**Exhibit10.431**

 

**LOAN AGREEMENT**

 

**THIS LOAN AGREEMENT**, dated as of this 20th day of December, 2004 (as amended, restated, replaced, supplemented orotherwise modified from time to time, this **“Agreement”**),between BEAR STEARNS COMMERCIAL MORTGAGE, INC., a New York corporation, havingan address at 383 Madison Avenue, New York, New York 10179 (**“Lender”**), and INLAND WESTERN GURNEE, L.L.C., aDelaware 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 andin accordance with the terms of this Agreement and the other Loan Documents (ashereinafter defined).

 

NOW, THEREFORE, in consideration of the making of the Loan by Lenderand the covenants, agreements, representations and warranties set forth in thisAgreement, the parties hereto hereby covenant, agree, represent and warrant as follows:

 

**ARTICLE IDEFINITIONS; PRINCIPLES OF CONSTRUCTION**

 

Section 1.1                                      Definitions. For all purposes of this Agreement, except as otherwise expresslyrequired or unless the context clearly indicates a contrary intent:

 

**“Additional Insolvency Opinion”  **shall mean any subsequent Insolvency Opinion.

 

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

 

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

 

**“Anchor Tenant”**shall mean shall mean, collectively (a)Borders, Inc., (b) LNT West, Inc., (c) Cost Plus, Inc., and (d) Old Navy, LLC,pursuant to the Anchor Tenant Lease.

 

**“Anchor Tenant Lease”  **shall mean:

 

(i)                                     with respect to LNT West, Inc., that certainLease, dated October 28, 1999, by and between Rubloff Gurnee Town Centre,L.L.C., f/k/a Dalan/Rubloff Gurnee, L.L.C., 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);

 

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(ii)                                  with respect to Cost Plus, Inc., that certainLease, dated October 18, 1999, by and between Rubloff Gurnee Town Centre,L.L.C., f/k/a Dalan/Rubloff Gurnee, L.L.C., 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);

 

(iii)                               with respect to Borders, Inc., that certainLease, dated October 24, 1999, by and between Rubloff Gurnee Town Centre,L.L.C., f/k/a Dalan/Rubloff Gurnee, L.L.C., 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

 

(iv)                              with respect to Old Navy, LLC, that certainLease, dated September 20, 2004, by and between Dalan/Rubloff Gurnee,L.L.C., as original landlord and predecessor-in-interest to Borrower, aslandlord, and Anchor Tenant (or its predecessor-in-interest) as tenant as thesame has previously been amended and may be further amended, restated, renewed,substituted or replaced (but only to the extent permitted under thisAgreement).

 

**“Annual****Budget****”**shall mean the operating budget, includingall planned capital expenditures, for the Property prepared by Borrower for theapplicable Fiscal Year or other period.

 

**“Assignment****of Leases****”** 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 of ManagementAgreement”**shallmean that certain Assignment of Management Agreement and Subordination ofManagement Fees dated as of the Closing Date among Lender, Borrower andManager, as the same may be amended, restated, replaced, supplemented orotherwise modified from time to time.

 

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

 

**“Basic Carrying Costs”** shall mean, with respect to the Property,the sum of the following costs associated with the Property for the relevantFiscal Year or payment period: (i) Taxes and (ii) Insurance Premiums.

 

**“Borrower”**shall mean Inland Western Gurnee, L.L.C.,together with its permitted 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.

 

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**“Capital Expenditures”** shall mean, for any period, the amount expended for items capitalizedunder accounting principles reasonably acceptable to Lender, consistentlyapplied (including expenditures for building improvements or major repairs,leasing commissions and tenant improvements).

 

**“Cash Expenses”** shall mean, for any period, the operating expenses for the operationof the Property as set forth in an Approved Annual Budget to the extent thatsuch expenses are actually incurred by Borrower minus any payments into the Taxand Insurance Escrow Fund.

 

**“Cash Management Agreement”** shall have the meaning specified in Section 2.6.3.

 

**“Cash Management Termination Event”** shall mean the Debt Service Coverage Ratioshall be equal to or greater than 1.35 to 1.0 for two (2) complete, consecutivecalendar quarters following the calendar quarter in which the Cash ManagementTrigger caused by a Debt Service Coverage Ratio deficiency occurred, provided,however, there shall not be more than two (2) Cash Management TerminationEvents during the term of the Loan.

 

**“Cash Management Trigger”** shall mean (i) the existence of an Event ofDefault, (ii) the bankruptcy or insolvency of Borrower or Manager, or (iii)Lender’s determination that the Debt Service Coverage Ratio for the precedingsix (6) months annualized is less than or equal to 1.25 to 1.0.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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**“Debt”**shall mean the outstanding principal amountset forth in, and evidenced by, this Agreement and the Note together with allinterest accrued and unpaid thereon and all other sums (including thePrepayment Consideration) due to Lender in respect of the Loan under the Note,this Agreement, the Mortgage or any other Loan Document.

 

**“Debt Service”**shall mean, with respect to any particularperiod of time, scheduled interest payments under the Note.

 

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

 

(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 $0.44 per square foot of gross leaseable area at theProperty; and

 

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

 

**“Default”**shall mean the occurrence of any eventhereunder or under any other Loan Document which, but for the giving of noticeor passage of time, or both, would be an Event of Default.

 

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

 

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

 

**“Eligible Account”**shall mean a separate and 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.

 

**“Eligible Institution”**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-1by Standard Poor’s Ratings Services, P-1

 

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byMoody’s Investors Service, Inc., and F-1+ by Fitch, Inc. in the case ofaccounts in which funds are held for 30 days or less (or, in the case ofaccounts in which funds are held for more than 30 days, the long term unsecureddebt obligations of which are rated at least “AA” by Fitch and S&P and “Aa”by Moody’s).

 

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

 

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

 

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

 

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

 

**“Excess****Cash Flow****”**shallhave the meaning set forth in Section 2.6.3 hereof 

 

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

 

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

 

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

 

**“Gross Income from Operations”** shall mean all sustainable income asreported on the financial statements delivered by the Borrower in accordancewith this Agreement, computed in accordance with accounting principlesreasonably acceptable to Lender, consistently applied, derived from theownership and operation of the Property from whatever source, *including,*but not limited to, (i)Rents from Tenants that arc in occupancy, open for business and paying unabatedRent, (ii) utility charges, (iii) escalations, (iv) intentionally omitted; (v)service fees or charges, (vi) license fees, (vii) parking fees, and (viii)other required pass-throughs but *excluding*(i) Rents from Tenants that are subject to any bankruptcy proceeding(unless such Tenant has affirmed its Lease or Inland Western Retail Real EstateTrust, Inc. has master leased such Tenant’s premises for full contract rent fora period not less than three years, and the net worth of Inland Western RetailReal Estate Trust, Inc. (as determined by Lender) is not less than such entity’snet worth as of September 30, 2003), or are not in occupancy, open forbusiness or paying unabated Rent, (ii) sales, use and occupancy or other taxeson receipts required to be accounted for by Borrower to any GovernmentalAuthority, (iii) refunds and uncollectible accounts, (iv) sales of furniture,fixtures and equipment, (v) Insurance Proceeds (other than businessinterruption or other loss of income insurance), (vi) Awards, (vii) unforfeitedsecurity deposits, (viii) utility and other similar deposits and (ix) anydisbursements to Borrower from the Reserve Funds. Gross income shall not bediminished as a

 

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resultof the Mortgage or the creation of any intervening estate or interest in theProperty or any part thereof.

 

**“Improvements”** shall have the meaning set forth in the granting clause of theMortgage with 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.

 

**“Indemnity Agreement”** shall mean that certain Indemnity Agreement dated as of the ClosingDate by Borrower and Indemnitor in favor of Lender.

 

**“Independent Director”** shall mean a director of a corporation or a limited liability companywho is not at the time of initial appointment, or at any time while serving asa director of such an entity, and has not been at any time during the precedingfive (5) years: (a) a stockholder, director (with the exception of serving asthe Independent Director), officer, employee, partner, attorney or counsel ofthe Borrower or any Affiliate of either of them; (b) a customer, supplier orother person who derives any of its purchases or revenues from its activitieswith the Borrower or any Affiliate of either of them; (c) a Person controllingor under common control with any such stockholder, director, officer, partner,customer, supplier or other Person; or (d) a member of the immediate family ofany such stockholder, director, officer, employee, partner, customer, supplieror other person. As used in this definition, the term “control” means thepossession, directly or indirectly, of the power to direct or cause thedirection of management, policies or activities of a Person, whether throughownership of voting securities, by contract or otherwise.

 

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

 

**“Insolvency Opinion”** shall have the meaning set forth in Section 3.1.6 hereof. 

 

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

 

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

 

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

 

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**“Lease”**shall mean any lease, sublease orsubsublease, letting, license, concession or other agreement (whether writtenor oral and whether now or hereafter in effect) pursuant to which any Person isgranted a possessory interest in, or right to use or occupy all or any portionof any space in the Property of Borrower, and every modification, amendment orother agreement relating to such lease, sublease, subsublease, or otheragreement entered into in connection with such lease, sublease, subsublease, orother agreement and every guarantee of the performance and observance of thecovenants, conditions and agreements to be performed and observed by the otherparty thereto.

 

**“Legal Requirements”**shall mean, with respect to the Property, allfederal, state, county, municipal and other governmental statutes, laws, rules,orders, regulations, ordinances, judgments, decrees and injunctions ofGovernmental Authorities affecting the Property or any part thereof, or theconstruction, use, alteration or operation thereof, or any part thereof, whethernow or hereafter enacted and in force, and all permits, licenses andauthorizations and regulations relating thereto, and all covenants, agreements,restrictions and encumbrances contained in any instruments, either of record orknown to Borrower, at any time in force affecting the Property or any panthereof, including, without limitation, any which may (a) require repairs,modifications or alterations in or to the Property or any part thereof, or (b)in any way limit the use and enjoyment thereof.

 

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

 

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

 

**“Lien”**shall mean, with respect to the Property, anymortgage, deed of trust, deed to secure debt, lien, pledge, hypothecation,assignment, security interest, or any other encumbrance, charge or transfer of,on or affecting Borrower, the Property, any portion thereof or any interesttherein, including, without limitation, any conditional sale or other titleretention agreement, any financing lease having substantially the same economiceffect as any of the foregoing, the filing of any financing statement, andmechanic’s, materialmen’s and other similar liens and encumbrances.

 

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

 

**“Loan Documents”**shall mean, collectively, this Agreement, theNote, the Mortgage, the Assignment of Leases and Rents, the Environmental Indemnity,the Assignment of Management Agreement, the Indemnity Agreement and all otherdocuments executed and/or delivered in connection with the Loan.

 

**“Lockbox Account”**shall have the meaning specified in Section 2.6.3hereof.

 

**“Lockbox Bank”**shall have the meaning specified in Section 2.6.3hereof.

 

**“Lockbox Trigger”**shall mean (i) Lender’s determination thatthe Debt Service Coverage Ratio for the preceding six (6) months annualized isless than or equal to 1.75 to 1.0 or (ii) a Cash Management Trigger.

 

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

 

**“Manager”**shall mean Inland US Management LLC, aDelaware limited liability company.

 

**“Maturity Date”**shall mean January 1, 2010, or suchother date on which the final payment of principal of the Note becomes due andpayable as therein or herein provided, whether at such stated maturity dale, bydeclaration of acceleration, or otherwise.

 

**“Maximum Legal Rate”**shall mean the maximum nonusurious interestrate, if any, that at any time or from time to time may be contracted for,taken, reserved, charged or received on the indebtedness evidenced by the Noteand as provided for herein or the other Loan Documents, under the laws of suchstate or states whose laws are held by any court of competent jurisdiction togovern the interest rate provisions of the Loan.

 

**“Monthly Debt Service Payment Amount”**shall mean an amount equal to $93,319.10.

 

**“Mortgage”**shall mean, with respect to the Property,that certain first priority Mortgage and Security Agreement, 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, with respect to the Property forany period, the amount obtained by subtracting Operating Expenses and CapitalExpenditures for such period from Gross Income from Operations for such period.

 

**“Net****Cash Flow After Debt Service****”**shall mean, with respect to the Property forany period, the amount obtained by subtracting Debt Service for such periodfrom Net Cash Flow for such period.

 

**“Net Cash Flow Schedule”**shall have the meaning set forth in Section 5.1.1l(b) hereof.

 

**“Net Operating Income”**shall mean the amount obtained by subtractingfrom Gross Income from Operations (i) Operating Expenses, and (ii) a vacancyallowance equal to the greater of (x) market vacancy (as reasonably determinedby Lender), less actual vacancy, and (y) underwritten vacancy of 5.87%, lessactual vacancy. Notwithstanding the foregoing, if actual vacancy exceeds marketvacancy and underwritten vacancy, then there shall be no adjustment for avacancy allowance.

 

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

 

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

 

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

 

**“Note”** shall mean that certain Promissory Note of even date herewith in the principalamount of TWENTY FOUR MILLION THREE HUNDRED SIXTY THOUSAND AND NO/100 DOLLARS($24,360,000.00), made by Borrower in favor of Lender, as the same may beamended, restated, replaced, supplemented or otherwise modified from time totime.

 

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

 

**“Operating Expenses”**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, taut excluding depreciation, DebtService, Capital Expenditures and contributions to the Reserve Funds.

 

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

 

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

 

**“Payment Date”**shall mean the first (1st) day of eachcalendar month during the term of the Loan or, if such day is not a BusinessDay, the immediately succeeding Business Day.

 

**“Permitted Encumbrances”**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 Properly 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.

 

**“Permitted Investments”**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:

 

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(i)                                     obligations of, or obligations fullyguaranteed as to payment of principal and interest by,**the United States or any agency orinstrumentality thereof provided such obligations are backed by the full faithand credit of the United States of America including, without limitation,obligations of: the U.S. Treasury (all direct or fully guaranteed obligations),the Farmers Home Administration (certificates of beneficial ownership), theGeneral Services Administration (participation certificates), the U.S. MaritimeAdministration (guaranteed Title XI financing), the Small BusinessAdministration (guaranteed participation certificates and guaranteed poolcertificates), 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,that the investments described in this clause must (A) have a predeterminedfixed dollar of principal due at maturity that cannot vary or change, (B) ifrated by S&P, must not have an “r” highlighter affixed to their rating, (C)if such investments have a variable rate of interest, such interest rate mustbe tied to a single interest rate index plus a fixed spread (if any) and mustmove proportionately with that index, and (D) such investments must not besubject to liquidation prior to their maturity;

 

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

 

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(v)                                 fully Federal Deposit Insurance Corporation-insureddemand and time deposits in, or certificates of deposit of, or bankers’acceptances issued by, any bank or trust company, savings and loan associationor savings bank, the short term obligations of which at all times are rated inthe highest short term rating category by each Rating Agency (or, if not ratedby all Rating Agencies, rated by at least one Rating Agency in the highestshort term rating category and otherwise acceptable to each other RatingAgency, as confirmed in writing that such investment would not, in and ofitself, result in a downgrade, qualification or withdrawal of the initial, or,if higher, then current ratings assigned to the Securities); provided, however,that the investments described in this clause must (A) have a predeterminedfixed dollar of principal due at maturity that cannot vary or change, (B) ifrated by S&P, must not have an “r” highlighter affixed to their rating, (C)if such investments have a variable rate of interest, such interest rate mustbe tied to a single interest rate index plus a fixed spread (if any) and mustmove proportionately with that index, and (D) such investments must not besubject to liquidation prior to their maturity;

 

(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 arc regulated investment companies, seek to maintain a constant, netasset value per share and invest solely in obligations backed by the full faithand credit of the United States, which funds

 

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have the highest rating available from each Rating Agency (or, if notrated by all Rating Agencies, rated by at least one Rating Agency and otherwiseacceptable to each other Rating Agency, as confirmed in writing that suchinvestment would not, in and of itself, result in a downgrade, qualification orwithdrawal of the initial, or, if higher, then current ratings assigned to theSecurities) for money market funds; and

 

(ix)                                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 PermittedInvestment will not, in and of itself, result in a downgrade, qualification orwithdrawal of the initial, or, if higher, then current ratings assigned to theSecurities by 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”**shall mean the date that is three (3) yearsfrom the first day of the calendar month immediately following the Closing Date.

 

**“Person**”shall mean any individual, corporation, partnership, joint venture, limitedliability company, estate, trust, unincorporated association, any federal,state, county or municipal government or any bureau, department or agencythereof and any fiduciary acting in such capacity on behalf of any of theforegoing.

 

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

 

**“Physical Conditions Report”** shall mean, with respect to the Property, areport prepared by a company satisfactory to Lender regarding the physicalcondition of the Property, satisfactory in form and substance to Lender in itssole discretion, which report shall, among other things, (a) confirm that theProperty and its use complies, in all material respects, with all applicableLegal Requirements (including, without limitation, zoning, subdivision andbuilding laws) and (b) include a copy of a final certificate of occupancy withrespect to all Improvements on the Property.

 

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

 

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

 

**“Prepayment Rate”** shall mean the bond equivalent yield (in the secondary market) on theUnited States Treasury Security that as of the Prepayment. Rate DeterminationDate has a remaining term to maturity closest to, but not exceeding, theremaining term to the Maturity Date, as most recently published in the “TreasuryBonds, Notes and Bills” section in The Wall Street Journal as of the dateof the related tender of the payment. If more than one issue of United StatesTreasury Securities has the remaining term to the Maturity Dale referred to

 

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above,the “Prepayment Rate” shall be the yield on the United States Treasury Securitymost recently issued as of such date. If the publication of the Prepayment Ratein The Wall Street Journal is discontinued, Lender shall determine thePrepayment Rate on the basis of “Statistical Release H.15(519), SelectedInterest Rates,” or any successor publication, published by the Board ofGovernors 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 prepayment date.

 

**“Property”**shall mean the parcel of real property, theImprovements thereon and all personal property owned by Borrower and encumberedby the Mortgage, together with all rights pertaining to such property andImprovements, as more particularly described in the Granting Clauses of theMortgage and referred to therein as the “Property”.

 

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

 

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

 

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

 

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

 

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

 

**“Relevant Leasing Threshold”**shall mean, any Lease For an amount ofleaseable square footage equal to or greater than 10,000 square feet.

 

**“Relevant Restoration Threshold”**shall mean Three Hundred Fifty Thousand andNo/100 dollars ($350,000.00).

 

**“REMIC Trust”**shall mean a “real estate mortgage investmentconduit” within the meaning of Section 860D of the Code that holds theNote.

