Unassociated Document


     

     

    EXHIBIT
10.10

    


     

    
      
        

      



     

    LOAN AND SECURITY
AGREEMENT

    


     

    Dated as of June 30,
2006

     

    between

     

    SCOTSDALE MI LLC,

    CARRIAGE PARK MI
LLC,

    MACOMB MANOR MI LLC
AND

    CARRIAGE HILL MI
LLC,

    collectively, as
Borrowers

     

    and

     

    CITIGROUP GLOBAL MARKETS REALTY
CORP.

     

    as Lender

     

    
       

       

      
        
          

        



    

    


    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

      Table of
Contents
 

    

    
      	 	 	
              Page 

            
	
              ARTICLE
      I

            	
              DEFINITIONS

            	
              1

            
	
              Section

            	
               1.1

            	
               Certain
      Defined Terms

            	
              1

            
	
              Section

            	
               1.2

            	
               Accounting
      Terms

            	
              20

            
	
              Section

            	
               1.3

            	
               Other
      Definitional Provisions

            	
              20

            
	 	 	 	 
	
              ARTICLE
      II

            	
              TERMS
      OF THE LOAN

            	
              21

            
	
              Section

            	
               2.1

            	
               Loan

            	 	
              21

            
	 	 	
               (A)

            	
               Loan

            	
              21

            
	 	 	
               (B)

            	
               Note

            	
              21

            
	 	 	
               (C)

            	
               Use
      of Proceeds

            	
              21

            
	
              Section

            	
               2.2

            	
               Interest

            	 	
              21

            
	 	 	
               (A)

            	
               Rate
      of Interest

            	
              21

            
	 	 	
               (B)

            	
               Default
      Rate

            	
              21

            
	 	 	
               (C)

            	
               Computation
      of Interest

            	
              21

            
	 	 	
               (D)

            	
               Interest
      Laws

            	
              22

            
	 	 	
               (E)

            	
               Late
      Charges

            	
              22

            
	 	 	
               (F)

            	
               Additional
      Administrative Fee

            	
              22

            
	
              Section

            	
               2.3

            	
               Defeasance

            	
              23

            
	 	 	
               (A)

            	
               Total
      Defeasance

            	
              23

            
	 	 	
               (B)

            	
               Partial
      Defeasance

            	
              24

            
	 	 	
               (C)

            	
               Defeasance
      Collateral Account

            	
              26

            
	 	 	
               (D)

            	
               Successor
      Borrower

            	
              26

            
	
              Section

            	
               2.4

            	
               Payments

            	
              26

            
	 	 	
               (A)

            	
               Payments
      of Interest and Principal

            	
              26

            
	 	 	
               (B)

            	
               Date
      and Time of Payment

            	
              27

            
	 	 	
               (C)

            	
               Manner
      of Payment

            	
              27

            
	
              Section

            	
               2.5

            	
               Maturity

            	
              27

            
	
              Section

            	
               2.6

            	
               Prepayment

            	
              27

            
	 	 	
               (A)

            	
               Limitation
      on Prepayment; Prepayment Consideration Due

            	 
	 	 	 	
               on
      Acceleration

            	
              27

            
	 	 	
               (B)

            	
               Prepayment
      Consideration Due

            	
              28

            
	 	 	
               (C)

            	
               Definitions

            	
              28

            
	
              Section

            	
               2.7

            	
               Outstanding
      Balance

            	
              29

            
	
              Section

            	
               2.8

            	
               Taxes

            	 	
              29

            
	
              Section

            	
               2.9

            	
               Reasonableness
      of Charges

            	
              29

            
	
              Section

            	
               2.10

            	
               Partial
      Releases

            	
              30

            
	 	 	 	 
	
              ARTICLE
      III

            	
              CONDITIONS
      TO LOAN

            	
              32

            
	
              Section

            	
               3.1

            	
               Conditions
      to Funding of the Loan on the Closing Date

            	
              32

            
	 	 	
               (A)

            	
               Loan
      Documents

            	
              32

            
	 	 	
               (B)

            	
               Origination
      Fees and Deposits

            	
              32

            
	 	 	
               (C)

            	
               Performance
      of Agreements, Truth of Representations and

            	 
	 	 	 	
               Warranties

            	
              32

            
	 	 	
               (D)

            	
               Closing
      Certificate

            	
              32

            
	 	 	
               (E)

            	
               Opinions
      of Counsel

            	
              32

            
	 	 	
               (F)

            	
               Title
      Policy

            	
              33

            


    

    


    
      
        
        

      

      
        i

        
          

        

      

      
        
        

      

    

    
      	 	 	
               (G)

            	
               Survey

            	
              33

            
	 	 	
               (H)

            	
               Zoning

            	
              33

            
	 	 	
               (I)

            	
               Certificates
      of Formation and Good Standing

            	
              33

            
	 	 	
               (J)

            	
               Certificates
      of Incumbency and Resolutions

            	
              34

            
	 	 	
               (K)

            	
               Financial
      Statements

            	
              34

            
	 	 	
               (L)

            	
               Agreements

            	
              34

            
	 	 	
               (M)

            	
               Management
      Agreement

            	
              34

            
	 	 	
               (N)

            	
               Operating
      and Capital Expenditure Budgets

            	
              34

            
	 	 	
               (O)

            	
               Rent
      Rolls, Leases, Estoppels

            	
              34

            
	 	 	
               (P)

            	
               Licenses,
      Permits and Approvals

            	
              34

            
	 	 	
               (Q)

            	
               Insurance
      Policies and Endorsements

            	
              34

            
	 	 	
               (R)

            	
               Environmental
      Assessment

            	
              35

            
	 	 	
               (S)

            	
               Property
      Condition Reports

            	
              35

            
	 	 	
               (T)

            	
               Appraisals

            	
              35

            
	 	 	
               (U)

            	
               Searches

            	
              35

            
	 	 	
               (V)

            	
               Documentation
      Regarding Application of Proceeds

            	
              35

            
	 	 	
               (W)

            	
               Legal
      Fees; Closing Expenses

            	
              35

            
	 	 	
               (X)

            	
               Other
      Review

            	
              36

            
	 	 	 	 	 
	
               

            	
              36

            
	
              ARTICLE
      IV 

            	 REPRESENTATIONS AND WARRANTIES	 
	
              Section

            	
               4.1

            	
               Organization,
      Powers, Capitalization, Good Standing, Business

            	
              36

            
	 	 	
               (A)

