Permitted Prepayment Date**” shallmean the date that is three (3) years from the first day of the calendar monthimmediately following the Closing Date.

 

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

 

“**Personal Property**” shall have themeaning set forth in the granting clause of the Mortgage with respect to theProperty.

 

“**Physical Conditions Report**” shallmean, with respect to the Property, a report prepared by a company satisfactoryto Lender regarding the physical condition of the Property, satisfactory inform and substance to Lender in its sole discretion, which report shall, amongother things, (a) confirm that the Property and its use complies, in allmaterial respects, with all applicable Legal Requirements (including, withoutlimitation, zoning, subdivision and building laws) and (b) include a copy of afinal certificate of occupancy with respect to all Improvements on the Property.

 

“**Policies**” shall have the meaningspecified in Section 6.l(b) hereof.

 

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

 

“**Prepayment Rate**” shall mean thebond equivalent yield (in the secondary market) on the United States TreasurySecurity that as of the Prepayment Rate Determination Date has a remaining termto maturity closest to, but not exceeding, the remaining term to the MaturityDate, as most recently published in the “Treasury Bonds, Notes and Bills”section in The Wall Street Journal as of the date of the related tender of thepayment. If more than one issue of United States Treasury Securities has theremaining term to the Maturity Date referred to above, the “Prepayment Rate”shall be the yield on the United States Treasury Security most recently issuedas of such date. If the publication of the Prepayment Rate in The Wall StreetJournal is discontinued, Lender shall determine the Prepayment Rate on thebasis of “Statistical

 

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Release H.I5(519),Selected Interest Rates,” or any successor publication, published by the Boardof Governors of the Federal Reserve System, or on the basis of such otherpublication or statistical guide as Lender may reasonably select.

 

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

 

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

 

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

 

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

 

“**Qualifying Manager**” shall meaneither (a) a reputable and experienced management organization reasonablysatisfactory to Lender, which organization or its principals possess at leastten (10) years experience in managing properties similar in size, scope andvalue of the Property and which, on the date Lender determines whether suchmanagement organization is a Qualifying Manager, manages at least one millionsquare feet of retail space, provided that Borrower shall have obtained priorwritten confirmation from the Rating Agency that management of the Property bysuch entity will not cause a downgrading, withdrawal or qualification of thethen current rating of the securities issued pursuant to the Securitization, or(b) the fee owner of the Property, provided that such owner possessesexperience in managing and operating properties similar in size, scope andvalue of the Property. Lender acknowledges that on the Closing Date, Managershall be deemed to be a Qualifying Manager.

 

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

 

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

 

“**Relevant Leasing Threshold**” shallmean, any Lease for an amount of leaseable square footage equal to or greaterthan 10,000 square feet.

 

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

 

“**REMIC Trust**” shall mean a “realestate mortgage investment conduit” within the meaning of Section 860D of theCode that holds 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,

 

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revenues, deposits(including, without limitation, security, utility and other deposits),accounts, cash, issues, profits, charges for services rendered, and otherconsideration of whatever form or nature received by or paid to or for theaccount of or benefit of Borrower or its agents or employees from any and allsources arising from or attributable to the Property, and proceeds, if any,from business interruption or other loss of income insurance, including the OtherContract Funds.

 

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

 

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

 

**“Replacement Reserve Monthly Deposit”**shall have the meaning set forth in Section7.3.1 hereof.

 

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

 

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

 

“**RequiredRepair Fund”**shallhave the meaning set forth in Section 7.1.1 hereof.

 

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

 

“**Reserve Funds**”****shall mean the Tax and Insurance Escrow Fund, the Replacement ReserveFund, the Required Repair Fund (if any), or any other escrow fund establishedby the Loan Documents.

 

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

 

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

 

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

 

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

 

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

 

“**ServicingAgreement**”****shall have the meaning set forth in Section9.6 hereof.

 

“**Severed LoanDocuments**”****shall have the meaning set forth in Section8.2(c) hereof.

 

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

 

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

 

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

 

(i)                                     is organized solely for the purpose of (A)acquiring, developing, owning, holding, selling, leasing, transferring,exchanging, managing and operating the Property, entering into this Agreementwith the Lender, refinancing the Property in connection with a permittedrepayment of the Loan, and transacting lawful business that is incident, necessaryand appropriate to accomplish the foregoing; or (B) acting as a general partnerof the limited partnership that owns the Property, a member of the limitedliability company that owns the Property or the beneficiary or trustee of aDelaware statutory trust that owns the Property;

 

(ii)                                  is not engaged and will not engage in anybusiness unrelated to (A) the acquisition, development, ownership, managementor operation of the Property, (B) acting as general partner of the limitedpartnership that owns the Property, (C) acting as a member of the limitedliability company that owns the Property, or (D) acting as the beneficiary ortrustee of a Delaware statutory trust that owns the Property, as applicable;

 

(iii)                               does not have and will not have any assets otherthan those related to the Property or its partnership interest in the limitedpartnership, the member interest in the limited liability company or thebeneficial interest in the Delaware statutory trust that owns the Property oracts as the general partner, managing member or beneficiary or trustee thereof,as applicable;

 

(iv)                              has not engaged, sought or consented to andwill not engage in, seek or consent to any dissolution, winding up,liquidation, consolidation, merger, sale of all or substantially all of itsassets, transfer of partnership, membership or beneficial or trustee interests(if such entity is a general partner in a limited partnership, a member in alimited liability company or a beneficiary of a Delaware trust) or amendment ofits limited partnership agreement, articles of incorporation, articles oforganization, certificate of formation, operating agreement or trust formationand governance documents (as applicable) with respect to the matters set forthin this definition;

 

(v)                                 if such entity is a limited partnership, has asits only general partners, Special Purpose Entities that are corporations,limited partnerships or limited liability companies;

 

(vi)                              intentionally omitted;

 

(vii)                           if such entity is a limited liability companyand such limited liability company has more than one member, such limitedliability company has as its manager a Special Purpose Entity that is a corporationand that owns at least 1.0% (one percent) of the equity of the limitedliability company;

 

(viii)                        if such entity is a limited liability companyand such limited liability company has only one member, such limited liabilitycompany (a) has been formed under Delaware law, and (b) has either acorporation or other person or entity that shall become

 

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a memberof the limited liability company upon the dissolution or disassociation of the member;

 

(ix)                                if such entity is (a) a limited liabilitycompany, has articles of organization, a certificate of formation and/or anoperating agreement, as applicable, (b) a limited partnership, has a limitedpartnership agreement, (c) a corporation, has a certificate or articles ofincorporation and bylaws, as applicable, or (d) a Delaware statutory trust, hasorganizational documents that, in each case, provide that such entity will not:(1) dissolve, merge, liquidate, consolidate; (2) except as permitted herein,sell all or substantially all of its assets or the assets of the Borrower (asapplicable) except as permitted herein; (3) engage in any other businessactivity, or amend its organizational documents with respect to the matters setforth in this definition without the consent of the Lender; or (4) without theaffirmative vote of all directors of the corporation (that is such entity orthe general partner or managing or co-managing member or manager of suchentity), file a bankruptcy or insolvency petition or otherwise instituteinsolvency proceedings with respect to itself or to any other entity in whichit has a direct or indirect legal or beneficial ownership interest;

 

(x)                                   has not entered into or been a party to, andwill not enter into or be a party to, any transaction with its partners,members, beneficiaries, shareholders or Affiliates except (A) in the ordinarycourse of its business and on terms which are intrinsically fair, commerciallyreasonable and are no less favorable to it than would be obtained in acomparable arm’s-length transaction with an unrelated third party and (B) inconnection with this Agreement;

 

(xi)                                is solvent and pays its debts and liabilities(including, as applicable, shared personnel and overhead expenses) from itsassets as the same become due, and is maintaining adequate capital for thenormal obligations reasonably foreseeable in a business of its size andcharacter and in light of its contemplated business operations;

 

(xii)                             has not failed and will not fail to correct anyknown misunderstanding regarding the separate identity of such entity;

 

(xiii)                          will file its own tax returns; provided, however,that Borrower’s assets and income may be included in a consolidated tax returnof its parent companies if inclusion on such consolidated tax return is incompliance with applicable law;

 

(xiv)                         has maintained and will maintain its ownresolutions and agreements;

 

(xv)                            (a) has not commingled and will not commingleits funds or assets with those of any other Person and (b) has not participatedand will not participate in any cash management system with any other Person,except with respect to a custodial account maintained by the Manager on behalfof Affiliates of Borrower and, with respect to funds in such custodial account,has separately accounted, and will continue to separately account for, eachitem of income and expense applicable to the Property and Borrower;

 

(xvi)                         has held and will hold its assets in its ownname;

 

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(xvii)                      has conducted and will conduct its business inits name or in a name franchised or licensed to it by an entity other than anAffiliate of Borrower;

 

(xviii)                   has maintained and will maintain its balancesheets, operating statements and other entity documents separate from any otherPerson and has not permitted and will not permit its assets to be listed asassets on the financial statement of any other entity except as required orpermitted by applicable accounting principles acceptable to Lender,consistently applied; provided, however, that (i) any suchconsolidated financial statement shall contain a note indicating that itmaintains separate balance sheets and operating statements for the Borrower andthe Property, or (ii) if such Person is controlled by Inland Western RetailReal Estate Trust, Inc., then such Person may be included in the consolidatedfinancial statement of Inland Western Retail Real Estate Trust, Inc. providedsuch consolidated financial statement contains a note indicating that itmaintains separate financial records for each Person controlled by InlandWestern Retail Real Estate Trust, Inc.;

 

(xix)                           has a sufficient number of employees in lightof its contemplated business operations, which may be none;

 

(xx)                              has observed and will observe all partnership,corporate, limited liability company or Delaware statutory trust formalities,as applicable;

 

(xxi)                           has and will have no Indebtedness (includingloans (whether or not such loans are evidenced by a written agreement) betweenBorrower and any Affiliates of Borrower and relating to the management of fundsin the custodial account maintained by the Manager) other than (i) the Loan,(ii) liabilities incurred in the ordinary course of business relating to theownership and operation of the Property and the routine administration ofBorrower, which liabilities are not more than sixty (60) days past the date incurred(unless disputed in accordance with applicable law), are not evidenced by anote and are paid when due, and which amounts are normal and reasonable underthe circumstances, and (iii) such other liabilities that are permitted pursuantto this Agreement;

 

(xxii)                        has not and will not assume or guarantee orbecome obligated for the debts of any other Person or hold out its credit asbeing available to satisfy the obligations of any other Person except asotherwise permitted pursuant to this Agreement;

 

(xxiii)                     has not and will not acquire obligations orsecurities of its partners, members, beneficiaries or shareholders or any otherAffiliate;

 

(xxiv)                    has allocated and will allocate fairly andreasonably any overhead expenses that are shared with any Affiliate, including,but not limited to, paying for shared office space and services performed byany employee of an affiliate;

 

(xxv)                       has not maintained or used, and will notmaintain or use, invoices and checks bearing the name of any other Person, provided,however, that Manager, on behalf of such Person, may maintain and useinvoices and checks bearing Manager’s name;

 

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(xxvi)                    has not pledged and will not pledge its assetsfor the benefit of any other Person except as permitted or required pursuant tothis Agreement;

 

(xxvii)                 has held itself out and identified itself andwill hold itself out and identify itself as a separate and distinct entityunder its own name or in a name franchised or licensed to it by an entity otherthan an Affiliate of Borrower and not as a division or part of any otherPerson, except for services rendered by Manager under the Management Agreement,so long as Manager holds itself out as an agent of the Borrower;

 

(xxviii)              has maintained and will maintain its assets in such a manner that it willnot be costly or difficult to segregate, ascertain or identify its individualassets from those of any other Person;

 

(xxix)                      has not made and will not make loans to anyPerson or hold evidence of indebtedness issued by any other person or entity(other than cash and investment-grade securities issued by an entity that isnot an Affiliate of or subject to common ownership with such entity);

 

(xxx)                         has not identified and will not identify itspartners, members, beneficiaries or shareholders, or any Affiliate of any ofthem, as a division or part of it, and has not identified itself and shall notidentify itself as a division of any other Person;

 

(xxxi)                      does not and will not have any of its obligationsguaranteed by any Affiliate except as otherwise required in the Loan Documents;

 

(xxxii)                   has not entered into or been a party to, andwill not enter into or be a party to, any transaction with its partners,members, beneficiaries, shareholders or Affiliates except (A) in the ordinarycourse of its business and on terms which are intrinsically fair, commerciallyreasonable and are no less favorable to it than would be obtained in acomparable arm’s-length transaction with an unrelated third party and (B) inconnection with this Agreement; and

 

(xxxiii)                has complied and will comply with all of the terms and provisionscontained in its organizational documents. The statement offacts contained in its organizationaldocuments are trueand correct and will remain true and correct.

 

“**State**” shall mean, with respect tothe Property, the State or Commonwealth in which the Property or any partthereof is located.

 

“**Survey**” shall mean a survey of theProperty in question prepared by a surveyor licensed in the State andsatisfactory to Lender and the company or companies issuing the Title InsurancePolicy, and containing a certification of such surveyor satisfactory to Lender.

 

“**Tax and insurance Escrow Fund**”shall have the meaning set forth In Section 7.2 hereof regardless of whetherthe funds held therein are held by Lender for the payment of Taxes or InsurancePremiums or both.

 

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“**Taxes**” shall mean all real estateand personal property taxes, assessments, water rates or sewer rents, now orhereafter levied or assessed or imposed against the Property or any partthereof.

 

“**Tenant**” shall mean any person orentity with a possessory right to all or any part of the Property pursuant to aLease or other written agreement.

 

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

 

“**Title Insurance Policy**” shall mean,with respect to the Property, an ALTA mortgagee title insurance policy in theform (acceptable to Lender) (or, if the Property is in a State which does notpermit the issuance of such ALTA policy, such form as shall be permitted insuch State and acceptable to Lender) issued with respect to the Property andinsuring the lien of the Mortgage encumbering the Property.

 

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

 

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

 

“**U.S. Obligations**” shall mean directnon-callable obligations of the United States of America as defined in Section2(a)(16) of the Investment Company Act as amended (15 USC 80a-l) stated inREMIC Section 1.86 OG-2(a)(8).

 

Section1.2                                      Principles of Construction.  Allreferences to sections and schedules are to sections and schedules in or tothis Agreement unless otherwise specified. All uses of the word “including”shall mean “including, without limitation” unless the context shall indicateotherwise. Unless otherwise specified, the words “hereof,” “herein” and “hereunder”and words of similar import when used in this Agreement shall refer to thisAgreement as a whole and not to any particular provision of this Agreement.Unless otherwise specified, all meanings attributed to defined terms herein shallbe equally applicable to both the singular and plural forms of the terms sodefined.

 

**ARTICLEII**

**GENERAL TERMS**

 

Section2.1                                      Loan Commitment; Disbursement to Borrower.

 

2.1.1                        The Loan.  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                        Disbursement to Borrower.  Borrowermay request and receive only one borrowing hereunder in respect of the Loan andany amount borrowed and repaid hereunder in respect of the Loan may not bereborrowed.

 

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2.1.3                        The Note, Mortgage and Loan Documents.  TheLoan shall be evidenced by the Note and secured by the Mortgage, the Assignmentof Leases and the other Loan Documents.

 

2.1.4                        Use of Proceeds.  Borrowershall use the proceeds of the Loan to (a) repay and discharge any existingloans relating to the Property, (b) pay all past-due Basic Carrying Costs, ifany, in respect of the Property, (c) make deposits into the Reserve Funds onthe Closing Date in the amounts provided herein, (d) pay costs and expensesincurred in connection with the closing of the Loan, as approved by Lender, (e)fund any working capital requirements of the Property, and (f) distribute thebalance, if any, to Borrower.

 

Section 2.2                                      Interest; Loan Payments; Late Payment Charge.

 

2.2.1                        Interest Generally.  Intereston the outstanding principal balance of the Loan shall accrue from the ClosingDate to but excluding the Maturity Date at the Interest Rate.

 

2.2.2                        Interest Calculation.  Intereston the outstanding principal balance of the Loan shall be calculated on thebasis of a three hundred sixty (360) day year comprised of twelve (12) monthsof thirty (30) days each, except that interest due and payable for a period ofless than a full month shall be calculated by multiplying the actual number ofdays elapsed in the period for which the calculation is being made by a dailyrate based on a three hundred sixty (360) day year.

 

2.2.3                        Payments Generally.  Borrowershall pay to Lender (a) on the Closing Date, an amount equal to interest onlyon the outstanding principal balance of the Loan from the Closing Date up tobut not including the first Payment Date following the Closing Date, and (b) onFebruary 1, 2005 and each Payment Date thereafter up to but not including theMaturity Date, an amount equal to the Monthly Debt Service Payment Amount,which shall be applied to interest on the outstanding principal amount of theLoan for the prior calendar month at the Interest Rate.

 

2.2.4                        Intentionally Omitted.

 

2.2.5                        Payment on Maturity Date.  Borrowershall pay to Lender on the Maturity Date the outstanding principal balance ofthe Loan, all accrued and unpaid interest and all other amounts due hereunderand under the Note, the Mortgage and other the Loan Documents.

 

2.2.6                        Payments after Default.  Uponthe occurrence and during the continuance of an Event of Default, interest onthe outstanding principal balance of the Loan and, to the extent permitted bylaw, overdue interest and other amounts due in respect of the Loan, shall accrueat the Default Rate, calculated from the date such payment was due withoutregard to any grace or cure periods contained herein. Interest at the DefaultRate shall be computed from the occurrence of the Event of Default until theearlier of (i) in the event of a non-monetary default, the cure of such Eventof Default by Borrower and acceptance of such cure by Lender, and (ii) in theevent of a monetary default, the actual receipt and collection of the Debt (orthat portion thereof that is then due). To the extent permitted by applicablelaw, interest at the Default Rate shall be added to the Debt, shall itselfaccrue interest at the same rate as the Loan and shall be secured by theMortgage. This paragraph shall not be construed as an agreement or privilege to

 

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extend the date of thepayment of the Debt, nor as a waiver of any other right or remedy accruing toLender by reason of the occurrence of any Event of Default and Lender retainsits lights under the Note and this Agreement to accelerate and to continue todemand payment of the Debt upon the happening and continuance of any Event ofDefault.