 

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**“Rents”**shall mean, with respect to the Property, allrents, rent equivalents, moneys payable as damages or in lieu of rent or rentequivalents, royalties (including, without limitation, all oil and gas or othermineral royalties and bonuses), income, receivables, receipts, 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 theOther Contract Funds.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

**“Special Purpose Entity”**means a corporation, limited partnership,limited liability company, or Delaware statutory trust which at all times onand 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,necessary and appropriate to accomplish the foregoing; or (B) acting as a generalpartner of the limited partnership that owns the Property, a member of thelimited liability company that owns the Property or the beneficiary or trusteeof a Delaware 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 assetsother than those related to the Property or its partnership interest in thelimited partnership, the member interest in the limited liability company orthe beneficial interest in the Delaware statutory trust that owns the Propertyor acts as the general partner, managing member or beneficiary or trusteethereof, 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, hasas its only general partners, Special Purpose Entities that are corporations,limited partnerships or limited liability companies;

 

(vi)                              if such entity is a corporation, has at leastone (1) Independent Director, and has not caused or allowed and will not causeor allow the board of directors of such entity to take any action related to abankruptcy or insolvency proceeding or a voluntary dissolution without theunanimous affirmative vote of 100% of the members of its board of directors,including the Independent Director;

 

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(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 acorporation and that owns at least 1.0% (one percent) of the equity of thelimited liability company;

 

(viii)                        if such entity is a limited liability companyand such limited liability company has only one member, such limned liabilitycompany (a) has been formed under Delaware law, and (b) has either acorporation or other person or entity that shall become a member of the limitedliability company upon the dissolution or disassociation of the member, and (c)has a board of directors with not less than one (1) Independent Director, and(d) will not cause or allow its board of directors to take any action relatedto a bankruptcy or insolvency proceeding or a voluntary dissolution without theunanimous affirmative vote of 100% of the members of its hoard of directors,including the Independent Director;

 

(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 arc 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 andliabilities (including, as applicable, shared personnel and overhead expenses)from its assets as the same become due, and is maintaining adequate capital forthe normal 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 correctany known misunderstanding regarding the separate identity of such entity;

 

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(xiii)                          will file its own tax returns; provided,however, that Borrower’s assets and income may be included in a consolidatedtax return of its parent companies if inclusion on such consolidated tax returnis in compliance 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;

 

(xvii)                      has conducted and will conduct its businessin its name or in a name franchised or licensed to it by an entity other thanan Affiliate 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 allpartnership, corporate, limited liability company or Delaware statutory trustformalities, 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 man (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 dateincurred (unless disputed in accordance with applicable law), are not evidencedby a note and are paid when due, and which amounts are normal and reasonableunder the circumstances, and (iii) such other liabilities that are permittedpursuant to this Agreement;

 

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(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 use invoicesand checks bearing Manager’s name;

 

(xxvi)                    has not pledged and will not. pledge itsassets for the benefit of any other Person except as permitted or requiredpursuant to this 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 assetsin such a manner that it will not be costly or difficult to segregate,ascertain or identify its individual assets 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)                      docs not and will not have any of itsobligations guaranteed by any Affiliate except as otherwise required in theLoan 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

 

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(xxxiii)                has complied and will comply with all of theterms and provisions contained in its organizational documents. The statementof facts contained in its organizational documents are true and correct andwill remain true and correct.

 

**“State”**shall mean, with respect to the Properly, theState or Commonwealth in which the Property or any part thereof is located.

 

**“Survey”**shall mean a survey of the Property inquestion prepared by a surveyor licensed in the State and satisfactory toLender and the company or companies issuing the Title Insurance Policy, andcontaining a certification of such surveyor satisfactory to Lender.

 

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

 

**“Taxes”**shall mean all real estate and personal property taxes, assessments, waterrates or sewer rents, now or hereafter levied or assessed or imposed againstthe Property or any part thereof.

 

**“Tenant”**shall mean any person or entity with apossessory right to all or any part of the Property pursuant to a Lease orother written agreement.

 

**“Tenant Direction Letter”**shall mean a letter in the form of Schedule Iattached hereto from Borrower to the tenant under each Lease with respect tothe Property (whether such Lease is presently effective or executed after theClosing Date) directing such tenant to send directly to the Lockbox Account allpayments of Rent payable to Borrower under such Lease.

 

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

 

**“Title Insurance Policy”**shall mean, with respect to the Property, anALTA mortgagee title insurance policy in the form (acceptable to Lender) (or,if the Property is in a State which does not permit the issuance of such ALTApolicy, such form as shall be permitted in such State and acceptable to Lender)issued with respect to the Property and insuring the lien of the Mortgageencumbering the Property.

 

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

 

**“UCC”**or“**Uniform Commercial Code”**shallmean the Uniform Commercial Code as in effect in the applicable State in whichthe Property is located.

 

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

 

Section 1.2                                      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

 

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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 hereinshall be equally applicable to both the singular and plural forms of the termsso defined.

 

**ARTICLE II**

**GENERAL TERMS**

 

Section 2.1                                      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.  Borrower may request and receive only one borrowing hereunder in respectof the Loan and any amount borrowed and repaid hereunder in respect of the Loanmay not be reborrowed.

 

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

 

2.1.4                        Use of Proceeds.   Borrower shall use the proceeds of the Loan to(a) repay and discharge any existing loans relating to the Property, (b) payall past-due Basic Carrying Costs, if any, in respect of the Property, (c) makedeposits into the Reserve Funds on the Closing Date in the amounts providedherein, (d) pay costs and expenses incurred in connection with the closing ofthe Loan, as approved by Lender, (e) fund any working capital requirements ofthe Property, and (f) distribute the balance, if any, to Borrower.

 

Section 2.2                                      Interest; Loan Payments; Late Payment Charge.

 

2.2.1                        Interest Generally.  Interest on the outstanding principal balance of the Loan shall accruefrom the Closing Date to but excluding the Maturity Date at the Interest Rate.

 

2.2.2                        Interest Calculation.  Interest on the outstanding principal balance of the Loan shall becalculated on the basis of a three hundred sixty (360) day year comprised oftwelve (12) months of thirty (30) days each, except that interest due andpayable for a period of less than a full month shall be calculated bymultiplying the actual number of days elapsed in the period for which thecalculation is being made by a daily rate based on a three hundred sixty (360)day year.

 

2.2.3                        Payments Generally.  Borrower shall pay to Lender (a) on the Closing Date, an amount equal tointerest only on the outstanding principal balance of the Loan from the ClosingDate up to but not including the first Payment Date following the Closing Date,and (b) on February 1, 2005 and each Payment Date thereafter up to but notincluding the Maturity Date, an amount equal to the Monthly Debt ServicePayment Amount, which shall be applied to

 

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interest on the outstanding principal amount of the Loan for the priorcalendar 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 Default Rate shall becomputed from the occurrence of the Event of Default until the earlier of (i)in the event of a non-monetary default, the cure of such Event of Default byBorrower and acceptance of such cure by Lender, and (ii) in the event of amonetary default, the actual receipt and collection of the Debt (or thatportion thereof that is then due).  Tothe extent permitted by applicable law, interest at the Default Rate shall beadded to the Debt, shall itself accrue interest at the same rate as the Loanand shall be secured by the Mortgage. This paragraph shall not be construed asan agreement or privilege to extend the date of the payment of the Debt, nor asa waiver of any other right or remedy accruing to Lender by reason of theoccurrence of any Event of Default and Lender retains its rights under the Noteand this Agreement to accelerate and to continue to demand payment of the Debtupon the happening and continuance of any Event of Default.

 

2.2.7                        Late Payment Charge.   Ifany principal, interest or any other sums due under the Loan Documents is notpaid by Borrower on or prior to the date which is five (5) days after the dateon which 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 the paymentof all outstanding principal, interest and other sums due on the Maturity Date.

 

2.2.8                        Usury Savings.  This Agreement and the Note are subject to the express condition that atno time shall Borrower be obligated or required to pay interest on theprincipal balance of the Loan at a rate which could subject Lender to eithercivil or criminal liability as a result of being in excess of the Maximum LegalRate.  If, by the terms of this Agreementor the other Loan Documents, Borrower is at any time required or obligated topay interest on the principal balance due hereunder at a rate in excess of theMaximum Legal Rate, the Interest Rate or the Default Rate, as the case may be,shall be deemed to be immediately reduced to the Maximum Legal Rate and allprevious payments in excess of the Maximum Legal Rate shall be deemed to havebeen payments in reduction of principal and not on account of the interest due hereunder.All sums paid or agreed to be paid to Lender for the use, forbearance, ordetention of the sums due under the Loan, shall, to the extent permitted byapplicable law, be amortized, prorated, allocated, and spread throughout thefull stated term of the Loan until payment in full

 

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sothat the rate or amount of interest on account of the Loan does not exceed theMaximum Legal Rate of interest from time to time in effect and applicable tothe Loan for so long as the Loan is outstanding.

 

Section 2.3                                      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 afterthe Permitted Prepayment Date, Borrower may, provided it has given Lender priorwritten notice in accordance with the terms of this Agreement, prepay theunpaid principal balance of the Loan in whole, but not in. part, by paying,together with the amount to be prepaid, (i) interest accrued and unpaid on theoutstanding principal balance of the Loan being prepaid to and including thedate of prepayment, (ii) unless prepayment is tendered on a Payment Date, anamount equal to the interest that would have accrued on the amount beingprepaid after the date of prepayment through and including the next PaymentDate had the prepayment not been made (which amount shall constitute additionalconsideration for the prepayment), (iii) all other sums then due under thisAgreement, the Note, the Mortgage and the other Loan Documents, and (iv) ifprepayment occurs prior to the Payment Date which is one month prior to theMaturity Date, a prepayment consideration (the **“PrepaymentConsideration”**) equal to the greater of (A) one percent (1%) of theoutstanding principal balance of the Loan being prepaid or (B) the excess, ifany, of (1) the sum of the present values of all then-scheduled payments of principaland interest 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 Datefollowing the date on winch Borrower actually receives any Net Proceeds, ifLender is not. obligated to make such Net Proceeds available to Borrowerpursuant to this Agreement for the restoration of the Property, Borrower shallat Lender’s option, prepay the outstanding principal balance of the Note in anamount equal to one hundred percent (100%) of such Net Proceeds.

 

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NoPrepayment Consideration or other penalty or premium shall be due in connectionwith any prepayment made pursuant to this Section 2.3.2. Any partialprepayment under this Section shall be applied to the last payments ofprincipal due under the Loan.

 

(b)                                 On the date on which Borrower tenders aCasualty/Condemnation Prepayment pursuant to Section 6.4(e) below, suchtender 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 Section 2.3.2(b), other thanfollowing an Event of Default, no Prepayment Consideration or other penalty orpremium shall be due in connection with any Casualty/Condemnation Prepayment.

 

2.3.3                        Prepayments after Default. Following an Event of Default, if Borroweror anyone on Borrower’s behalf makes a tender of payment of all or any portionof the Debt at any time prior to a foreclosure sale (including a sale under thepower of sale under the Mortgage), or during any redemption period afterforeclosure, (i) the tender of payment shall constitute an evasion of Borrower’sobligation to pay any Prepayment Consideration due under this Agreement andsuch payment shall, therefore, to the maximum extent permitted by law, includea premium equal to the Prepayment Consideration that would have been payable onthe date of such tender had the Loan not been so accelerated, or (ii) if at thetime of such tender a prepayment of the principal amount of the Loan would havebeen prohibited under this Agreement had the principal amount of the Loan notbeen so accelerated, the tender of payment shall constitute an evasion of suchprepayment prohibition and shall, therefore, to the maximum extent permitted bylaw, include an amount equal to the greater of (i) 1% of the then principalamount of the Loan (or the relevant portion thereof being prepaid) and (ii) anamount equal to the excess of (A) the sum of the present values of a series ofpayments payable at the times and in the amounts equal to the payments ofprincipal and interest (including, but not limited to the principal andinterest payable on the Maturity Date) which would have been scheduled to bepayable after the date of such tender under this Agreement had the Loan (or therelevant portion thereof) not been accelerated, with each such paymentdiscounted to its present value at the date of such tender at the rate whichwhen compounded monthly is equivalent to the Prepayment Rate, over (B) the thenprincipal amount of the Loan.

 

Section 2.4                                      Intentionally Omitted.

 

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

 

2.5.1                        Release on Payment in Full. Lender shall, upon the written request andat the expense of Borrower, upon payment in full of all principal and intereston the Loan and all other amounts due and payable under the Loan Documents inaccordance with the terms and

 

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provisions of Section 2.3.1 of this Loan Agreement, release theLien of the Mortgage on the Property not theretofore released.

 

2.5.2                        Intentionally Omitted.

 

Section 2.6                                      Manner of Making Payments.

 

2.6.1                        Making of Payments. Each payment by Borrower hereunder or underthe Note shall be made in funds settled through the New York Clearing HouseInterbank Payments System or other funds immediately available to Lender by 1:00p.m., New York City time, on the date such payment is due, to Lender by depositto such account as Lender may designate by written notice to Borrower.  Whenever any payment hereunder or under theNote shall be stated to be due on a day which is not a Business Day, suchpayment 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                        Cash Management.  Inconnection with the Closing, Borrower shall execute and deliver to Lender aTenant Direction Letter for each of the tenants at the Property, which TenantDirection Letter instructs each such tenant to deposit Rent and otherreceivables related to the Property directly into an account (the “LockboxAccount”) owned and controlled by Lender at a bank to be selected by Lender(the “Lockbox Bank”).  Borrowercovenants and agrees to execute and deliver to Lender a Tenant Direction Letterfor each new tenant at the Property within thirty (30) days after the executionof each new Lease for premises at the Property. Lender will hold the TenantDirection Letters in escrow; provided, however, upon the occurrence of aLockbox Trigger, Lender shall have the right to deliver a Tenant DirectionLetter to each tenant at the Property, Within five (5) Business Days afterreceiving notice of Lender’s determination that a Lockbox Trigger has occurred,Borrower shall enter into a “cash management agreement” with Lender and LockboxBank, in form and substance acceptable to Lender (“Cash Management Agreement”),which shall provide, among other things, that tenants at the Property shalldeposit Rent and other receivables related to the Property directly into LockboxAccount. The Lockbox Bank shall apply funds in the Lockbox Account to pay debt serviceand required reserves, fees of the Lockbox Bank and budgeted operating expensesfor the Property, as to be more particularly set forth in the Cash ManagementAgreement.  Funds remaining in theLockbox Account after payment of the foregoing (the “Excess Cash Flow”) shallbe distributed to Borrower; provided, however, upon the occurrence of aCash Management Trigger and until the occurrence of a Cash ManagementTermination Event, such Excess Cash Flow shall be distributed to Borrower onlyto the extent of unbudgeted operating expenses approved by Lender and anyremaining funds shall remain in such Lockbox Account as additional collateralfor the Loan. Upon the occurrence of a Cash Management Termination Event, thebalance of the funds in the Lockbox Account shall be distributed toBorrower.  The Borrower shall be responsiblefor the costs associated with the Lockbox Bank and the Lockbox Account.

 

Section 2.7                                      Intentionally Omitted.

 

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**ARTICLE III**

**CONDITIONSPRECEDENT**

 

Section 3.1                                      Conditions Precedent to Closing. The obligation of Lender to make the Loanhereunder is subject to the fulfillment by Borrower or waiver by Lender of thefollowing conditions precedent no later than the Closing Date:

 

3.1.1                        Representations and Warranties; Compliancewith Conditions. Therepresentations and warranties of Borrower contained in this Agreement and theother Loan Documents shall be true and correct in all material respects on andas of the Closing Date with the same effect as if made on and as of such date,and no Default or an Event of Default shall have occurred and be continuing;and Borrower shall be in compliance in all material respects with all terms andconditions set forth in this Agreement and in each other Loan Document on itspart to be observed or performed.

 

3.1.2                        Loan Agreement and Note. Lender shall have received a copy of thisAgreement and the Note, in each case, duly executed and delivered on behalf ofBorrower.

 

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.   Lender shall have received a Title Insurance Policy issued by a titlecompany acceptable to Lender and dated as of the Closing Date, Such Title InsurancePolicy shall (i) provide coverage in an amount equal to the principal amount ofthe Loan together with, if applicable, a “tie-in” or similar endorsement, (ii)insure Lender that the Mortgage creates a valid first priority lien on theProperty encumbered thereby, free and clear of all exceptions from coverageother than Permitted Encumbrances and standard exceptions and exclusions fromcoverage (as modified by the terms of any endorsements), (iii) contain such endorsementsand affirmative coverages as Lender may reasonably request, and (iv) name Lender,its successors and assigns, as the insured. The Title Insurance Policy shall heassignable without cost to Lender. Lender also shall have received evidencethat all premiums in respect of 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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listof “Optional Survey Responsibilities and Specifications” (Table A) should beadded to each survey: 2, 3, 4, 6, 8, 9, 10, 11 and 13. The survey shall reflectthe same legal description contained in the Title Insurance Policy relating tothe Property referred to in clause (ii) above and shall include, among otherthings, a legal description of the real property comprising part of suchProperty reasonably satisfactory to Lender. The surveyor’s seal shall beaffixed to each survey and the surveyor shall provide a certification for eachsurvey in form and substance acceptable to Lender.

 

(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.   Lender shall have received an environmental report in respect of theProperty, in each case 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.  Borrower shall have taken or caused to be taken such actions in such amanner so that Lender has a valid and perfected first Lien on the Property asof the Closing Date with respect to the Mortgage, subject only to applicablePermitted Encumbrances and such other Liens as are permitted pursuant to theLoan Documents, and Lender shall have received satisfactory evidence thereof.

 

3.1.4                        Related Documents. Each additional document not specificallyreferenced herein, but relating to the transactions contemplated herein, shallhave been duly authorized, executed and delivered by all parties thereto andLender shall have received and approved certified copies 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.  Lender shall have received opinions of Borrower’s counsel (and ifapplicable, Borrower’s local counsel) (a) with respect to non-consolidationissues (an “Insolvency Opinion”) and (b) with respect to due execution,authority, enforceability of the Loan Documents and such other matters asLender may reasonably require, all such opinions in form, scope and substancereasonably satisfactory to Lender and Lender’s counsel in their reasonablediscretion.

 

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3.1.7                        Budgets. Borrower shall have delivered, and Lender shall have approved, theAnnual Budget for the current Fiscal Year.

 

3.1.8                        Basic Carrying Costs. Borrower shall have paid all Basic Carrying Costs relating to theProperty which are in arrears, including without limitation, (a) accrued butunpaid insurance premiums relating to the Property, (b) currently due andpayable Taxes (including any in arrears) relating to the Property, and (c)currently due Other Charges relating to the Property, which amounts shall befunded with proceeds of the Loan.