            	
               Organization
      and Powers

            	
              36

            
	 	 	
               (B)

            	
               Qualification

            	
              36

            
	 	 	
               (C)

            	
               Organization

            	
              36

            
	
              Section

            	
               4.2

            	
               Authorization
      of Borrowing, etc

            	
              36

            
	 	 	
               (A)

            	
               Authorization
      of Borrowing

            	
              36

            
	 	 	
               (B)

            	
               No
      Conflict

            	
              36

            
	 	 	
               (C)

            	
               Governmental
      Consents

            	
              37

            
	 	 	
               (D)

            	
               Binding
      Obligations

            	
              37

            
	
              Section

            	
               4.3

            	
               Financial
      Statements

            	
              37

            
	
              Section

            	
               4.4

            	
               Indebtedness
      and Contingent Obligations

            	
              37

            
	
              Section

            	
               4.5

            	
               Title
      to Properties

            	
              37

            
	
              Section

            	
               4.6

            	
               Zoning;
      Compliance with Laws

            	
              38

            
	
              Section

            	
               4.7

            	
               Leases;
      Agreements

            	
              38

            
	 	 	
               (A)

            	
               Leases;
      Agreements

            	
              38

            
	 	 	
               (B)

            	
               Rent
      Roll; Disclosure

            	
              38

            
	 	 	
               (C)

            	
               Lease
      Issues

            	
              39

            
	
              Section

            	
               4.8

            	
               Condition
      of Properties

            	
              39

            
	
              Section

            	
               4.9

            	
               Litigation;
      Adverse Facts

            	
              40

            
	
              Section

            	
               4.10

            	
               Payment
      of Taxes

            	
              40

            
	
              Section

            	
               4.11

            	
               Adverse
      Contracts

            	
              40

            
	
              Section

            	
               4.12

            	
               Performance
      of Agreements

            	
              40

            
	
              Section

            	
               4.13

            	
               Governmental
      Regulation

            	
              40

            
	
              Section

            	
               4.14

            	
               Employee
      Benefit Plans

            	
              40

            
	
              Section

            	
               4.15

            	
               Broker’s
      Fees

            	
              40

            
	
              Section

            	
               4.16

            	
               Environmental
      Compliance

            	
              41

            
	 	 	
               (A)

            	
               No
      Environmental Claims

            	
              41

            


    

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    

    
      	 	 	
               (B)

            	
               Storage
      of Hazardous Materials

            	
              41

            
	 	 	
               (C)

            	
               Compliance
      with Environmental Laws

            	
              41

            
	
              Section

            	
               4.17

            	
               Solvency

            	
              41

            
	
              Section

            	
               4.18

            	
               Disclosure

            	
              42

            
	
              Section

            	
               4.19

            	
               Use
      of Proceeds and Margin Security

            	
              42

            
	
              Section

            	
               4.20

            	
               Insurance

            	
              42

            
	
              Section

            	
               4.21

            	
               Separate
      Tax Lots

            	
              42

            
	
              Section

            	
               4.22

            	
               Investments

            	
              42

            
	
              Section

            	
               4.23

            	
               Bankruptcy

            	
              42

            
	
              Section

            	
               4.24

            	
               Defaults

            	
              43

            
	
              Section

            	
               4.25

            	
               No
      Plan Assets

            	
              43

            
	
              Section

            	
               4.26

            	
               No
      Prohibited Transaction

            	
              43

            
	
              Section

            	
               4.27

            	
               Not
      Foreign Person

            	
              43

            
	
              Section

            	
               4.28

            	
               No
      Collective Bargaining Agreements

            	
              43

            
	
              Section

            	
               4.29

            	
               Compliance

            	
              43

            
	
              Section

            	
               4.30

            	
               Intellectual
      Property

            	
              43

            
	
              Section

            	
               4.31

            	
               Pre-Closing
      Date Activities

            	
              44

            
	
              Section

            	
               4.32

            	
               Mortgage
      and Other Liens

            	
              44

            
	
              Section

            	
               4.33

            	
               Management
      Agreement

            	
              44

            
	
              Section

            	
               4.34

            	
               No
      Prohibited Persons

            	
              44

            
	 	 	 	 
	
              ARTICLE
      V

            	
              COVENANTS
      OF BORROWER PARTIES

            	
              44

            
	
              Section

            	
               5.1

            	
               Financial
      Statements and Other Reports

            	
              45

            
	 	 	
               (A)

            	
               Financial
      Statements

            	
              45

            
	 	 	
               (B)

            	
               Accountants’
      Reports

            	
              47

            
	 	 	
               (C)

            	
               Tax
      Returns

            	
              47

            
	 	 	
               (D)

            	
               Material
      Notices

            	
              47

            
	 	 	
               (E)

            	
               Events
      of Default, etc

            	
              47

            
	 	 	
               (F)

            	
               Litigation

            	
              47

            
	 	 	
               (G)

            	
               Insurance

            	
              47

            
	 	 	
               (H)

            	
               Other
      Information

            	
              48

            
	
              Section

            	
               5.2

            	
               Existence;
      Qualification

            	
              48

            
	
              Section

            	
               5.3

            	
               Payment
      of Impositions and Claims

            	
              48

            
	
              Section

            	
               5.4

            	
               Maintenance
      of Insurance

            	
              49

            
	
              Section

            	
               5.5

            	
               Maintenance
      of the Properties; Alterations; Casualty or Taking

            	
              51

            
	 	 	
               (A)

            	
               Maintenance
      of the Properties; Alterations

            	
              51

            
	 	 	
               (B)

            	
               Casualty
      or Taking

            	
              52

            
	 	 	
               (C)

            	
               Proceeds
      Application to Restoration

            	
              53

            
	 	 	
               (D)

            	
               Disbursement
      for Restoration

            	
              54

            
	 	 	
               (E)

            	
               Disbursement
      Conditions

            	
              54

            
	 	 	
               (F)

            	
               Retainage

            	
              54

            
	
              Section

            	
               5.6

            	
               Inspection

            	
              55

            
	
              Section

            	
               5.7

            	
               Environmental
      Compliance

            	
              55

            
	 	 	
               (A)

            	
               Environmental
      Laws

            	
              55

            
	 	 	
               (B)

            	
               Remedial
      Action

            	
              55

            
	 	 	
               (C)

            	
               Further
      Assurance

            	
              56

            
	 	 	
               (D)

            	
               O
      & M Program

            	
              56

            


    

    


    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

     

    
      	