 

2.2.7                        Late Payment Charge.  If anyprincipal, interest or any other sums due under the Loan Documents is not paidby Borrower on or prior to the date which is five (5) days after the date onwhich it is due, Borrower shall pay to Lender upon demand an amount equal tothe lesser of five percent (5%) of such unpaid sum or the maximum amountpermitted by applicable law in order to defray the expense incurred by Lenderin handling and processing such delinquent payment and to compensate Lender forthe loss of the use of such delinquent payment. Any such amount shall besecured by the Mortgage and the other Loan Documents to the extent permitted byapplicable law. The foregoing late payment charge shall not apply to thepayment of all outstanding principal, interest and other sums due on the MaturityDate.

 

2.2.8                        Usury Savings.  ThisAgreement and the Note are subject to the express condition that at no timeshall Borrower be obligated or required to pay interest on the principalbalance of the Loan at a rate which could subject Lender to either civil orcriminal liability as a result of being in excess of the Maximum Legal Rate.If, by the terms of this Agreement or the other Loan Documents, Borrower is atany time required or obligated to pay interest on the principal balance duehereunder at a rate in excess of the Maximum Legal Rate, the Interest Rate orthe Default Rate, as the case may be, shall be deemed to be immediately reducedto the Maximum Legal Rate and all previous payments in excess of the MaximumLegal Rate shall be deemed to have been payments in reduction of principal andnot on account of the interest due hereunder. All sums paid or agreed to bepaid to Lender for the use, forbearance, or detention of the sums due under theLoan, 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.

 

Section2.3                                      Prepayments.

 

2.3.1                        Voluntary Prepayments.

 

(a)                                  Except as otherwise provided herein, Borrowershall not have the right to prepay the Loan in whole or in part prior to thePermitted Prepayment Date. On or 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 inwhole, 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 amountshall constitute additional consideration for the prepayment), (iii) all othersums then due under this Agreement, the Note, the Mortgage and the other Loan Documents, and (iv) if prepaymentoccurs prior to the Payment Date which is one month prior to the Maturity Date,a prepayment

 

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consideration (the “**Prepayment Consideration**”) equal to the greater of (A) one percent (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 notify Borrower of the amount and the basis ofdetermination of the required prepayment consideration.

 

(b)                                 On the Payment Date that is one month priorto the Maturity Date, and on each day thereafter through the Maturity Date,Borrower may, at its option, prepay the Debt without payment of any PrepaymentConsideration or other penalty or premium; provided, however, ifsuch prepayment is not paid on a regularly scheduled Payment Date, the Debtshall include interest that would have accrued on such prepayment through andincluding the day immediately preceding the Maturity Date. Borrower’s right toprepay any portion of the principal balance of the Loan shall be subject to (i)Borrower’s submission of a notice to Lender setting forth the amount to beprepaid and the projected date of prepayment, which date shall be no less thanthirty (30) days from the date of such notice, and (ii) Borrower’s actualpayment to Lender of the amount to be prepaid as set forth in such notice onthe projected date set forth in such notice or any day following such projecteddate occurring in the same calendar month as such projected date.

 

2.3.2                        Mandatory Prepayments.  (a)                                     On the next occurring Payment Date followingthe date on which Borrower actually receives any Net Proceeds, if Lender is notobligated to make such Net Proceeds available to Borrower pursuant to thisAgreement for the restoration of the Property, Borrower shall, at Lender’soption, prepay the outstanding principal balance of the Note in an amount equalto one hundred percent (100%) of such Net Proceeds. No Prepayment Considerationor other penalty or premium shall be due in connection with any prepayment madepursuant to this Section 2.3.2. Any partial prepayment under this Section shallbe applied to the last payments of principal due under the Loan.

 

(b)                                 On the date on which Borrower tenders aCasualty/Condemnation Prepayment pursuant to Section 6.4(e) below,such tender shall include (a) all accrued and unpaid interest and the principalindebtedness being prepaid, including interest on the outstanding principalamount of the applicable Note through the last day of the month within whichsuch tender occurs, and (b) any other sums due hereunder relating to theapplicable Note. Except as set forth in this Section2.3.2(b), other than following an Event of Default, no Prepayment Considerationor other penalty or premium shall be due in connection with any Casualty/CondemnationPrepayment.

 

2.3.3                        Prepayments after Default.  Followingan Event of Default, if Borrower or anyone on Borrower’s behalf makes a tenderof payment of all or any portion of the Debt at any time prior to a foreclosuresale (including a sale under the power of sale under the Mortgage), or duringany redemption period after foreclosure, (i) the tender of payment shallconstitute an evasion of Borrower’s obligation to pay any PrepaymentConsideration due under this Agreement and such payment shall, therefore, tothe maximum extent permitted by law, include a premium equal to the PrepaymentConsideration that would have been payable on the date of

 

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such tender had the Loan notbeen so accelerated, 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.

 

Section2.4                                      Intentionally Omitted.

 

Section2.5                                      Release of Property.  Except as set forth in this Section 2.5, no repayment or prepayment of all orany portion of the Loan shall cause, give rise to a right to require, orotherwise result in, the release of any Lien of the Mortgage on the Property.If Borrower has elected to prepay the entire amount of the Loan pursuant toSection 2.3.1 and the requirements of this Section 2.5 have been satisfied, theProperty shall be released from the Lien of the Mortgage.

 

2.5.1                        Release on Payment in Full.  Lendershall, upon the written request and at the expense of Borrower, upon payment infull of all principal and intereston the Loan and all other amounts due and payable under the Loan Documents inaccordance with the terms and provisions of Section 2.3.1 of this LoanAgreement, release the Lien of the Mortgage on the Property not theretoforereleased.

 

2.5.2                        Intentionally Omitted.

 

Section2.6                                      Manner of Making Payments.

 

2.6.1                        Making of Payments.  Eachpayment by Borrower hereunder or under the Note shall be made in funds settledthrough the New York Clearing House Interbank Payments System or other fundsimmediately available to Lender by 1:00 p.m., New York City time, on the datesuch payment is due, to Lender by deposit to such account as Lender maydesignate by written notice to Borrower. Whenever any payment hereunder orunder the Note shall be stated to be due on a day which is not a Business Day,such payment shall be made on the next succeeding Business Day.

 

2.6.2                        No Deductions Etc.  Allpayments made by Borrower hereunder or under the Note or the other LoanDocuments shall be made irrespective of, and without any deduction for, anysetoff, defense or counterclaims.

 

2.6.3                        Intentionally Omitted.

 

Section2.7                                      Intentionally Omitted.

 

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**ARTICLE III**

**CONDITIONS PRECEDENT**

 

Section 3.1                                      Conditions Precedent to Closing.  The obligation of Lender tomake the Loan hereunder is subject to the fulfillment by Borrower or waiver byLender of the following conditions precedent no later than the Closing Date:

 

3.1.1                        Representations and Warranties; Compliancewith Conditions.  The representations and warranties ofBorrower contained in this Agreement and the other Loan Documents shall be trueand correct in all material respects on and as of the Closing Date with thesame effect as if made on and as of such date, and no Default or an Event ofDefault shall have occurred and be continuing; and Borrower shall be incompliance in all material respects with all terms and conditions set forth inthis Agreement and in each other Loan Document on its part to be observed orperformed.

 

3.1.2                        Loan Agreement and Note.  Lendershall have received a copy of this Agreement and the Note, in each case, dulyexecuted and delivered on behalf of Borrower.

 

3.1.3                        Delivery of Loan Documents; Title Insurance;Reports; Leases; Etc.

 

(a)                                  Mortgage, Assignment of Leases and other LoanDocuments.  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 also received from Borrower fully executed counterpartsof the Assignment of Management Agreement and the other Loan Documents.

 

(b)                                 Title Insurance.  Lendershall have received a Title Insurance Policy issued by a title companyacceptable to Lender and dated as of the Closing Date.  Such Title Insurance Policy shall (i) providecoverage in an amount equal to the principal amount of the Loan together with,if applicable, a “tie-in” or similar endorsement, (ii) insure Lender that the Mortgagecreates a valid first priority lien on the Property encumbered thereby, freeand clear of all exceptions from coverage other than Permitted Encumbrances andstandard exceptions and exclusions from coverage (as modified by the terms ofany endorsements), (iii) contain such endorsements and affirmative coverages asLender may reasonably request, and (iv) name Lender, its successors and assigns,as the insured. The Title Insurance Policy shall be assignable without cost toLender. Lender also shall have received evidence that all premiums in respectof such Title Insurance Policy have been paid.

 

(c)                                  Survey.  Lender shall have received atitle survey for the Property, certified to the title company and Lender andtheir successors and assigns, in form and content satisfactory to Lender andprepared by a professional and properly licensed land surveyor satisfactory toLender in accordance with the most recent Minimum Standard Detail Requirementsfor ALTA/ACSM Land Title Surveys.  Thefollowing additional items from the

 

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list of “Optional Survey Responsibilities andSpecifications” (Table A) should be added to each survey: 2, 3, 4, 6, 8, 9, 10,11 and 13. The survey shall reflect the same legal description contained in theTitle Insurance Policy relating to the Property referred to in clause (ii)above and shall include, among other things, a legal description of the realproperty comprising part of such Property reasonably satisfactory to Lender.The surveyor’s seal shall be affixed to each survey and the surveyor shallprovide a certification for each survey in form and substance acceptable toLender.

 

(d)                                 Insurance.  Lender shall have receivedvalid certificates of insurance for the policies of insurance requiredhereunder, satisfactory to Lender in its sole discretion, and evidence of thepayment of all premiums payable for the existing policy period.

 

(e)                                  Environmental Reports.  Lendershall have received an environmental report in respect of the Property, in eachcase reasonably satisfactory to Lender.

 

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

 

(g)                                 Encumbrances.  Borrowershall have taken or caused to be taken such actions in such a manner so thatLender has a valid and perfected first Lien on the Property as of the ClosingDate with respect to the Mortgage, subject only to applicable Permitted Encumbrancesand such other Liens as are permitted pursuant to the Loan Documents, and Lendershall have received satisfactory evidence thereof.

 

3.1.4                        Related Documents.  Eachadditional document not specifically referenced herein, but relating to thetransactions contemplated herein, shall have been duly authorized, executed anddelivered by all parties thereto and Lender shall have received and approved certifiedcopies thereof.

 

3.1.5                        Delivery of Organizational Documents.  Onor before 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                        Opinions of Borrower’s Counsel.  Lendershall have 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,and Lender shall have approved, the Annual Budget for the current Fiscal Year.

 

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3.1.8                        Basic Carrying Costs.  Borrowershall have paid all Basic Carrying Costs relating to the Property which are inarrears, including without limitation, (a) accrued but unpaid insurancepremiums relating to the Property, (b) currently due and payable Taxes(including any in arrears) relating to the Property, and (c) currently due OtherCharges relating to the Property, which amounts shall be funded with proceedsof the Loan.

 

3.1.9                        Completion of Proceedings.  Allorganizational proceedings taken or to be taken in connection with thetransactions contemplated by this Agreement and other Loan Documents and alldocuments incidental thereto shall be reasonably satisfactory in form and substanceto Lender, 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                  Tenant Estoppels.  Borrower shall exercisereasonable commercial efforts to deliver estoppel letters from Tenantsoccupying not less than eighty percent (80%) of the gross leasable area of theProperty; provided, however, that, in the event that Borrower is unable to deliversome or all of the estoppels described above in this Section 3.1.11, Lenderagrees that the requirement to deliver such letters to Lender shall be waivedby Lender as a condition precedent to the closing of the Loan so long asBorrower delivers on or before the Closing Date, a certificate executed byBorrower with respect to all applicable leases which shall be in substantiallythe same form and contain the same terms as set forth in Lender’s standard formof estoppel certificate.  Borrower shalldeliver to Lender an estoppel letter executed by Anchor Tenant in formreasonably acceptable to Lender.

 

3.1.12                  Transaction Costs.  Borrowershall have paid or reimbursed Lender for all title insurance premiums,recording and filing fees or taxes, costs of environmental reports, PhysicalConditions Reports, appraisals and other reports, the fees and costs of Lender’scounsel and all other third party out-of-pocket expenses incurred in connectionwith the origination of the Loan.

 

3.1.13                  Material Adverse Change.  There shall have been nomaterial adverse change in the financial condition or business condition ofBorrower or the Property since the date of the most recent financial statementsdelivered to Lender.  The income andexpenses of the Property, the occupancy leases thereof, and all other featuresof the transaction shall be as represented to Lender without material adversechange. Neither Borrower, any of its constituent Persons, shall be the subjectof any bankruptcy, reorganization, or insolvency proceeding.

 

3.1.14                  Leases and Rent Roll.  Lendershall have received copies of all tenant leases, certified copies of any tenantleases as requested by Lender and certified copies of all ground leasesaffecting the Property.  Lender shallhave received a current certified rent roll of the Property, reasonablysatisfactory in form and substance to Lender.

 

3.1.15                  Subordination and Attornment.  Lender shall have receivedappropriate instruments acceptable to Lender in its commercially reasonablediscretion subordinating any

 

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Leasesof record prior to the Mortgage and including an agreement by such Tenants toattorn to Lender in the event of a foreclosure or delivery of a deed in lieuthereof.

 

3.1.16                  Tax Lot.  Lender shall have received evidence that theProperty constitutes one (1) or more separate tax lots, which evidence shall bereasonably satisfactory in form and substance to Lender.

 

3.1.17                  Physical Conditions Reports.  Lender shall have receivedPhysical Conditions Reports with respect to the Property, which reports shallbe reasonably satisfactory in form and substance to Lender.

 

3.1.18                  Management Agreement.  Lender shall have received acertified copy of the Management Agreement with respect to the Property whichshall be satisfactory in form and substance to Lender. Lender acknowledges thatit has reviewed the Management Agreement, and as drafted, such ManagementAgreement does not violate Borrower’s covenant that affiliated agreements be onterms which are intrinsically fair, commercially reasonable and are no less favorableto it than would be obtained in a comparable arm’s length transaction with anunrelated third party.

 

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

 

3.1.20                  Financial Statements.  Lender shall have received (a)a balance sheet with respect to the Property for the two most recent FiscalYears and statements of income and statements of cash flows with respect to theProperty for the three most recent Fiscal Years, each in form and substancereasonably satisfactory to Lender or (b) such other financial statements relatingto the ownership and operation of the Property, in form and substancereasonably satisfactory to Lender.

 

3.1.21                  Further Documents.  Lender or its counsel shallhave 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                  Environmental Insurance.  If required by Lender, Borrowershall have obtained a secured creditor environmental insurance policy withrespect to the Property, which shall be in form and substance satisfactory toLender. Any such policy shall have a term not less than the term of the Loan.Borrower shall have provided to Lender evidence that the premiums for suchpolicy has been paid in full.

 

**ARTICLE IV**

**REPRESENTATIONS AND WARRANTIES**

 

Section4.1                                      Borrower Representations.  Borrowerrepresents and warrants as of the date hereof and as of the Closing Date that:

 

4.1.1                        Organization.  Borrowerhas been duly organized and is validly existing and in good standing withrequisite power and authority to own the Property and to transact the

 

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businesses in which it isnow engaged. Borrower is duly qualified to do business and is in good standingin each jurisdiction where it is required to be so qualified in connection withthe Property, businesses and operations. Borrower possesses all rights,licenses, permits and authorizations, governmental or otherwise, necessary toentitle it to own the Property and to transact the businesses in which it isnow engaged, and the sole business of Borrower is the ownership, management andoperation of the Property.

 

4.1.2                        Proceedings.  Borrower has taken allnecessary action to authorize the execution, delivery and performance of thisAgreement and the other Loan Documents. This Agreement and such other Loan Documents have been duly executed anddelivered by or on behalf of Borrower and constitute legal, valid and bindingobligations of Borrower enforceable against Borrower in accordance with theirrespective terms, subject only to applicable bankruptcy, insolvency and similarlaws affecting rights of creditors generally, and subject, as to enforceability,to general principles of equity (regardless of whether enforcement is sought ina proceeding in equity or at law).

 

4.1.3                        No Conflicts.  Theexecution, delivery and performance of this Agreement and the other LoanDocuments by Borrower will not conflict with or result in a breach of any of theterms or provisions of, or constitute a default under, or result in thecreation or imposition of any lien, charge or encumbrance (other than pursuantto the Loan Documents) upon any of the property or assets of Borrower pursuantto the terms of any indenture, mortgage, deed of trust, loan agreement,partnership agreement or other agreement or instrument to which Borrower is a partyor by which any of Borrower’s property or assets is subject, nor will suchaction result in any violation of the provisions of any statute or any order,rule or regulation of any court or governmental agency or body havingjurisdiction over Borrower or any of Borrower’s properties or assets, and anyconsent, approval, authorization, order, registration or qualification of orwith any court or any such regulatory authority or other governmental agency orbody required for the execution, delivery and performance by Borrower of thisAgreement or any other Loan Documents has been obtained and is in full forceand effect.

 

4.1.4                        Litigation.  To Borrower’s knowledge, thereare no actions, suits or proceedings at law or in equity by or before anyGovernmental Authority or other agency now pending or threatened against oraffecting Borrower or the Property, which actions, suits or proceedings, ifdetermined against Borrower or the Property, might materially adversely affect thecondition (financial or otherwise) or business of Borrower or the condition orownership of the Property.

 

4.1.5                        Agreements.  Except such instruments andagreements set forth as Permitted Exceptions in the Title Insurance Policy,Borrower is not a party to any agreement or instrument or subject to anyrestriction which might materially and adversely affect Borrower or theProperty, or Borrower’s business, properties or assets, operations orcondition, financial or otherwise.  ToBorrower’s knowledge, Borrower is not in default in any material respect in theperformance, observance or fulfillment of any of the obligations, covenants orconditions contained in any agreement or instrument to which it is a party orby which Borrower or the Property are bound. Borrower has no material financial obligation under any indenture, mortgage,deed of trust, loan agreement or other agreement or instrument to whichBorrower is a party or by which Borrower or the Property is otherwise bound,other than (a) obligations

 

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incurred in the ordinarycourse of the operation of the Property and (b) obligations under the LoanDocuments.