 

3.1.9                        Completion of Proceedings. All organizational proceedings taken or tobe taken in connection with the transactions contemplated by this Agreement andother Loan Documents and all documents incidental thereto shall he reasonablysatisfactory in form and substance to Lender, and Lender shall have receivedall such counterpart originals or certified copies of such documents as Lendermay reasonably request.

 

3.1.10                  Payments.   All payments, deposits orescrows required to be made or established by Borrower under this Agreement,the Note and the other Loan Documents on or before the Closing Date shall havebeen paid.

 

3.1.11                  Tenant Estoppels. Borrower shall exercise reasonablecommercial efforts to deliver estoppel letters from Tenants occupying not lessthan eighty percent (80%) of the gross leasable area of the Property; provided,however, that, in the event that Borrower is unable to deliver some or all ofthe estoppels described above in this Section 3.1.11, Lender agrees thatthe requirement to deliver such letters to Lender shall be waived by Lender asa condition precedent to the closing of the Loan so long as Borrower deliverson or before the Closing Date, a certificate executed by Borrower with respectto all applicable leases which shall be in substantially the same form andcontain the same terms as set forth in Lender’s standard form of estoppelcertificate.  Borrower shall deliver toLender an estoppel letter executed by Anchor Tenant in form reasonablyacceptable to Lender.

 

3.1.12                  Transaction Costs. Borrower shall have paid or reimbursedLender for all title insurance premiums, recording and filing fees or taxes,costs of environmental reports, Physical Conditions Reports, appraisals andother reports, the fees and costs of Lender’s counsel and all other third partyout-of-pocket expenses incurred in connection with the origination of the Loan.

 

3.1.13                  Material Adverse Change.  There shall have been no material adverse change in the financialcondition or business condition of Borrower or the Property since the date ofthe most recent financial statements delivered to Lender.  The income and expenses of the Property, theoccupancy leases thereof, and all other features of the transaction shall be asrepresented to Lender without material adverse change. Neither Borrower, any ofits constituent Persons, shall be the subject of any bankruptcy,reorganization, or insolvency proceeding.

 

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

 

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3.1.15                  Subordinationand Attornment.   Lender shall havereceived appropriate instruments acceptable to Lender in its commerciallyreasonable discretion subordinating any Leases of record prior to the Mortgageand including an agreement by such Tenants to attorn to Lender in the event ofa foreclosure or delivery of a deed in lieu thereof.

 

3.1.16                  TaxLot. Lender shall have received evidence that the Property constitutes one(1) or more separate tax lots, which evidence shall be reasonably satisfactoryin form and substance to Lender.

 

3.1.17                  PhysicalConditions Reports. Lender shall have received Physical Conditions Reportswith respect to the Property, which reports shall be reasonably satisfactory inform and substance to Lender.

 

3.1.18                  ManagementAgreement.   Lender shall havereceived a certified copy of the Management Agreement with respect to theProperty which shall be satisfactory in form and substance to Lender.   Lender acknowledges that it has reviewed theManagement Agreement, and as drafted, such Management Agreement does notviolate Borrower’s covenant that affiliated agreements be on terms which areintrinsically fair, commercially reasonable and are no less favorable to itthan would be obtained in a comparable arm’s length transaction with anunrelated third party.

 

3.1.19                  Appraisal.Lender shall have received an appraisal of the Property, which shall besatisfactory in form and substance to Lender.

 

3.1.20                  FinancialStatements. Lender shall have received (a) a balance sheet with respect tothe Property for the two most recent Fiscal Years and statements of income andstatements of cash flows with respect to the Property for the three most recentFiscal Years, each in form and substance reasonably satisfactory to Lender or(b) such other financial statements relating to the ownership and operation ofthe Property, in form and substance reasonably satisfactory to Lender.

 

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

 

3.1.22                  EnvironmentalInsurance.   If required by Lender,Borrower shall have obtained a secured creditor environmental insurance policywith respect to the Property, which shall be in form and substance satisfactoryto Lender. Any such policy shall have a term not less than the term of theLoan. Borrower shall have provided to Lender evidence that the premiums forsuch policy has been paid in full.

 

**ARTICLE IV**

**REPRESENTATIONSAND WARRANTIES**

 

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

 

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

 

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

 

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

 

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

 

4.1.5                        Agreements.   Except such instruments and agreements setforth as Permitted Exceptions in**theTitle Insurance Policy, Borrower is not a party to any agreement or instrumentor subject to any restriction which might materially and adversely affectBorrower or the Property, or Borrower’s business, properties or assets,operations or condition, financial or otherwise. To Borrower’s knowledge,Borrower is not in default in any material respect in the performance,observance or fulfillment of any of the obligations, covenants or conditionscontained in any agreement or instrument to which it is a party or by whichBorrower or the property are bound. Borrower has no material financialobligation under any indenture,

 

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mortgage, deed of trust,loan agreement or other agreement or instrument to which Borrower is a party orby which Borrower or the Property is otherwise bound, other than (a)obligations incurred in the ordinary course of the operation of the Propertyand (b) obligations under the Loan Documents.

 

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

 

4.1.7                        Solvency;No Bankruptcy Filing.   Borrower (a)has not entered into the transaction or executed the Note, this Agreement orany other Loan Documents with the actual intent to hinder, delay or defraud anycreditor and (b) received reasonably equivalent value in exchange for itsobligations under such Loan Documents. Giving effect to the Loan, the fair saleable value of Borrower’s assetsexceeds and will, immediately following the making of the Loan, exceed Borrower’stotal liabilities, including, without limitation, subordinated, unliquidated,disputed and contingent liabilities.  Thefair saleable value of Borrower’s assets is and will, immediately following themaking of the Loan, be greater than Borrower’s probable liabilities, includingthe maximum amount of its contingent liabilities on its debts as such debtsbecome absolute and matured. Borrower’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 beconducted.  Borrower does not intend to,and does not believe that it will, incur debt and liabilities (includingcontingent liabilities and other commitments) beyond its ability to pay suchdebt and liabilities as they mature (taking into account the timing and amountsof cash to be received by Borrower and the amounts to be payable on or inrespect of obligations of Borrower). Except as expressly disclosed to Lender in writing, no petition inbankruptcy has been filed against Borrower, or to the best of Borrower’sknowledge, any constituent Person in the last seven (7) years, and neitherBorrower, nor to the best of Borrower’s knowledge, any constituent Person inthe last seven (7) years has ever made an assignment for the benefit ofcreditors or taken advantage of any insolvency act for the benefit ofdebtors.  Neither Borrower nor any of itsconstituent Persons are contemplating either the filing of a petition by itunder any state or federal bankruptcy or insolvency laws or the liquidation ofall or a major portion of Borrower’s assets or property, and Borrower has noknowledge of any Person contemplating the filing of any such petition againstit or such constituent Persons.

 

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4.1.8                        Fulland Accurate Disclosure. To Borrower’s knowledge, no statement of fact madeby Borrower in this Agreement or in any of the other Loan Documents containsany untrue statement of a material fact or omits to state any material factnecessary to make statements contained herein or therein not misleading. Thereis no material fact presently known to Borrower which has not been disclosed toLender which adversely affects, nor as far as Borrower can foresee, mightadversely affect, the Property or the business, operations or condition(financial or otherwise) of Borrower.

 

4.1.9                        NoPlan Assets.   Borrower is not an “employeebenefit plan,” as defined in Section 3(3) of ERISA, subject to Title I ofERISA, and none of the assets of Borrower constitutes or will constitute “planassets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101.  In addition, (a) Borrower is not a “governmentalplan” within the meaning of Section 3(32) of ERISA and (b) transactions byor with Borrower are not subject to state statutes regulating investment of,and fiduciary obligations with respect to, governmental plans similar to theprovisions of Section 406 of ERISA or Section 4975 of the Codecurrently in effect, which prohibit or otherwise restrict the transactionscontemplated by this Loan Agreement.

 

4.1.10                  Compliance.   To Borrower’s knowledge, Borrower and theProperty and the use thereof comply in all material respects with allapplicable Legal Requirements, including, without limitation, building andzoning ordinances and codes.  Borrower isnot in default or violation of any order, writ, injunction, decree or demand ofany Governmental Authority. There 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                  FinancialInformation.   All financial data,including, without limitation, the statements of cash flow and income andoperating expense, that have been delivered to Lender in respect of theProperty (i) are, to the best of Borrower’s knowledge, true, complete andcorrect in all material respects, (ii) accurately represent the financialcondition of the Property as of the date of such reports, and (iii) to theextent prepared or audited by an independent certified public accounting firm,have been prepared in accordance with accounting principles reasonablyacceptable to Lender, consistently applied throughout the periods covered,except as disclosed therein; provided, however, that if anyfinancial data is delivered to Lender by any Person other than Borrower,Indemnitor or any of their Affiliates, or if such financial data has beenprepared by or at the direction of any Person other than Borrower, Indemnitoror any of their Affiliates, then the foregoing representations with respect tosuch financial data shall be to the best of Borrower’s knowledge, after dueinquiry.  Borrower does not have anycontingent liabilities, liabilities for taxes, unusual forward or long-termcommitments or unrealized or anticipated losses from any unfavorablecommitments that are known to Borrower and reasonably likely to have amaterially adverse effect on the Property or the operation thereof as a retailshopping center, except as referred to or reflected in said financialstatements.  Since the date of suchfinancial statements, there has been no materially adverse change in thefinancial condition. operations or business of Borrower from that set forth in saidfinancial statements.

 

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4.1.12                  Condemnation.   No Condemnation or other proceeding has beencommenced or, to Borrower’s knowledge, is contemplated with respect to all orany portion of the Property or for the relocation of roadways providing accessto the Property.

 

4.1.13                  FederalReserve Regulations.   No part of theproceeds of the Loan will be used for the purpose of**purchasing or acquiring any “margin stock” within themeaning of Regulation U of the Board of Governors of the Federal Reserve Systemor for any other purpose which would be inconsistent with such Regulation U orany other Regulations of such Board of Governors, or for any purposesprohibited by Legal Requirements or by the terms and conditions of thisAgreement or the other Loan Documents.

 

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

 

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

 

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

 

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

 

4.1.18                  Enforceability.   The Loan Documents are not subject to anyright of rescission, set-off, counterclaim or defense by Borrower, includingthe defense of usury, nor would the operation of any of the terms of the LoanDocuments, or the exercise of” any right thereunder, render the Loan Documentsunenforceable, and Borrower has not asserted any right of rescission, set-off,counterclaim or defense with respect thereto.

 

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

 

4.1.20                  Insurance.   Borrower has obtained and has delivered toLender certified copies of all insurance policies reflecting the insurancecoverages, amounts and other requirements set forth in this Agreement. To 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.

 

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4.1.21                  Useof Property. The Property is used exclusively for retail purposes and otherappurtenant and related uses.

 

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

 

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

 

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

 

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

 

4.1.26                  Leases.  The Property is not subject to any Leasesother than the Leases described on the Rent Roll attached as Schedule IVhereto and made a part hereof (and subleases permitted under the Anchor Lease).  No Person has any possessory interest in theProperty or right to occupy the same except under and pursuant to theprovisions of the Leases. The current Leases are in full force and effect andto Borrower’s knowledge after inquiry, there are no defaults thereunder byeither party and there are no conditions that, with the passage of time or

 

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the giving of notice, or both, would constitute defaults thereunder. NoRent (including security deposits) has been paid more than one (1) month inadvance of its due date. All work to be performed by Borrower under each Leasehas been performed as required and has been accepted 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 in connectionherewith, no hazardous wastes or toxic substances, as defined by applicablefederal, state or local statutes, rules and regulations, have been disposed,stored or treated by any tenant under any Lease on or about the leased premisesnor does Borrower have any knowledge of any tenant’s intention to use itsleased premises for any activity which, directly or indirectly, involves theuse, generation, treatment, storage, disposal or transportation of anypetroleum product or any toxic or hazardous chemical, material, substance orwaste, except in either event, in compliance with applicable federal, state orlocal 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                  Loanto Value.  The maximum principalamount of the Note does not exceed one hundred twenty-five percent (125%) ofthe fair market value of the Property as set forth on the appraisal of theProperty delivered to Lender.

 

4.1.29                  Filingand Recording Taxes.  All transfertaxes, deed stamps, intangible taxes or other amounts in the nature of transfertaxes required to be paid by any Person under applicable Legal Requirementscurrently in effect in connection with the acquisition of the Property byBorrower have been paid or are simultaneously being paid. All mortgage,mortgage recording, stamp, intangible or other similar tax required to be 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, theMortgage is enforceable in accordance with its terms by Lender (or any subsequentholder thereof).

 

4.1.30                  SpecialPurpose Entity/Separateness.   (a) Until the Debt has been paid in full, Borrower hereby represents,warrants and covenants that the Borrower is, shall be and shall continue to bea Special Purpose Entity.  IF Borrowerconsists of more than one Person, each such Person shall be a Special PurposeEntity.

 

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

 

(c)                                  Anyand all of the assumptions made in any Insolvency Opinion, including, but notlimited to, any exhibits attached thereto, will have been and shall be true andcorrect in all respects, and Borrower will have complied and will comply withall of the assumptions made with respect to it in any Insolvency Opinion. Eachentity other than Borrower with respect to which an assumption is made in anyInsolvency Opinion will have complied and will comply with all of theassumptions made with respect to it in any such Insolvency Opinion.

 

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

 

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

 

4.133                     NoChange 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 been no material adverse change in anycondition, fact, circumstance or event that would make any such information inaccurate,incomplete or otherwise misleading in any material respect or that otherwisematerially and adversely affects or might materially and adversely affect theProperty or the business operations or the financial condition of Borrower.Borrower has disclosed to Lender all material facts and has not failed todisclose any material fact that could cause any representation or warranty madeherein to be materially misleading.

 

4.1.34                  InvestmentCompany Act.  Borrower is not (a) an “investmentcompany” or a company “controlled” by an “investment company,” within themeaning of the Investment Company Act of 1940, as amended; (b) a “holdingcompany” or a “subsidiary company” of a “holding company” or an “affiliate” ofeither a “holding company” or a “subsidiary company” within the meaning of thePublic Utility Holding Company Act of 1935, as amended; or (c) subject to anyother federal or state law or regulation which purports to restrict or regulateits ability to borrow money.

 

4.1.35                  PrincipalPlace of Business and Organization. Borrower shall not change its principal place of business set forth inthe introductory paragraph of this Agreement without first giving Lender thirty(30) days prior written notice. Borrower shall not change the place of itsorganization as set forth in the introductory paragraph of this Agreementwithout the consent of Lender, which consent shall not be unreasonablywithheld, conditioned or delayed.  Upon

 

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Lender’s request,Borrower shall execute and deliver additional financing statements, securityagreements and other instruments which may be necessary to effectively evidenceor perfect Lender’s security interest in the Property as a result of suchchange of principal place of business or place of organization.

 

Section 4.2                                      Survivalof Representations.  Borrower agreesthat all of the representations and warranties of Borrower set forth in Section4.1 and elsewhere in this Agreement and in the other Loan Documents shallsurvive for so long as any amount remains owing to Lender under this Agreementor any of the other Loan Documents by Borrower. All representations,warranties, covenants and agreements made in this Agreement or in the otherLoan Documents by Borrower shall be deemed to have been relied upon by Lendernotwithstanding any investigation heretofore or hereafter made by Lender or onits behalf

 

**ARTICLEV**

**BORROWERCOVENANTS**

 

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

 

5.1.1                        Existence;Compliance with Legal Requirements; Insurance.  Borrower shall do or cause to be done allthings necessary to preserve, renew and keep in full force and effect itsexistence, rights, licenses, permits and franchises and comply with all LegalRequirements applicable to it and the Property. Borrower shall not commit, norshall Borrower permit any other Person in occupancy of or involved with theoperation or use of the Property to commit, any act or omission affording thefederal government or any stale or local government 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. Borrower herebycovenants and agrees not to commit, permit or suffer to exist any act oromission 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 any allegedviolation of any Legal Requirement, provided that, (i) no Event of Default hasoccurred and remains uncured; (ii) intentionally omitted; (iii) such proceedingshall be permitted under and be conducted in accordance with the provisions ofany instrument to which Borrower is subject and shall not constitute a defaultthereunder and such

 

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proceeding shall be conducted in accordance with all applicablestatutes, laws and ordinances; (iv) the Property or any part thereof orinterest therein will not be in danger of being sold, forfeited, terminated,cancelled or lost; (v) Borrower shall promptly upon final determination thereofcomply with any such Legal Requirement determined to be valid or applicable orcure any violation of any Legal Requirement; (vi) such proceeding shall suspendthe enforcement of the contested Legal Requirement against Borrower or theProperty; and (vii) Borrower shall furnish such security as may be required inthe proceeding, or as may be requested by Lender, to insure compliance withsuch Legal Requirement, together with all interest and penalties payable inconnection therewith. Lender may apply any such security, as necessary to causecompliance with such Legal Requirement at any time when, in the reasonablejudgment of Lender, the validity, applicability or violation of such LegalRequirement is finally established or the Property (or any part thereof orinterest therein) shall be in danger of being sold, forfeited, terminated, cancelledor lost.

 

5.1.2                        Taxesand Other Charges.  Borrower shallpay or cause to be paid all Taxes and Other Charges now or hereafter levied orassessed or imposed against the Property or any part thereof as the same becomedue and payable; provided, however, Borrower’s obligation todirectly pay to the appropriate taxing authority Taxes shall be suspended forso long as Borrower complies with the terms and provisions of Section 7.2hereof. Borrower will deliver to Lender receipts for payment or other evidencesatisfactory to Lender that the Taxes and Other Charges have been so paid orarc not then delinquent no later than, ten (10) days prior to the date on whichthe Taxes and/or Other Charges would otherwise be delinquent if not paid (provided,however, that Borrower is not required to furnish such receipts forpayment of Taxes in the event that such Taxes have been paid by Lender pursuantto Section 7.2 hereof). If Borrower pays or causes to be paid all Taxes andOther Charges and provides a copy of the receipt evidencing the payment thereofto Lender, then Lender shall reimburse Borrower, provided that there are thensufficient proceeds in the Tax and Insurance Escrow Fund and provided that theTaxes are being paid pursuant to Section 7.2. Upon written request of Borrower,if Lender has paid such Taxes pursuant to Section 7.2 hereof, Lender shallprovide Borrower with evidence that such Taxes have been paid. Borrower shallnot suffer and shall promptly cause to be paid and discharged any Lien orcharge whatsoever which may be or become a Lien or charge against the Property,and shall promptly pay for all utility services provided to the Property. Afterprior written notice to Lender, Borrower, at its own expense, may contest byappropriate Segal proceeding, promptly initiated and conducted in good faithand with due diligence, the amount or validity or application in whole or inpart of any Taxes or Other Charges, provided that (i) Borrower is permitted todo so under the provisions of any mortgage or deed of trust superior in lien tothe Mortgage; (ii) such proceeding shall he 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

 

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part thereof held byLender to the claimant entitled thereto at any time when, in the reasonablejudgment of Lender, the entitlement of such claimant is established.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

5.1.10                  IntentionallyOmitted.

 

5.1.11                  FinancialReporting.   (a) Borrower will keepand maintain or will cause to be kept and maintained on a Fiscal Year basis, inaccordance with the requirements for a Special Purpose Entity set forth above,proper and accurate books, records and accounts reflecting all of the financialaffairs of Borrower and all items of income and expense in connection with the operationon an individual basis of the Property. Lender shall have the right from timeto time at all times during normal business hours upon reasonable notice toexamine such books, records and accounts at the office of Borrower or otherPerson maintaining such books, records and accounts and to make such copies orextracts thereof as Lender shall desire. After the occurrence and during thecontinuance of an Event of Default, Borrower shall pay any costs and expenses incurredby Lender to examine Borrower’s accounting records with respect to theProperty, as Lender shall reasonably determine to be necessary or appropriatein the protection of Lender’s interest.