              Section

            	
               5.8

            	
               Environmental
      Disclosure

            	
              56

            
	
              Section

            	
               5.9

            	
               Compliance
      with Laws and Contractual Obligations

            	
              57

            
	
              Section

            	
               5.10

            	
               Further
      Assurances

            	
              57

            
	
              Section

            	
               5.11

            	
               Performance
      of Agreements and Leases

            	
              57

            
	
              Section

            	
               5.12

            	
               Leases

            	 	
              58

            
	
              Section

            	
               5.13

            	
               Management
      and Leasing

            	
              59

            
	
              Section

            	
               5.14

            	
               Material
      Agreements

            	
              59

            
	
              Section

            	
               5.15

            	
               Certain
      VCOC Provisions

            	
              60

            
	
              Section

            	
               5.16

            	
               Estoppel
      Certificates

            	
              60

            
	
              Section

            	
               5.17

            	
               Indebtedness

            	
              60

            
	
              Section

            	
               5.18

            	
               Liens
      and Related Matters

            	
              61

            
	 	 	
               (A)

            	
               No
      Liens

            	
              61

            
	 	 	
               (B)

            	
               No
      Negative Pledges

            	
              61

            
	
              Section

            	
               5.19

            	
               Contingent
      Obligations

            	
              61

            
	
              Section

            	
               5.20

            	
               Restriction
      on Fundamental Changes

            	
              61

            
	
              Section

            	
               5.21

            	
               Transactions
      with Related Persons

            	
              62

            
	
              Section

            	
               5.22

            	
               ERISA

            	 	
              62

            
	 	 	
               (A)

            	
               No
      ERISA Plans

            	
              62

            
	 	 	
               (B)

            	
               Compliance
      with ERISA

            	
              62

            
	 	 	
               (C)

            	
               No
      Plan Assets. No Plan Assets

            	
              63

            
	 	 	
               (D)

            	
               Indemnification

            	
              63

            
	
              Section

            	
               5.23

            	
               Lender’s
      Expenses

            	
              63

            
	
              Section

            	
               5.24

            	
               Environmental
      Matters; Inspection

            	
              63

            
	
              Section

            	
               5.25

            	
               Environmental
      Claims

            	
              64

            
	
              Section

            	
               5.26

            	
               Environmental
      Indemnification

            	
              65

            
	
              Section

            	
               5.27

            	
               Operation
      of Properties

            	
              65

            
	
              Section

            	
               5.28

            	
               Taxes
      on Security

            	
              66

            
	
              Section

            	
               5.29

            	
               Cooperate
      in Legal Proceedings

            	
              66

            
	
              Section

            	
               5.30

            	
               Insurance
      Benefits

            	
              66

            
	
              Section

            	
               5.31

            	
               Prohibited
      Persons

            	
              66

            
	 	 	 	 
	
              ARTICLE
      VI 

            	 RESERVES	 
	
              Section

            	
               6.1

            	
               Security
      Interest in Reserves; Other Matters Pertaining to

            	 
	 	 	
               Reserves

            	
              67

            
	
              Section

            	
               6.2

            	
               Funds
      Deposited with Lender

            	
              67

            
	 	 	
               (A)

            	
               Interest,
      Offsets

            	
              67

            
	 	 	
               (B)

            	
               Funding
      at Closing

            	
              68

            
	
              Section

            	
               6.3

            	
               Impositions
      and Insurance Reserve

            	
              68

            
	
              Section

            	
               6.4

            	
               Replacement
      Reserve

            	
              68

            
	
              Section

            	
               6.5

            	
               Security
      Deposits

            	
              68

            
	
              Section

            	
               6.6

            	
               Conditions
      to Disbursements from the Replacement Reserve;

            	 
	 	 	
               Performance
      of Work

            	
              69

            
	 	 	
               (A)

            	
               Disbursements
      from the Replacement Reserve

            	
              69

            
	 	 	
               (B)

            	
               Performance
      of Work

            	
              71

            
	 	 	
               (C)

            	
               Indemnification

            	
              72

            
	
              Section

            	
               6.7

            	
               Completion/Repair
      Reserve

            	
              73

            


    

    


    
      
        
        

      

      
        iv

        
          

        

      

      
        
        

      

    

    
      	
              ARTICLE
      VII 

            	 DEPOSIT ACCOUNT; CASH MANAGEMENT	 
	
              Section
      7.1

            	
               Establishment
      of Accounts

            	
              73

            
	 	
               (A)

            	
               Clearing
      Account/Deposit Account

            	
              73

            
	 	
               (B)

            	
               Account
      Name

            	
              74

            
	 	
               (C)

            	
               Eligible
      Accounts/Characterization of Accounts

            	
              74

            
	 	
               (D)

            	
               Permitted
      Investments

            	
              75

            
	
              Section
      7.2

            	
               Deposit
      of Receipts into the Clearing Account and the Deposit

            	 
	 	
               Account

            	
              75

            
	
              Section
      7.3

            	
               Application
      of Funds in Accounts

            	
              75

            
	 	
               (A)

            	
               Allocations

            	
              75

            
	 	
               (B)

            	
               Cure
      of Cash Trap Condition

            	
              76

            
	 	
               (C)

            	
               Required
      Payments

            	
              76

            
	 	
               (D)

            	
               Operating
      Expenses Disbursements

            	
              77

            
	 	
               (E)

            	
               Event
      of Default

            	
              77

            
	
              Section
      7.4

            	
               Budget
      Approvals

            	
              78

            
	
              Section
      7.5

            	
               Sole
      Dominion and Control

            	
              78

            
	
              Section
      7.6

            	
               Pledge
      of Accounts

            	
              79

            
	 	
               (A)

            	
               Security
      for Obligations

            	
              79

            
	 	
               (B)

            	
               Rights
      on Default

            	
              79

            
	 	
               (C)

            	
               Financing
      Statement; Further Assurances

            	
              79

            
	 	
               (D)

            	
               Termination
      of Agreement

            	
              80

            
	
              Section
      7.7

            	
               Lender
      Appointed Attorney-In-Fact

            	
              80

            
	 	 	 
	
              ARTICLE
      VIII 

            	 DEFAULT, RIGHTS AND REMEDIES	 
	
              Section
      8.1

            	
               Event
      of Default

            	
              81

            
	 	
               (A)

            	
               Scheduled
      Payments

            	
              81

            
	 	
               (B)

            	
               Other
      Payments

            	
              81

            
	 	
               (C)

            	
               Breach
      of Reporting Provisions

            	
              81

            
	 	