 

4.1.6                        Title.  Borrower has good andindefeasible fee simple title to the real property comprising part of theProperty and good title to the balance of the Property, free and clear of allLiens whatsoever except the Permitted Encumbrances, such other Liens as arepermitted pursuant to the Loan Documents and the Liens created by the LoanDocuments. The Mortgage, when properly recorded in the appropriate records,together with any Uniform Commercial Code financing statements required to befiled in connection therewith, will create (a) a valid, perfected lien on theProperty, subject only to Permitted Encumbrances and the Liens created by theLoan Documents and (b) perfected security interests in and to, and perfectedcollateral assignment of, all personalty (including the Leases), all inaccordance with the terms thereof, in each case subject only to any applicablePermitted Encumbrances, such other Liens as are permitted pursuant to the LoanDocuments and the Liens created by the Loan Documents. 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 Agreementor any other Loan Documents with the actual intent to hinder, delay or defraudany creditor and (b) received reasonably equivalent value in exchange for itsobligations under such Loan Documents. Giving effect to the Loan, the fairsaleable value of Borrower’s assets exceeds and will, immediately following themaking of the Loan, exceed Borrower’s total liabilities, including, withoutlimitation, subordinated, unliquidated, disputed and contingent liabilities.The fair saleable value of Borrower’s assets is and will, immediately followingthe making of the Loan, be greater than Borrower’s probable liabilities,including the maximum amount of its contingent liabilities on its debts as suchdebts become absolute and matured. Borrower’s assets do not and, immediatelyfollowing the making of the Loan will not, constitute unreasonably smallcapital to carry out its business as conducted or as proposed to be conducted.Borrower does 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 of Borrower). Except as expresslydisclosed to Lender in writing, no petition in bankruptcy has been filedagainst Borrower, or to the best of Borrower’s knowledge, any constituent Personin the last seven (7) years, and neither Borrower, nor to the best of Borrower’sknowledge, any constituent Person in the last seven (7) years has ever made anassignment for the benefit of creditors or taken advantage of any insolvencyact 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                        Full and Accurate Disclosure.  ToBorrower’s knowledge, no statement of fact made by Borrower in this Agreementor in any of the other Loan Documents contains any untrue statement of amaterial fact or omits to state any material fact necessary to make

 

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statements contained herein or therein not misleading.  There is no material fact presently known toBorrower which has not been disclosed to Lender which adversely affects, nor asfar as Borrower can foresee, might adversely affect, the Property or the business,operations or condition (financial or otherwise) of Borrower.

 

4.1.9                        No Plan Assets.  Borroweris not an “employee benefit plan,” as defined in Section 3(3) of ERISA, subjectto Title I of ERISA, and none of the assets of Borrower constitutes or willconstitute “plan assets” of one or more such plans within the meaning of 29 C.F.R.Section 2510.3-101.  In addition, (a)Borrower is not a “governmental plan” within the meaning of Section 3(32) ofERISA and (b) transactions by or with Borrower are not subject to statestatutes regulating investment of, and fiduciary obligations with respect to,governmental plans similar to the provisions of Section 406 of ERISA or Section4975 of the Code currently in effect, which prohibit or otherwise restrict thetransactions contemplated 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 has not been committed by Borrower or, toBorrower’s knowledge, any other Person in occupancy of or involved with theoperation or use of the Property any act or omission affording the federalgovernment or any other Governmental Authority the right of forfeiture asagainst the Property or any part thereof or any monies paid in performance ofBorrower’s obligations under any of the Loan Documents.

 

4.1.11                  Financial Information.  All financial data, including,without limitation, the statements of cash flow and income and operatingexpense, that have been delivered to Lender in respect of the Property (i) are,to the best of Borrower’s knowledge, true, complete and correct in all materialrespects, (ii) accurately represent the financial condition of the Property as ofthe date of such reports, and (iii) to the extent prepared or audited by anindependent certified public accounting firm, have been prepared in accordancewith accounting principles reasonably acceptable to Lender, consistentlyapplied throughout the periods covered, except as disclosed therein; provided,however, that if any financial data is delivered to Lender by any Personother than Borrower, Indemnitor or any of their Affiliates, or if suchfinancial data has been prepared by or at the direction of any Person otherthan Borrower, Indemnitor or any of their Affiliates, then the foregoing representationswith respect to such financial data shall be to the best of Borrower’sknowledge, after due inquiry.  Borrowerdoes not have any contingent liabilities, liabilities for taxes, unusualforward or long-term commitments or unrealized or anticipated losses from anyunfavorable commitments that are known to Borrower and reasonably likely to havea materially adverse effect on the Property or the operation thereof as aretail shopping center, except as referred to or reflected in said financial statements.  Since the date of such financial statements,there has been no materially adverse change in the financial condition, operationsor business of Borrower from that set forth in said financial statements.

 

4.1.12                  Condemnation.  No Condemnation or otherproceeding has been commenced or, to Borrower’s knowledge, is contemplated withrespect to all or any portion of the Property or for the relocation of roadwaysproviding access to the Property.

 

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

 

4.1.14                  Utilities and Public Access.  The Property has rights ofaccess to public ways and is served by water, sewer, sanitary sewer and stormdrain facilities adequate to service the Property for its respective intendeduses.  All public utilities necessary orconvenient to the full use and enjoyment of the Property are located either inthe 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                  Not a Foreign Person.  Borrower is not a “foreignperson” within the meaning of §1445(f)(3) of the Code.

 

4.1.16                  Separate Lots.  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 notsubject to any right of rescission, set-off, counterclaim or defense byBorrower, including the defense of usury, nor would the operation of any of theterms of the Loan Documents, or the exercise of any right thereunder, renderthe Loan Documents unenforceable, and Borrower has not asserted any right ofrescission, set-off, counterclaim or defense with respect thereto.

 

4.1.19                  No Prior Assignment.  There is no prior assignment ofthe Leases or any portion of the Rents by Borrower or any of its predecessorsin interest, given as collateral security which arepresently outstanding.

 

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 thebest of Borrower’s knowledge, no claims have been made under any such policy,and no Person, including Borrower, has done, by act or omission, anything whichwould impair the coverage of any such policy.

 

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

 

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4.1.22                  Certificate of Occupancy; Licenses.  All certifications, permits,licenses and approvals, including without limitation, certificates ofcompletion and occupancy permits required to be obtained by Borrower for thelegal use, occupancy and operation of the Property as a retail shopping centerhave been obtained and are in full force and effect, and to the best of Borrower’sknowledge, after due inquiry, all certifications, permits, licenses andapprovals, including without limitation, certificates of completion andoccupancy permits required to be obtained by any Person other than Borrower forthe legal use, occupancy and operation of the Property as a retail shoppingcenter, have been obtained and are in full force and effect (all of the foregoingcertifications, permits, licenses and approvals are collectively referred to asthe “**Licenses**”). Borrower shall andshall cause all other Persons to, keep and maintain all licenses necessary forthe operation of the Property as a retail shopping center. To Borrower’s knowledge,the use being made of the Property is in conformity with all certificates ofoccupancy issued for the Property.

 

4.1.23                  Flood Zone.  To the best of Borrower’s knowledge, afterdue inquiry, no Improvements on the Property are located in an area identifiedby the Federal Emergency Management Agency as an area having special floodhazards.

 

4.1.24                  Physical Condition.  Except as disclosed in thePhysical Conditions Reports delivered to Lender in connecting with this Loan,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.

 

4.1.25                  Boundaries.  To the best of Borrower’s knowledge, afterdue inquiry, all of the improvements which were included in determining theappraised value of the Property lie wholly within the boundaries and buildingrestriction lines of the Property, and no improvements on adjoining propertiesencroach upon the Property, and no easements or other encumbrances upon theProperty encroach upon any of the improvements, so as to affect the value or marketabilityof the Property except those which are insured against by title 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 AnchorLease).  No Person has any possessoryinterest in the Property or right to occupy the same except under and pursuantto the provisions of the Leases. The current Leases are in full force andeffect and to Borrower’s knowledge after inquiry, there are no defaultsthereunder by either party and there are no conditions that, with the passageof time or the giving of notice, or both, would constitute defaults thereunder.No Rent (including security deposits) has been paid more than one (1) month inadvance of its due date.  All work to be performedby Borrower under each Lease has been performed as required and has beenaccepted

 

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by the applicable tenant,and any payments, free rent, partial rent, rebate of rent or other payments,credits, allowances or abatements required to be given by Borrower to anytenant has already been received by such tenant. There has been no prior sale,transfer or assignment, hypothecation or pledge of any Lease or of the Rentsreceived therein which is outstanding. To Borrower’s knowledge after inquiry,except as set forth on Schedule IV, no tenant listed on Schedule IVhas assigned its Lease or sublet all or any portion of the premises demisedthereby, no such tenant holds its leased premises under assignment or sublease,nor does anyone except such tenant and its employees occupy such leasedpremises. No tenant under any Lease has a right or option pursuant to suchLease or otherwise to purchase all or any part of the leased premises or thebuilding of which the leased premises are a part. Except as set forth in ScheduleIV, no tenant under any Lease has any right or option for additional spacein the Improvements except as set forth in Schedule IV. To Borrower’sactual knowledge based on the Environmental Report delivered to Lender inconnection herewith, no hazardous wastes or toxic substances, as defined byapplicable federal, state or local statutes, rules and regulations, have beendisposed, stored or treated by any tenant under any Lease on or about theleased premises nor does Borrower have any knowledge of any tenant’s intentionto use its leased premises for any activity which, directly or indirectly,involves the use, generation, treatment, storage, disposal or transportation ofany petroleum product or any toxic or hazardous chemical, material, substanceor waste, except in either event, in compliance with applicable federal, stateor local statues, rules and regulations.

 

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 reflect anymaterial matter affecting the Property or the title thereto.

 

4.1.28                  Loan to Value.  The maximum principal amount ofthe Note does not exceed one hundred twenty-five percent (125%) of the fairmarket value of the Property as set forth on the appraisal of the Propertydelivered to Lender.

 

4.1.29                  Filing and Recording Taxes.  Alltransfer taxes, deed stamps, intangible taxes or other amounts in the nature oftransfer taxes required to be paid by any Person under applicable LegalRequirements currently in effect in connection with the acquisition of the Propertyby Borrower have been paid or are simultaneously being paid. All mortgage,mortgage recording, stamp, intangible or other similar tax required to be paidby any Person under applicable Legal Requirements currently in effect inconnection with the execution, delivery, recordation, filing, registration,perfection or enforcement of any of the Loan Documents, including,  without limitation, the Mortgage,  have been paid, and, under current Legal Requirements,the Mortgage is enforceable in accordance with its terms by Lender (or any subsequentholder thereof).

 

4.1.30                  Special Purpose Entity/Separateness.  (a)  Until the Debt 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.

 

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(b)                                 The representations,  warranties and covenants set forth in Section4.1.30(a) shall survive for so long as any amount remains payable to Lenderunder this Agreement or any other Loan Document.

 

(c)                                  Intentionally omitted

 

4.1.31                  Management Agreement.  The Management Agreement is infull 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                  Illegal Activity.  To Borrower’s knowledge, noportion of the Property has been or will be purchased with proceeds of anyillegal activity.

 

4.1.33                  No Change in Facts or Circumstances;Disclosure.  All information submitted by Borrower toLender and in all financial statements, rent rolls, reports, certificates andother documents submitted in connection with the Loan or in satisfaction of theterms thereof and all statements of fact made by Borrower in this Agreement orin any other Loan Document, are accurate, complete and correct in all materialrespects, provided, however, that if such information was provided to Borrowerby non-affiliated third parties, Borrower represents that such information is,to the best of its knowledge after due inquiry, accurate, complete and correctin all material respects.  There has beenno material adverse change in any condition, fact, circumstance or event thatwould make any such information inaccurate, incomplete or otherwise misleadingin any material respect or that otherwise materially and adversely affects or mightmaterially and adversely affect the Property or the business operations or thefinancial condition of Borrower. Borrower has disclosed to Lender all materialfacts and has not failed to disclose any material fact that could cause anyrepresentation or warranty made herein to be materially misleading.

 

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

 

4.1.35                  Principal Place of Business and Organization.  Borrower shall not change itsprincipal place of business set forth in the introductory paragraph of thisAgreement without first giving Lender thirty (30) days prior written notice.Borrower shall not change the place of its organization as set forth in theintroductory paragraph of this Agreement without the consent of Lender, whichconsent shall not be unreasonably withheld, conditioned or delayed.  Upon Lender’s request, Borrower shall executeand deliver additional financing statements, security agreements and otherinstruments which may be necessary to effectively evidence or perfect Lender’ssecurity interest in the Property as a result of such change of principal placeof business or place of organization.

 

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Section4.2                                      Survival of Representations.  Borrower agrees that all of therepresentations and warranties of Borrower set forth in Section 4.1 andelsewhere in this Agreement and in the other Loan Documents shall survive forso long as any amount remains owing to Lender under this Agreement or any ofthe 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                                      Affirmative Covenants.  Fromthe Closing Date and until payment and performance in full of all obligationsof Borrower under the Loan Documents or the earlier release of the Lien of theMortgage encumbering the Property (and all related obligations) in accordancewith the terms of this Agreement and the other Loan Documents, Borrower herebycovenants and agrees with 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 its existence, rights, licenses, permits andfranchises and comply with all Legal Requirements applicable to it and the Property. Borrower shall not commit, nor shallBorrower permit any other Person in occupancy of or involved with the operationor use of the Property to commit, any act or omission affording the federalgovernment or any state or local government the right of forfeiture as againstthe Property or any part thereof or any monies paid in performance of Borrower’sobligations under any of the Loan Documents. Borrower hereby covenants andagrees not to commit, permit or suffer to exist anyact or omission affording such right of forfeiture. Borrower shall at all timesmaintain, preserve and protect all its franchises and trade names and preserveall the remainder of its property used or useful in the conduct of its businessand shall keep the Property in good working order and repair, and from time totime make, or cause to be made, all reasonably necessary repairs, renewals,replacements, betterments and improvements thereto, all as more fully providedin the Mortgage. Borrower shall keep the Property insured at all times byfinancially sound and reputable insurers, to such extent and against suchrisks, and maintain liability and such other insurance, as is more fullyprovided in this Agreement. Borrower shall operate, or cause the tenant tooperate, any Property that is the subject of an O&M Agreement (if any) inaccordance with the terms and provisions thereof in all material respects.After prior written notice to Lender, Borrower, at its own expense, may contestby appropriate legal proceeding promptly initiated and conducted in good faithand with due diligence, the validity of any Legal Requirement, theapplicability of any Legal Requirement to Borrower or the Property or anyalleged violation of any Legal Requirement, provided that (i) no Event ofDefault has occurred and remains uncured; (ii) intentionally omitted; (iii)such proceeding shall be permitted under and be conducted in accordance withthe provisions of any instrument to which Borrower is subject and shall notconstitute a default thereunder and such proceeding shall be conducted inaccordance with all applicable statutes, laws and ordinances; (iv) the Propertyor any part thereof or interest therein will not be in danger of being sold,forfeited, terminated, cancelled or lost; (v) Borrower shall promptly uponfinal determination thereof comply with any such Legal Requirement determinedto be valid or applicable or cure any violation of any Legal Requirement; (vi)such proceeding shall suspend the enforcement of

 

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the contested LegalRequirement against Borrower or the Property; and (vii) Borrower shall furnishsuch security as may be required in the proceeding, or as may be requested byLender, to insure compliance with such Legal Requirement, together with allinterest and penalties payable in connection therewith. Lender may apply anysuch security, as necessary to cause compliance with such Legal Requirement atany time when, in the reasonable judgment of Lender, the validity,applicability or violation of such Legal Requirement is finally established orthe Property (or any part thereof or interest therein) shall be in danger ofbeing sold, forfeited, terminated, cancelled or lost.

 

5.1.2                        Taxes and Other Charges.  Borrowershall pay or cause to be paid all Taxes and Other Charges now or hereafterlevied or assessed or imposed against the Property or any part thereof as thesame become due and payable; provided, however, Borrower’sobligation to directly pay to the appropriate taxing authority Taxes shall besuspended for so long as Borrower complies with the terms and provisions ofSection 7.2 hereof. Borrower will deliver to Lender receipts for payment orother evidence satisfactory to Lender that the Taxes and Other Charges havebeen so paid or are not then delinquent no later than ten (10) days prior tothe date on which the Taxes and/or Other Charges would otherwise be delinquentif not paid (provided, however,that Borrower is not required to furnish such receipts for payment of Taxes inthe event that such Taxes have been paid by Lender pursuant to Section 7.2hereof). If Borrower pays or causes to be paid all Taxes and Other Charges andprovides a copy of the receipt evidencing the payment thereof to Lender, thenLender shall reimburse Borrower, provided that there are then sufficientproceeds in the Tax and Insurance Escrow Fund and provided that the Taxes arebeing 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 toLender, Borrower, at its own expense, may contest by appropriate legalproceeding, promptly initiated and conducted in good faith and with duediligence, the amount or validity or application in whole or in part of anyTaxes or Other Charges, provided that (i) Borrower is permitted to do so underthe provisions of any mortgage or deed of trust superior in lien to theMortgage; (ii) such proceeding shall be permitted under and be conducted inaccordance with the provisions of any other instrument to which Borrower issubject and shall not constitute a default thereunder and such proceeding shallbe conducted 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 or part thereof held by Lender to theclaimant entitled thereto at any time when, in the reasonable judgment ofLender, the entitlement of such claimant is established.

 

5.1.3                        Litigation.  Borrower shall give promptwritten notice to Lender of any litigation or governmental proceedings pendingor threatened against Borrower which might

 

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materially adversely affect Borrower’s condition(financial or otherwise) or business or the Property.

 

5.1.4                        Access to Property.  Borrowershall permit agents, representatives and employees of Lender to inspect theProperty or any part thereof at reasonable hours upon reasonable advancenotice, subject to the rights of Tenants under their respective Leases.

 

5.1.5                        Notice of Default.  Borrowershall promptly advise Lender of any material adverse change in Borrower’scondition, financial or otherwise, or of the occurrence of any Default or Eventof Default of which Borrower has knowledge.

 

5.1.6                        Cooperate in Legal Proceedings.  Borrowershall cooperate fully with Lender with respect to any proceedings before anycourt, board or other Governmental Authority which may in any way affect therights of Lender hereunder or any rights obtained by Lender under any of theother Loan Documents and, in connection therewith, permit Lender, at its election,to participate in any such proceedings.