 

(b)                                 Borrowerwill furnish to Lender annually, within ninety (90) days following the end ofeach Fiscal Year of Borrower, either (i) a complete copy of Borrower’s annualfinancial statements audited by an accounting firm or other independentcertified public accountant reasonably acceptable to Lender in accordance withthe requirements for a Special Purpose Entity set forth above, or (ii) aconsolidated and annotated financial statement of Borrower and Sole Member (asapplicable), audited by an accounting firm or other independent certifiedpublic accountant reasonably acceptable to Lender in accordance with therequirements for a Special Purpose Entity set forth above, together withunaudited financial statements relating to the Borrower and the Property. Suchfinancial statements for the Property for such Fiscal Year and shall containstatements of profit and loss for Borrower and the Property and a balance sheetfor Borrower. Such statements shall set forth the financial condition and theresults of operations for the Property for such Fiscal Year, and shall include,but not be limited to, amounts representing annual Net Cash Flow, Net OperatingIncome, Gross Income from Operations and Operating Expenses. Borrower’s annualfinancial statements shall be accompanied by (i) a comparison of the budgetedincome and expenses and the actual income and expenses for the prior FiscalYear, (ii) a certificate executed by the chief financial officer of Borrower orSole Member, as applicable, stating that each such annual financial statementpresents fairly the financial condition and the results of operations ofBorrower 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 adjustments made to Net Operating Income to arrive atNet Cash Flow deemed material by such independent certified public accountant.Together with Borrower’s annual financial statements, Borrower shall furnish toLender an Officer’s Certificate certifying as of the date thereof whether there

 

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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)                                  Borrowerwill furnish, or cause to be furnished, to Lender on or before forty five (45)days after the end of each calendar quarter the following items, accompanied bya certificate of the chief financial officer of Borrower or Sole Member, asapplicable, stating that such items are true, correct, accurate, and completeand fairly present the financial condition and results of the operations ofBorrower and the Property (subject to normal year-end adjustments) asapplicable: (i) a rent roll for the subject month accompanied by an Officer’sCertificate with respect thereto;  (ii)  quarterly and year-to-date operating statements(including capital Expenditures) prepared for each calendar quarter, noting NetOperating Income, Gross Income from Operations, and Operating Expenses (notincluding any contributions to the Replacement Reserve Fund, and otherinformation necessary and sufficient to fairly represent the financial positionand results of operation of the Property during such calendar month, andcontaining a comparison of budgeted income and expenses and the actual incomeand expenses together with a detailed explanation of any variances of fivepercent (5%) or more between budgeted and actual amounts for such periods, allin form satisfactory to Lender; (iii) a calculation reflecting the annual DebtService Coverage Ratio for the immediately preceding twelve (12) month period asof the last day of such month accompanied by an Officer’s Certificate withrespect thereto; and (iv) a Net Cash Flow Schedule (such Net Cash Flow for theBorrower may be unaudited if it is certified by an officer of the Borrower). Inaddition, such certificate shall also be accompanied by a certificate of thechief financial officer of Borrower or Sole Member stating that the representationsand warranties of Borrower set forth in Section 4.1.30(a) are true and correctas of the date of such certificate.

 

(d)                                 Forthe partial year period commencing on the Closing Date, and for each FiscalYear thereafter, Borrower shall submit to Lender an Annual Budget not laterthan thirty (30) days after the commencement of such period or Fiscal Year inform reasonably satisfactory to Lender.

 

(e)                                  Borrowershall furnish to Lender, within ten (10) Business Days after request (or assoon thereafter as may be reasonably possible), such further detailedinformation with respect to the operation of the Property and the financialaffairs of Borrower as may be reasonably requested by Lender.

 

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

 

(g)                                 Borrowerwill cause Indemnitor to furnish to Lender annually, within one hundred twenty(120) days following the end of each Fiscal Year of Indemnitor, financialstatements audited by an independent certified public accountant, which shallinclude an annua1

 

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balance sheet and profitand loss statement of Indemnitor, in the form reasonably required by Lender.

 

(h) Any reports, statements or other informationrequired to be delivered under this Agreement shall be delivered (i) in paperform, (ii) on a diskette, and (iii) if requested by Lender and within thecapabilities of Borrower’s data systems without change or modification thereto,in electronic form and prepared using a Microsoft Word for Windows orWordPerfect for Windows files (which files may be prepared using a spreadsheetprogram and saved as word processing files).

 

5.1.12                  Businessand Operations.  Borrower willcontinue to engage in the businesses presently conducted by it as and to theextent the same are necessary for the ownership, maintenance, management andoperation of the Property.  Borrower willqualify to do business and will remain in good standing under the laws of eachjurisdiction as and to the extent the same are required for the ownership,maintenance, management and operation of the Property.

 

5.1.13                  Titleto the Property. Borrower will warrant and defend (a) the title to the Propertyand every part thereof, subject only to Liens permitted hereunder (includingPermitted Encumbrances) and (b) the validity and priority of the Liens of theMortgage and the Assignment of Leases on the Property, subject only to Lienspermitted hereunder (including Permitted Encumbrances), in each case againstthe 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                  Costsof Enforcement. In the event (a) that the Mortgage encumbering the Propertyis foreclosed in whole or in part or that the Mortgage is put into the hands ofan attorney for collection, suit, action or foreclosure, (b) of the foreclosureof any mortgage prior to or subsequent to the Mortgage encumbering the Propertyin which proceeding Lender is made a party, or (c) of the bankruptcy,insolvency, rehabilitation or other similar proceeding in respect of Borroweror any of its constituent Persons or an assignment by Borrower or any of its constituentPersons for the benefit of its creditors, Borrower, its successors or assigns,shall be chargeable with and agrees to pay all costs of collection and defense,including reasonable attorneys’ fees and costs, incurred by Lender or Borrowerin connection therewith and in connection with any appellate proceeding orpost-judgment action involved therein, together with all required service oruse taxes.

 

5.1.15                  EstoppelStatement.   (a) After request by Lender, Borrower shallwithin ten (10) days furnish Lender with a statement, duly acknowledged andcertified, setting forth (i) the amount of the original principal amount of theNote, (ii) the unpaid principal amount of the Note, (iii) the applicableinterest rate of the Note, (iv) the date installments of interest and/or principalwere last paid, (v) any offsets or defenses to the payment of the Debt, if any,and (vi) that the Note, this Agreement, the Mortgage and the other LoanDocuments are valid, legal and binding obligations and have not been modifiedor if modified, giving particulars of such modification.

 

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(b)                                 Borrowershall use commercially reasonable efforts to deliver to Lender upon request,tenant estoppel 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.

 

(c)                                  Withinthirty (30) days of request by Borrower, Lender shall deliver to Borrower astatement setting forth the items described at (a)(i), (ii), (iii) and (iv) ofthis Section 5.1.15.

 

5.1.16                  LoanProceeds.  Borrower shall use theproceeds of the Loan received by it on the Closing Date only for the purposesset forth in Section 2.1.4.

 

5.1.17                  Performanceby Borrower.  Borrower shall in atimely manner observe, perform and fulfill each and every covenant, term andprovision of each Loan Document executed and delivered by, or applicable to,Borrower, and shall not enter into or otherwise suffer or permit any amendment,waiver, supplement, termination or other modification of any Loan Documentexecuted and delivered by, or applicable to, Borrower without the prior writtenconsent of Lender.

 

5.1.18                  Confirmationof Representations.  Borrower shalldeliver, in connection with any Securitization, (a) one or more Officer’sCertificates certifying as to the accuracy of all representations made byBorrower in the Loan Documents as of the date of the closing of such Securitization,and (b) certificates of the relevant Governmental Authorities in all relevant jurisdictionsindicating the good standing and qualification of Borrower and its member as ofthe date of the Securitization.

 

5.1.19                  NoJoint Assessment.  Borrower shall notsuffer, permit or initiate the joint assessment of the Property (a) with anyother real property constituting a tax lot separate from the Properly, and (b)which constitutes real property with any portion of the Property which may bedeemed to constitute personal property, or any other procedure whereby the lienof any taxes which may be levied against such personal property shall beassessed or levied or charged to such real property portion of the Property.

 

5.1.20                  LeasingMatters.  Any Leases with respect tothe Property written after the Closing Date for more than the Relevant LeasingThreshold square footage shall be subject to the prior written approval ofLender, which approval may be given or withheld in the sole discretion ofLender. Lender shall approve or disapprove any such Lease within ten (10)Business Days of Lender’s receipt of a final execution draft of such Lease(including all exhibits, schedules, supplements, addenda or other agreementsrelating thereto) and a written notice from Borrower requesting Lender’sapproval to such Lease, and such Lease shall be deemed approved, if Lender doesnot disapprove such Lease within said ten (10) Business Day period *provided*such written notice conspicuouslystates, in large bold type, that **“PURSUANT TO SECTION 5.1.20OF THE LOAN AGREEMENT, THE LEASE SHALL BE DEEMED APPROVED IF LENDER DOES NOTRESPOND TO THE CONTRARY WITHIN TEN (10) BUSINESS DAYS OF LENDER’S RECEIPT OF SUCHLEASE AND WRITTEN NOTICE”**. Borrower shall furnish Lender withexecuted copies of all Leases. All renewals of Leases and all

 

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proposed Leases shall provide for rental rates comparable to existinglocal market rates (unless such rental rates are otherwise set forth in theLeases executed prior to the Closing Date). All proposed Leases shall be oncommercially reasonable terms and shall not contain any terms which would materially affect Lender’s rights under theLoan Documents. All Leases executed after the Closing Date shall provide thatthey are subordinate to the Mortgage encumbering the Property and that thetenant thereunder agrees to attorn to Lender or any purchaser at a sale byforeclosure or power of sale. Borrower (i) shall observe and perform theobligations imposed upon the lessor under the Leases in a commerciallyreasonable manner; (ii) shall enforce the terms, covenants and conditionscontained in the Leases upon the part of the tenant thereunder to be observedor performed in a commercially reasonable manner and in a manner not to impairthe value of the Property involved except that no termination by Borrower oracceptance of surrender by a tenant of any Lease shall be permitted unless byreason of a tenant default and then only in a commercially reasonable manner topreserve and protect the Property provided, however, that no suchtermination or surrender of any Lease covering more than the Relevant LeasingThreshold will be permitted without the written consent of Lender which consentmay be withheld in the sole discretion of Lender; (iii) shall not collect anyof the rents more than one (1) month in advance (other than security deposits);(iv) shall not execute any other assignment of lessor’s interest in the Leasesor the Rents (except as contemplated by the Loan Documents); (v) shall notalter, modify or change the terms of the Leases in a manner inconsistent withthe provisions of the Loan Documents without the prior written consent ofLender, which consent may be withheld in the sole discretion of Lender; and(vi) shall execute and deliver at the request of Lender all such furtherassurances, confirmations and assignment in connection with the Leases asLender shall from time to time reasonably require. Notwithstanding theforegoing, Borrower may, without the prior written consent of Lender, terminateany Lease which demises less than the Relevant Leasing Threshold under any ofthe following circumstances: (i) the tenant under said Lease is in default beyondany applicable grace and cure period, and Borrower has the right to terminatesuch Lease; (ii) such termination is permitted by the terms of the Lease inquestion and Borrower has secured an obligation from a third party to lease thespace under the Lease to be terminated at a rental equal to or higher than therental due under the Lease to be terminated; and (iii) if the tenant under theLease to be terminated, has executed a right under said Lease to terminate itslease upon payment of a termination fee to Borrower, and has in fact terminatedits lease and 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

 

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or (d) any structural alteration which costs less than $50,000.00 inthe aggregate for all components thereof which constitute such alteration orany non-structural alteration which costs less than $100,000.00 in theaggregate for all components thereof which constitute such alteration. If thetotal unpaid amounts due and payable with respect to alterations to theImprovements at the Property (other than such amounts to be paid or reimbursedby tenants under the Leases) shall at any time equal or exceed $350,000.00 (the**“Threshold****Amount”**), Borrower, upon Lender’srequest, shall promptly deliver to Lender as security for the payment of suchamounts and as additional security for Borrower’s obligations under the LoanDocuments any of the following: (A) cash, (B) U.S. Obligations, (C) othersecurities having a rating acceptable to Lender and that the applicable RatingAgencies have confirmed in writing will not, in and of itself, result in adowngrade, withdrawal or qualification of the initial, or, if higher, thencurrent ratings assigned in connection with any Securitization, or (D) acompletion bond or letter of credit issued by a financial institution having arating by Standard £ Poor’s Ratings Group of not less than A-1+ if the term ofsuch bond or letter of credit is no longer than three (3) months or, if suchterm is in excess of three (3) months, issued by a financial institution havinga rating that is acceptable to Lender and that the applicable Rating Agencieshave confirmed 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              IntentionallyOmitted.

 

5.1.23              IntentionallyOmitted.

 

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

 

5.2.1                   Operationof Property.  Borrower shall not,without the prior consent of Lender, terminate the Management Agreement orotherwise replace the Manager or enter into any other management agreement withrespect to the Property unless the Manager is in default thereunder beyond anyapplicable grace or cure period, in which event no consent by Lender shall berequired. Lender agrees that its consent will not be unreasonably withheld,delayed or conditioned provided that the Person chosen by Borrower as thereplacement Manager is a Qualifying Manager and provided further that Borrowershall deliver an acceptable non-consolidation opinion covering such replacementManager if such Person was not covered by such opinion delivered at the closingof the Loan.

 

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

 

(i)                                     PermittedEncumbrances;

 

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

 

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

 

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

 

5.2.4                        Changein Business.  Borrower shall notenter into any line of business other than the ownership and operation of theProperty, or make any material change in the scope or nature of its businessobjectives, purposes or operations, or undertake or participate in activitiesother than the continuance of its present business.

 

5.2.5                        DebtCancellation.  Borrower shall notcancel or otherwise forgive or release any claim or debt (other thantermination of Leases in accordance herewith) owed to Borrower by any Person,except for adequate consideration and in the ordinary course of Borrower’sbusiness.

 

5.2.6                        AffiliateTransactions.  Borrower shall notenter into, or be a party to, any transaction with an Affiliate of Borrower orany of the partners of Borrower except in the ordinary course of business andon terms which are fully disclosed to Lender in advance and are no lessfavorable to Borrower or such Affiliate than would be obtained in a comparablearm’s-length transaction with an unrelated third party.

 

5.2.7                        Zoning.  Borrower shall not initiate or consent to anyzoning reclassification of any portion of the Property or seek any varianceunder any existing zoning ordinance or use or permit the use of any portion ofthe Property in any manner that could result in such use becoming anon-conforming use under any zoning ordinance or any other applicable land uselaw, rule or regulation, without the prior consent of Lender.

 

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

 

5.2.9                        Debt. Borrower shall not create, incur orassume any Indebtedness other than the Debt except to the extent expresslypermitted hereby.

 

5.2.10                  NoJoint Assessment.  Borrower shall notsuffer, permit or initiate the joint assessment of the Property with (a) anyother real property constituting a tax lot separate from the Property, or (b)any portion of the Property which may be deemed to constitute personal property,or any other procedure whereby the Lien of any taxes which may be leviedagainst such personal property shall be assessed or levied or charged to theProperty.

 

5.2.11                  IntentionallyOmitted.

 

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

 

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

 

(i)                                     Equityinterests in Borrower arc publicly offered securities, within the meaning of 29C.F.R. §2510.3-101 (b)(2);

 

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

 

(iii)                               Borrowerqualifies as an “operating company” or a “real estate operating company” withinthe meaning of 29 C.F.R. §2510.3-101 (c) or (e).

 

5.2.13                  Transfers.  Unless such action is permitted by theprovisions of this Section 5.2.13, Borrower agrees that it will not (i) sell,assign, convey, transfer or otherwise dispose of its interests in the Propertyor any part thereof, (ii) permit any owner, directly or indirectly, of anownership interest in the Property, to transfer such interest, whether bytransfer of stock or other interest in Borrower or any entity, or otherwise,(iii) incur Indebtedness (other than the Indebtedness permitted pursuant to theterms of this Agreement), (iv) mortgage, hypothecate or otherwise encumber orgrant a security interest in the Property or any part thereof, (v) sell,assign, convey, transfer, mortgage, encumber, grant a security interest in, or otherwisedispose of any direct or indirect ownership interest in Borrower, or permit anyowner of an interest in Borrower to do the same, or (vi) file a declaration ofcondominium with respect

 

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to the Property (any ofthe foregoing transactions, a “**Transfer**”).For purposes hereof, a “Transfer” shall not include (A) any issuance, sale ortransfer of interests in Inland Western Retail Real Estate Trust, Inc., (B)transfer by devise or descent or by operation of law upon the death of a memberof Borrower, and (C) a sale, transfer or hypothecation of a membership interestin Borrower, whichever the case may be, by the current member(s), asapplicable, to an immediate family member (i.e., parents, spouses, siblings,children or grandchildren) of such member (or a trust for the benefit of anysuch persons).