               (D)

            	
               Breach
      of Provisions Regarding Insurance, Transfers,

            	 
	 	 	
               Liens,
      Single Purpose

            	
              81

            
	 	
               (E)

            	
               Breach
      of Warranty

            	
              81

            
	 	
               (F)

            	
               Other
      Defaults Under Loan Documents

            	
              81

            
	 	
               (G)

            	
               Involuntary
      Bankruptcy; Appointment of Receiver, etc

            	
              82

            
	 	
               (H)

            	
               Voluntary
      Bankruptcy; Appointment of Receiver, etc

            	
              82

            
	 	
               (I)

            	
               Bankruptcy
      Involving Ownership Interests or Property

            	
              82

            
	 	
               (J)

            	
               Solvency

            	
              82

            
	 	
               (K)

            	
               Injunction

            	
              82

            
	 	
               (L)

            	
               Invalidity
      of Loan Documents

            	
              82

            
	 	
               (M)

            	
               Cross-Default
      with Other Loan Documents

            	
              83

            
	 	
               (N)

            	
               Default
      under Management Agreement

            	
              83

            
	
              Section
      8.2

            	
               Acceleration
      and Remedies

            	
              83

            
	
              Section
      8.3

            	
               Performance
      by Lender

            	
              84

            
	 	 	 
	
              ARTICLE IX 

            	 SINGLE-PURPOSE, BANKRUPTCY-REMOTE REPRESENTATIONS,	 
	 	 WARRANTIES AND COVENANTS	 
	
              Section
      9.1

            	
               Applicable
      to Borrowers

            	
              85

            


    

    


    
      
        
        

      

      
        v

        
          

        

      

      
        
        

      

    

    
      
        
          
            
              
                
                  	
                          ARTICLE
      X

                        	
                          RESTRUCTURING
      LOAN, SECONDARY MARKET

                        	 
	 	
                          TRANSACTIONS

                        	
                          88

                        
	
                          Section

                        	
                           10.1

                        	
                           Secondary
      Market Transactions Generally

                        	
                          88

                        
	
                          Section

                        	
                           10.2

                        	
                           Cooperation;
      Limitations

                        	
                          89

                        
	
                          Section

                        	
                           10.3

                        	
                           Information

                        	
                          89

                        
	
                          Section

                        	
                           10.4

                        	
                           Additional
      Provisions

                        	
                          90

                        
	 	 	 	 
	
                          ARTICLE
      XI

                        	
                          RESTRICTIONS
      ON LIENS, TRANSFERS; RELEASE OF

                        	 
	 	
                          PROPERTIES

                        	
                          91

                        
	
                          Section

                        	
                           11.1

                        	
                           Restrictions
      on Transfer and Encumbrance

                        	
                          91

                        
	
                          Section

                        	
                           11.2

                        	
                           Permitted
      Transfers of Beneficial Interests in Sole Member

                        	
                          91

                        
	
                          Section

                        	
                           11.3

                        	
                           Assumability

                        	
                          92

                        
	 	 	 	 
	
                           

                        	
                          93

                        
	
                          ARTICLE
      XII 

                        	 RECOURSE; LIMITATIONS ON RECOURSE	 
	
                          Section

                        	
                           12.1

                        	
                           Limitations
      on Recourse

                        	
                          93

                        
	
                          Section

                        	
                           12.2

                        	
                           Recourse
      to Borrowers and Guarantor

                        	
                          94

                        
	
                          Section

                        	
                           12.3

                        	
                           Miscellaneous

                        	
                          95

                        
	 	 	 	 
	
                           

                        	
                          96

                        
	
                          ARTICLE
      XIII 

                        	 MISCELLANEOUS	 
	
                          Section

                        	
                           13.1

                        	
                           Expenses
      and Attorneys’ Fees

                        	
                          96

                        
	
                          Section

                        	
                           13.2

                        	
                           Indemnity

                        	
                          96

                        
	
                          Section

                        	
                           13.3

                        	
                           Amendments
      and Waivers

                        	
                          97

                        
	
                          Section

                        	
                           13.4

                        	
                           Retention
      of Borrowers’ Documents

                        	
                          97

                        
	
                          Section

                        	
                           13.5

                        	
                           Notices

                        	
                          97

                        
	
                          Section

                        	
                           13.6

                        	
                           Survival
      of Warranties and Certain Agreements

                        	
                          99

                        
	
                          Section

                        	
                           13.7

                        	
                           Failure
      or Indulgence Not Waiver; Remedies Cumulative

                        	
                          99

                        
	
                          Section

                        	
                           13.8

                        	
                           Marshaling;
      Payments Set Aside

                        	
                          99

                        
	
                          Section

                        	
                           13.9

                        	
                           Severability

                        	
                          99

                        
	
                          Section

                        	
                           13.10

                        	
                           Headings

                        	
                          99

                        
	
                          Section

                        	
                           13.11

                        	
                           APPLICABLE
      LAW

                        	
                          99

                        
	
                          Section

                        	
                           13.12

                        	
                           Successors
      and Assigns

                        	
                          100

                        
	
                          Section

                        	 13.13	
                           Sophisticated
      Parties, Reasonable Terms, No Fiduciary Relationship

                        	
                          100

                        
	
                          Section

                        	
                           13.14

                        	
                           Reasonableness
      of Determinations

                        	
                          100

                        
	
                          Section

                        	
                           13.15

                        	
                           No
      Duty

                        	
                          101

                        
	
                          Section

                        	
                           13.16

                        	
                           Entire
      Agreement

                        	
                          101

                        
	
                          Section

                        	
                           13.17

                        	
                           Construction;
      Supremacy of Loan Agreement

                        	
                          101

                        
	
                          Section

                        	
                           13.18

                        	
                           Consent
      to Jurisdiction

                        	
                          101

                        
	
                          Section

                        	
                           13.19

                        	
                           Waiver
      of Jury Trial

                        	
                          101

                        
	
                          Section

                        	
                           13.20

                        	
                           Counterparts;
      Effectiveness

                        	
                          102

                        
	
                          Section

                        	
                           13.21

                        	
                           Servicer

                        	
                          102

                        
	
                          Section

                        	
                           13.22

                        	
                           Waiver
      of Notice

                        	
                          102

                        
	
                          Section

                        	
                           13.23

                        	
                           Offsets,
      Counterclaims and Defenses

                        	
                          103

                        
	
                          Section

                        	
                           13.24

                        	
                           Waiver
      of Counterclaim

                        	
                          103

                        
	