 

5.1.7                        Perform Loan Documents.  Borrowershall observe, 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                        Insurance Benefits.  Borrowershall cooperate with Lender in obtaining for Lender the benefits of anyInsurance Proceeds lawfully or equitably payable in connection with theProperty, and Lender shall be reimbursed for any expenses incurred inconnection therewith (including reasonable attorneys’ fees and disbursements,and the payment by Borrower of the expense of an appraisal on behalf of Lenderin case of a fire or other casualty affecting the Property or any part thereof)out of such Insurance Proceeds.

 

5.1.9                        Further Assurances.  Borrowershall, at Borrower’s sole cost and expense:

 

(a)                                  furnish to Lender all instruments, documents,boundary surveys, footing or foundation surveys, certificates, plans andspecifications, appraisals, title and other insurance reports and agreements,and each and every other document, certificate, agreement and instrumentrequired to be furnished by Borrower pursuant to the terms of the LoanDocuments or reasonably requested by Lender in connection therewith;

 

(b)                                 execute and deliver to Lender such documents,instruments, certificates, assignments and other writings, and do such otheracts necessary or desirable, to evidence, preserve and/or protect thecollateral at any time securing or intended to secure the obligations of Borrowerunder the Loan Documents, as Lender may reasonably require; and

 

(c)                                  do and execute all and such further lawfuland reasonable acts, conveyances and assurances for the better and moreeffective carrying out of the intents and purposes of this Agreement and theother Loan Documents, as Lender shall reasonably require from time to time.

 

5.1.10                  Intentionally Omitted.

 

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5.1.11                  Financial Reporting.  (a) Borrower will keep andmaintain 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**thefinancial affairs of Borrower and all items of income and expense in connectionwith the operation on an individual basis of the Property. Lender shall havethe right from time to time at all times during normal business hours uponreasonable notice to examine such books, records and accounts at the office ofBorrower or other Person maintaining such books, records and accounts and tomake such copies or extracts thereof as Lender shall desire. After theoccurrence and during the continuance of an Event of Default, Borrower shallpay any costs and expenses incurred by Lender to examine Borrower’s accountingrecords with respect to the Property, as Lender shall reasonably determine tobe necessary or appropriate in the protection of Lender’s interest.

 

(b)                                 Borrower will furnish to Lenderannually,  within ninety (90) daysfollowing the end of each Fiscal Year of Borrower, either (i) a complete copyof Borrower’s annual financial statements audited by an accounting firm orother independent certified public accountant reasonably acceptable to Lenderin accordance with the requirements for a Special Purpose Entity set forthabove, or (ii) a consolidated and annotated financial statement of Borrower andSole Member (as applicable), 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, 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 fromOperations and Operating Expenses.  Borrower’sannual financial statements shall be accompanied by (i) a comparison of thebudgeted income and expenses and the actual income and expenses for the priorFiscal Year, (ii) a certificate executed by the chief financial officer ofBorrower or Sole Member, as applicable, stating that each such annual financialstatement presents fairly the financial condition and the results of operationsof Borrower and the Property being reported upon and has been prepared inaccordance with accounting principles reasonably acceptable to Lender,consistently applied, (iii) an unqualified opinion of an accounting firm orother independent certified public accountant reasonably acceptable to Lender,(iv) a certified rent roll containing current rent, lease expiration dates andthe square footage 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 adjustmentsmade to Net Operating Income to arrive at Net Cash Flow deemed material by suchindependent certified public accountant. Together with Borrower’s annual financial statements, Borrower shallfurnish to Lender an Officer’s Certificate certifying as of the date thereof whetherthere exists an event or circumstance which constitutes a Default or Event ofDefault under the Loan Documents executed and delivered by, or applicable to,Borrower, and if such Default or Event of Default exists, the nature thereof,the period of time it has existed and the action then being taken to remedy thesame.

 

(c)                                  Borrower will furnish, or cause to befurnished, to Lender on or before forty five (45) days after the end of eachcalendar quarter the following items, accompanied by a

 

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certificate of the chief financial officer ofBorrower or Sole Member, as applicable, stating that such items are true,correct, accurate, and complete and fairly present the financial condition andresults of the operations of Borrower and the Property (subject to normalyear-end adjustments) as applicable: (i) a rent roll for the subject monthaccompanied by an Officer’s Certificate with respect thereto; (ii) quarterlyand year-to-date operating statements (including Capital Expenditures) preparedfor each calendar quarter, noting Net Operating Income, Gross Income fromOperations, and Operating Expenses (not including any contributions to theReplacement Reserve Fund, and other information necessary and sufficient tofairly represent the financial position and results of operation of theProperty during such calendar month, and containing a comparison of budgetedincome and expenses and the actual income and expenses together with a detailedexplanation of any variances of five percent (5%) or more between budgeted andactual amounts for such periods, all in form satisfactory to Lender; (iii) acalculation reflecting the annual Debt Service Coverage Ratio for theimmediately preceding twelve (12) month period as of the last day of such monthaccompanied by an Officer’s Certificate with respect thereto; and (iv) a NetCash Flow Schedule (such Net Cash Flow for the Borrower may be unauditedif it is certified by an officer of the Borrower). 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)                                 For the partialyear 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)                                  Borrower shallfurnish to Lender, within ten (10) Business Days after request (or as soonthereafter as may be reasonably possible), such further detailed informationwith respect to the operation of the Property and the financial affairs ofBorrower as may be reasonably requested by Lender.

 

(f)                                    Borrower shallfurnish to Lender, within ten (10) Business Days after Lender’s request (or assoon thereafter as may be reasonably possible), financial and sales informationfrom any Tenant designated by Lender (to the extent such financial and salesinformation is required to be provided under the applicable Lease and same isreceived by Borrower after request therefor).

 

(g)                                 Borrower will causeIndemnitor to furnish to Lender annually, within one hundred twenty (120) daysfollowing the end of each Fiscal Year of Indemnitor, financial statementsaudited by an independent certified public accountant, which shall include anannual balance sheet and profit and loss statement of Indemnitor, in the formreasonably required by Lender.

 

(h)                                 Any reports,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

 

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for Windows files(which files may be prepared using a spreadsheet program and saved as wordprocessing files).

 

5.1.12                  Business andOperations.  Borrower will continue to engagein the businesses presently conducted by it as and to the extent the same arenecessary for the ownership, maintenance, management and operation of theProperty.  Borrower will qualify to dobusiness and will remain in good standing under the laws of each jurisdictionas and to the extent the same are required for the ownership, maintenance, managementand operation of the Property.

 

5.1.13                  Title to theProperty.  Borrower will warrant and defend(a) the title to the Property and every part thereof, subject only to Lienspermitted hereunder (including Permitted Encumbrances) and (b) the validity andpriority of the Liens of the Mortgage and the Assignment of Leases on theProperty, subject only to Liens permitted hereunder (including PermittedEncumbrances), 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 Mortgageencumbering the Property is foreclosed in whole or in part or that the Mortgageis put into the hands of an attorney for collection, suit, action orforeclosure, (b) of the foreclosure of any mortgage prior to or subsequent tothe Mortgage encumbering the Property in which proceeding Lender is made aparty, or (c) of the bankruptcy, insolvency, rehabilitation or other similarproceeding in respect of Borrower or any of its constituent Persons or anassignment by Borrower or any of its constituent Persons for the benefit of itscreditors, Borrower, its successors or assigns, shall be chargeable with andagrees to pay all costs of collection and defense, including reasonableattorneys’ fees and costs, incurred by Lender or Borrower in connectiontherewith and in connection with any appellate proceeding or post-judgmentaction involved therein, together with all required service or use taxes.

 

5.1.15                  Estoppel Statement.  (a) After request by Lender, Borrower shall within ten (10) days furnishLender with a statement, duly acknowledged and certified, setting forth (i) theamount of the original principal amount of the Note, (ii) the unpaid principalamount of the Note, (iii) the applicable interest rate of the Note, (iv) thedate installments of interest and/or principal were last paid, (v) any offsetsor defenses to the payment of the Debt, if any, and (vi) that the Note, thisAgreement, the Mortgage and the other Loan Documents are valid, legal andbinding obligations and have not been modified or if modified, giving particularsof such modification.

 

(b)                                 Borrower shall usecommercially reasonable efforts to deliver to Lender upon request, tenantestoppel certificates from each commercial tenant leasing space at the Propertyin form and substance reasonably satisfactory to Lender provided that Borrowershall not be required to deliver such certificates more frequently than one (1)time in any calendar year.

 

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(c)                                  Within thirty (30)days of request by Borrower, Lender shall deliver to Borrower a statementsetting forth the items described 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 Loanreceived by it on the Closing Date only for the purposes set forth in Section 2.1.4.

 

5.1.17                  Performance byBorrower.  Borrower shall in a timely mannerobserve, perform and fulfill each and every covenant, term and provision ofeach Loan Document executed and delivered by, or applicable to, Borrower, andshall not enter into or otherwise suffer or permit any amendment, waiver,supplement, termination or other modification of any Loan Document executed anddelivered by, or applicable to, Borrower without the prior written consent ofLender.

 

5.1.18                  Confirmation ofRepresentations.  Borrower shall deliver, inconnection with any Securitization, (a) one or more Officer’s Certificatescertifying as to the accuracy of all representations made by Borrower in theLoan Documents as of the date of the closing of such Securitization, and (b)certificates of the relevant Governmental Authorities in all relevantjurisdictions indicating the good standing and qualification of Borrower andits member as of the date of the Securitization.

 

5.1.19                  No Joint Assessment.  Borrower shall not suffer, permit or initiatethe joint assessment of the Property (a) with any other real propertyconstituting a tax lot separate from the Property, and (b) which constitutesreal property with any portion of the Property which may be deemed toconstitute personal property, or any other procedure whereby the lien of anytaxes which may be levied against such personal property shall be assessed orlevied or charged to such real property portion of the Property.

 

5.1.20                  Leasing Matters.  Any Leases with respect to the Propertywritten after the Closing Date for more than the Relevant Leasing Thresholdsquare footage shall be subject to the prior written approval of Lender, whichapproval may be given or withheld in the sole discretion of Lender. Lendershall approve or disapprove any such Lease within ten (10) Business Days ofLender’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 5.1.20OF THE LOAN AGREEMENT, THE****LEASE****SHALLBE DEEMED APPROVED IF LENDER DOES NOT RESPOND TO THE CONTRARY WITHIN****TEN (10)****BUSINESS****DAYS****OF LENDER’S RECEIPT OF SUCH****LEASE****AND WRITTEN NOTICE”.**  Borrower shall furnish Lender with executedcopies of all Leases. All renewals of Leases and all proposed Leases shallprovide for rental rates comparable to existing local market rates (unless suchrental rates are otherwise set forth in the Leases executed prior to theClosing Date).  All proposed Leases shallbe on commercially reasonable terms and shall not contain any terms which wouldmaterially affect Lender’s rights under the Loan Documents. All Leases executedafter the Closing Date shall provide that they are subordinate to the Mortgageencumbering the Property and that the tenant thereunder agrees to attorn toLender or any purchaser at a sale by

 

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foreclosure or power of sale.Borrower (i) shall observe and perform the obligations imposed upon the lessorunder the Leases in a commercially reasonable manner; (ii) shall enforce theterms, covenants and conditions contained in the Leases upon the part of thetenant thereunder to be observed or performed in a commercially reasonablemanner and in a manner not to impair the value of the Property involved exceptthat no termination by Borrower or acceptance of surrender by a tenant of anyLease shall be permitted unless by reason of a tenant default and then only ina commercially reasonable manner to preserve and protect the Property provided,however, that no such termination or surrender of any Lease coveringmore than the 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 the foregoing, Borrower may, without theprior written consent of Lender, terminate any Lease which demises less thanthe Relevant Leasing Threshold under any of the following circumstances: (i)the tenant under said Lease is in default beyond any applicable grace and cureperiod, and Borrower has the right to terminate such Lease; (ii) suchtermination is permitted by the terms of the Lease in question and Borrower hassecured an obligation from a third party to lease the space under the Lease tobe terminated at a rental equal to or higher than the rental due under theLease to be terminated; and (iii) if the tenant under the Lease to beterminated, has executed a right under said Lease to terminate its lease uponpayment of a termination fee to Borrower, and has in fact terminated its leaseand paid said fee, Borrower may accept 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 financialcondition, the value of the Property or the Net Operating Income.Notwithstanding the foregoing, Lender’s consent shall not be required inconnection with any alterations that will not have a material adverse effect onBorrower’s financial condition, the value of the Property or the Net OperatingIncome, provided that such alterations are made in connection with (a) tenantimprovement work performed pursuant to the terms of any Lease executed on orbefore the Closing Date, (b) tenant improvement work performed pursuant to theterms and provisions of a Lease and not adversely affecting any structuralcomponent of any Improvements, any utility or HVAC system contained in anyImprovements or the exterior of any building constituting a part of anyImprovements, (c) alterations performed in connection with the restoration ofthe Property after the occurrence of a casualty in accordance with the termsand provisions of this Agreement or (d) any structural alteration which costsless than $50,000.00 in the aggregate for all components thereof whichconstitute such alteration or any non-structural alteration which costs lessthan $100,000.00 in the aggregate for all components thereof which constitutesuch alteration. If the total unpaid amounts due and payable with respect toalterations to the Improvements at the Property (other than such amounts to bepaid or reimbursed by tenants under the Leases) shall at any time equal orexceed $350,000.00 (the “**Threshold Amount**”),

 

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Borrower, upon Lender’s request, shallpromptly deliver to Lender as security for the payment of such amounts and asadditional security for Borrower’s obligations under the Loan Documents any ofthe 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 anamount equal to the excess of the total unpaid amounts with respect toalterations to the Improvements on the Property (other than such amounts to bepaid or reimbursed by tenants under the Leases) over the Threshold Amount and,if cash, may be applied from time to time, at the option of Borrower, to payfor such alterations. At the option of Lender, following the occurrence andduring the continuance of an Event of Default, Lender may terminate any of thealterations and use the deposit to restore the Property to the extent necessaryto prevent any material adverse effect on the value of the Property.

 

5.1.22                  Intentionally Omitted.

 

5.1.23                  Intentionally Omitted.

 

Section 5.2                                      Negative Covenants.  From the Closing Date until payment andperformance in full of all obligations of Borrower under the Loan Documents orthe earlier release of the Lien of the Mortgage encumbering the Property inaccordance with the terms of this Agreement and the other Loan Documents,Borrower covenants and agrees with Lender that it will not do, directly orindirectly, any of the following:

 

5.2.1                        Operation of Property.  Borrower shall not, without the prior consentof Lender, terminate the Management Agreement or otherwise replace the Manageror enter into any other management agreement with respect to the Propertyunless the Manager is in default thereunder beyond any applicable grace or cureperiod, in which event no consent by Lender shall be required.  Lender agrees that its consent will not beunreasonably withheld, delayed or conditioned provided that the Person chosenby Borrower as the replacement Manager is a Qualifying Manager and providedfurther that Borrower shall deliver an acceptable non-consolidation opinioncovering such replacement Manager if such Person was not covered by suchopinion delivered at the closing of the Loan.

 

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

 

(i)                                     PermittedEncumbrances;

 

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(ii)                                  Liens created by orrelated to Indebtedness permitted pursuant to the Loan Documents; and

 

(iii)                                Liens for Taxes orOther Charges not yet due (or that Borrower is contesting in accordance withthe terms of Section 5.1.2 hereof).

 

5.2.3                        Dissolution. Borrower shall not (a) engage in any dissolution, liquidation orconsolidation or merger with or into any other business entity, (b) engage inany business activity not related to the ownership and operation of theProperty, (c) transfer, lease or sell, in one transaction or any combination oftransactions, the assets or all or substantially all of the properties orassets of Borrower except to the extent permitted by the Loan Documents, (d)modify, amend, waive or terminate its organizational documents or itsqualification and good standing in any jurisdiction or (e) cause the SoleMember to (i) dissolve, wind up or liquidate or take any action, or omit totake an action, as a result of which the Sole Member would be dissolved, woundup or liquidated in whole or in part, or (ii) amend, modify, waive or terminatethe certificate of limited partnership or partnership agreement of the SoleMember, in each case, without obtaining the prior written consent of Lender orLender’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 any zoning reclassificationof any portion of the Property or seek any variance under any existing zoningordinance or use or permit the use of any portion of the Property in any mannerthat could result in such use becoming a non-conforming use under any zoningordinance or any other applicable land use law, rule or regulation, without theprior consent of Lender.

 

5.2.8                        Assets. Borrower shall not purchase or own any properties other than theProperty owned by Borrower as of the Closing Date as reflected in theapplicable Title Insurance Policy.

 

5.2.9                        Debt. Borrower shall not create, incur or assume any Indebtedness other thanthe Debt except to the extent expressly permitted hereby.

 

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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) Borrower shall not engage in any transaction which would cause anyobligation, or action taken or to be taken, hereunder (or the exercise byLender of any of its rights under the Note, this Agreement or the other LoanDocuments) to be a non-exempt (under a statutory or administrative classexemption) prohibited transaction under ERISA.

 

(b)                                 Borrower furthercovenants and agrees to deliver to Lender such certifications or other evidencefrom time to time throughout the term of the Loan, as requested by Lender inits sole discretion, that (A) Borrower is not and does not maintain an“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)                                       Equity interests inBorrower are publicly offered securities, within the meaning of 29 C.F.R. §2510.3-101(b)(2);

 

(ii)                                    Less thantwenty-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)                                 Borrower qualifiesas an “operating company” or a “real estate operating company” within themeaning of 29 C.F.R. §2510.3-101(c) or (e).

 

5.2.13                  Transfers. Unless such action is permitted by the provisions of this Section 5.2.13,Borrower agrees that it will not (i) sell, assign, convey, transfer orotherwise dispose of its interests in the Property or any part thereof, (ii)permit any owner, directly or indirectly, of an ownership interest in theProperty, to transfer such interest, whether by transfer of stock or otherinterest in Borrower or any entity, or otherwise, (iii) incur indebtedness(other than the Indebtedness permitted pursuant to the terms of thisAgreement), (iv) mortgage, hypothecate or otherwise encumber or grant asecurity interest in the Property or any part thereof, (v) sell, assign,convey, transfer, mortgage, encumber, grant a security interest in, orotherwise dispose of any direct or indirect ownership interest in Borrower, orpermit any owner of an interest in Borrower to do the same, or (vi) file adeclaration of condominium with respect to the Property (any of the foregoingtransactions, 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

 

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immediate family member(i.e., parents, spouses, siblings, children or grandchildren) of such member(or a trust for the benefit of any such persons).