 

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

 

(1)                                  thetransferee of the Property shall be a Special Purpose Entity (the **“Transferee”**) which at the time of such transfer willbe in compliance with the covenants contained in Section 5.1.1 and therepresentations contained in 4.1.30 hereof and which shall have assumed inwriting (subject to the terms of Section 9.4 hereof) and agreed to comply withall the terms, covenants and conditions set forth in this Loan Agreement and theother Loan Documents, expressly including the covenants contained in Section5.1.1 and the representations contained in 4.1.30 hereof;

 

(2)                                  ifrequested by Lender, Borrower shall deliver confirmation in writing from theRating Agencies that such proposed Transfer will not cause a downgrading,withdrawal or qualification of the then current rating of any securities issuedpursuant to such Securitization;

 

(3)                                  ifManager does not act as manager of the transferred Property then the manager ofthe Property must be a Qualifying Manager;

 

(4)                                  noEvent of Default shall have occurred and be continuing;

 

(5)                                  ifrequired or requested by any of the Rating Agencies, Borrower shall deliver anAdditional Insolvency Opinion, and if required by a Rating Agency, a fraudulentconveyance opinion which in each case may be relied upon by the holder of theNote, the Ratings Agencies and their respective counsel, agents andrepresentatives with respect to the proposed transaction, including theTransferee, which opinion shall be acceptable to Lender in its reasonablediscretion;

 

(6)                                  Borrowershall have paid (A) an assumption fee equal to one percent (1.0%) of the thenoutstanding principal balance of the Loan, and (B) the reasonable and customarythird-party expenses (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

 

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provided InlandWestern Retail Real Estate Trust, Inc., or an Affiliate wholly-owned (directlyor indirectly) by Inland Western Retail Real Estate Trust, Inc., owns at leasttwenty percent (20%) of the ownership interests in such Transferee and forwhich Inland Western Retail Real Estate Trust, Inc, or an Affiliatewholly-owned (directly or indirectly) by Inland Western Retail Real EstateTrust, Inc., is the managing entity and 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 proposed Transfer governed bythis Section 5.2.13(a) within thirty (30) days of Lender’s receipt of a writtennotice from Borrower requesting Lender’s approval, provided such noticeincludes all information necessary to make such decision, and further providedthat such written notice from Borrower shall conspicuously state, in large boldtype, that **“PURSUANT TO SECTION 5.2.13 OF THELOAN AGREEMENT, A RESPONSE IS REQUIRED WITHIN THIRTY (30) DAYS OF LENDER’SRECEIPT OF THIS WRITTEN NOTICE”.**If Lender fails to disapprove anysuch matter within such period, Borrower shall provide a second written noticerequesting approval, which written notice shall conspicuously state, in largebold 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 notdisapprove such matter within said ten (10) day period such matter shall bedeemed approved.

 

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

 

(c)                                  Notwithstandinganything in this Section 5.2.13 to the contrary, on or after the date that istwelve (12) months after the Closing Date, Borrower shall be permitted to Transferthe entire Property in a single transaction to one newly-formed Special PurposeEntity which shall be wholly-owned subsidiary of Inland Western Retail RealEstate Trust, Inc.

 

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(**“Permitted Affiliate Transferee”**) whichshall be approved by Lender in its reasonable discretion (**“PermittedAffiliate Transfer”**), provided (1) no Event of Defaultshall have occurred and be continuing, (2) the creditworthiness of Inland WesternRetail Real Estate Trust, Inc., as applicable, has not deteriorated, in thesole discretion of Lender, from the Closing Date to the date of the proposedTransfer, and (3) Borrower shall have paid all reasonable and customary thirdparty expenses (including reasonable attorneys’ fees and disbursements)actually incurred by Lender in connection with such Transfer (but not anyassumption or processing fee).

 

(d)                                 Borrower,without the 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 theProperty providing at least the following coverages:

 

(i)                                     comprehensiveall risk insurance on the Improvements and the Personal Property, includingcontingent liability from Operation of Building Laws, Demolition Costs andIncreased Cost of Construction Endorsements, in each case (A) in an amountequal to one hundred percent (100%) of the “Full Replacement Cost,”which for purposes of this Agreement shall mean actual replacement value(exclusive of costs of excavations, foundations, underground utilities andfootings) with a waiver of depreciation; (B) containing an agreed amountendorsement with respect to the Improvements and Personal Property waiving allco-insurance provisions; (C) providing for no deductible in excess of TenThousand and No/100 Dollars ($10,000) for all such insurance coverage; and (D)containing an “Ordinance or Law Coverage’’ or “Enforcement” endorsement if anyof the Improvements or the use of the. Property shall at any time constitutelegal non-conforming structures or uses. In addition, Borrower shall obtain:(y) if any portion of the Improvements is currently or at any time in thefuture located in a federally designated “special flood hazard area”, floodhazard insurance in an amount equal to the lesser of (1) the outstandingprincipal balance of the Note or (2) the maximum amount of

 

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such insuranceavailable under the National Flood Insurance Act of 1968, the Flood DisasterProtection Act of 1973 or the National Flood Insurance Reform Act of 1994, aseach may be amended or such greater amount as Lender shall require; and (z)earthquake insurance in amounts and in form and substance satisfactory toLender in the event the Property is located in an area with a high degree ofseismic activity, provided that the insurance pursuant to clauses (y) and (z)hereof shall be on terms consistent with the comprehensive all risk insurancepolicy required under this subsection (i).

 

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

 

(iii)                               businessincome insurance (A) with loss payable to Lender; (B) covering all risksrequired to be covered by the insurance provided for in subsection (i) above;(C) covering rental losses or business interruption, as may be applicable, fora period of at least twelve (12) months after the date of the casualty; and (D)in an annual amount equal to (100%) of the rents or estimated gross revenuesfrom the 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 be appliedto the obligations secured by the Loan Documents from time to time due andpayable 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)                              atall times during which structural construction, repairs or alterations arebeing made with respect to the Improvements, and only if the Property coverageform does not otherwise apply, (A) owner’s contingent or protective liabilityinsurance covering claims not covered by or under the terms or provisions ofthe above mentioned commercial general liability insurance policy; and (B) theinsurance provided for in subsection (i) above written in a so-called builder’srisk completed value form (1) on a non-reporting basis, (2) against all risksinsured against pursuant to subsection (i) above, (3) including permission tooccupy the Property, and (4) with an agreed amount endorsement waivingco-insurance provisions;

 

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

 

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

 

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

 

(viii)                        ifany of the policies of insurance covering the risks required to be coveredunder subsections (i) through (vii) above contains an exclusion from coveragefor acts 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 shall protectand hold Lender harmless from any losses associated with such risks by, amongother things, either (A) depositing with Lender sums sufficient to pay for alluninsured costs related to a Restoration of the Property following any act ofterrorism (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 6.4 hereof)and (III) Terrorism Insurance Guarantor maintains a net worth of at least$300,000,000 (as determined by such entity’s most recent audited financialstatements), such entity maintains a direct or indirect ownership interest inBorrower, and the aggregate loan-to-value ratio (as determined by Lender) (“LTV”)for all properties on which such entity has a direct or indirect ownershipinterest shall not exceed 55%, however, Terrorism Insurance Guarantor may exceedthe 55% LTV for a period not to exceed six (6) months out of any twelve (12)month period cither 1) during the time period when Terrorism InsuranceGuarantor is offering securities to the public, or 2) when in the businessjudgement of Terrorism Insurance Guarantor, exceeding an LTV of 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)                                uponsixty (60) days’ written notice, such other reasonable insurance and in suchreasonable amounts as Lender from time to time may reasonably request againstsuch other insurable hazards which at the time are commonly insured against forproperty similar to the Property located in or around the region in which theProperty is located.

 

(b)                                 Allinsurance provided 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 insurance companies,amounts, deductibles, loss payees and insureds. The Policies shall be issued byfinancially sound and responsible insurance

 

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companies authorized todo business in the State and having a rating of “A:X” or better in the currentBest’s Insurance Reports and a claims paying ability rating of “AA” or betterby at least two (2) of the Rating Agencies including, (i) Standard & Poor’sRatings Group, and (ii) Moody’s Investors Services, Inc. if Moody’s InvestorsService, Inc. is rating the Securities. The Policies described in Section 6.1 (otherthan those strictly limited to liability protection) shall designate Lender asloss payee. Not less than thirty (30) days prior to the expiration dates of thePolicies theretofore furnished to Lender, certificates of insurance evidencingthe Policies accompanied by evidence satisfactory to Lender of payment of thepremiums due thereunder (the **“InsurancePremiums”**), shallbe delivered by Borrower to Lender.

 

(c)                                  Anyblanket insurance Policy shall specifically allocate to the Property the amountof coverage from time to time required hereunder and shall otherwise providethe same protection as would a separate Policy insuring only the Property incompliance with the provisions of Section 6.1 (a).

 

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

 

(e)                                  AllPolicies of insurance provided for in Section 6.1 (a) shall contain clauses orendorsements to the effect that:

 

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

 

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

 

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

 

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

 

(f)                                    Ifat any time Lender is not in receipt of written evidence that all insurancerequired hereunder is in full force and effect, Lender shall have the right,after ten (10) Business Days written notice to Borrower, to take such action asLender deems necessary to protect its interest in the Property, including,without limitation, the obtaining of such insurance coverage as Lender in itssole discretion deems appropriate. All premiums incurred by Lender inconnection with such action or in obtaining such insurance and keeping it ineffect shall be paid by Borrower to Lender upon demand and, until paid, shallbe secured by the Mortgage and shall

 

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bear interest at theDefault Rate. If Borrower fails in so insuring the Property or in so assigningand delivering the Policies, Lender may, at its option, obtain such insuranceusing such carriers and agencies as Lender shall elect from year to year andpay the premiums therefor, and Borrower will reimburse Lender for any premiumso paid, with interest thereon as stated in the Note from the time of payment,on demand, and the amount so owning to Lender shall be secured by the Mortgage.The insurance obtained by Lender may, but need not, protect Borrower’s interestand the coverage that Lender purchases may not pay any claim that Borrowermakes or any claim that is made against Borrower in connection with theProperty.

 

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

 

Section 6.3                                      Condemnation.

 

(a)                                  Borrowershall promptly give Lender notice of the actual or threatened commencement ofany proceeding 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 ofSection 6.4. If the Property is sold, through foreclosure or otherwise, priorto the receipt by Lender of the Award, Lender shall have the right, whether ornot a deficiency judgment on the Note shall have been sought, recovered ordenied, to receive the Award, or a portion thereof sufficient to pay the Debt.

 

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Section 6.4                                      Restoration.  The following provisions shall apply inconnection with the Restoration of the Property:

 

(a)                                  Ifthe Net Proceeds shall be less than Relevant Restoration Threshold and thecosts of completing the Restoration shall be less than the Relevant RestorationThreshold, the Net Proceeds will be disbursed by Lender to Borrower uponreceipt, provided that all 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 Borrowerdelivers to Lender a written undertaking to expeditiously commence and to satisfactorilycomplete with due diligence the Restoration in accordance with the terms ofthis Agreement.

 

(b)                                 Ifthe Net Proceeds are equal to or greater than the Relevant Restoration Thresholdor the costs of completing the Restoration is equal to or greater than theRelevant Restoration Threshold, then in either case, Lender shall make the NetProceeds available for the Restoration in accordance with the provisions ofthis Section 6.4(b).  The term. **“Net Proceeds”** for purposes of this Section 6.4 shallmean: (x) the net amount of ail insurance proceeds received by Lender pursuantto Section 6.1 (a)(i), (iv), (vi) and (viii) as a result of such damage or destruction,after deduction of its reasonable costs and expenses (including, but notlimited to, reasonable counsel fees), if any, in collecting same (**“Insurance Proceeds”**), or (y) the net amount of theAward, after deduction of its reasonable costs and expenses (including, but notlimited to, reasonable counsel fees), if any, in collecting same (**“Condemnation Proceeds”**), whichever the case may be.

 

(i)                                     TheNet Proceeds shall be made available to Borrower for Restoration provided thateach of the following conditions are met:

 

(A)                              noEvent of Default shall have occurred and be continuing;

 

(B)                                (1)in the event the Net Proceeds are Insurance Proceeds, and (x) less thantwenty-five percent (25%) of the total floor area of the Improvements on theProperty has been damaged, destroyed or rendered unusable as a result of suchfire or other casualty, or (y) Borrower is required under a Lease exceeding theRelevant Leasing Threshold to use the Net Proceeds for the restoration of theProperty, or (2) in the event the Net Proceeds are Condemnation Proceeds, and(x) less than ten percent (10%) of the land constituting the Property is taken,and such land is located along the perimeter or periphery of the Property, andno portion of the Improvements is located on such land, or (y) Borrower isrequired under a Lease exceeding the Relevant Leasing Threshold to use the Net Proceedsfor the restoration of the Property;

 

(C)                                Leasesdemising in the aggregate a percentage amount equal to or greater than theRentable Space Percentage of the total rentable space in the Property which hasbeen demised under executed and delivered Leases in effect as of the date ofthe occurrence of such fire or other casualty or taking, whichever the case maybe, shall remain in full force and effect during and after the completion ofthe Restoration, notwithstanding the occurrence of any such fire or othercasualty or taking, whichever the case maybe, and will make all necessaryrepairs and restorations thereto at their sole cost and expense.  The term **“Rentable Space Percentage”**

 

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shall mean (x) in the event the Net Proceeds areInsurance Proceeds, a percentage amount equal to fifty percent (50%) and (y) inthe event the Net Proceeds are Condemnation Proceeds, a percentage amount equalto fifty percent (50%);

 

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

 

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

 

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

 

(G)                                theProperty and the use thereof after the Restoration will be in compliance withand permitted under all applicable zoning laws, ordinances, rules and regulationsprovided, however, that compliance with such zoning laws, ordinances, rules andregulations (including, without limitation, parking requirements) will notrequire restoration of the Improvements or the Property to a size, condition,or configuration materially different, than that which existed immediatelyprior to such Casualty or taking;

 

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

 

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

 

(J)                                   theDebt Service Coverage Ratio, after giving effect to the Restoration, shall beequal lo or greater than 2.49:1.0;

 

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

 

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

 

(ii)                                  TheNet Proceeds shall be held by Lender in an interest bearing account and, untildisbursed in accordance with the provisions of this Section 6.4(b), shallconstitute additional security for the Debt and other obligations under theLoan Documents. The Net Proceeds shall be disbursed by Lender to, or asdirected by, Borrower from time to time during the course of the Restoration,upon receipt of evidence satisfactory to Lender that (A) all materialsinstalled and work and labor performed to be paid for out of the requesteddisbursement in connection with the Restoration have been performed, and (B)there exist no notices of pendency, stop orders, mechanic’s or materialman’sliens or notices of intention to file same, or any other liens or encumbrancesof any nature whatsoever on the Property which have not either been fullybonded to the satisfaction of Lender and discharged of record or in thealternative fully insured to the satisfaction of Lender by the title companyissuing the Title Insurance Policy.

 

(iii)                               Allplans and specifications required in connection with the Restoration shall besubject to prior review and acceptance in all respects by Lender and by anindependent consulting engineer selected by Lender (the **“Casualty Consultant”),**such reviewand acceptance not to be unreasonably withheld or delayed. Lender shall havethe use of the plans arid specifications and all permits, licenses andapprovals required or obtained in connection with the Restoration. The identityof the contractors, subcontractors and materialmen engaged in the Restoration,as well as the contracts under which they have been engaged, shall be subjectto prior review and acceptance by Lender and the Casualty Consultant, suchreview and acceptance not to he unreasonably withheld or delayed. All costs andexpenses incurred by Lender in connection with making the Net Proceedsavailable for the Restoration including, without limitation, reasonable counselfees and disbursements and the Casualty Consultant’s fees, shall be paid byBorrower.

 

(iv)                              Inno event shall Lender be obligated to make disbursements of the Net Proceeds inexcess of an amount equal to the costs actually incurred from time to time forwork in place as part of the Restoration, as certified by the CasualtyConsultant, minus the Casualty Retainage. The term **“Casualty Retainage”** shall mean anamount equal to ten percent (10%) of the costs actually incurred for work inplace as part of the Restoration, as certified by the Casualty Consultant,until the Restoration has been completed. The Casualty Retainage shall in noevent, and notwithstanding anything to

 

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the contrary set forth above in this Section 6.4(b),be less than the amount actually held back by Borrower from contractors,subcontractors and materialmen engaged in the Restoration. The CasualtyRetainage shall not be released until the Casualty Consultant certifies toLender that the Restoration has been completed in accordance with theprovisions of this Section 6.4(b) and that all approvals necessary for there-occupancy and use of the Property have been obtained from all appropriategovernmental and quasi-governmental authorities, and Lender receives evidencesatisfactory to Lender that the costs of the Restoration have been paid in fullor will be paid in full out of the Casualty Retainage; provided, however,that Lender will release the portion of the Casualty Retainage being held withrespect to any contractor, subcontractor or materialman engaged in theRestoration as of the date upon which the Casualty Consultant certifies toLender that the contractor, subcontractor or materialman has satisfactorilycompleted all work and has supplied all materials in accordance with theprovisions of the contractor’s, subcontractor’s or materialman’s contract, thecontractor, subcontractor or materialman delivers the lien waivers and evidenceof payment in full of all sums due to the contractor, subcontractor ormaterialman as may be reasonably requested by Lender or by the title companyissuing the Title Insurance Policy, and Lender receives an endorsement to theTitle Insurance Policy insuring the continued priority of the lien of theMortgage and evidence of payment of any premium payable for such endorsement.If required by Lender, the release of any such portion of the CasualtyRetainage shall be approved by the surety company, if any, which has issued apayment or performance bond with respect to the contractor, subcontractor ormaterialman.

 

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

 

(vi)                              Ifat any time the Net Proceeds or the undisbursed balance thereof shall not, inthe reasonable opinion of Lender in consultation with the Casualty Consultant,be sufficient to pay in full the balance of the costs which are estimated bythe Casualty Consultant to be incurred in connection with the completion of theRestoration, Borrower shall deposit the deficiency (the **“NetProceeds Deficiency”**) with Lender before any furtherdisbursement of the Net Proceeds shall be made. The Net Proceeds Deficiencydeposited with Lender shall be held by Lender and shall be disbursed for costsactually incurred in connection with the Restoration on the same conditionsapplicable to the disbursement of the Net Proceeds, and until so disbursedpursuant to this Section 6.4(b) shall constitute additional security for theDebt and other obligations under the Loan Documents.

 

(vii)                           Theexcess, if any, of the Net Proceeds and the remaining balance, if any, of theNet Proceeds Deficiency deposited with Lender after the Casualty Consultantcertifies to Lender that the Restoration has been completed in accordance withthe provisions of this Section 6.4(b), and the receipt by Lender 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.

 

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

 

(d)                                 Inthe event of foreclosure of the Mortgage with respect to the Property, or othertransfer of title to the Property in extinguishment in whole or in part of theDebt all right, title and interest of Borrower in and to the Policies that arenot blanket Policies then in force concerning the Property and all proceedspayable thereunder shall thereupon vest in the purchaser at such foreclosure orLender or other transferee in the event of such other transfer of title.