                          Section

                        	
                           13.25

                        	
                           Brokers
      and Financial Advisors

                        	
                          103

                        
	
                          Section

                        	
                           13.26

                        	
                           Joint
      and Several Liability

                        	
                          103

                        


                

              

            

          

        

      

    

     

     

    
      
        
        

      

      
        vi

        
          

        

      

      
        
        

      

    

     

     

    LOAN AND SECURITY
AGREEMENT

     

    This LOAN
AND SECURITY AGREEMENT (this “Loan
Agreement”) is
dated as of June 30, 2006, and entered into by and among SCOTSDALE MI LLC, a
Delaware limited liability company; CARRIAGE PARK MI LLC, a Delaware limited
liability company, MACOMB MANOR MI LLC, a Delaware limited liability company;
and CARRIAGE HILL MI LLC, a Delaware limited liability company (individually,
each a “Borrower” and
collectively the “Borrowers”); and
CITIGROUP GLOBAL MARKETS REALTY CORP., a New York corporation (together with its
successors and assigns, whether one or more, “Lender”).

     

    NOW,
THEREFORE, in consideration of the premises and the agreements, provisions and
covenants herein contained, Borrowers and Lender agree as follows:

     

    ARTICLE I

    DEFINITIONS

     

    Section 1.1 Certain Defined
Terms. The
terms defined below are used in this Loan Agreement as so defined. Terms defined
in the preamble to this Loan Agreement are used in this Loan Agreement as so
defined.

     

    “Accounts” means,
collectively, the Clearing Account, the Deposit Account, the Sub-Accounts
thereof, and any other accounts pledged to Lender pursuant to this Loan
Agreement or any other Loan Document.

     

    “Account
Banks” has the
meaning set forth in Section 7.1.

     

    “Account
Collateral” means
all of Borrowers’ right, title and interest in and to the Accounts, the
Reserves, all monies and amounts which may from time to time be on deposit
therein, all monies, checks, notes, instruments, documents, deposits, and
credits from ti-me to time in the possession of Lender representing or
evidencing such Accounts and Reserves and all earnings and investments held
therein and proceeds thereof, including, but not limited to, the Account
Collateral specified in Section 7.6(A) hereof.

     

    “Adjusted Net Cash
Flow” for any
twelve month calculation period means, as of the date of such calculation, the
excess of (a) all Receipts, including, without limitation, base rents and
monthly recoveries under bona fide Leases at the Properties, received by or on
behalf of Borrowers and attributable to such twelve month period, over (b)
Operating Expenses attributable to such twelve month calculation period
(determined on an accrual basis), in each case adjusted to reflect the
following, all as determined by Lender: (i) a vacancy factor for each Individual
Property equal to the greatest of (A) the market vacancy rate (as determined by
Lender) for similar properties in the commercial business district or market
area in which the applicable Individual Property is located, (B) the actual
vacancy rate at the applicable Individual Property, and (C) 5% of the rentable
area of the applicable Individual Property, (ii) inclusion in Operating Expenses
of a base management fee equal to the greater of (A) the actual base management
for such period and (B) 4% of gross revenues for such period; (iii) subtraction
of a reserve for Capital Expenditures equal to $300 per Unit per annum, (iv)
exclusion from Receipts of (W) Prepaid Rents not attributable and actually
applied in such twelve month period, (X) amounts other than rents and other
payments under Leases at the Properties, (Y) amounts representing non-recurring
items as reasonably determined by Lender, and (Z) amounts received from tenants
affiliated with any Borrower Parties; (v) adjustment of Operating Expenses to
reflect the higher of actual Operating Expenses for such period and historical
annualized Operating Expenses and historical operating levels at the Properties;
and (vi) adjustments deemed necessary by Lender based upon Lender’s underwriting
criteria and Lender’s sole good faith determination of Rating Agency
underwriting and evaluation criteria. Lender’s calculation of Adjusted Net Cash
Flow shall be final absent manifest error.

     


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    “Affiliate” means
in relation to any Person, any other Person: (i) directly or indirectly
controlling, controlled by, or under common control with, the first Person; (ii)
directly or indirectly owning or holding five percent (5%) or more of any equity
interest in the first Person; or (iii) five percent (5%) or more of whose voting
stock or other equity interest is directly or indirectly owned or held by the
first Person. In addition, the Affiliates of each Borrower Party include,
without limitation, all other Borrower Parties, irrespective of whether they now
or hereafter satisfy the foregoing criteria. For purposes of this definition,
“control”
(including with correlative meanings, the terms “controlling”,
“controlled
by” and
“under common control
with”) means
the possession directly or indirectly of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise. Where expressions such
as “[name of party] or any Affiliate” are used, the same shall refer to the
named party and any Affiliate of the named party.

     

    “Allocated Loan
Amount” means,
for each Individual Property, the amount for such Individual Property as set
forth in the table below:

    


    
      	
              Individual
      Property 

            	
               

            	
              Allocated

              Loan
      Amounts for

              Individual
      Property 

            	
               

            
	
               

            	
               

            	
               

            	
               

            
	
              1.    Carriage
      Hill Property

            	
               

            	
              $

            	
              7,050,000

            	
               

            
	
              2.    Carriage
      Park Property

            	
               

            	
              $

            	
              10,950,000

            	
               

            
	
              3.    Macomb
      Manner Property

            	
               

            	
              $

            	
              8,175,000

            	
               

            
	
              4.    Scotsdale
      Property

            	
               

            	
              $

            	
              14,550,000

            	
               

            


    

     

    “Applicable Individual
Property” means
the following:

     

    
      	
               

            	
              (1)

            	
              as
      to the Borrower known as Carriage Hill MI LLC, the Carriage Hill
      Property;

            


    

     

    
      	
               

            	
              (2)

            	
              as
      to the Borrower known as Carriage Park MI LLC the Carriage Park
      Property;

            


    

     

    
      	
               

            	
              (3)

            	
              as
      to the Borrower known as Macomb Manner MI LLC, the Macomb Manner Property;
      and

            


    

     

    
      	
               

            	
              (4)

            	
              as
      to the Borrower known as Scotsdale MI LLC, the Scotsdale
      Property.

            


    

     

    “Approved
Architect” has the
meaning set forth in Section 5.5.


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

     

    “Approved
Bank” shall
mean a bank, the long term unsecured debt obligations of which are rated at
least “AA” by S&P and the equivalent by Fitch and Moody’s (unless Lender
approves in writing a financial institution other than a bank or a lower rating,
in each case in Lender’s sole and absolute discretion).