 

(a)                                  On and after thedate that is twelve (12) months following the Closing Date, Lender shall notwithhold its consent to a Transfer of the Property, provided that the followingconditions are satisfied:

 

(1)                                the transferee ofthe Property shall be a Special Purpose Entity (the “**Transferee**”) which at the time of suchtransfer will be in compliance with the covenants contained in Section 5.1.1and the representations contained in 4.1.30 hereof and which shall have assumedin writing (subject to the terms of Section 9.4 hereof) and agreed tocomply with all the terms, covenants and conditions set forth in this LoanAgreement and the other Loan Documents, expressly including the covenantscontained in Section 5.1.1 and the representations contained in 4.1.30hereof;

 

(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 may be relied upon by theholder of the Note, the Ratings Agencies and their respective counsel, agentsand representatives with respect to the proposed transaction, including theTransferee, which opinion shall be acceptable to Lender in its reasonablediscretion;

 

(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 to Lender in connection with a joint venture betweenInland Western Retail Real Estate Trust, Inc. and an institution acceptable toLender provided Inland Western Retail Real Estate Trust, Inc., or an Affiliatewholly-owned (directly or indirectly) by Inland Western Retail Real EstateTrust, Inc., owns at least twenty percent (20%) of the ownership interests insuch Transferee and for which Inland Western Retail Real Estate Trust, Inc., oran Affiliate wholly-owned (directly or indirectly) by Inland Western RetailReal Estate Trust,  Inc., is the managingentity and

 

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otherwise maintains operational andmanagerial control of such Transferee, provided that Borrower shall pay all ofLender’s reasonable and customary third-party expenses (including reasonableattorneys’ fees and disbursements) actually incurred by Lender in connectionwith such Transfer and a processing fee of $5,000.

 

Lender shall approve or disapprove any proposedTransfer governed by this Section 5.2.13(a) within thirty (30) days ofLender’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 **“PURSUANT TO SECTION 5.2.13OF THE LOAN AGREEMENT, A RESPONSE IS REQUIRED WITHIN THIRTY (30) DAYS OFLENDER’S RECEIPT OF THIS WRITTEN NOTICE”.** If Lender fails to disapproveany such matter within such period, Borrower shall provide a second writtennotice requesting approval, which written notice shall conspicuously state, inlarge bold type, that **“PURSUANT TO SECTION 5.2.13OF THE LOAN AGREEMENT, THE MATTER DESCRIBED HEREIN SHALL BE DEEMED APPROVED IFLENDER DOES NOT RESPOND TO THE CONTRARY WITHIN TEN (10) DAYS OF LENDER’SRECEIPT OF THIS WRITTEN NOTICE”.** Thereafter, if Lender does not disapprove such matter within said ten(10) day period such matter shall be deemed approved.

 

(b)                                 On and after thedate that is twelve (12) months following the Closing Date, Lender shall notwithhold its consent to, and shall not charge an assumption fee in connectionwith, (1) a Transfer of up to, in the aggregate, forty-nine percent (49%) ofthe direct or indirect ownership interests in Borrower, or (2) a Transfer ofgreater than forty-nine percent (49%) of the direct or indirect ownershipinterest in Borrower, provided that (A) such transfer is to a QualifiedEntity (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**”shall mean an entity (x) with a networth of $200,000,000 or more, (y) with sufficient experience (determined byLender in its reasonable discretion) in the ownership and management ofproperties similar to the Property, and (z) which owns or manages retailproperties containing at least 1,000,000 square feet of gross leasable area. Ifrequired or 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.

 

(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-formedSpecial Purpose Entity which shall be wholly-owned subsidiary of Inland WesternRetail Real Estate Trust, Inc. (“**Permitted Affiliate Transferee**”) which shall be approved by Lender in itsreasonable discretion (“**Permitted AffiliateTransfer**”) provided (1)no Event of Default shall have occurred and be continuing, (2) thecreditworthiness of Inland Western Retail Real Estate Trust, Inc., asapplicable, has not deteriorated, in the sole discretion of Lender, from theClosing Date to the date of the proposed Transfer, and (3) Borrower shall havepaid all reasonable and

 

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customary third partyexpenses (including reasonable attorneys’ fees and disbursements) actuallyincurred by Lender in connection with such Transfer (but not any assumption orprocessing fee).

 

(d)                                 Borrower, withoutthe consent of Lender, may grant easements, restrictions, covenants,reservations and rights of way in the ordinary course of business for access,parking, water and sewer lines, telephone and telegraph lines, electric linesand other utilities or for other similar purposes, provided that no transfer,conveyance or encumbrance shall materially impair the utility and operation ofthe Property or materially adversely affect the value of the Property or theNet Operating Income of the Property. If Borrower shall receive anyconsideration in connection with any of said described transfers orconveyances, Borrower shall have the right to use any such proceeds inconnection with any alterations performed in connection therewith, or requiredthereby. In connection with any transfer, conveyance or encumbrance permittedabove, the Lender shall execute and deliver any instrument reasonably necessaryor appropriate to evidence its consent to said action or to subordinate theLien of the Mortgage to such easements, restrictions, covenants, reservationsand rights of way or other similar grants upon receipt by the Lender of: (A) acopy of the instrument of transfer; and (B) an Officer’s Certificate statingwith respect to any transfer described above, that such transfer does notmaterially impair the utility and operation of the Property or materiallyreduce the value of the Property or the Net Operating Income of the Property.

 

**ARTICLE VI****INSURANCE;****CASUALTY; CONDEMNATION**

 

Section 6.1                                     Insurance.  (a)Borrower shall obtain and maintain, or shall cause Anchor Tenant to maintain,insurance for Borrower and the Property providing at least the followingcoverages:

 

(i)                                    comprehensive allrisk 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 legalnon-conforming structures or uses. In addition, Borrower shall obtain: (y) ifany portion of the Improvements is currently or at any time in the futurelocated in a federally designated “special flood hazard area”, flood hazardinsurance in an amount equal to the lesser of (1) the outstanding principalbalance of the Note or (2) the maximum amount of such insurance available underthe National Flood Insurance Act of 1968, the Flood Disaster Protection Act of1973 or the National Flood Insurance Reform Act of 1994, as each may be amendedor such greater amount as Lender shall require; and (z)**earthquake insurance in amounts and inform and substance satisfactory to Lender in the event the Property is locatedin an area with a high degree of seismic activity, provided that the

 

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insurance pursuant toclauses (y) and (z) hereof shall be on terms consistent with the comprehensiveall risk insurance policy required under this subsection (i).

 

(ii)                                    commercial generalliability insurance against claims for personal injury, bodily injury, death orproperty damage occurring upon, in or about the Property, such insurance (A) tobe on the so-called “occurrence” form with a combined limit, including umbrellacoverage, of not less than Five Million and No/100 Dollars ($5,000,000.00); (B)to continue at not less than the aforesaid limit until required to be changedby Lender in writing by reason of changed economic conditions making suchprotection inadequate; and (C) to cover at least the following hazards: (1)premises and operations; (2) products and completed operations on an “if any”basis; (3) independent contractors; (4) blanket contractual liability for alllegal contracts; and (5) contractual liability covering the indemnitiescontained in Article 9 of the Mortgage to the extent the same isavailable;

 

(iii)                                  business incomeinsurance (A) with loss payable to Lender; (B) covering all risks required tobe covered by the insurance provided for in subsection (i) above; (C)covering rental losses or business interruption, as may be applicable, for aperiod of at least twelve (12) months after the date of the casualty; and (D) inan annual amount equal to (100%) of the rents or estimated gross revenues fromthe operation of the Property (as reduced to reflect expenses not incurredduring 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 toLender pursuant to this subsection shall be held by Lender and shall beapplied to the obligations secured by the Loan Documents from time to time dueand payable hereunder and under the Note; provided, however, thatnothing herein contained shall be deemed to relieve Borrower of its obligationsto pay the 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)                                at all times duringwhich structural construction, repairs or alterations are being made withrespect to the Improvements, and only if the Property coverage form does nototherwise apply, (A) owner’s contingent or protective liability insurancecovering claims not covered by or under the terms or provisions of the abovementioned commercial general liability insurance policy; and (B) the insuranceprovided for in subsection (i) above written in a so-called builder’s riskcompleted value form (1) on a non-reporting basis, (2) against all risksinsured against pursuant to subsection (i) above, (3) including permissionto occupy the Property, and (4) with an agreed amount endorsement waivingco-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;

 

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(vii)                              umbrella liabilityinsurance 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 of thepolicies 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 shall not be required to obtain such apolicy, provided (I) Borrower confirms to Lender, in writing, that it shallprotect and hold Lender harmless from any losses associated with such risks by,among other things, either (A) depositing with Lender sums sufficient to payfor all uninsured costs related to a Restoration of the Property following anyact of terrorism (which sum shall be treated as a Net Proceeds Deficiency), or(B) provided such act of terrorism occurs on or after the Permitted PrepaymentDate, prepaying the Loan in accordance with the terms hereof; (II) InlandWestern Retail Real 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 auditedfinancial statements), such entity maintains a direct or indirect ownershipinterest in Borrower, and the aggregate loan-to-value ratio (as determined byLender) (“LTV”) for all properties on which such entity has a direct orindirect ownership interest shall not exceed 55%, however, Terrorism InsuranceGuarantor may exceed the 55% LTV for a period not to exceed six (6) months outof any twelve (12) month period either 1) during the time period when TerrorismInsurance Guarantor is offering securities to the public, or 2) when in thebusiness judgement of Terrorism Insurance Guarantor, exceeding an LTV of 55% 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)                                upon sixty (60) days’written notice, such other reasonable insurance and in such reasonable amountsas Lender from time to time may reasonably request against such other insurablehazards which at the time are commonly insured against for property similar tothe Property located in or around the region in which the Property is located.

 

(b)                                 All insuranceprovided for in Section 6.1(a) shall be obtained under valid andenforceable policies (collectively, the “**Policies**”or in the singular, the “**Policy**”), and shall be subject to the approval of Lender as to insurancecompanies, amounts, deductibles, loss payees and insureds. The Policies shallbe issued by financially sound and responsible insurance companies authorizedto do business in the State and having a rating of “A:X”or better in the current Best’s Insurance Reports and a claims paying abilityrating of “AA” or better by at least two (2) of the Rating Agencies including,(i) Standard & Poor’s Ratings Group, and (ii) Moody’s Investors Services,Inc. if Moody’s Investors Service, Inc. is rating the Securities. The Policies

 

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described in Section 6.1(other than those strictly limited to liability protection) shall designateLender as loss payee. Not less than thirty (30) days prior to the expirationdates of the Policies theretofore furnished to Lender, certificates ofinsurance evidencing the Policies accompanied by evidence satisfactory toLender of payment of the premiums due thereunder (the “**Insurance Premiums**”), shall be delivered by Borrower to Lender.

 

(c)                                  Any blanketinsurance Policy shall specifically allocate to the Property the amount ofcoverage from time to time required hereunder and shall otherwise provide thesame protection as would a separate Policy insuring only the Property incompliance with the provisions of 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 lossthereunder shall be payable to Lender.

 

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

 

(i)                                     no act ornegligence of Borrower, or anyone acting for Borrower, or of any Tenant orother occupant, or failure to comply with the provisions of any Policy, whichmight otherwise result in a forfeiture of the insurance or any part thereof,shall in any way affect the validity or enforceability of the insurance insofaras Lender is concerned;

 

(ii)                                  the Policy shallnot be materially changed (other than to increase the coverage providedthereby) or canceled without at least thirty (30) days’ written notice toLender and any other party named therein as an additional insured;

 

(iii)                              the issuers thereofshall give written notice to Lender if the Policy has not been renewed fifteen(15) days prior to its expiration; and

 

(iv)                             Lender shall not beliable for any Insurance Premiums thereon or subject to any assessmentsthereunder.

 

(f)                                    If at any timeLender 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 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. If Borrower fails in so insuring the Property orin so assigning and delivering the Policies, Lender may, at its option, obtainsuch insurance using such carriers and agencies as Lender shall elect from yearto year and pay the premiums therefor, and Borrower will reimburse Lender forany premium so paid, with interest thereon as stated in the

 

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Note from the time of payment, on demand, andthe amount so owning to Lender shall be secured by the Mortgage. The insuranceobtained by Lender may, but need not, protect Borrower’s interest and thecoverage that Lender purchases may not pay any claim that Borrower makes or anyclaim that is made against Borrower in connection with the Property.

 

Section 6.2                                     Casualty.  Ifthe Property shall be damaged or destroyed, in whole or in part, by fire orother casualty (a “**Casualty**”),Borrower (a) shall give to Lender prompt notice of such damage reasonablyestimated by Borrower to cost more than One Hundred Thousand Dollars ($100,000.00)to repair, and (b) shall promptly commence and diligently prosecute thecompletion of the repair and restoration of the Property as nearly as possibleto the condition the Property was in immediately prior to such fire or othercasualty, with such alterations as may be reasonably approved by Lender (a “**Restoration**”) and otherwise in accordancewith Section 6.4. Borrower shall pay all costs of such Restoration whetheror not such costs are covered by insurance. Lender may, but shall not beobligated to make proof of loss if not made promptly by Borrower.

 

Section 6.3                                      Condemnation.

 

(a)                                  Borrower shallpromptly give Lender notice of the actual or threatened commencement of anyproceeding for the Condemnation of the Property and shall deliver to Lendercopies of any and all papers served in connection with such proceedings. Lendermay participate in any such proceedings, and Borrower shall from time to timedeliver to Lender all instruments requested by it to permit such participation.Borrower shall, at its expense, diligently prosecute any such proceedings, andshall consult with Lender, its attorneys and experts, and cooperate with themin the carrying on or defense of any such proceedings. Notwithstanding anytaking by any public or quasi-public authority through Condemnation orotherwise (including but not limited to any transfer made in lieu of or inanticipation of the exercise of such taking), Borrower shall continue to paythe Debt at the time and in the manner provided for its payment in the Note andin this Agreement and the Debt shall not be reduced until any Award shall havebeen actually received and applied by Lender, after the deduction of expensesof collection, to the reduction or discharge of the Debt, Lender shall not belimited to the interest paid on the Award by the condemning authority but shallbe entitled to receive out of the Award interest at the rate or rates providedherein or in the Note, If the Property or any portion thereof is taken by acondemning authority, Borrower shall promptly commence and diligently prosecutethe Restoration of the Property and otherwise comply with the provisions of Section 6.4.If the Property is sold, through foreclosure or otherwise, prior to the receiptby Lender of the Award, Lender shall have the right, whether or not adeficiency judgment on the Note shall have been sought, recovered or denied, toreceive the Award, or a portion thereof sufficient to pay the Debt.

 

Section 6.4                                     Restoration.

 

(a)                                  If the Net Proceedsshall be less than Relevant Restoration Threshold and the costs of completingthe Restoration shall be less than the Relevant Restoration Threshold, the NetProceeds will be disbursed by Lender to Borrower upon receipt, provided thatall of the conditions set forth in clauses (A), (E), (F), (G), (H), (J) and (L)of Section 6.4(b)(i) below are met and Borrower delivers to Lender awritten undertaking to expeditiously commence and to

 

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satisfactorily complete with duediligence the Restoration in accordance with the terms of this Agreement.

 

(b)                                  If the Net Proceedsare equal to or greater than the Relevant Restoration Threshold or the costs ofcompleting the Restoration is equal to or greater than the Relevant RestorationThreshold, then in either case, Lender shall make the Net Proceeds availablefor the Restoration in accordance with the provisions of this Section 6.4(b).The term “**Net****Proceeds**” forpurposes 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,reasonable counsel fees), if any, in collecting same (“**Insurance Proceeds**”), or (y) the net amount of the Award, afterdeduction of its reasonable costs and expenses (including, but not limited to,reasonable counsel fees), if any, in collecting same (“**Condemnation Proceeds**”), whichever the case may be.

 

(i)                                     The Net Proceedsshall be made available to Borrower for Restoration provided that each of thefollowing conditions are met:

 

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

 

(B)                                (1) in the eventthe Net Proceeds are Insurance Proceeds, and (x) less than twenty-five percent(25%) of the total floor area of the Improvements on the Property has beendamaged, destroyed or rendered unusable as a result of such fire or othercasualty, or (y) Borrower is required under a Lease exceeding the RelevantLeasing Threshold to use the Net Proceeds for the restoration of the Property,or (2) in the event the Net Proceeds are Condemnation Proceeds, and (x) lessthan ten percent (10%) of the land constituting the Property is taken, and suchland is located along the perimeter or periphery of the Property, and noportion of the Improvements is located on such land, or (y) Borrower isrequired under a Lease exceeding the Relevant Leasing Threshold to use the NetProceeds for the restoration of the Property;

 

(C)                                Leases demising inthe aggregate a percentage amount equal to or greater than the Rentable SpacePercentage of the total rentable space in the Property which has been demisedunder executed and delivered Leases in effect as of the date of the occurrenceof such fire or other casualty or taking, whichever the case may be, shall remainin full force and effect during and after the completion of the Restoration,notwithstanding the occurrence of any such fire or other casualty or taking,whichever the case may be, and will make all necessary repairs and restorationsthereto at their sole cost and expense. The term “**Rentable Space Percentage**” shall mean (x) in the event the Net Proceedsare Insurance Proceeds, a percentage amount equal to fifty percent (50%) and(y)  in the event the Net Proceeds areCondemnation Proceeds, a percentage amount equal to fifty percent (50%);

 

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(D)                               Borrower shallcommence the Restoration as soon as reasonably practicable (but in no eventlater 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)                                 Lender shall besatisfied that any operating deficits, including all scheduled payments ofprincipal and interest under the Note, which will be incurred with respect tothe Property as a result of the occurrence of any such fire or other casualtyor 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)                                 Lender shall besatisfied that the Restoration will be completed on or before the earliest tooccur of (1) the Maturity Date, (2) the earliest date required for suchcompletion 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)                                the Property andthe use thereof after the Restoration will be in compliance with and permittedunder all applicable zoning laws, ordinances, rules and regulations provided,however, that compliance with such zoning laws, ordinances, rules andregulations (including, without limitation, parking requirements)  will not require restoration of theImprovements or the Property to a size, condition, or configuration materiallydifferent than that which existed immediately prior to such Casualty or taking;

 

(H)                               the Restorationshall be done and completed by Borrower in an expeditious and diligent fashionand in compliance with all applicable governmental laws, rules and regulations(including, without limitation, all applicable environmental laws);

 

(I)                                    such fire or othercasualty or taking, as applicable, does not result in the loss of access to theProperty or the related Improvements;

 

(J)                                   the Debt ServiceCoverage Ratio, after giving effect to the Restoration, shall be equal to orgreater than 2.50:1.0;

 

(K)                               Borrower shalldeliver or cause to be delivered to Lender a signed detailed budget approved inwriting by Borrower’s architect or engineer stating the entire cost ofcompleting the Restoration, which budget should be consistent with restorationbudgets of similar retail

 

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properties then owned andoperated by nationally recognized owners and operators of retail propertieslocated in the areas in which the Property is located; and

 

(L)                                 the Net Proceedstogether with any cash or cash equivalent deposited by Borrower with Lender aresufficient in Lender’s discretion to cover the cost of the Restoration.