 

(e)                                  Lendershall with reasonable promptness following any Casualty or Condemnation notifyBorrower whether or not Net Proceeds are required to be made available to Borrowerfor restoration 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 Section2.3.2(a) hereof (a **“Net ProceedsPrepayment”**).  If such NetProceeds Prepayment shall be equal to or greater than Fourteen Million FiveHundred Thousand and 00/100 Dollars ($14,500,000.00), Borrower shall have theright to elect to prepay the remaining outstanding principal balance of theNote (a **“Casualty/Condemnation Prepayment”**)in accordance with Section 2.3.2(b) hereof upon satisfaction of thefollowing conditions:  (i) within thirty(30) days following the date of the Net Proceeds Prepayment, Borrower shallprovide Lender with written notice of Borrower’s intention to pay the Note infull, (ii) Borrower shall prepay the Note in accordance with Section 2.3.2(b)hereof on or before the second Payment Date occurring following the date of theNet Proceeds Prepayment, and (iii) no Event of Default shall exist on the dateof such Casualty/Condemnation Prepayment. Notwithstanding anything in Section 6.2 or Section 6.3 to the contrary,Borrower shall have no obligation to commence Restoration of the Property upondelivery of the written notice set forth in clause (i) of the precedingsentence (unless Borrower subsequently shall fail to satisfy the requirement ofclause (ii) of the preceding sentence).

 

**ARTICLE VII**

**RESERVE FUNDS**

 

Section 7.1                                      RequiredRepair Funds.

 

7.1.1                        Deposits.  Borrower shall perform the repairs at theProperty, if any, as more particularly set forth on Schedule III hereto(such repairs hereinafter referred to as **“Required Repairs”**)within six (6) months from the Closing Date, or such earlier time as specifiedon Schedule III. If Borrower has not delivered to Lender evidencereasonably satisfactory to Lender that it has completed all Required Repairs onor before the date that is six (6) months from the Closing Date, or suchearlier time as specified on Schedule III, Borrower shall deposit withLender the amount for the Property set forth on such Schedule IIIhereto, if

 

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any (less the amount allocated to the performance of Required Repairsfor which evidence of completion has been delivered to Lender), to perform theRequired 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 **“Required Repair Fund”** and the account, if any, in whichsuch amounts are held shall hereinafter be referred to as Borrower’s **“Required Repair Account”**.  It shallbe 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) months fromthe Closing Date. Upon the occurrence of such an Event of Default, Lender, atits 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                        Releaseof Required Repair Funds.  Lendershall disburse to Borrower the Required Repair Funds from the Required RepairAccount from time to time upon satisfaction by Borrower of each of thefollowing conditions: (i) Borrower shall submit a written request for paymentto Lender at least fifteen (15) days prior to the date on which Borrowerrequests such payment be made and specifics the Required Repairs to be paid,(ii) on the date such request is received by Lender and on the date such paymentis to be made, no Default or Event of Default shall exist and remain uncured,(iii) Lender shall have received a certificate from Borrower (A) stating thatall Required Repairs at the Property to be funded by the requested disbursementhave been completed in good and workmanlike manner and in accordance with allapplicable federal, state and local laws, rules and regulations, suchcertificate to be accompanied by a copy of any license, permit or otherapproval by any Governmental Authority required to commence and/or complete theRequired Repairs, (B) identifying each Person that supplied materials or laborin connection with the Required Repairs performed at the Property to be fundedby the requested disbursement under a contract in excess of $50,000, and (C)stating that each Person who has supplied materials or labor in connection withthe Required Repairs to be funded by the requested disbursement has been paidin full or will be paid in full upon such disbursement, such certificate to beaccompanied by lien waivers or other evidence of payment satisfactory toLender, (iv) at Lender’s option, a title search for the Property indicatingthat the Property is free from all liens, claims and other encumbrances notpreviously approved by Lender, and (v) Lender shall have received such otherevidence as Lender shall reasonably request that the Required Repairs at theProperty to be funded by the requested disbursement have been completed and arepaid for or will be paid upon such disbursement to Borrower. Lender shall notbe required to make disbursements from the Required Repair Account with respectto the Property more than once each calendar month and such disbursement shallbe made only upon satisfaction of each condition contained in this Section 7.1.2.

 

Section 7.2                                      Taxand Insurance Escrow Fund.

 

Borrower shall payto Lender on each Payment Date (a) one-twelfth of the Taxes that Lenderestimates will be payable during the next ensuing twelve (12) months in orderto accumulate with Lender sufficient funds to pay all such Taxes at leastthirty (30) days prior to their respective due dates and (b) one-twelfth of theInsurance Premiums that Lender estimates

 

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will be payable for therenewal of the coverage afforded by the Policies upon the expiration thereof inorder to accumulate with Lender sufficient funds to pay all such InsurancePremiums at least thirty (30) days prior to the expiration of the Policies,(said amounts in (a) and (b) above are hereinafter called the **“Tax and Insurance Escrow Fund”**).  The Tax and Insurance Escrow Fund and thepayments of interest or principal or both, payable pursuant to the Note, shall beadded together and shall be paid as an aggregate sum by Borrower to Lender.Lender will apply the Tax and Insurance Escrow Fund to payments of Taxes andInsurance Premiums required to be made by Borrower pursuant to this Agreementand under the Mortgage. In making any payment relating to the Tax and InsuranceEscrow Fund, Lender may do so according to any bill, statement or estimateprocured from the appropriate public office (with respect to Taxes) or insureror agent (with respect to Insurance Premiums) or from Borrower without inquiryinto the accuracy of such bill, statement or estimate or into the validity ofany tax, assessment, sale, forfeiture, tax lien or title or claim thereof,provided, however, Lender shall use reasonable efforts to pay such realproperty taxes sufficiently early to obtain the benefit of any availablediscounts of which it has knowledge. If the amount of the Tax and InsuranceEscrow Fund shall exceed the amounts due for Taxes and Insurance Premiums,Lender shall, in its sole discretion, return any excess to Borrower or creditsuch excess against future payments to be made to the Tax and Insurance EscrowFund. The Tax and Insurance Escrow Fund shall be held by Lender in an interest-bearingaccount and shall at Lender’s option be held in Eligible Account at an EligibleInstitution. Any interest earned on said account shall accrue in said accountfor the benefit of Borrower, but shall remain in and constitute part of the Taxand Insurance Escrow Fund, and shall be disbursed in accordance with the termshereof. Any amount remaining in the Tax and Insurance Escrow Fund after theDebt has been paid in full shall be returned to Borrower. In allocating suchexcess, Lender may deal with the Person shown on the records of Lender to bethe owner of the Property. If at any time Lender reasonably determines that theTax and Insurance Escrow Fund is not or will not be sufficient to pay Taxes orInsurance Premiums by the dates set forth above, Lender shall notify Borrowerof such determination and Borrower shall increase its monthly payments toLender by the amount that Lender estimates is sufficient to make up thedeficiency at least thirty (30) days prior to delinquency of the Taxes orInsurance Premiums.

 

Notwithstandinganything to the contrary hereinbefore contained, in the event that Borrowerprovides (1) evidence satisfactory to Lender that the Property is insured inaccordance with Section 6.1 of this Agreement and (2) evidencesatisfactory to Lender that the Taxes for the Properly have been paid inaccordance with the requirements set forth in this Agreement, Lender will waivethe requirement set forth herein for Borrower to make deposits into the Tax andInsurance Escrow Fund for the payment of Insurance Premiums and for payment ofsuch Taxes, provided, however, Lender expressly reserves the right to requireBorrower to make deposits to the Tax and Insurance Escrow Fund for the paymentof Insurance Premiums if at any time the Property is not insured in accordancewith Section 6.1 of this Agreement or Taxes are not paid in accordancewith the requirements of this Agreement.

 

Section 7.3                                      Replacementsand Replacement Reserve.

 

Section 7.3.1                             ReplacementReserve Fund.  Borrower shall pay toLender on the Closing Date and on each Payment Date one twelfth of the amount(the **“Replacement Reserve Monthly Deposit”**)reasonably estimated by Lender in its sole discretion to be due for

 

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replacements and repairs required to be made to theProperty during the calendar year (collectively, the **“Replacements”**)which Replacement Reserve Monthly Deposit shall be in an amount equal tono less than $0.15 per year per square foot of gross leasable area. Amounts sodeposited shall hereinafter be referred to as Borrower’s **“Replacement Reserve Fund”**and theaccount in which such amounts are held shall hereinafter be referred to asBorrower’s **“Replacement Reserve Account”.**Lender may reassess its estimate of the amount necessary for theReplacement Reserve Fund from time to time, and may increase the monthlyamounts required to be deposited into the Replacement Reserve Fund upon thirty(30) days notice to Borrower if Lender determines in its reasonable discretionthat an increase is necessary to maintain the proper maintenance and operationof the Property. Any amount held in the Replacement Reserve Account and allocatedfor the Property shall be retained by Lender in an interest bearing account,or, at the option of Lender, in an Eligible Account at an Eligible Institution;provided, however, that, any interest earned on said accountshall accrue in said account for the benefit of Borrower, but shall remain inand constitute part of the Replacement Reserve Fund, and shall be disbursed inaccordance with the terms hereof.

 

Notwithstanding anythingto the contrary in this Section 7.3, Borrower shall not be required to makeReplacement Reserve Monthly Deposits, provided that: (i) no Event of Defaultshall have occurred; and (ii) Borrower makes all necessary Replacements andotherwise maintains the Property to Lender’s satisfaction. Upon notice fromLender following: (a) an Event of Default; or (b) the failure of Borrower tomake necessary Replacements or otherwise maintain the Properly to Lender’ssatisfaction, Borrower shall begin to deposit the Replacement Reserve MonthlyDeposit into the Replacement Reserve Fund beginning on the Payment Date (asdefined herein) immediately following the date of such notice.

 

Section 7.3.2                             Disbursementsfrom Replacement Reserve Account.

 

(a)                                  Lendershall make disbursements from the Replacement Reserve Account to pay Borroweronly for the costs of the Replacements.  Lendershall rot be obligated to make disbursements from the Replacement ReserveAccount to reimburse Borrower for the costs of routine maintenance to theProperty or for costs which arc to be reimbursed from the Required Repair Fund(if any).

 

(b)                                 Lendershall, upon written request from Borrower and satisfaction of the requirementsset forth 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 shall Lender be obligated todisburse funds from the Replacement Reserve Account if a Default or an Event ofDefault exists.

 

(c)                                  Eachrequest for disbursement from the Replacement Reserve Account shall be in aform specified or approved by Lender and shall specify (i) the specific Replacementsfor which the disbursement is requested, (ii) the quantity and price of eachitem purchased, if the Replacement includes the purchase or replacement ofspecific items, (iii) the price of all materials (grouped by type or category)used in any Replacement other than the purchase or replacement of specificitems, and (iv) the cost of all contracted labor or other

 

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services applicable to each Replacement for which such request fordisbursement is made. With each request Borrower shall certify that allReplacements have been made in accordance with all applicable LegalRequirements of any Governmental Authority having jurisdiction over theProperty to which the Replacements are being provided and, unless Lender hasagreed to issue joint checks as described below, each request shall includeevidence of payment of all such 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)                                 Borrowershall pay all invoices in connection with the Replacements with respect towhich a disbursement is requested prior to submitting such request fordisbursement from the Replacement Reserve Account or, at the request ofBorrower, Lender will issue joint checks, payable to Borrower and thecontractor, supplier, materialman, mechanic, subcontractor or other party towhom payment is due in connection with a Replacement.  In the case of payments made by joint check,Lender may require a waiver of lien from each Person receiving payment prior toLender’s disbursement from the Replacement Reserve Account. In addition, as acondition to any disbursement, Lender may require Borrower to obtain lienwaivers from each contractor, supplier, materialman, mechanic or subcontractorwho receives payment in an amount equal to or greater than $100,000 forcompletion of its work or delivery of its materials. Any lien waiver deliveredhereunder shall conform to the requirements of applicable law and shall coverall work performed and materials supplied (including equipment and fixtures)for the Property by that contractor, supplier, subcontractor, mechanic ormaterialman through the date covered by the current reimbursement request (or,in the event that payment to such contractor, supplier, subcontractor, mechanicor materialmen is to be made by a joint check, the release of lien shall beeffective through the date covered by the previous release of funds request).

 

(e)                                  If(i) the cost of a Replacement exceeds $100,000, (ii) the contractor performingsuch Replacement requires periodic payments pursuant to terms of a writtencontract, and (iii) Lender has approved in writing in advance such periodicpayments, a request for reimbursement from the Replacement Reserve Account maybe made after 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 andare properly 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 arc, 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 o! lien with respect to amounts which havebeen, paid to that contractor or subcontractor.

 

(f)                                    Borrowershall not make a request for disbursement from the Replacement Reserve Accountmore frequently than once in any calendar month and (except in connection withthe final disbursement) the total cost of all Replacements in any request shallnot be less than $5,000.00.

 

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Section 7.3.3                             Performanceof Replacements.

 

(a)                                  Borrowershall make Replacements when required in order to keep the Property incondition and repair consistent with other first class, full service retailproperties in the same market segment in the metropolitan area in which theProperty is located, and to keep the Property or any portion thereof from deteriorating.  Borrower shall complete all Replacements in agood and workmanlike manner as soon as practicable following the commencementof making each such Replacement.

 

(b)                                 Lenderreserves the right, at its option, to approve all contracts or work orders withmaterialmen, mechanics, suppliers, subcontractors, contractors or other partiesproviding labor or materials under contracts for an amount in excess of$100,000 in connection with the Replacements performed by Borrower.  Upon Lender’s request, Borrower shall assign anycontract or subcontract to Lender.

 

(c)                                  Inthe event Lender determines in its reasonable discretion that any Replacementis not being performed in a workmanlike or timely manner or that anyReplacement has not been completed in a workmanlike or timely manner, and suchfailure continues to exist for more than thirty (30) days after notice fromLender to Borrower, Lender shall have the option to withhold disbursement forsuch unsatisfactory 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)                                 Inorder to facilitate Lender’s completion or making of the Replacements pursuantto Section 7.3.3(c) above, Borrower grants Lender the right to enter onto theProperty and perform any and all work and labor necessary to complete or makethe Replacements and/or employ watchmen to protect the Property from damage,subject to the rights of Tenants.  All sumsso expended by Lender, to the extent not from the Replacement Reserve Fund,shall be deemed to have been advanced under the Loan to Borrower and secured bythe Mortgage.  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 shallbe deemed to be a power coupled with an interest and cannot be revoked butshall only be effective following an Event of Default.  Borrower empowers said attorney-in-fact asfollows:  (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)                                  Nothingin this Section 7.3.3 shall: (i) make Lender responsible for making orcompleting the Replacements; (ii) require Lender to expend funds in addition tothe

 

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Replacement Reserve Fundto make or complete any Replacement; (iii) obligate Lender to proceed with theReplacements; or (iv) obligate Lender to demand from Borrower additional sumsto make or complete any Replacement.

 

(f)                                    Borrowershall permit 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 Property duringnormal business hours (subject to the rights of tenants under their Leases) toinspect the progress of any Replacements and all materials being used inconnection therewith, to examine all plans and shop drawings relating to suchReplacements which are or may be kept at the Property, and to complete anyReplacements made pursuant to this Section 7.3.3.  Borrower shall cause all contractors andsubcontractors to cooperate with Lender or Lender’s representatives or such otherpersons described above in connection with inspections described in thisSection 7.3.3(1) or the completion of Replacements pursuant to this Section7.3.3.

 

(g)                                 Lendermay require an inspection of the Property at Borrower’s expense prior to makinga monthly disbursement in excess of $10,000 from the Replacement Reserve Accountin order to verify completion of the Replacements for which reimbursement issought. Lender may require that such inspection be conducted by an appropriateindependent qualified professional selected by Lender and/or may require a copyof a certificate of completion by an independent qualified professionalacceptable to Lender prior to the disbursement of any amounts from theReplacement Reserve Account.  Borrowershall pay the expense of the inspection as required hereunder, whether suchinspection is conducted by Lender or by an independent qualified professional.

 

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

 

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

 

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

 

(k)                                  Inaddition to any insurance required under the Loan Documents, Borrower shallprovide or cause to be provided workmen’s compensation insurance, builder’srisk, and public liability insurance and other insurance to the extent requiredunder applicable law in connection with a particular Replacement. All suchpolicies shall be in form and amount reasonably satisfactory to Lender. Allsuch policies which can be endorsed with standard

 

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mortgagee clauses makingloss payable to Lender or its assigns shall be so endorsed.  Certified copies of such policies shall bedelivered to Lender.

 

Section 7.3.4                             Failureto Make Replacements.   (a)  It 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 anEvent of Default, Lender may use the Replacement Reserve Fund (or any portionthereof) for any purpose, including but not limited to completion of theReplacements as provided in Section 7.3.3, or for any other repair orreplacement to the Property or toward payment of the Debt in such order,proportion and priority as Lender may determine in its sole discretion.  Lender’s right to withdraw and apply theReplacement Reserve Funds shall be in addition to all other rights and remediesprovided to Lender under this Agreement and the other Loan Documents.

 

(b)                                 Nothingin this Agreement 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                             Balancein the Replacement Reserve Account.   The insufficiency of any balance in theReplacement Reserve Account shall not relieve Borrower from its obligation tofulfill all preservation and maintenance covenants in the Loan Documents.

 

Section 7.3.6                             Indemnification.   Borrower shall indemnify Lender and holdLender harmless from and against any and all actions, suits, claims, demands,liabilities, losses, damages, obligations and costs and expenses (includinglitigation costs and reasonable attorneys fees and expenses) arising from or inany way connected with the performance of the Replacements unless the same aresolely due to gross negligence or willful misconduct of Lender.  Borrower shall assign to Lender all 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                                      ReserveFunds, Generally.

 

7.7.1                        Borrowergrants to Lender a first-priority perfected security interest in each of theReserve Funds and any and all monies now or hereafter deposited in each ReserveFund as additional security for payment of the Debt.  Until expended or applied in accordanceherewith, the Reserve Funds shall constitute additional security for the Debt.

 

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7.7.2                        Uponthe occurrence of an Event of Default, Lender may, in addition to any and allother rights and remedies available to Lender, apply any sums then present inany or all of the Reserve Funds to the payment of the Debt in any order in itssole discretion.

 

7.7.3                        TheReserve Funds shall not constitute trust funds and may be commingled with othermonies held by Lender.

 

7.7.4                        Intentionallyomitted.

 

7.7.5                        Borrowershall not, without obtaining the prior written consent of Lender, furtherpledge, assign or grant any security interest in any Reserve Fund or the moniesdeposited therein or permit any lien or encumbrance to attach thereto, or anylevy to be made thereon, or any UCC-1 Financing Statements, except those namingLender as the secured party, to be filed with respect thereto.

 

7.7.6                        Lendershall not be liable for any loss sustained on the investment of any funds constitutingthe Reserve Funds unless occasioned by the gross negligence or willful misconductof Lender.