     

    “Approved Operating
Budget” has the
meaning set forth in Section 7.4.

     

    “Approved Capital
Expenditures” has the
meaning set forth in Section 6.4.

     

    “Approved
Expenditures” has the
meaning set forth in Section 6.6.

     

    “Assignments of
Leases” means,
collectively, the Assignments of Leases and Rents of even date herewith from
each Borrower to Lender, constituting an assignment of the Leases and proceeds
therefrom as Collateral for the Loan, as same may be amended or modified from
time to time. “Assignment of
Leases” means
any one of the Assignments of Leases.

     

    “Assignment of Management
Agreement” means
that certain Conditional Assignment of Management Agreement of even date
herewith executed by Borrowers and current Manager, constituting an assignment
of the Management Agreement as Collateral for the Loan, as same may be amended
or modified from time to time.

     

    “Bankruptcy
Code” means
Title 11 of the United States Code, as amended from time to time, and all rules
and regulations promulgated thereunder.

     

    “Borrower” and
“Borrowers” have
the meaning set forth in the preamble.

     

    “Borrower
Party” and
“Borrower
Parties” mean,
individually or collectively, the Borrowers, the Sole Member and the
Guarantor.

     

    “Business
Day” means
any day excluding (i) Saturday, (ii) Sunday, (iii) any day which is a legal
holiday under the laws of the State of New York, and (iv) any day on which
banking institutions located in such state are generally not open for the
conduct of regular business.

     

    “Calendar
Quarter” means
each of the four periods of three consecutive months each from January 1 - March
31, April 1 - June 30, July 1 - September 30 and October 1 - December 31,
respectively.

     

    “Capital
Expenditures” means
expenditures for capital improvements, furnishings, fixtures and equipment
(whether paid in cash or property or accrued as liabilities) made by any
Borrower that, in conformity with GAAP, are required to be included in the
property, plant, or equipment, or similar fixed asset account or otherwise
capitalized.

     

    “Capital Expenditure
Budget” means
Borrowers’ budget for Capital Expenditures for the Properties, the costs of
which are to be paid from the Replacement Reserve, which budget has been
approved by Lender as and to the extent required hereunder.


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    


     

    “Carriage Hill
Property” means
that certain Individual Property commonly known as Carriage Hill, 26322 Westphal
Drive, Dearborn, Michigan, the legal description of which is set forth on
Schedule A-1.

     

    “Carriage Park
Property” means
that certain Individual Property commonly known as Carriage Park, 27201 Canfield
Drive, Dearborn Heights, Michigan, the legal description of which is set forth
on Schedule A-2.

     

    “Cash Trap
Condition” shall
exist (1) upon the occurrence of an Event of Default, or (2) in the event a Debt
Service Coverage Ratio, as measured by Lender as of the end of any Calendar
Quarter based upon Adjusted Net Cash Flow for the twelve (12) month period ended
as of the end of such Calendar Quarter, is less than the Minimum DSCR Threshold;
provided, that in
the event of a failure of the Borrowers to deliver the certification and
documentation required under Section 5.1(A)(iv) by the required delivery date
hereunder, at Lender’s option the Debt Service Coverage Ratio will be presumed
to be less than the Minimum DSCR Threshold unless and until such certification
and documentation are provided to Lender and demonstrate that the Debt Service
Coverage Ratio is at least equal to the Minimum DSCR Threshold.

     

    “Cash Trap
Cure” has the
meaning set forth in Section 7.1.

     

    “Claims” has the
meaning set forth in Section 5.3.

     

    “Clearing
Account” has the
meanings set forth in Section 7.1.

     

    “Clearing Account
Agreement” means
the written agreement among Borrowers, Lender and the holder of the Clearing
Account with respect to the maintenance and control thereof.

     

    “Clearing Account
Bank” has the
meaning set forth in Section 7.1.

     

    “Closing” means
the funding of the Loan contemplated by this Loan Agreement.

     

    “Closing
Date” means
the date on which the Closing occurs.

     

    “Collateral” means
rights, interests, and property of every kind, real and personal, tangible and
intangible, which is granted, pledged, liened, or encumbered as security for the
Loan or any of the other Obligations under this Loan Agreement, the Mortgage or
other Loan Documents, including the Properties (including all land and
Improvements), the Rents and the Accounts.

     

    “Compliance
Certificate” has the
meaning set forth in Section 5.1.

     

    “Condemnation
Proceeds” means,
in the event of a Taking with respect to any of the Properties, the proceeds in
respect of such Taking.

     

    “Contingent
Obligation”, as
applied to any Person, means any direct or indirect liability, contingent or
otherwise, of that Person: (A) with respect to any indebtedness, lease, dividend
or other obligation of another if the primary purpose or intent of the Person
incurring such liability, or the primary effect thereof, is to provide assurance
to the obligee of such liability that such liability will be paid or discharged,
or that any agreements relating thereto will be complied with, or that the
holders of such liability will be protected (in whole or in part) against loss
with respect thereto; (B) with respect to any letter of credit issued for the
account of that Person or as to which that Person is otherwise liable for
reimbursement of drawings; (C) under any interest rate swap agreement, interest
rate cap agreement, interest rate collar agreement or other similar agreement or
arrangement designed to protect against fluctuations in interest rates; or (D)
under any foreign exchange contract, currency swap agreement or other similar
agreement or arrangement designed to protect that Person against fluctuations in
currency values. Contingent Obligations shall include (i) the direct or indirect
guaranty, endorsement (other than for collection or deposit in the ordinary
course of business), co-making, discounting with recourse or sale with recourse
by such Person of the obligation of another, (ii) the obligation to make
take-or-pay or similar payments if required regardless of nonperformance by any
other party or parties to an agreement, and (iii) any liability of such Person
for the obligations of another through any agreement to purchase, repurchase or
otherwise acquire such obligation or any property constituting security
therefor, to provide funds for the payment or discharge of such obligation or to
maintain the solvency, financial condition or any balance sheet item or level of
income of another. For purposes of this definition, the amount of any Contingent
Obligation at any time shall be computed as the amount that, in light of all of
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured
liability.


    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

     

    “Contractual
Obligation”, as
applied to any Person, means any indenture, mortgage, deed of trust, contract,
undertaking, agreement or other instrument to which that Person is a party or by
which it or any of its properties is bound or to which it or any of its
properties is subject including, without limitation, the Loan
Documents.