 

(ii)                                  The Net Proceedsshall be held by Lender in an interest bearing account and, until disbursed inaccordance with the provisions of this Section 6.4(b), shall constituteadditional security for the Debt and other obligations under the LoanDocuments. The Net Proceeds shall be disbursed by Lender to, or as directed by,Borrower from time to time during the course of the Restoration, upon receiptof evidence satisfactory to Lender that (A) all materials installed and work andlabor performed to be paid for out of the requested disbursement in connectionwith the Restoration have been performed, and (B) there exist no notices ofpendency, stop orders, mechanic’s or materialman’s liens or notices ofintention to file same, or any other liens or encumbrances of any naturewhatsoever on the Property which have not either been fully bonded to thesatisfaction of Lender and discharged of record or in the alternative fullyinsured to the satisfaction of Lender by the title company issuing the TitleInsurance Policy.

 

(iii)                               All plans andspecifications required in connection with the Restoration shall be subject toprior review and acceptance in all respects by Lender and by an independentconsulting engineer selected by Lender (the “**Casualty****Consultant**”),such review and acceptance not to beunreasonably withheld or delayed. Lender shall have the use of the plans andspecifications and all permits, licenses and approvals required or obtained inconnection 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 and acceptancenot to be unreasonably withheld or delayed. All costs and expenses incurred byLender in connection 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)                              In no event shallLender be obligated to make disbursements of the Net Proceeds in excess of anamount equal to the costs actually incurred from time to time for work in placeas part of the Restoration, as certified by the Casualty Consultant, minus theCasualty Retainage. The term “**Casualty Retainage**” shall mean an amount equal to ten percent(10%) of the costs actually incurred for work in place as part of theRestoration, as certified by the Casualty Consultant, until the Restoration hasbeen completed. The Casualty Retainage shall in no event, and notwithstandinganything to the contrary set forth above in this Section 6.4(b), be lessthan the amount actually held back by Borrower from contractors, subcontractorsand materialmen engaged in the Restoration. The Casualty Retainage shall not bereleased until the Casualty Consultant certifies to Lender that the Restorationhas been completed in accordance with the

 

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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 any such portion of the Casualty Retainage shall be approved bythe surety company, if any, which has issued a payment or performance bond withrespect to the contractor, subcontractor or materialman.

 

(v)                                 Lender shall notbe obligated to make disbursements of the Net Proceeds more frequently thanonce every calendar month.

 

(vi)                              If at any timethe Net Proceeds or the undisbursed balance thereof shall not, in thereasonable opinion of Lender in consultation with the Casualty Consultant, besufficient to pay in full the balance of the costs which are estimated by theCasualty Consultant to be incurred in connection with the completion of theRestoration, Borrower shall deposit the deficiency (the “**Net********Proceeds Deficiency**”) with Lenderbefore any further disbursement of the Net Proceeds shall be made. The NetProceeds Deficiency deposited with Lender shall be held by Lender and shall bedisbursed for costs actually incurred in connection with the Restoration on thesame conditions applicable to the disbursement of the Net Proceeds, and untilso disbursed pursuant to this Section 6.4(b) shall constitute additionalsecurity for the Debt and other obligations under the Loan Documents.

 

(vii)                           The excess, ifany, of the Net Proceeds and the remaining balance, if any, of the Net ProceedsDeficiency deposited with Lender after the Casualty Consultant certifies toLender that the Restoration has been completed in accordance with theprovisions of this Section 6.4(b), and the receipt by Lender of evidencesatisfactory 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 occurred and shall be continuing underthe Note, this Agreement or any of the other Loan Documents.

 

(c)                                  All Net Proceedsnot required (i) to be made available for the Restoration or (ii) to bereturned 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

 

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(provided no Event of Default exists, suchBorrower 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 NetProceeds Prepayment shall be equal to or greater than Eight Million and 00/100Dollars ($8,000,000.00), 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) daysfollowing 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) hereofon or before the second Payment Date occurring following the date of the NetProceeds Prepayment, and (iii) no Event of Default shall exist on the date ofsuch Casualty/Condemnation Prepayment. Notwithstanding anything in Section 6.2or Section 6.3 to the contrary, Borrower shall have no obligation tocommence Restoration of the Property upon delivery of the written notice setforth in clause (i) of the preceding sentence (unless Borrower subsequentlyshall fail to satisfy the requirement of clause (ii) of the preceding sentence).

 

**ARTICLE VIIRESERVE FUNDS**

 

Section 7.1                                      Required RepairFunds.

 

7.1.1                        Deposits.  Borrower shall perform the repairs at theProperty, if any, as more particularly set forth on Schedule IIIhereto (such repairs hereinafter referred to as “**Required Repairs**”)withinsix (6) months from the Closing Date, or such earlier time as specified on Schedule III.If Borrower has not delivered to Lender evidence reasonably satisfactory toLender that it has completed all Required Repairs on or before the date that issix (6) months from the Closing Date, or such earlier time as specified on Schedule III,Borrower shall deposit with Lender the amount for the Property set forth onsuch Schedule III hereto, if any (less the amount allocated to theperformance of Required Repairs for which evidence of completion has beendelivered to Lender), to perform the Required Repairs for the Property.  Amounts so deposited with Lender, if any,shall be held by Lender in an interest bearing account. 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

 

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Borrower’s “**Required Repair Account**”.Itshall be an Event of Default under this Agreement if Borrower does not either(i) does not deposit with Lender the Required Repair Fund as set forth above,or (ii) complete the Required Repairs at the Property within nine (9) monthsfrom the Closing Date. Upon the occurrence of such an Event of Default, Lender,at its option, may withdraw all Required Repair Funds from the Required RepairAccount and Lender may apply such funds either to completion of the RequiredRepairs at the Property or toward payment of the Debt in such order, proportionand priority as Lender may determine in its sole discretion. Lender’s right towithdraw and apply Required Repair Funds shall be in addition to all otherrights and remedies provided to Lender under this Agreement and the other LoanDocuments.

 

7.1.2                        Release ofRequired 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 requesteddisbursement has been paid in full or will be paid in full upon suchdisbursement, such certificate to be accompanied by lien waivers or otherevidence of payment satisfactory to Lender, (iv) at Lender’s option, a titlesearch for the Property indicating that the Property is free from all liens,claims and other encumbrances not previously approved by Lender, and (v) Lendershall have received such other evidence as Lender shall reasonably request thatthe Required 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 required to make disbursements from the RequiredRepair Account with respect to the Property more than once each calendar monthand such disbursement shall be made only upon satisfaction of each conditioncontained in this Section 7.1.2.

 

Section 7.2                                      Tax and InsuranceEscrow Fund.

 

Borrower shall pay to Lender on eachPayment Date (a) one-twelfth of the Taxes that Lender estimates will be payableduring the next ensuing twelve (12) months in order to accumulate with Lendersufficient funds to pay all such Taxes at least thirty (30) days prior to theirrespective due dates and (b) one-twelfth of the Insurance Premiums that Lenderestimates will be payable for the renewal of the coverage afforded by thePolicies 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 andInsurance Escrow Fund and the payments of interest or principal or both,payable pursuant to the Note, shall be

 

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added together and shall be paid as an aggregatesum by Borrower to Lender. Lender will apply the Tax and Insurance Escrow Fundto payments of Taxes and Insurance Premiums required to be made by Borrowerpursuant to this Agreement and under the Mortgage. In making any paymentrelating to the Tax and Insurance Escrow Fund, Lender may do so according toany bill, statement or estimate procured from the appropriate public office(with respect to Taxes) or insurer or agent (with respect to InsurancePremiums) or from Borrower without inquiry into the accuracy of such bill,statement or estimate or into the validity of any tax, assessment, sale,forfeiture, tax lien or title or claim thereof, provided, however, Lender shalluse reasonable efforts to pay such real property taxes sufficiently early toobtain the benefit of any available discounts of which it has knowledge. If theamount of the Tax and Insurance Escrow Fund shall exceed the amounts due forTaxes and Insurance Premiums, Lender shall, in its sole discretion, return anyexcess to Borrower or credit such excess against future payments to be made tothe Tax and Insurance Escrow Fund. The Tax and Insurance Escrow Fund shall beheld by Lender in an interest-bearing account and shall at Lender’s option beheld in Eligible Account at an Eligible Institution. Any interest earned onsaid account shall accrue in said account for the benefit of Borrower, butshall remain in and constitute part of the Tax and Insurance Escrow Fund, andshall be disbursed in accordance with the terms hereof. Any amount remaining inthe Tax and Insurance Escrow Fund after the Debt has been paid in full shall bereturned to Borrower. In allocating such excess, Lender may deal with thePerson shown on the records of Lender to be the owner of the Property. If atany time Lender reasonably determines that the Tax and Insurance Escrow Fund isnot or will not be sufficient to pay Taxes or Insurance Premiums by the datesset forth above, Lender shall notify Borrower of such determination andBorrower shall increase its monthly payments to Lender by the amount thatLender estimates is sufficient to make up the deficiency at least thirty (30)days prior to delinquency of the Taxes or Insurance Premiums.

 

Notwithstanding anything to the contraryhereinbefore contained, in the event that Borrower provides (1) evidencesatisfactory to Lender that the Property is insured in accordance with Section 6.1of this Agreement and (2) evidence satisfactory to Lender that the Taxes forthe Property have been paid in accordance with the requirements set forth inthis Agreement, Lender will waive the requirement set forth herein for Borrowerto make deposits into the Tax and Insurance Escrow Fund for the payment ofInsurance Premiums and for payment of such Taxes, provided, however, Lenderexpressly reserves the right to require Borrower to make deposits to the Taxand Insurance Escrow Fund for the payment of Insurance Premiums if at any timethe Property is not insured in accordance with Section 6.1 of thisAgreement or Taxes are not paid in accordance with the requirements of thisAgreement.

 

Section 7.3                                      Replacements andReplacement Reserve.

 

Section 7.3.1                             ReplacementReserve Fund.  Borrower shall pay to Lenderon the Closing Date and on each Payment Date one twelfth of the amount (the “**ReplacementReserve Monthly Deposit**”) reasonably estimated by Lender in its solediscretion to be due for replacements and repairs required to be made to theProperty during the calendar year (collectively, the “**Replacements**”),whichReplacement Reserve Monthly Deposit shall be in an amount equal to no less than$0.15 per year per square foot of gross leasable area. Amounts so depositedshall hereinafter be referred to as Borrower’s “**Replacement Reserve********Fund**” and the account in which such amounts areheld shall hereinafter be referred to as Borrower’s

 

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“**Replacement Reserve Account**”. 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 Reserve Accountand allocated for the Property shall be retained by Lender in an interestbearing account, or, at the option of Lender, in an Eligible Account at anEligible 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.

 

Notwithstanding anything to the contrary inthis Section 7.3, Borrower shall not be required to make ReplacementReserve Monthly Deposits, provided that: (i) no Event of Default shall haveoccurred; and (ii) Borrower makes all necessary Replacements and otherwisemaintains the Property to Lender’s satisfaction. Upon notice from Lender following:(a) an Event of Default; or (b) the failure of Borrower to make necessaryReplacements or otherwise maintain the Property to Lender’s satisfaction,Borrower shall begin to deposit the Replacement Reserve Monthly Deposit intothe Replacement Reserve Fund beginning on the Payment Date (as defined herein)immediately following 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,upon written request from Borrower and satisfaction of the requirements setforth in this Section 7.3.2, disburse to Borrower amounts from theReplacement Reserve Account necessary to pay for the actual approved costs ofReplacements or to reimburse Borrower therefor, upon completion of suchReplacements (or, upon partial completion in the case of Replacements madepursuant 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 purchased,if the Replacement includes the purchase or replacement of specific items,(iii) the price of all materials (grouped by type or category) used in any Replacementother than the purchase or replacement of specific items, and (iv) the cost ofall contracted labor or other services applicable to each Replacement for whichsuch request for disbursement is made. With each request Borrower shall certifythat all Replacements have been made in accordance with all applicable LegalRequirements of any Governmental Authority having jurisdiction over the Propertyto which the Replacements are being provided and, unless Lender has agreed toissue joint checks as described below, each request shall include evidence ofpayment of all such

 

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amounts. Each request for disbursement shallinclude copies of invoices for all items or materials purchased and allcontracted labor or services provided. Except as provided in Section 7.3.2(e),each request for disbursement from the Replacement Reserve Account shall bemade only after completion of the Replacement for which disbursement isrequested. Borrower shall provide Lender evidence of completion satisfactory toLender in its reasonable judgment.

 

(d)                                 Borrower shallpay all invoices 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 inconnection with a Replacement.  In thecase of payments made by joint check, Lender may require a waiver of lien fromeach Person receiving payment prior to Lender’s disbursement from theReplacement Reserve Account. In addition, as a condition to any 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 delivered hereunder shall conform to therequirements of applicable law and shall cover all work performed and materialssupplied (including equipment and fixtures) for the Property by thatcontractor, supplier, subcontractor, mechanic or materialman through the date coveredby the current reimbursement request (or, in the event that payment to suchcontractor, supplier, subcontractor, mechanic or materialmen is to be made by ajoint check, the release of lien shall be effective through the date covered bythe previous release of funds request).

 

(e)                                  If (i) the costof a Replacement exceeds $100,000, (ii) the contractor performing suchReplacement requires periodic payments pursuant to terms of a written contract,and (iii) Lender has approved in writing in advance such periodic payments, arequest for reimbursement from the Replacement Reserve Account may be madeafter completion of a portion of the work under such contract, provided (A)such contract requires payment upon completion of such portion of the work, (B)the materials for which the request is made are on site at the Property and areproperly secured or have been installed in the Property, (C) all other conditionsin this Agreement for disbursement have been satisfied, (D) funds remaining inthe Replacement Reserve Account are, in Lender’s judgment, sufficient tocomplete such Replacement and other Replacements when required, and (E) ifrequired by Lender, each contractor or subcontractor receiving payments undersuch contract shall provide a waiver of lien with respect to amounts which havebeen paid to that contractor or subcontractor.

 

(f)                                    Borrower shallnot make a request for disbursement from the Replacement Reserve Account morefrequently than once in any calendar month and (except in connection with thefinal disbursement) the total cost of all Replacements in any request shall notbe less than $5,000,00.

 

Section 7.3.3                             Performance ofReplacements.

 

(a)                                  Borrower shallmake Replacements 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 Property or any portion thereof from deteriorating. Borrowershall complete all

 

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Replacements in a good and workmanlikemanner as soon as practicable following the commencement of making each suchReplacement.

 

(b)                                 Lender reservesthe right, 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 eventLender determines in its reasonable discretion that any Replacement is notbeing performed in a workmanlike or timely manner or that any Replacement hasnot been completed in a workmanlike or timely manner, and such failurecontinues to exist for more than thirty (30) days after notice from Lender toBorrower, Lender shall have the option to withhold disbursement for suchunsatisfactory Replacement and to proceed under existing contracts or tocontract with third parties to complete such Replacement and to apply the ReplacementReserve Fund toward the labor and materials necessary to complete such Replacement,without providing any prior notice to Borrower and to exercise any and allother remedies available to Lender upon an Event of Default hereunder.

 

(d)                                 In order tofacilitate Lender’s completion or making of the Replacements pursuant to Section 7.3.3(c)above, Borrower grants Lender the right to enter onto the Property and performany and all work and labor necessary to complete or make the Replacementsand/or employ watchmen to protect the Property from damage, subject to therights of Tenants.  All sums so expendedby Lender, to the extent not from the Replacement Reserve Fund, shall be deemedto have been advanced under the Loan to Borrower and secured by theMortgage.  For this purpose Borrowerconstitutes and appoints Lender its true and lawful attorney-in-fact with fullpower of substitution to complete or undertake the Replacements in the name ofBorrower. Such power of attorney shall be deemed to be a power coupled with aninterest and cannot be revoked but shall only be effective following an Eventof Default.  Borrower empowers said attorney-in-factas follows:   (i) to use any funds in theReplacement Reserve Account for the purpose of making or completing theReplacements; (ii) to make such additions, changes and corrections to theReplacements as shall be necessary or desirable to complete the Replacements; (iii)to employ such contractors, subcontractors, agents, architects and inspectorsas shall be required for such purposes; (iv) to pay, settle or compromise allexisting bills and claims which are or may become Liens against the Property,or as may be necessary or desirable for the completion of the Replacements, orfor clearance of title; (v) to execute all applications and certificates in thename of Borrower which may be required by any of the contract documents; (vi)to prosecute and defend all actions or proceedings in connection with theProperty or the rehabilitation and repair of the Property; and (vii) to do anyand every act which Borrower might do in its own behalf to fulfill the terms ofthis 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.

 

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(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 and subcontractorsto cooperate with Lender or Lender’s representatives or such other personsdescribed 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 requirean inspection 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. Lendermay require that such inspection be conducted by an appropriate independentqualified professional selected by Lender and/or may require a copy of acertificate of completion by an independent qualified professional acceptableto Lender prior to the disbursement of any amounts from the Replacement ReserveAccount. Borrower shall pay the expense of the inspection as requiredhereunder, whether such inspection is conducted by Lender or by an independentqualified professional.

 

(h)                                 The Replacementsand all materials, equipment, fixtures, or any other item comprising a part ofany Replacement shall be constructed, installed or completed, as applicable,free and clear of all mechanic’s, materialman’s or other liens (except forthose Liens existing on the date of this Agreement which have been approved inwriting by Lender).