 

7.7.7                        Uponpayment in full of the Debt and performance of all other obligations under thisAgreement and the other Loan Documents, Lender shall disburse to Borrower all remainingReserve Funds.

 

**ARTICLEVIII**

**DEFAULTS**

 

Section 8.1                                      Eventof Default.   (a) Each of thefollowing events shall constitute an event of default hereunder (an **“Event of Default”**):

 

(i)                                     ifany portion of the Debt is not paid within five (5) days of the applicable duedate;

 

(ii)                                  ifany of the Taxes or Other Charges are not paid prior to the date when the samebecome delinquent, except to the extent that Borrower is contesting same inaccordance with the terms of Section 5.1*.2*hereof,or there are sufficient funds in the Tax and Insurance Escrow Fund to pay suchTaxes or Other Charges and Lender fails to or refuses to release the same fromthe Tax and Insurance Escrow Fund;

 

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

 

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

 

(v)                                 ifany material representation or warranty made by Borrower herein or in any otherLoan Document, or in any report, certificate financial statement or otherinstrument, agreement or document furnished to Lender shall have been false or

 

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misleading in any material respect as of the date therepresentation or warranty was made;

 

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

 

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

 

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

 

(ix)                                ifBorrower breaches any of its respective negative covenants contained in Section5.2 or any covenant contained in Section 4.1.30 hereof;

 

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

 

(xi)                                ifany of the assumptions contained in any Insolvency Opinion or AdditionalInsolvency Opinion are or shall become untrue in any material respect;

 

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

 

(xiii)                          ifthere shall be default under any of the other Loan Documents beyond anyapplicable cure periods contained in such documents, whether as to Borrower orthe

 

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Property, or if any othersuch event shall occur or condition shall exist, if the effect of such event orcondition is to accelerate the maturity of any portion of the Debt or to permitLender to accelerate the maturity of all or any portion of the Debt.

 

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

 

Section 8.2                                      Remedies.  (a) Upon the occurrence of an Event ofDefault, all or any one or more of the rights, powers, privileges and otherremedies available to Lender against Borrower under this Agreement or any ofthe other Loan Documents executed and delivered by, or applicable to, Borroweror at law or in equity may be exercised by Lender at any time and from time totime, whether or not all or any of the Debt shall be declared due and payable,and whether or not Lender shall have commenced any foreclosure proceeding orother action for the enforcement of its rights and remedies under any of theLoan Documents with respect to the Property.  Any such actions taken by Lender shall becumulative 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)                                 Lendershall have the right from time to time to partially foreclose the Mortgage inany manner and for any amounts secured by the Mortgage then due and payable asdetermined by Lender in its sole discretion including, without limitation, thefollowing circumstances: (i) in the event Borrower defaults beyond anyapplicable grace period in the payment of one or more scheduled payments ofprincipal and interest, Lender may foreclose the Mortgage to recover suchdelinquent payments, or (ii) in the event Lender elects to accelerate less thanthe entire outstanding principal balance of the Loan, Lender may foreclose theMortgage to recover so much of the principal balance of the Loan as Lender mayaccelerate and such other sums secured by the Mortgage as Lender may elect.Notwithstanding one or more

 

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partial foreclosures, the Property shall remainsubject to the Mortgage to secure payment of sums secured by the Mortgage andnot previously recovered.

 

(c)                                  Lendershall have the right from time to time to sever the Note and the other LoanDocuments into one or more separate notes, mortgages and other securitydocuments (the **“Severed Loan Documents”**) in suchdenominations as Lender shall determine in its sole discretion for purposes ofevidencing and enforcing its rights and remedies provided hereunder. Borrowershall execute and deliver to Lender from time to time, promptly after therequest of Lender, a severance agreement and such other documents as Lendershall request in order to effect the severance described in the precedingsentence, all in form and substance reasonably satisfactory to Lender.  Borrower hereby absolutely and irrevocablyappoints Lender following the occurrence of an Event of Default as its true andlawful attorney, coupled with an interest, in its name and stead to make andexecute all documents necessary or desirable to effect the aforesaid severance,Borrower ratifying all that its said attorney shall do by virtue thereof; provided,however, Lender shall not make or execute any such documents under suchpower until three (3) days after notice has been given to Borrower by Lender ofLender’s intent to exercise its rights under such power.  Borrower shall not be obligated to pay anycosts or expenses incurred in connection with the preparation, execution,recording or filing of the Severed Loan Documents, and the Severed Loan Documentsshall not contain any representations, warranties or covenants not contained inthe Loan Documents and any such representations and warranties contained in theSevered Loan Documents will be given by Borrower only as of the Closing Date.

 

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

 

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

 

**ARTICLE IX**

**SPECIAL PROVISIONS**

 

Section 9.1                                      Saleof Notes and Securitization.   At therequest of the holder of the Note and, to the extent not already required to beprovided by Borrower under this Agreement, Borrower shall cooperate with Lenderto allow Lender to satisfy the market standards to which the holder of the Notecustomarily adheres or which may be reasonably required in the marketplace orby the Rating Agencies in connection with the sale of the Note or

 

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participations therein or the first successful securitization(such sale and/or securitization, the **“Securitization”**)of rated single or multi-class securities (the **“Securities”**)secured by or evidencing ownership interests in the Note and the Mortgage.  In this regard Borrower shall;

 

(a)                                  (i)                                     providesuch financial and other information with respect to the Property, Borrower andthe Manager, (ii) provide budgets relating to the Property and (iii) to performor permit or cause to be performed 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 diligenceinvestigations of the Property, as may be reasonably requested by the holder ofthe Note or the Rating Agencies or as may be necessary or appropriate in connectionwith the Securitization (the **“Provided Information”**),together, if customary, with appropriate verification and/or consents of theProvided Information through letters of auditors or opinions of counsel ofindependent attorneys acceptable to Lender and the Rating Agencies;

 

(b)                                 causecounsel to render opinions, which may be relied upon by the holder of the Note,the Rating Agencies 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)                                  makesuch representations 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)                                 executesuch amendments 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 party costs andexpenses incurred by Borrower in connection with complying with requests madeunder this Section 9.1 shall be paid by Lender.

 

Section 9.2                                      Securitization.  Borrower understands that certain ofthe Provided Information may be included in disclosure documents in connectionwith the Securitization, including, without limitation, a prospectus,prospectus supplement or private placement memorandum (each, a **“Disclosure Document”**) and may also be included in filingswith the Securities and Exchange Commission pursuant to the Securities Act of1933, as amended (the **“Securities Act”**),or the Securities and Exchange Act of 1934, as amended (the **“Exchange Act”**), or provided or made available to investorsor prospective investors in the Securities, the Rating Agencies, and serviceproviders relating to the Securitization. In the event that the DiscloserDocument is required to be revised prior to the sale of all Securities,Borrower will cooperate with the holder of the Note in updating the DisclosureDocument by providing all current information necessary to keep the DisclosureDocument accurate and complete in all material respects.

 

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Section 9.3                                      RatingSurveillance.   Lender, at itsoption, may retain the Rating Agencies to provide rating surveillance serviceson any certificates issued in a Securitization. Such rating surveillance willbe at the expense of Lender (the **“Rating Surveillance Charge”**).

 

Section 9.4                                      Exculpation.  Subject to the qualifications below,Lender shall not enforce the liability and obligation of Borrower to performand observe the obligations contained in the Note, this Agreement, the Mortgageor the other Loan Documents by any action or proceeding wherein a moneyjudgment shall be sought against Borrower, except that Lender may bring aforeclosure action, an action for specific performance or any other appropriateaction or proceeding to enable Lender to enforce and realize upon its interestunder the Note, this Agreement, the Mortgage and the other Loan Documents, orin the Property, the Rents following an Event of Default, or any othercollateral given to Lender pursuant to the Loan Documents; provided, however,that, except as specifically provided herein, any judgment in any such actionor proceeding shall be enforceable against Borrower only to the extent ofBorrower’s interest in the Property, in the Rents following an Event of Defaultand in any other collateral given to Lender, and Lender, by accepting the Note,this Agreement, the Mortgage and the other Loan Documents, agrees that it shallnot sue for, seek or demand any deficiency judgment against Borrower in anysuch action or proceeding under or by reason of or under or in connection withthe Note, this Agreement, the Mortgage or the other Loan Documents. Theprovisions of this section shall not, however, (a) constitute a waiver, releaseor impairment of any obligation evidenced or secured by any of the LoanDocuments; (b) impair the right of Lender to name Borrower as a party defendantin any action or suit for foreclosure and sale under any of the Mortgage; (c)affect the validity or enforceability of or any guaranty made in connectionwith the Loan or any of the rights and remedies of Lender thereunder; (d)impair the right of Lender to obtain the appointment of a receiver; (e) impairthe enforcement of any of the Assignment of Leases following an Event ofDefault; (f) constitute a prohibition against Lender commencing any otherappropriate action or proceeding in order for Lender to exercise its remediesagainst the Property; or (g) constitute a waiver of the right of Lender toenforce the liability and obligation of Borrower, by money judgment, orotherwise, to the extent of any loss, damage, cost, expense, liability, claimor other obligation incurred by Lender (including attorneys’ fees and costsreasonably incurred) arising out of or in connection with the following:

 

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

 

(ii)                                  thegross negligence or willful misconduct of Borrower;

 

(iii)                               materialphysical waste of the Property;

 

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

 

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

 

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

 

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

 

Notwithstanding anything to the contrary in thisAgreement, the Note or any of the Loan Documents, (A) the Debt shall be fullyrecourse to the Borrower and (B) Lender shall not be deemed to have waived anyright which Lender may have under Section 506(a), 506(b), 111 l(b) or any otherprovisions of the U.S. Bankruptcy Code to file a claim for the full amount ofthe Debt secured by the Mortgage or to require that all collateral shallcontinue to secure all of the Debt owing to Lender in accordance with the LoanDocuments in the event that the (I) first full monthly payment under the Noteis not paid within five (5) days of notice that such payment is late (provided,however, that such grace period relates only to the recourse trigger describedin this paragraph), or (II) failure of Borrower to permit on-site inspectionsof the Property subject to the rights of Tenants and any applicable cure periodset forth in the Loan Documents, to provide financial information as requiredunder the Loan Documents subject to any applicable cure period (except forfinancial information required to be delivered by a tenant pursuant to theapplicable Lease that has not been delivered to Borrower, provided Borrower hasrequested such financial information from such tenant), or (III) failure ofBorrower to comply with Section 4.1.30 hereof, or (IV) failure of Borrower toobtain Lender’s prior written consent. (to extent such consent is required) toany subordinate financing or other voluntary lien encumbering the Property, or(V) failure of Borrower to obtain Lender’s prior written consent to anyassignment, transfer or conveyance of the Property, or any portion thereof, orany interest therein as required by this Agreement. Notwithstanding theprovision set forth in clause (IV) of this paragraph, a voluntary lien otherthan a lien securing an extension of credit filed against the Propertyshall not constitute a recourse trigger for purposes of this paragraph providedsuch lien (A) is fully bonded to the satisfaction of Lender and discharged ofrecord within ninety (90) days of filing, or (B) within such ninety (90) dayperiod, Lender receives affirmative title insurance from the title insurancecompany insuring the lien of the Mortgage that such lien is subject andsubordinate to the lien of the Mortgage and no enforcement action is commencedby the applicable lien holder. Upon the acceptance by Lender of any cure byBorrower of a recourse trigger described in clauses (I), (II) or (IV) above,the Debt shall no longer be fully recourse to Borrower solely as a result ofsuch trigger. Upon the acceptance by Lender of any cure by Borrower of arecourse trigger described in clauses (III) or (V) above, the Debt shall nolonger be fully recourse to Borrower solely as a result 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(including attorneys’ fees and costs reasonably incurred) arising out of or inconnection with such trigger.

 

Section 9.5                                   Terminationof Manager.   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 the rightsof Lender hereunder or under any of the other Loan Documents, in the event that(i) the Management Agreement is terminated, (ii) the Manager no longer managesthe Property, or (iii) a receiver, liquidator or trustee shall be appointed forManager or if Manager shall be adjudicated a bankrupt or insolvent, or if anypetition for bankruptcy, reorganization or arrangement pursuant to federalbankruptcy law, or any similar federal or state law, shall be filed by oragainst, consented to, or acquiesced in by, Manager, or if any proceeding forthe dissolution or liquidation of Manager shall be instituted, then Borrower(at Borrower’s sole cost and expense) shall immediately, in its name, establishnew deposit accounts separate from any other Person with a depositorysatisfactory to Lender into which all Rents and other income from the Propertyshall be deposited and shall grant Lender a first priority security interest insuch account pursuant to documentation satisfactory in form and substance toLender.

 

Section 9.6                                      Servicer.  At the option of Lender, the Loan maybe serviced by a servicer/trustee (the **“**Servicer**”**) selected by Lender and Lender may delegate all or anyportion of its responsibilities under this Agreement and the other LoanDocuments to the Servicer pursuant to a servicing 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                                      Splittingthe Loan.   At the election of Lenderin its sole discretion, the Loan or any individual Note making up the Loanshall be split and severed into two or more loans which, at Lender’s election,shall not be cross-collateralized or cross-defaulted with each other. Borrowerhereby agrees to deliver to Lender to effectuate such severing of the Loan orany individual Note, as the case may be, as reasonably requested by Lender, (a)additional executed documents, or amendments and modifications to theapplicable Loan Documents, (b) new opinions or updates to the opinionsdelivered to Lender in connection with the closing of the Loan, (c)endorsements and/or updates to the title insurance policies delivered to Lenderin connection with the closing of the Loan, and (d) any other certificates,instruments and documentation reasonably determined by Lender as necessary orappropriate to such severance (the items described in subsections (a) through(d) collectively hereinafter shall be referred to as “Severing Documentation”),which Severing Documentation shall be acceptable to Lender in form andsubstance in its reasonable discretion. Lender hereby agrees to be responsiblefor all reasonable third-party expenses incurred in connection with thepreparation and delivery of the

 

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Severing Documentationand the effectuation of the uncrossing of the Loan from the additional Loans.Borrower hereby acknowledges and agrees that upon such severing of the Loan,Lender may effect, in its sole discretion, one or more Securitizations of whichthe severed loans may be apart.

 

**ARTICLEX**

**MISCELLANEOUS**

 

Section 10.1                                Survival.  This Agreement and all covenants,agreements, representations and warranties made herein and in the certificatesdelivered pursuant hereto shall survive the making by Lender of the Loan andthe execution and delivery to Lender of the Note, and shall continue in fullforce and effect so long as all or any of the Debt is outstanding and unpaidunless a longer period is expressly set forth herein or in the other LoanDocuments. Whenever in this Agreement any of the parties hereto is referred to,such reference shall be deemed to include the legal representatives, successorsand assigns of such party. All covenants, promises and agreements in thisAgreement, by or on behalf of Borrower, shall inure to the benefit of the legalrepresentatives, successors and assigns of Lender.

 

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

 

Section 10.3                                GoverningLaw.   **THIS****AGREEMENT SHALL BE DEEMED TO BE A CONTRACT ENTERED INTOPURSUANT TO THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED AND SHALL IN ALL RESPECTS BE GOVERNED,CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE INWHICH THE PROPERTY 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 thisAgreement, or of the Note, or of any other Loan Document, nor consent to anydeparture by Borrower therefrom, shall in any event be effective unless thesame shall be in a writing signed by the party against whom enforcement issought, and then such waiver or consent shall be effective only in the specificinstance, and for the purpose, for which given. Except as otherwise expresslyprovided herein, no notice to, or demand on Borrower, shall entitle Borrower toany other or future notice or demand in the same, similar or othercircumstances.

 

Section 10.5                                DelayNot a Waiver.   Neither any failurenor any delay on the part of Lender in insisting upon strict performance of anyterm, condition, covenant or agreement, or exercising any right, power, remedyor privilege hereunder, or under the Note or under any other Loan Document, orany other instrument given as security therefor, shall operate as or constitutea waiver thereof, nor shall a single or partial exercise thereof preclude anyother future exercise, or the exercise of any other right, power, remedy orprivilege. In particular, and not by way of limitation, by accepting paymentafter the due date of any amount payable under this Agreement,

 

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the Note or any otherLoan Document, Lender shall not be deemed to have waived any right either torequire prompt payment when due of all other amounts due under this Agreement,the Note or the other Loan Documents, or to declare a default for failure toeffect prompt payment of any such other amount.

 

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

 

If to Lender:

 

Bear Steams CommercialMortgage, Inc.

383 Madison Avenue

New York, New York. 10179

Attention: J. ChristopherHoeffel

 

with a copy to:

 

Katten Muchin Zavis Rosenman

401 South Tryon Street

Suite 2600

Charlotte, North Carolina28202-1935

Attention: Daniel S.Huffenus, Esq.

 

If to Borrower:

 

Inland Western Gurnee, L.L.C.

2901 Butlerfield Road

Oak Brook, TL 60523

Attention: Steven Grimes

 

with a copy to:

 

Inland Western Retail Real Estate Trust, Inc.

2901 Butterfield Road

Oak Brook IL 60523

Attention: Robert H. Baum, Esq.

 

and with a copy to:

 

Inland Western Retail Real Estate Trust, Inc.

2901 Butterfield Road

Oak Brook, IL 60523

Attention: Roberta Matlin

 

 

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

 

Section 10.7                                Trialby Jury.   **BORROWER AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF****ANY ISSUE TRIABLE OFRIGHT BY JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENTTHAT ANY SUCH RIGHT SHALL NOW ORHEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIMOR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIALBY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY BORROWER AND LENDER, AND ISINTENDED TO ENCOMPASS INDIVIDUALLYEACH INSTANCE AND EACH ISSUEAS TO WHICH THE RIGHT TO A TRIAL BYJURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THISPARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWERAND LENDER.**

 

Section 10.8                                Headings.  The Article and/or Section headings andthe Table of Contents in this Agreement are included herein for convenience ofreference only and shall not constitute a part of this Agreement for any otherpurpose.

 

Section 10.9                                Severability.  Wherever possible, each provision ofthis Agreement 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 and exclusive rightto apply or reverse and reapply any and all payments by Borrower to any portionof the obligations of Borrower hereunder. To the extent Borrower makes apayment or payments to Lender, which payment or proceeds or any part thereofare subsequently invalidated, declared to be fraudulent or preferential, setaside or required to be repaid to a trustee, receiver or any other party underany bankruptcy law, state or federal law, common law or equitable cause, then,to the extent of such payment or proceeds received, the obligations hereunderor part thereof intended to be satisfied shall be revived and continue in fullforce and effect, as if such payment or proceeds had not been received byLender.