     

    “Debt Service Coverage
Ratio” shall
mean, for any trailing twelve (12) month period measured as of the end of any
Calendar Quarter, the ratio of (i) Adjusted Net Cash Flow for such twelve (12)
month period to (ii) an adjusted annualized debt service base amount equal to
the greater of (1) the product of (A) the Monthly Debt Service Payment Amount,
multiplied by (B) 12 or (2) the product of the original principal balance of the
Loan multiplied by .0727.

     

    “Debt Service
Sub-Account” has the
meaning set forth in Section 7.1.

     

    “Default” means
any breach or default under any of the Loan Documents, whether or not the same
is an Event of Default, and also any condition or event that, after notice or
lapse of time or both, would constitute an Event of Default if that condition or
event were not cured or removed within any applicable grace or cure
period.

     

    “Default
Rate” has the
meaning set forth in Section 2.2.

     

    “Defeasance
Collateral” shall
mean the Total Defeasance Collateral or Partial Defeasance Collateral, as
applicable.

     

    “Defeasance Collateral
Account” has the
meaning set forth in Section 2.3.

     

    “Defeasance
Date” has the
meaning set forth in Section 2.3.


    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    


     

    “Defeased
Note” has the
meaning set forth in Section 2.3.

     

    “Deposit
Account” has the
meaning set forth in Section 7.1

     

    “Deposit Account
Agreement” means
the written agreement among Borrowers, Lender and the holder of the Deposit
Account with respect to the maintenance and control thereof.

     

    “Deposit Account
Bank” means
Wachovia Bank, National Association, a national banking association, or any
successor financial institution appointed by Lender pursuant hereto or pursuant
to the Deposit Account Agreement.

     

    “Documents” means
all “documents” as defined in the UCC or other receipts covering, evidencing or
representing goods now owned or hereafter acquired by any or all of the
Borrowers.

     

    “Dollars” and the
sign “$” mean
the lawful money of the United States of America.

     

    “Eligible
Account” shall
mean a separate and identifiable account from all other funds held by the
holding institution, which account is either (i) an account maintained with an
Eligible Bank or (ii) a segregated trust account maintained by a corporate trust
department of a federal depository institution or a state chartered depository
institution subject to regulations regarding fiduciary funds on deposit similar
to Title 12 of the Code of Federal Regulations § 9.10(B), which has corporate
trust powers and is acting in its fiduciary capacity and in either case having
combined capital and surplus of at least $100,000,000 or otherwise acceptable to
the Rating Agencies.

     

    “Eligible
Bank” shall
mean a bank that (i) satisfies the Rating Criteria and (ii) insures the deposits
hereunder through the Federal Deposit Insurance Corporation.

     

    “Employee Benefit
Plan” means
any employee benefit plan within the meaning of Section 3(3) of ERISA (including
any Multiemployer Plan) (i) which is maintained for employees of any Borrower or
any ERISA Affiliate, (ii) which has at any time within the preceding six (6)
years been maintained for the employees of any Borrower or any current or former
ERISA Affiliate or (iii) for which any Borrower or any ERISA Affiliate has any
liability, including contingent liability.

     

    “Environmental
Claims” has the
meaning set forth in Section 4.16.

     

    “Environmental
Indemnity” means
the Environmental Indemnity Agreement of even date herewith from Borrowers and
Guarantor to Lender, as same may be amended or modified from time to
time.

     

    “Environmental
Laws” means
any federal, state, or local law, ordinance or regulation or any court judgment
or order of any federal, state or local agency or regulatory body applicable to
any of the Borrowers or to any of the Properties relating to industrial hygiene
or to environmental or unsafe conditions including, but not limited to, those
relating to the generation, manufacture, storage, handling, transportation,
disposal, release, emission or discharge of Hazardous Material, those in
connection with the construction, fuel supply, power generation and
transmission, waste disposal or any other operations or processes relating to
any of the Properties, and those relating to the atmosphere, soil, surface and
ground water, wetlands, stream sediments and vegetation on, under, in or about
any of the Properties. “Environmental
Laws” also
shall include the Comprehensive Environmental Response, Compensation and
Liability Act, the Hazardous Materials Transportation Act, the Resource
Conservation and Recovery Act, the Solid Waste Disposal Act, the Clean Water
Act, the Clean Air Act, the Toxic Substance Control Act, the Safe Drinking Water
Act and the Occupational Safety and Health Act, and all regulations adopted in
respect to the foregoing laws.


    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    


     

    “Environmental
Report” means,
collectively, the Phase I Environmental Site Assessment dated March 24, 2006
prepared by EMG for the Carriage Hill Property, the Phase I Environmental Site
Assessment dated March 24, 2006 prepared by EMG for the Carriage Park Property,
the Phase I Environmental Site Assessment dated January 30, 2006 prepared by ATC
Associates, Inc. for the Macomb Manor Property, the Limited Phase II
Environmental Site Assessment dated April 10, 2006 prepared by ATC Associates,
Inc. for the Macomb Manor Property, the Phase I Environmental Site Assessment
dated January 25, 2006 prepared by ATC Associates, Inc. for the Scotsdale
Property, true, correct and complete copies of each which have been delivered to
Lender.

     

    “EO13224” has the
meaning set forth in Section 4.34.

     

    “ERISA” means
the Employee Retirement Income Security Act of 1974, and all rules and
regulations promulgated thereunder. Section references to ERISA are to ERISA, as
in effect at the date of this Agreement and, as of the relevant date, any
subsequent provisions of ERISA, amendatory thereof, supplemental thereto or
substituted therefor.

     

    “ERISA
Affiliate” means
each of the Borrowers and any corporation, trade or business that is, along with
any Borrower, a member of a controlled group of corporations or a controlled
group of trades or businesses, as described in Section 414 of the Internal
Revenue Code of 1986, as amended, or Section 4001 of ERISA.

     

    “Event of
Default” has the
meaning set forth in Section 8.1.

     

    “Excess
Interest” has the
meaning set forth in Section 2.2.

     

    “Financial
Statements” means
(i) statements of operations and retained earnings, statements of cash flow, and
balance sheets and (ii) such other financial reports as the subject entity shall
routinely and regularly prepare.

     

    “Financing
Statements” means
the Uniform Commercial Code Financing Statements naming the applicable Borrower
Parties as debtors, and Lender as secured party, required under applicable state
law to perfect the security interests created hereunder or under the other Loan
Documents.