 

(i)                                     Before eachdisbursement from the Replacement Reserve Account, Lender may require Borrowerto provide Lender with a search of title to the Property effective to the dateof the disbursement, which search shows that no mechanic’s or materialmen’sliens or other liens of any nature have been placed against the Property sincethe date of recordation of the Mortgage and that title to the Property is freeand clear of all Liens (other than the lien of the Mortgage and any other Lienspreviously approved in writing by Lender, if any).

 

(j)                                     All Replacementsshall comply with all applicable Legal Requirements of all GovernmentalAuthorities having jurisdiction over the Property and applicable insurance requirementsincluding, without limitation, applicable building codes, special use permits,environmental regulations, and requirements of insurance underwriters.

 

(k)                                  In addition toany insurance required under the Loan Documents, Borrower shall provide or causeto be 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 inform and amount reasonably satisfactory to Lender. All such policies which canbe endorsed with standard mortgagee clauses making loss payable to Lender orits assigns shall be so endorsed. Certified copies of such policies shall bedelivered to Lender.

 

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Section 7.3.4                             Failure to MakeReplacements.  (a)  It shall be an Event of Default under thisAgreement if Borrower fails to comply with any provision of this Section 7.3and such failure is not cured within thirty (30) days after notice from Lender;provided, however, if such failure is not capable of being curedwithin said thirty (30) day period, then provided that Borrower commencesaction to complete such cure and thereafter diligently proceeds to completesuch cure, such thirty (30) day period shall be extended for such time as isreasonably necessary for Borrower, in the exercise of due diligence, to curesuch failure, but such additional period of time shall not exceed sixty (60)days. Upon the occurrence of such an Event of Default, Lender may use theReplacement Reserve Fund (or any portion thereof) for any purpose, includingbut not limited to completion of the Replacements as provided in Section 7.3.3,or for any other repair or replacement to the Property or toward payment of theDebt in such order, proportion and priority as Lender may determine in its solediscretion. Lender’s right to withdraw and apply the Replacement Reserve Fundsshall be in addition to all other rights and remedies provided to Lender underthis Agreement and the other Loan Documents.

 

(b)                                 Nothing in thisAgreement shall obligate Lender to apply all or any portion of the ReplacementReserve Fund on account of an Event of Default to payment of the Debt or in anyspecific order or priority.

 

Section 7.3.5                             Balance in theReplacement Reserve Account.  Theinsufficiency of any balance in the Replacement Reserve Account shall notrelieve Borrower from its obligation to fulfill all preservation andmaintenance 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 rights andclaims 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                                      IntentionallyOmitted.

 

Section 7.5                                      IntentionallyOmitted.

 

Section 7.6                                      IntentionallyOmitted.

 

Section 7.7                                      Reserve Funds,Generally.

 

7.7.1                        Borrower grants to Lender a first-priorityperfected security interest in each of the Reserve Funds and any and all moniesnow or hereafter deposited in each Reserve Fund as additional security forpayment of the Debt. Until expended or applied in accordance herewith, theReserve Funds shall constitute additional security for the Debt.

 

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7.7.2                        Upon the occurrence of an Event of Default,Lender may, in addition to any and all other rights and remedies available toLender, apply any sums then present in any or all of the Reserve Funds to thepayment 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, without obtaining theprior written consent of Lender, further pledge, assign or grant any securityinterest in any Reserve Fund or the monies deposited therein or permit any lienor encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1Financing Statements, except those naming Lender as the secured party, to befiled with respect thereto.

 

7.7.6                        Lender shall not be liable for any losssustained on the investment of any funds constituting the Reserve Funds unlessoccasioned by the gross negligence or willful misconduct of Lender.

 

7.7.7                        Upon payment in full of the Debt andperformance of all other obligations under this Agreement and the other LoanDocuments, Lender shall disburse to Borrower all remaining Reserve Funds.

 

**ARTICLE VIIIDEFAULTS**

 

Section 8.1                                      Event of Default.  (a)  Eachof the following events shall constitute an event of default hereunder (an “**Event ofDefault**”):

 

(i)                                     if any portion ofthe Debt is not paid within five (5) days of the applicable due date;

 

(ii)                                  if any of theTaxes or Other Charges are not paid prior to the date when the same becomedelinquent, except to the extent that Borrower is contesting same in accordancewith the terms of Section 5.1.2 hereof, or there are sufficient funds inthe Tax and Insurance Escrow Fund to pay such Taxes or Other Charges and Lenderfails to or refuses to release the same from the Tax and Insurance Escrow Fund;

 

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

 

(iv)                              if Borrowertransfers or encumbers any portion of the Property without Lender’s priorwritten consent (to extent such consent is required) or otherwise violates theprovisions of Section 5.2.13 of this Loan Agreement;

 

(v)                                 if any materialrepresentation or warranty made by Borrower herein or in any other LoanDocument, or in any report, certificate, financial statement or otherinstrument, agreement or document furnished to Lender shall have been false or

 

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misleading in any materialrespect as of the date the representation or warranty was made;

 

(vi)                              if Borrower orindemnitor or any guarantor under any guaranty or indemnity issued inconnection with the Loan shall make an assignment for the benefit of creditors;

 

(vii)                           if a receiver,liquidator or trustee shall be appointed for Borrower or any guarantor orindemnitor under any guarantee or indemnity issued in connection with the Loanor if Borrower or such guarantor or indemnitor shall be adjudicated a bankruptor insolvent, or if any petition for bankruptcy, reorganization or arrangementpursuant to federal bankruptcy law, or any similar federal or state law, shallbe filed by or against, consented to, or acquiesced in by, Borrower or suchguarantor or indemnitor, or if any proceeding for the dissolution orliquidation of Borrower or such guarantor or indemnitor shall be instituted; provided,however, if such appointment, adjudication, petition or proceeding wasinvoluntary and not consented to by Borrower or such guarantor or indemnitor,upon the same not being discharged, stayed or dismissed within one hundredeighty (180) days;

 

(viii)                        if Borrowerattempts to assign its rights under this Agreement or any of the other LoanDocuments or any interest herein or therein in contravention of the LoanDocuments;

 

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

 

(x)                                   with respect toany term, covenant or provision set forth herein which specifically contains anotice requirement or grace period, if Borrower shall be in default under suchterm, covenant or condition after the giving of such notice or the expirationof such grace period;

 

(xi)                                if any of theassumptions contained in any substantive non-consolidation opinion delivered inconnection herewith are or shall become untrue in any material respect;

 

(xii)                             if Borrower shallcontinue to be in Default under any of the other terms, covenants or conditionsof this Agreement not specified in subsections (i) to (xi) above, for ten (10)days after notice to Borrower from Lender, in the case of any Default which canbe cured by the payment of a sum of money, or for thirty (30) days after noticefrom Lender in the case of any other Default; provided, however,that if such non-monetary Default is susceptible of cure but cannot reasonablybe cured within such 30-day period and provided further that Borrower shallhave commenced to cure such Default within such 30-day period and thereafterdiligently and expeditiously proceeds to cure the same, such 30-day periodshall be extended for such time as is reasonably necessary for Borrower in theexercise of due diligence to cure such Default, such additional period not toexceed one hundred eighty (180) days; or

 

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(xiii)                          if there shall bedefault under any of the other Loan Documents beyond any applicable cureperiods contained in such documents, whether as to Borrower or the Property, orif any other such event shall occur or condition shall exist, if the effect ofsuch event or condition is to accelerate the maturity of any portion of theDebt or to permit Lender to accelerate the maturity of all or any portion ofthe Debt.

 

(b)                                 Upon theoccurrence of an Event of Default (other than an Event of Default described inclauses (vi), (vii) or (viii) above) and at any time thereafter Lender may, inaddition 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.

 

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 Lendershall be cumulative and concurrent and may be pursued independently, singly,successively, together or otherwise, at such time and in such order as Lendermay determine in its sole discretion, to the fullest extent permitted by law,without impairing or otherwise affecting the other rights and remedies ofLender permitted by law, equity or contract or as set forth herein or in theother Loan Documents. Without limiting the generality of the foregoing,Borrower agrees that if an Event of Default is continuing (i) Lender is notsubject to any “one action” or “election of remedies” law or rule, and (ii) allliens and other rights, remedies or privileges provided to Lender shall remainin full force and effect until Lender has exhausted all of its remedies againstthe Property and the Mortgage has been foreclosed, sold and/or otherwiserealized upon in satisfaction of the Debt or the Debt has been paid in full.

 

(b)                                 Lender shall havethe right from time to time to partially foreclose the Mortgage in any mannerand for any amounts secured by the Mortgage then due and payable as determinedby Lender 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

 

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such other sums secured by the Mortgage asLender may elect. Notwithstanding one or more partial foreclosures, theProperty shall remain subject to the Mortgage to secure payment of sums securedby the Mortgage and not previously recovered.

 

(c)                                  Lender shall havethe right from time to time to sever the Note and the other Loan Documents intoone or more separate notes, mortgages and other security documents (the “**SeveredLoan Documents**”) in such denominations as Lender shall determinein its sole discretion for purposes of evidencing and enforcing its rights andremedies provided hereunder. Borrower shall execute and deliver to Lender fromtime to time, promptly after the request of Lender, a severance agreement andsuch other documents as Lender shall request in order to effect the severancedescribed in the preceding sentence, all in form and substance reasonably satisfactoryto Lender.  Borrower hereby absolutelyand irrevocably appoints Lender following the occurrence of an Event of Defaultas its true and lawful attorney, coupled with an interest, in its name andstead to make and execute all documents necessary or desirable to effect the aforesaidseverance, Borrower ratifying all that its said attorney shall do by virtuethereof; provided, however, Lender shall not make or execute anysuch documents under such power until three (3) days after notice has beengiven to Borrower by Lender of Lender’s intent to exercise its rights undersuch power.  Borrower shall not beobligated to pay any costs or expenses incurred in connection with thepreparation, execution, recording or filing of the Severed Loan Documents, andthe Severed Loan Documents shall not contain any representations, warranties orcovenants not contained in the Loan Documents and any such representations andwarranties contained in the Severed Loan Documents will be given by Borroweronly as of the Closing Date.

 

(d)                                 As used in this Section 8.2,a “foreclosure” shall include any sale by power of sale.

 

Section 8.3                                      RemediesCumulative; Waivers.  The rights, powers and remedies of Lenderunder this Agreement shall be cumulative and not exclusive of any other right,power or remedy which Lender may have against Borrower pursuant to thisAgreement or the other Loan Documents, or existing at law or in equity orotherwise. Lender’s rights, powers and remedies may be pursued singly,concurrently or otherwise, at such time and in such order as Lender maydetermine in Lender’s sole discretion. No delay or omission to exercise anyremedy, right or power accruing upon an Event of Default shall impair any suchremedy, right or power or shall be construed as a waiver thereof, but any suchremedy, right or power may be exercised from time to time and as often as maybe deemed expedient. A waiver of one Default or Event of Default with respectto Borrower shall not be construed to be a waiver of any subsequent Default orEvent of Default by Borrower or to impair any remedy, right or power consequentthereon.

 

**ARTICLE IXSPECIAL PROVISIONS**

 

Section 9.1                                      Sale of Notes andSecuritization.  At the request of the holder of the Note and,to the extent not already required to be provided by Borrower under thisAgreement, Borrower shall cooperate with Lender to allow Lender to satisfy themarket standards to which the holder of the Note customarily adheres or whichmay be reasonably

 

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required in the marketplace or by the RatingAgencies in connection with the sale of the Note or participations therein orthe first successful securitization (such sale and/or securitization, the “**Securitization**”) of rated singleor multi-class securities (the “**Securities**”)secured by or evidencing ownership interests in the Note and the Mortgage. Inthis regard Borrower shall:

 

(a)                                  (i)  provide such financial and other informationwith respect to the Property, Borrower and the Manager, (ii) provide budgetsrelating to the Property and (iii) to perform or permit or cause to beperformed or permitted such site inspection, appraisals, market studies,environmental reviews and reports (Phase I’s and, if appropriate, Phase II’s),engineering reports and other due diligence investigations of the Property, asmay be reasonably requested by the holder of the Note or the Rating Agencies oras may be necessary or appropriate in connection with the Securitization (the “**ProvidedInformation**”), together, if customary, with appropriateverification and/or consents of the Provided Information through letters ofauditors or opinions of counsel of independent attorneys acceptable to Lenderand 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 customaryin securitization transactions, which counsel and opinions shall be reasonably satisfactoryto the holder of the 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 material out-of-pocket third partycosts and expenses incurred by Borrower in connection with complying withrequests made under this Section 9.1 shall be paid by Lender.

 

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 “**DisclosureDocument**”) and may also be included in filings with the Securities and ExchangeCommission pursuant to the Securities Act of 1933, as amended (the “**SecuritiesAct**”), or the Securities and Exchange Act of 1934, as amended (the “**ExchangeAct**”), or provided or made available to investors or prospective investorsin the Securities, the Rating Agencies, and service providers relating to theSecuritization. In the event that the Disclosure Document is required to berevised prior to the sale of all Securities, Borrower will cooperate with theholder of the Note in updating the Disclosure Document by providing all currentinformation necessary to keep the Disclosure Document accurate and complete inall material respects.

 

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

 

Section 9.4                                      Exculpation.  Subject to the qualifications below, Lendershall not enforce the liability and obligation of Borrower to perform andobserve the obligations contained in the Note, this Agreement, the Mortgage orthe other Loan Documents by any action or proceeding wherein a money judgmentshall be sought against Borrower, except that Lender may bring a foreclosureaction, an action for specific performance or any other appropriate action orproceeding to enable Lender to enforce and realize upon its interest under theNote, this Agreement, the Mortgage and the other Loan Documents, or in theProperty, the Rents following an Event of Default, or any other collateralgiven to Lender pursuant to the Loan Documents; provided, however, that, exceptas specifically provided herein, any judgment in any such action or proceedingshall be enforceable against Borrower only to the extent of Borrower’s interestin the Property, in the Rents following an Event of Default and in any othercollateral given to Lender, and Lender, by accepting the Note, this Agreement,the Mortgage and the other Loan Documents, agrees that it shall not sue for,seek or demand any deficiency judgment against Borrower in any such action orproceeding under or by reason of or under or in connection with the Note, thisAgreement, the Mortgage or the other Loan Documents. The provisions of this section shallnot, 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 theAssignment of Leases following an Event of Default; (f) constitute aprohibition against Lender commencing any other appropriate action orproceeding in order for Lender to exercise its remedies against the Property;or (g) constitute a waiver of the right of Lender to enforce the liability andobligation of Borrower, by money judgment or otherwise, to the extent of anyloss, damage, cost, expense, liability, claim or other obligation incurred byLender (including attorneys’ fees and costs reasonably incurred) arising out ofor in connection with the following:

 

(i)            fraud orintentional misrepresentation by Borrower or any guarantor in connection withthe Loan;

 

(ii)           the gross negligence or willful misconductof Borrower;

 

(iii)          material physical waste of the Property;

 

(iv)          the breach of any representation, warranty,covenant or indemnification provision in the Environmental Indemnity or in theMortgage concerning environmental laws, hazardous substances and asbestos andany indemnification of Lender with respect thereto in either document;

 

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

 

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(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)                           failure to paycharges for labor or materials or other charges that can create liens on anyportion of the Property; or

 

(viii)                        any securitydeposits, advance deposits or any other deposits collected with respect to theProperty which are not delivered to Lender upon a foreclosure of the Propertyor action in lieu thereof, except to the extent any such security deposits wereapplied in accordance with the terms and conditions of any of the Leases priorto the occurrence of the Event of Default that gave rise to such foreclosure oraction in lieu thereof.

 

Notwithstanding anything to the contrary inthis Agreement, the Note or any of the Loan Documents, (A) the Debt shall befully recourse to the Borrower and (B) Lender shall not be deemed to havewaived any right which Lender may have under Section 506(a), 506(b),111l(b) or any other provisions of the U.S. Bankruptcy Code to file a claim forthe full amount of the Debt secured by the Mortgage or to require that allcollateral shall continue to secure all of the Debt owing to Lender inaccordance with the Loan Documents in the event that the (I) 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 (III) failure of Borrower to comply with Section 4.1.30hereof, or (IV) failure of Borrower to obtain Lender’s prior written consent(to extent such consent is required) to any subordinate financing or othervoluntary lien encumbering the Property, or (V) failure of Borrower to obtainLender’s prior written consent to any assignment, transfer or conveyance of theProperty, or any portion thereof, or any interest therein as required by thisAgreement. Notwithstanding the provision set forth in clause (IV) of thisparagraph, a voluntary lien other than a lien securing an extension ofcredit filed against the Property shall not constitute a recourse trigger forpurposes of this paragraph provided such lien (A) is fully bonded to thesatisfaction of Lender and discharged of record within ninety (90) days offiling, or (B) within such ninety (90) day period, Lender receives affirmativetitle insurance from the title insurance company insuring the lien of theMortgage that such lien is subject and subordinate to the lien of the Mortgageand no enforcement action is commenced by the applicable lien holder. Upon theacceptance by Lender of any cure by Borrower of a recourse trigger described inclauses (I), (II) or (IV) above, the Debt shall no longer be fully recourse toBorrower solely as a result of such trigger. Upon the acceptance by Lender ofany cure by Borrower of a recourse trigger described in clauses (III) or (V)above, the Debt shall no longer be fully recourse to Borrower solely as aresult of such trigger, provided, however, Borrower shall remain liable to

 

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the extent of any loss, damage, cost,expense, liability, claim or other obligation incurred by Lender (includingattorneys’ fees and costs reasonably incurred) arising out of or in connection withsuch trigger.