 

Section 10.11                          Waiverof Notice.   Borrower shall not beentitled to any notices of any nature whatsoever from Lender except withrespect to matters for which this Agreement or the other Loan Documentsspecifically and expressly provide for the giving of notice by Lender toBorrower and except with respect to matters for which Borrower is not, pursuantto applicable

 

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Legal Requirements,permitted to waive the giving of notice. Borrower hereby expressly waives theright to receive any notice from Lender with respect to any matter for whichthis Agreement or the other Loan Documents do not specifically and expresslyprovide for the giving of notice by Lender to Borrower.

 

Section 10.12                          Remediesof Borrower.   In the event that aclaim or adjudication is made that Lender or its agents have acted unreasonablyor unreasonably delayed acting in any case where by law or under this Agreementor the other Loan Documents, Lender or such agent, as the case may be, has anobligation to act reasonably or promptly, Borrower agrees that neither Lendernor its agents shall be liable for any monetary damages, and Borrower’s soleremedies shall be limited to commencing an action seeking injunctive relief ordeclaratory judgment. The parties hereto agree that any action or proceeding todetermine whether Lender has acted reasonably shall be determined by an actionseeking declaratory 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 andexpenses (including reasonable attorneys’ fees and disbursements)  incurredby Lender in connection with (i) the preparation, negotiation, execution anddelivery of this Agreement and the other Loan Documents and the consummation ofthe transactions contemplated hereby and thereby and all the costs offurnishing all opinions by counsel for Borrower (including without limitationany opinions requested by Lender as to any legal matters arising under thisAgreement or the other Loan Documents with respect to the Property); (ii)Borrower’s ongoing performance of and compliance with Borrower’s respectiveagreements and covenants contained in this Agreement and the other LoanDocuments on its part to be performed or complied with after the Closing Date,including, without limitation, confirming compliance with environmental andinsurance requirements; (iii) Lender’s ongoing performance and compliance withall agreements and conditions contained in this Agreement and the other LoanDocuments on its part to be performed or complied with after the Closing Date;(iv) except as otherwise provided in this Agreement, the negotiation,preparation, execution, delivery and administration of any consents,amendments, waivers or other modifications to this Agreement and the other LoanDocuments and any other documents or matters reasonably requested by Lender;(v) securing Borrower’s compliance with any requests made pursuant to theprovisions of this Agreement; (vi) the filing and recording fees and expenses,title insurance and reasonable fees and expenses of counsel for providing toLender all required legal opinions, and other similar expenses incurred increating and perfecting the Liens in favor of Lender pursuant to this Agreementand the other Loan Documents; (vii) enforcing or preserving any rights, inresponse to third party claims or the prosecuting or defending of any action orproceeding or other litigation, in each case against, under or affectingBorrower, this Agreement, the other Loan Documents, the Property, or any othersecurity given for the Loan; and (viii) enforcing any obligations of orcollecting any payments due from Borrower under this Agreement, the other LoanDocuments or with respect to the Property or in connection with any refinancingor restructuring of the credit arrangements provided under this Agreement inthe nature of a “work-out”‘ or of any insolvency or bankruptcy proceedings;provided, however, that Borrower shall not be liable for the payment of anysuch costs and expenses to the extent the same arise by reason of the grossnegligence, illegal acts, fraud or willful misconduct of Lender.

 

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(b)                                  Borrowershall indemnify, defend and hold harmless Lender from and against any and allother liabilities, 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 Loan Documents,or (ii) the use or intended use of the proceeds of the Loan (collectively, the **“IndemnifiedLiabilities”**);****provided,however, that Borrower shall not have any obligation to Lender hereunderto the extent that such Indemnified Liabilities arise from the gross negligence,illegal acts, fraud or willful misconduct of Lender. To the extent that theundertaking to indemnify, defend and hold harmless set forth in the precedingsentence may be unenforceable because it violates any law or public policy,Borrower shall pay the maximum portion that it is permitted to pay and satisfyunder applicable law to the payment and satisfaction of all IndemnifiedLiabilities incurred by Lender.

 

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

 

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

 

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

 

(a)                                  Borrowerand Lender intend that the relationships created hereunder and under the otherLoan Documents 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)                                 ThisAgreement and the other Loan Documents arc solely for the benefit of Lender andBorrower and nothing contained in this Agreement or the other Loan Documents shallbe deemed to confer upon anyone other than Lender and Borrower any right toinsist upon or to enforce the performance or observance of any of theobligations contained herein or therein. All conditions to the obligations ofLender to make the Loan hereunder arc imposed solely and exclusively for thebenefit of Lender and no other Person shall have standing to require satisfactionof such conditions in accordance with their terms or be entitled to assume thatLender will refuse to make the Loan in the absence of strict compliance withany or all thereof and no other Person shall under any circumstances be deemedto be a beneficiary of such

 

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conditions, any or all ofwhich may be freely waived in whole or in part by Lender if, in Lender’s solediscretion, Lender deems it advisable or desirable to do so.

 

Section 10.17                          Publicity.  All news releases, publicity oradvertising by Borrower or their Affiliates through any media intended to reachthe general public which refers to the Loan Documents or the financingevidenced by the Loan Documents, to Lender, Bear Stearns, or any of theirAffiliates shall be subject to the prior written approval of Lender. All newsreleases, publicity or advertising by Lender through, any media intended toreach the general public which refers solely to the Borrower or to the Loanmade by the Lender to the Borrower shall be subject to the prior writtenapproval of Borrower, provided however, the foregoing shall not apply toProvided Information included in disclosure documents in connection with aSecuritization.

 

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

 

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

 

Section 10.20                          Conflict;Construction of Documents; Reliance.   In the event of any conflict between theprovisions of this Loan Agreement and any of the other Loan Documents, theprovisions of this Loan Agreement shall control. The parties hereto acknowledgethat they were represented by competent counsel in connection with thenegotiation, drafting and execution of the Loan Documents and that such LoanDocuments shall not be subject to the principle of construing their meaningagainst the party which drafted same. Borrower acknowledges that, with respectto the Loan, Borrower shall rely solely on its own judgment and advisors inentering into the Loan without relying in any manner on any statements,representations or recommendations of Lender or any parent, subsidiary orAffiliate of Lender. Lender shall not be subject to any limitation whatsoeverin the exercise of any rights or remedies available to it under any of the LoanDocuments or any other agreements or instruments which govern the Loan byvirtue of the ownership by it or any parent, subsidiary or Affiliate of Lenderof any equity interest any of them may acquire in Borrower, and Borrower herebyirrevocably waives the right to raise any defense or take any action on thebasis of the foregoing with respect to Lender’s exercise of any such rights orremedies. Borrower acknowledges that Lender engages in the business of realestate financings and other real estate transactions and investments which maybe viewed as adverse to or competitive with the business of Borrower or itsAffiliates.

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Section 10.21                          Brokersand Financial Advisors.   Borrowerhereby represents that it has dealt with no financial advisors, brokers,underwriters, placement agents, agents or finders in connection with thetransactions contemplated by this Agreement other than Inland Mortgage Corp.Borrower hereby agrees to indemnify, defend and hold Lender harmless from andagainst any and all claims, liabilities, costs and expenses of any kind(including Lender’s reasonable attorneys’ fees and expenses) in any wayrelating to or arising from a claim by any Person that such Person acted onbehalf of Borrower or Lender in connection with the transactions contemplatedherein. The provisions of this Section 10.21 shall survive the expiration andtermination of this Agreement and the payment of the Debt.

 

Section 10.22                          PriorAgreements.   This Agreement and theother Loan Documents contain the entire agreement of the parties hereto andthereto in respect of the transactions contemplated hereby and thereby, and allprior agreements or understandings among or between such parties, whether oralor written, arc superseded by the terms of this Agreement and the other LoanDocuments and unless specifically set forth in a writing contemporaneousherewith the terms, conditions and provisions of such prior agreement do notsurvive execution of this Agreement.

 

Section 10.23                          Transferof Loan.   In the event that Lendertransfers the Loan, Borrower shall continue to make payments at the place setforth in the Note until such time that Borrower is notified in writing byLender that payments are to be made at another place.

 

Section 10.24                          Jointand Several Liability.   If Borrowerconsists of more than one person or party, the obligations and liabilities ofTeach person or party shall be joint and several.

 

(THE BALANCE OFTHIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK)

 

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

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

 

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SCHEDULE 1

 

**TENANT DIRECTION LETTER**

 

INLAND WESTERNGURNEE, L.L.C.

 
|                ,  200     |
|--------------------------------------------------------------------------------------------------------------------------|

 

(Tenant’s name and address)

                                                

                                                

 

Re:                               Lease,dated                ,by and between                        ,as original landlord and predecessor-in-interest to Inland Western Gurnee,L.L.C., as landlord, and                      as tenant as the same has been amended, concerning premises at Gurnee TownCenter, Gurnee, Illinois

 

Ladies and Gentlemen:

 

The undersignedhereby requests that, commencing with the First Rent payment date occurringafter the date hereof, you deliver all Rent to the following address:

 

 

Account Name:

Account No.

Attention:

ABA#

 

 
|   | **INLAND  WESTERN GURNEE, L.L.C., a** |
|--------|---------------------------------------|
|   | Delaware limited liability company    |
|   |                                  |
|   | By:                                   | Inland Western Retail Real Estate Trust,  Inc., a Maryland corporation, its sole  member |
|   |                                  |
|   |                                  | By: |   |   |
|   |                                  |   | Name: |
|   |                                  |   | Title: Assistant Secretary |

 

----

 

**SCHEDULEII**

 

Intentionally Omitted.

 

X-2

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*PROPERTY CONDITION ASSESSMENTUPDATE*

GURNEE TOWN CENTRE

Gurnee, Illinois

November 3, 2004

 
| ***REPLACEMENT  RESERVE SCHEDULE*** |       | ***7-YEAR PROJECTION*** |       |
|-------------------------------------|------------|-------------------------|------------|
| ** **                          | ** ** | ** **              | ** ** |

 
| **Property Component** | ** ** | **Quantity** | ** ** | **Units**  | ** ** | **Unit  Cost** | ** ** | **Footnote** | ** ** | **Cost**   | ** ** | **Expected  Life (a)** | ** ** | **Remaining  Life (b)** | ** ** | **Year 1  2005** | ** ** | **Year 2  2006** | ** ** | **Year 3  2007** | ** ** | **Year 4  2008** | ** ** | **Year 5  2009** | ** ** | **Year 6  2010** | ** ** | **Year 7  2011** | ** ** | **7-Year  Totals** |   |
|------------------------|------------|--------------|------------|------------|------------|----------------|------------|--------------|------------|------------|------------|------------------------|------------|-------------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|------------------|------------|--------------------|--------|
| ** **             | ** ** | ** **   | ** ** | ** ** | ** ** | ** **     | ** ** | ** **   | ** ** | ** ** | ** ** | ** **             | ** ** | ** **              | ** ** | ** **       | ** ** | ** **       | ** ** | ** **       | ** ** | ** **       | ** ** | ** **       | ** ** | ** **       | ** ** | ** **       | ** ** | ** **         |   |
| ***Site***             |       |         |       |       |       |           |       |         |       |       |       |                   |       |                    |       |             |       |             |       |             |       |             |       |             |       |             |       |             |       |               |   |
| Payment Maintenance                     |   | 315,000 |   | sf     |   | $      | 0.12     |   | (d)     |   | $      | 37,800 |   | 5      |   | 1           |         | $            | 7,560        |         | $            | 7,560       |         | $            | 7,560        |         | $            | 7,560       |         | $            | 7,560   |         | $            | 7,560   |         | $            | 7,560   |          | $      | 52,920 |   |
|-----------------------------------------|--------|---------|--------|--------|--------|--------|----------|--------|---------|--------|--------|--------|--------|--------|--------|-------------|--------------|--------------|--------------|--------------|--------------|-------------|--------------|--------------|--------------|--------------|--------------|-------------|--------------|--------------|---------|--------------|--------------|---------|--------------|--------------|---------|---------------|--------|--------|--------|
| Payment Replacement                     |   | 5,000   |   | sf     |   | $      | 1.75     |   | (e)     |   | $      | 8,750  |   | 30     |   | 1           |         | $            | 8,750        |         |         |        |         |         |         |         |         |        |         |         |    |         | $            | 8,750   |         |
| Payment Repairs                         |   | 3,500   |   | sf     |   | $      | 0.75     |   | (f)     |   | $      | 2,625  |   | 5      |   | 5           |         |         |         |         |         |        |         |         |         |         |         | $           | 2,625        |         |    |         | $            | 2,625   |         |
| Concrete Sidewalk  Repair               |   | 1       |   | yr     |   | $      | 1,750.00 |   | (g)     |   | $      | 1,750  |   | 1      |   | 1           |         |         |         |         |         | $           | 1,750        |         | $            | 1,750        |         | $           | 1,750        |         | $       | 1,750        |         | $       | 1,750        |         | $       | 8,750         |   |
|                                    |   |    |   |   |   |   |     |   |    |   |   |   |   |   |   |        |         |         |         |         |         |        |         |         |         |         |         |        |         |         |    |
| ***Building***                          |   |    |   |   |   |   |     | (c)    |    |   |   |   |   |   |   |        |         |         |         |         |         |        |         |         |         |         |         |        |         |         |    |
| Masanry & Seetants                  |   | 1       |   | yr     |   | $      | 4,000.00 |   | (h),(i) |   | $      | 4,000  |   | 1      |   | 1           |         | $            | 4,000        |         | $            | 4,000       |         | $            | 4,000        |         | $            | 4,000       |         | $            | 4,000   |         | $            | 4,000   |         | $            | 4,000   |          | $      | 28,000 |   |
| Roofing Repairs  & Maintenance      |   | 179,902 |   | sf     |   | $      | 0.030    |   | (j),(k) |   | $      | 5,397  |   | 1      |   | 1           |         | $            | 5,397        |         | $            | 5,397       |         | $            | 5,397        |         | $            | 5,397       |         | $            | 5,397   |         | $            | 5,397   |         | $            | 5,397   |          | $      | 37,779 |   |
| Curtain Wall  Maintenance               |   | 1       |   | yr     |   | $      | 1,250.00 |   | (l)     |   | $      | 1,250  |   | 1      |   | 1           |         | $            | 1,250        |         | $            | 1,250       |         | $            | 1,250        |         | $            | 1,250       |         | $            | 1,250   |         | $            | 1,250   |         | $            | 1,250   |          | $      | 8,750  |   |
| EIFS & Soffit  Paint & Patch    |   | 1       |   | yr     |   | $      | 3,500.00 |   | (m)     |   | $      | 3,500  |   | 1      |   | 1           |         | $            | 3,500        |         | $            | 3,500       |         | $            | 3,500        |         | $            | 3,500       |         | $            | 3,500   |         | $            | 3,500   |         | $            | 3,500   |          | $      | 24,500 |   |
|                                    |   |    |   |   |   |   |     |   |    |   |   |   |   |   |   |        |         |         |         |         |         |        |         |         |         |         |         |        |         |         |    |
| *TOTALS*                                |   |    |   |   |   |   |     |   |    |   |   |   |   |   |   | ***$***     | ***30,457*** | *** *** | ***$***      | ***21,707*** | *** *** | ***$***     | ***23,457*** | *** *** | ***$***      | ***23,457*** | *** *** | ***$***     | ***23,457*** | *** *** | ***$*** | ***26,082*** | *** *** | ***$*** | ***23,457*** | *** *** | ***$*** | ***172,074*** |   |
| *Escalation  Factor–2.5% per year* |   |    |   |   |   |   |     |   |    |   |   |   |   |   |   | ***1.025*** | *** *** | ***1.051***  | *** *** | ***1.077***  | *** *** | ***1.104*** | *** *** | ***1.131***  | *** *** | ***1.160***  | *** *** | ***1.189*** | *** *** | *** *** |    |
| *Escalated  Cost per year*              |   |    |   |   |   |   |     |   |    |   |   |   |   |   |   | ***$***     | ***31,218*** | *** *** | ***$***      | ***22,806*** | *** *** | ***$***     | ***25,261*** | *** *** | ***$***      | ***25,892*** | *** *** | ***$***     | ***26,540*** | *** *** | ***$*** | ***30,247*** | *** *** | ***$*** | ***27,883*** | *** *** | ***$*** | ***183,847*** |   |
| *Facility Area*                         |   | 179,902 |   | sf     |   |   |     |   |    |   |   |   |   |   |   |        |         |         |         |         |         |        |         |         |         |         |         |        |         |         |    |
| *$/sf/yr*                               |   |    |   |   |   |   |     |   |    |   |   |   |   |   |   | $           | 0.17         |         | $            | 0.12         |         | $           | 0.13         |         | $            | 0.13         |         | $           | 0.13         |         | $       | 0.14         |         | $       | 0.13         |         | $       | 0.14          |   |
| *Escalated $/sf/yr*                     |   |    |   |   |   |   |     |   |    |   |   |   |   |   |   | $           | 0.17         |         | $            | 0.13         |         | $           | 0.14         |         | $            | 0.14         |         | $           | 0.15         |         | $       | 0.17         |         | $       | 0.15         |         | $       | 0.15          |   |
| * *                                |   |    |   |   |   |   |     |   |    |   |   |   |   |   |   |        |         |         |         |         |         |        |         |         |         |         |         |        |         |         |    |         |         |    |         |         | $       | 172,074       |   |

 

45

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***Cost Summary***

 
| ** **                                         | ** ** | **Immediate** | ** **      |
|----------------------------------------------------|------------|---------------|-----------------|
| Code Compliance/Life  Safety Issues Subtotal       |       | $             | 4,500.00        |   |
| ADA Barrier  Removal Issues Subtotal               |       | $             | 2,500.00        |   |
| Deferred  Maintenance/Property Deficiency Subtotal |       | $             | 41,125.00       |   |
| ***Cost  Estimate Total***                         | * *   | ***$***       | ***48,125.00*** | * * |

 

43

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**SCHEDULEIII**

 

**REQUIREDREPAIRS**

 

None.

 

X-3

----

 

**SCHEDULE IV**

 

**RENT ROLL**

 

X-4

----

 

**SCHEDULE V**

 

Intentionally omitted.

 

X-5

----

** **

**SCHEDULE VI**

 

Intentionally omitted.

 

X-6

----

 

**SCHEDULE Vll**

** **

**PROPERTY AFFECTED BY SECTION4.1.22**

 

Not Applicable.

 

X-7

----

 

**SCHEDULE VIII**

 

Intentionally Omitted.

 

X-8

----

 

**SCHEDULE IX**

 

Intentionally Omitted.

 

X-9

----

 

**SCHEDULE X**

 

**OTHER CONTRACT FUNDS AGREEMENTS**

 

None.

 

10

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