 

Section 9.5                                      Termination ofManager.  If (a) the amounts evidenced by the Note havebeen accelerated pursuant to Section 8.1(b) hereof, (b) the Manager shallbecome insolvent, (c) the Manager is in default under the terms of theManagement Agreement beyond any applicable grace or cure period, or (d) Manageris not managing the Property in accordance with the management practices ofnationally recognized management companies managing similar properties inlocations comparable to those of the Property, then, in the case of (a), (b),(c) or (d), Borrower shall, at the request of Lender, terminate the ManagementAgreement and replace the Manager with a manager reasonably approved by Lenderon terms and conditions reasonably satisfactory to Lender, it being understoodand agreed that the management fee for such replacement manager shall notexceed then prevailing market rates. In addition and without limiting therights of Lender hereunder or under any of the other Loan Documents, in theevent that (i) the Management Agreement is terminated, (ii) the Manager nolonger manages the Property, or (iii) a receiver, liquidator or trustee shallbe appointed for Manager or if Manager shall be adjudicated a bankrupt orinsolvent, or if any petition for bankruptcy, reorganization or arrangementpursuant to federal bankruptcy law, or any similar federal or state law, shallbe filed by or against, consented to, or acquiesced in by, Manager, or if anyproceeding for the dissolution or liquidation of Manager shall be instituted,then Borrower (at Borrower’s sole cost and expense) shall immediately, in itsname, establish new deposit accounts separate from any other Person with adepository satisfactory to Lender into which all Rents and other income fromthe Property shall be deposited and shall grant Lender a first prioritysecurity interest in such account pursuant to documentation satisfactory inform and substance to Lender.

 

Section 9.6                                      Servicer.  Atthe option of Lender, the Loan may be serviced by a servicer/trustee (the “**Servicer**”) selected byLender and Lender may delegate all or any portion of its responsibilities underthis Agreement and the other Loan Documents to the Servicer pursuant to aservicing agreement (the “**Servicing Agreement**”)between Lender and Servicer.  Lendershall be responsible for any set-up fees or any other costs relating to orarising under the Servicing Agreement.

 

Section 9.7                                      Splitting theLoan.  At the election of Lender in its solediscretion, the Loan or any individual Note making up the Loan shall be split andsevered into two or more loans which, at Lender’s election, shall not becross-collateralized or cross-defaulted with each other. Borrower hereby agreesto deliver to Lender to effectuate such severing of the Loan or any individualNote, as the case may be, as reasonably requested by Lender, (a) additionalexecuted documents, or amendments and modifications to the applicable LoanDocuments, (b) new opinions or updates to the opinions delivered to Lender inconnection with the closing of the Loan, (c) endorsements and/or updates to thetitle insurance policies delivered to Lender in connection with the closing ofthe Loan, and (d) any other certificates, instruments and documentationreasonably determined by Lender as necessary or appropriate to such severance(the items described in subsections (a) through (d) collectively hereinaftershall be referred to as “Severing Documentation”), which Severing Documentationshall be acceptable to Lender in form and substance in its reasonablediscretion. Lender hereby agrees to be responsible for all reasonablethird-party expenses incurred in connection with the preparation and deliveryof the

 

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Severing Documentation and the effectuation of theuncrossing of the Loan from the additional Loans. Borrower hereby acknowledgesand agrees that upon such severing of the Loan, Lender may effect, in its solediscretion, one or more Securitizations of which the severed loans may be apart.

 

**ARTICLE XMISCELLANEOUS**

 

Section 10.1                                Survival.  This Agreement and all covenants, agreements,representations and warranties made herein and in the certificates deliveredpursuant hereto shall survive the making by Lender of the Loan and theexecution and delivery to Lender of the Note, and shall continue in full forceand effect so long as all or any of the Debt is outstanding and unpaid unless alonger period is expressly set forth herein or in the other Loan Documents.Whenever in this Agreement any of the parties hereto is referred to, suchreference shall be deemed to include the legal representatives, successors andassigns of such party.  All covenants,promises and agreements in this Agreement, by or on behalf of Borrower, shallinure to the benefit of the legal representatives, successors and assigns ofLender.

 

Section 10.2                                Lender’sDiscretion.  Whenever pursuant to this Agreement, Lenderexercises any right given to it to approve or disapprove, or any arrangement orterm is to be satisfactory to Lender, the decision of Lender to approve ordisapprove or to decide whether arrangements or terms are satisfactory or notsatisfactory shall (except as is otherwise specifically herein provided) be inthe sole discretion of Lender and shall be final and conclusive.

 

Section 10.3                                Governing Law. ** THIS****AGREEMENT SHALL BE DEEMED TOBE A CONTRACT ENTERED INTO PURSUANT TO THE****LAWS****OF THE****STATEIN****WHICHTHE PROPERTY IS LOCATED AND SHALL IN ALL RESPECTS BE GOVERNED, CONSTRUED,APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THEPROPERTY IS LOCATED AND APPLICABLE FEDERAL LAWS.**

 

Section 10.4                                Modification,Waiver in Writing.  No modification, amendment, extension,discharge, termination or waiver of any provision of this Agreement, or of theNote, or of any other Loan Document, nor consent to any departure by Borrowertherefrom, shall in any event be effective unless the same shall be in awriting signed by the party against whom enforcement is sought, and then suchwaiver or consent shall be effective only in the specific instance, and for thepurpose, for which given. Except as otherwise expressly provided herein, nonotice to, or demand on Borrower, shall entitle Borrower to any other or futurenotice or demand in the same, similar or other circumstances.

 

Section 10.5                                Delay Not aWaiver.  Neither any failure nor any delay on the partof Lender in insisting upon strict performance of any term, condition, covenantor agreement, or exercising any right, power, remedy or privilege hereunder, orunder the Note or under any other Loan Document, or any other instrument givenas security therefor, shall operate as or constitute a waiver thereof, norshall a single or partial exercise thereof preclude any other future exercise,or the exercise of any other right, power, remedy or privilege. In particular,and not by way of limitation, by accepting payment after the due date of anyamount payable under this Agreement,

 

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the Note or any other Loan Document, Lendershall not be deemed to have waived any right either to require prompt paymentwhen due of all other amounts due under this Agreement, the Note or the otherLoan Documents, or to declare a default for failure to effect prompt payment ofany such other amount.

 

Section 10.6                                Notices.  Allnotices, consents, approvals and requests required or permitted hereunder orunder any other Loan Document shall be given in writing and shall be effectivefor all purposes if hand delivered or sent by (a) certified or registeredUnited States mail, postage prepaid, return receipt requested or (b) expeditedprepaid delivery service, either commercial or United States Postal Service,with proof of attempted delivery, and by telecopier (with answer backacknowledged), addressed as follows (or at such other address and Person asshall be designated from time to time by any party hereto, as the case may be,in a written notice to the other parties hereto in the manner provided for inthis Section):

 

If to Lender:

 

Bear Stearns CommercialMortgage, Inc.383 Madison AvenueNew York, New York 10179Attention: J. Christopher Hoeffel

 

with a copy to:

 

Katten Muchin ZavisRosenman401 South Tryon StreetSuite 2600Charlotte, North Carolina 28202-1935Attention: Daniel S. Huffenus, Esq.

 

If to Borrower:

 

Inland WesternPlacentia, L.L.C.2901 Butterfield RoadOak Brook, IL 60523Attention: Steven Grimes

 

with a copy to:

 

Inland Western RetailReal Estate Trust, Inc.2901 Butterfield RoadOak Brook, IL 60523Attention: Robert H. Baum, Esq.

 

and with a copy to:

 

Inland Western RetailReal Estate Trust, Inc.2901 Butterfield RoadOakBrook, IL 60523Attention: Roberta Matlin

 

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A notice shall be deemed to have beengiven; in the case of hand delivery, at the time of delivery; in the case ofregistered or certified mail, when delivered or the first attempted delivery ona Business Day; or in the case of expedited prepaid delivery and telecopy, uponthe 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****ANYISSUE****TRIABLEOF RIGHT BY JURY, AND****WAIVESANY****RIGHTTO TRIAL BY JURY FULLY TO THE****EXTENT****THAT ANYSUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, ORANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THISWAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWERAND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH****INSTANCE****AND EACH****ISSUE AS****TO WHICH THE RIGHT TO ATRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE ACOPY OF THIS PARAGRAPH****INANY****PROCEEDINGAS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER 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 a part 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 extentBorrower makes a payment or payments to Lender, which payment or proceeds orany part thereof are subsequently invalidated, declared to be fraudulent orpreferential, set aside or required to be repaid to a trustee, receiver or anyother party under any bankruptcy law, state or federal law, common law orequitable cause, then, to the extent of such payment or proceeds received, theobligations hereunder or part thereof intended to be satisfied shall be revivedand continue in full force and effect, as if such payment or proceeds had notbeen received by Lender.

 

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

 

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Legal Requirements, permitted to waive thegiving of notice. Borrower hereby expressly waives the right to receive anynotice from Lender with respect to any matter for which this Agreement or theother Loan Documents do not specifically and expressly provide for the givingof notice by Lender to Borrower.

 

Section 10.12                          Remedies ofBorrower.  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 that any action or proceeding to determinewhether Lender has acted reasonably shall be determined by an action seekingdeclaratory judgment.

 

Section 10.13                          Expenses;Indemnity.

 

(a)                                  Borrowercovenants and agrees to pay or, if Borrower fails to pay, to reimburse, Lenderupon receipt of written notice from Lender for all reasonable costs and expenses(including reasonable attorneys’ fees and disbursements) incurred by Lender inconnectionwith (i) the preparation, negotiation, execution and delivery of this Agreementand theother Loan Documents and the consummation of the transactions contemplatedhereby and thereby and all the costs of furnishing all opinions by counsel forBorrower (including without limitation any opinions requested by Lender as toany legal matters arising under this Agreement or the other Loan Documents with respect tothe Property); (ii) Borrower’s ongoing performance of and compliancewith Borrower’s respective agreements and covenants contained in this Agreement and theother Loan Documents on its part to be performed or complied with after the ClosingDate, including, without limitation, confirming compliance with environmentaland insurancerequirements; (iii) Lender’s ongoing performance and compliance with allagreements and conditions contained in this Agreement and the other Loan Documentson its part to be performed or complied with after the Closing Date; (iv) except asotherwise 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 Loan Documentsand anyother documents or matters reasonably requested by Lender; (v) securingBorrower’s compliance with any requests made pursuant to the provisions of thisAgreement; (vi) the filing and recording fees and expenses, title insuranceand reasonable fees and expenses of counsel for providing to Lender all required legalopinions, and other similar expenses incurred in creating and perfectingthe Liens in favor of Lender pursuant to this Agreement and the other LoanDocuments;(vii) enforcing or preserving any rights, in response to third party claims orthe prosecutingor defending of any action or proceeding or other litigation, in each caseagainst, under or affecting Borrower, this Agreement, the other Loan Documents,the Property, or any other security given for the Loan; and (viii) enforcing any obligationsof or collecting any payments due from Borrower under this Agreement, the other LoanDocuments or with respect to the Property or in connection with anyrefinancing or restructuring of the credit arrangements provided underthis Agreement in the nature of a “work-out” or of any insolvency or bankruptcyproceedings;provided, however, that Borrower shall not be liable for the payment of anysuch costsand expenses to the extent the same arise by reason of the gross negligence,illegal acts, fraud or willful misconduct of Lender. 

 

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(b)                                 Borrower shallindemnify, defend and hold harmless Lender from and against any and all otherliabilities, obligations, losses, damages, penalties, actions, judgments,suits, claims, costs, expenses and disbursements of any kind or naturewhatsoever (including, without limitation, the reasonable fees anddisbursements of counsel for Lender in connection with any investigative,administrative or judicial proceeding commenced or threatened, whether or notLender shall be designated a party thereto), that may be imposed on, incurredby, or asserted against Lender in any manner relating to or arising out of (i)any breach by Borrower of its obligations under, or any materialmisrepresentation by Borrower contained in, this Agreement or the other LoanDocuments, or (ii) the use or intended use of the proceeds of the Loan(collectively, the “**Indemnified Liabilities**”); provided,however, that Borrower shall not have any obligation to Lender hereunderto the extent that such Indemnified Liabilities arise from the grossnegligence, illegal acts, fraud or willful misconduct of Lender. To the extentthat the undertaking to indemnify, defend and hold harmless set forth in thepreceding sentence may be unenforceable because it violates any law or publicpolicy, Borrower shall pay the maximum portion that it is permitted to pay andsatisfy under applicable law to the payment and satisfaction of all IndemnifiedLiabilities incurred by Lender.

 

Section 10.14                          SchedulesIncorporated.  The Schedules annexed hereto are herebyincorporated herein as a part of this Agreement with the same effect as if setforth in the body hereof.

 

Section 10.15                          Offsets,Counterclaims and Defenses.  Any assignee of Lender’s interest in and tothis Agreement, the Note and the other Loan Documents shall take the same freeand clear of all offsets, counterclaims or defenses which are unrelated to suchdocuments which Borrower may otherwise have against any assignor of suchdocuments, and no such unrelated counterclaim or defense shall be interposed orasserted by Borrower in any action or proceeding brought by any such assigneeupon such documents and any such right to interpose or assert any suchunrelated offset, counterclaim or defense in any such action or proceeding ishereby expressly waived by Borrower.

 

Section 10.16                          No Joint Ventureor Partnership: No Third Party Beneficiaries.

 

(a)                                  Borrower andLender intend 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 Agreementand the other Loan Documents are solely for the benefit of Lender and Borrowerand nothing contained in this Agreement or the other Loan Documents shall bedeemed to confer upon anyone other than Lender and Borrower any right to insistupon or to enforce the performance or observance of any of the obligationscontained herein or therein, All conditions to the obligations of Lender tomake the Loan hereunder are imposed solely and exclusively for the benefit ofLender and no other Person shall have standing to require satisfaction of suchconditions in accordance with their terms or be entitled to assume that Lenderwill refuse to make the Loan in the absence of strict compliance with any orall thereof and no other Person shall under any circumstances be deemed to be abeneficiary of such

 

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conditions, any or all of which may be freelywaived in whole or in part by Lender if, in Lender’s sole discretion, Lenderdeems it advisable or desirable to do so.

 

Section 10.17                          Publicity.  All news releases, publicity or advertising byBorrower or their Affiliates through any media intended to reach the generalpublic which refers to the Loan Documents or the financing evidenced by theLoan Documents, to Lender, Bear Stearns, or any of their Affiliates shall besubject to the prior written approval of Lender. All news releases, publicityor advertising 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.

 

Section 10.18                          Waiver ofMarshalling of Assets.  To the fullest extent permitted by law,Borrower, for itself and its successors and assigns, waives all rights to amarshalling of the assets of Borrower, Borrower’s partners and others withinterests in Borrower, and of the Property, or to a sale in inverse order ofalienation in the event of foreclosure of the Mortgage or sale of the Propertyby power of sale, and agrees not to assert any right under any laws pertainingto the marshalling of assets, the sale in inverse order of alienation,homestead exemption, the administration of estates of decedents, or any othermatters whatsoever to defeat, reduce or affect the right of Lender under theLoan Documents to a sale of the Property for the collection of the Debt withoutany prior or different resort for collection or of the right of Lender to thepayment of the Debt out of the net proceeds of the Property in preference toevery other claimant whatsoever.

 

Section 10.19                          Waiver ofCounterclaim.  Borrower hereby waives the right to assert acounterclaim, other than a compulsory counterclaim, in any action or proceedingbrought against it by Lender or its agents.

 

Section 10.20                          Conflict;Construction of Documents: Reliance.  Inthe event of any conflict between the provisions of this Loan Agreement and anyof the other Loan Documents, the provisions of this Loan Agreement shallcontrol. The parties hereto acknowledge that they were represented by competentcounsel in connection with the negotiation, drafting and execution of the LoanDocuments and that such Loan Documents shall not be subject to the principle ofconstruing their meaning against the party which drafted same. Borroweracknowledges that, with respect to the Loan, Borrower shall rely solely on itsown judgment and advisors in entering into the Loan without relying in anymanner on any statements, representations or recommendations of Lender or anyparent, subsidiary or Affiliate of Lender. Lender shall not be subject to anylimitation whatsoever in the exercise of any rights or remedies available to itunder any of the Loan Documents or any other agreements or instruments whichgovern the Loan by virtue of the ownership by it or any parent, subsidiary orAffiliate of Lender of any equity interest any of them may acquire in Borrower,and Borrower hereby irrevocably waives the right to raise any defense or takeany action on the basis of the foregoing with respect to Lender’s exercise ofany such rights or remedies. Borrower acknowledges that Lender engages in thebusiness 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.

 

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Section 10.21                          Brokers andFinancial Advisors.  Borrower hereby represents that it has dealtwith no financial advisors, brokers, underwriters, placement agents, agents orfinders in connection with the transactions contemplated by this Agreementother 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. The provisions of this Section 10.21shall survive the expiration and termination of this Agreement and the paymentof the Debt.

 

Section 10.22                          Prior Agreements.  This Agreement and the other Loan Documentscontain the entire agreement of the parties hereto and thereto in respect ofthe transactions contemplated hereby and thereby, and all prior agreements orunderstandings among or between such parties, whether oral or written, aresuperseded by the terms of this Agreement and the other Loan Documents andunless specifically set forth in a writing contemporaneous herewith the terms,conditions and provisions of such prior agreement do not survive execution ofthis Agreement.

 

Section 10.23                          Transfer of Loan.  In the event that Lender transfers the Loan,Borrower shall continue to make payments at the place set forth in the Noteuntil such time that Borrower is notified in writing by Lender that paymentsare to be made at another place.

 

Section 10.24                          Joint and SeveralLiability.  If Borrower consists of more than one personor party, the obligations and liabilities of each person or party shall bejoint and several.

 

(THE BALANCE OFTHIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK)

 

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

 
|   | **BORROWER:**                                        |
|--------|------------------------------------------------------|
|   |                                                 |
|   | **INLAND WESTERN**** ****PLACENTIA, L.L.C.**, a |
|   | Delaware limited liability company                   |
|   |                                                 |
|   | By:                                                  | Inland Western Retail Real Estate Trust,  Inc., a Maryland corporation, its sole  member |
|   |                                                 |
|   |                                                 | By: | /s/ Debra A. Palmer |   |
|   |                                                 | Name:  Debra  A. Palmer |
|   |                                                 | Title:   Assistant Secretary |
|   |                                                 |
|   |                                                 |
|   | **LENDER:**                                          |
|   |                                                 |
|   | **BEAR****STEARNS**** ****COMMERCIAL**          |
|   | **MORTGAGE, INC.,** a New York corporation      |
|   |                                                 |
|   |                                                 |
|   | By:                                                  |   |
|   |                                                 | Michael A. Forastiere  Managing Director |

 

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**SCHEDULE I**

 

Intentionallyomitted.

 

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**SCHEDULE II**

 

Intentionallyomitted.

 

SCH. X-2

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