     

    “First Open Payment
Date” is the
Payment Date which is in the third month preceding the month in which the
Scheduled Maturity Date occurs. For example, if the Scheduled Maturity Date is
April 11, 2010, the First Open Payment Date is the Payment Date in the month of
January, 2010.


    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    


     

    “First Payment
Date” has the
meaning set forth in Section 2.4.

     

    “Fitch” means
Fitch, Inc. and its successors.

     

    “GAAP” means
generally accepted accounting principles as in effect in the United States of
America from time to time.

     

    “Governmental
Authority” means,
with respect to any Person, any federal or state government or other political
subdivision thereof and any entity, including any regulatory or administrative
authority or court, exercising executive, legislative, judicial, regulatory or
administrative or quasi-administrative functions of or pertaining to government,
and any arbitration board or tribunal in each case having jurisdiction over such
applicable Person or such Person’s property, and any stock exchange on which
shares of capital stock of such Person are listed or admitted for
trading.

     

    “Guaranty” means
the Exceptions to Non-Recourse Guaranty of even date herewith executed by
Guarantor in favor of Lender, as same may be amended or modified from time to
time.

     

    “Guarantor” means
Lightstone Value Plus Real Estate Investment Trust, Inc., a Maryland corporation
and Lightstone Value Plus REIT LP, a Delaware limited partnership.

     

    “Hazardous
Material” means
all or any of the following: (i) substances, materials, compounds, wastes,
products, emissions and vapors that are defined or listed in, regulated by, or
otherwise classified pursuant to, any applicable Environmental Laws, including
any so defined, listed, regulated or classified as “hazardous substances”,
“hazardous materials”, “hazardous wastes”, “toxic substances”, “pollutants”,
“contaminants”, or any other formulation intended to regulate, define, list or
classify substances by reason of deleterious, harmful or dangerous properties;
(ii) waste oil, oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (iii) any flammable substances or
explosives or any radioactive materials; (iv) fungus, mold, mildew or other
biological agents the presence of which may adversely affect the health of
individuals or other animals or materially adversely affect the value or utility
of any of the Properties, (v) asbestos in any form; (vi) electrical or hydraulic
equipment which contains any oil or dielectric fluid containing polychlorinated
biphenyls; (vii) radon; or (viii) urea formaldehyde.

     

    “Immediate
Repairs” has the
meaning set forth in Section 6.7.

     

    “Impositions” means
all taxes (including, without limitation, all real estate, ad valorem, excise
and sales (including those imposed on lease rentals), use, single business,
gross receipts, value added, intangible transaction privilege, privilege,
license or similar taxes), assessments, ground rents, water, sewer or other
rents and charges, excises, levies, fees (including, without limitation,
license, permit, inspection, authorization and similar fees), and all other
governmental charges, in each case whether general or special, ordinary or
extraordinary, foreseen or unforeseen, of every character in respect of any or
all of the Borrowers, the Collateral, and any or all of the Properties
(including all interest and penalties thereon), which at any time prior to,
during or in respect of the term hereof may be assessed or imposed on or in
respect of or be a lien upon (i) any or all of the Borrowers (including, without
limitation, all income, franchise, single business, excise or other taxes
imposed on any or all of the Borrowers, for the privilege of doing business in
any jurisdiction) or Lender or (ii) any or all of the Properties, or any other
Collateral or any part thereof. Nothing contained in this Agreement shall be
construed to require any Borrower to pay (and Impositions shall not include) any
tax, assessment, levy or charge imposed on Lender, in the nature of a franchise,
capital levy, estate, inheritance, succession, income or net revenue
tax.

     

    
 

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    


     

    “Impositions and Insurance
Reserve” means
the reserve established pursuant to Section 6.3.

     

    “Impositions and Insurance
Reserve Sub-Account” has the
meaning set forth in Section 7.1.

     

    “Improvements” means
all buildings, structures and improvements of every kind and nature existing and
to be constructed upon the land which comprises any portion of any Individual
Property.

     

    “Indebtedness” or
“indebtedness”, as
applied to any Person, means: (A) all indebtedness for borrowed money; (B) that
portion of obligations with respect to leases that is properly classified as a
liability on a balance sheet in conformity with GAAP (excluding any prepaid
rents and security deposits under Leases); (C) notes payable and drafts accepted
representing extensions of credit whether or not representing obligations for
borrowed money; (D) any obligation owed for all or any part of the deferred
purchase price of property or services if the purchase price is due more than
thirty (30) days from the date the obligation is incurred or is evidenced by a
note or similar written instrument; and (E) all indebtedness secured by any Lien
on any property or asset owned or held by that Person regardless of whether the
indebtedness secured thereby shall have been assumed by that Person or is
nonrecourse to the credit of that Person.

     

    “Indemnified
Liabilities” has the
meaning set forth in Section 13.2.

     

    “Indemnified
Parties” has the
meaning set forth in Section 5.26.

     

    “Indemnitees” has the
meaning set forth in Section 13.2.

     

    “Independent
Director” has the
meaning set forth in Section 9.1.

     

    “Individual
Property” means,
individually, each of the four (4) parcels of real estate (including land and
Improvements) identified on Schedules A-1 through A-4 hereto (sometimes
collectively referred to as the “Individual
Properties”).

     

    “Insurance
Premiums” means
the annual insurance premiums for the insurance policies required to be
maintained by Borrowers with respect to the Properties under Section
5.4.

     

    “Intellectual
Property” means
all of each Borrower’s right, title and interest, whether now owned or hereafter
acquired, in, to and under the trademark licenses, trademarks, rights in
intellectual property, trade names, service marks and copyrights, copyright
licenses, patents, patent licenses or the license to use intellectual property
such as computer software owned or licensed by any of the Borrowers or other
proprietary business information relating to any Borrower’s policies,
procedures, manuals and trade secrets.

     

     

    
      
        
        

      

      
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    “Interest” means
interest accrued or accruing on the Loan.

     

    “Interest
Rate” shall
mean a rate per annum of 5.96%.

     

    “Involuntary Borrower Party
Bankruptcy” means
any involuntary case under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, in which any
Borrower Party is a debtor or all or any portion of any of the Properties is
property of the estate therein.

     

    “IRC” means
the Internal Revenue Code of 1986, and any rule or regulation promulgated
thereunder from time to time, in each case as amended.

     

    “IRS” means
the Internal Revenue Service or any successor thereto.

     

    “Lease” means
any lease, tenancy, license, sublease, assignment and/or other rental or
occupancy agreement (including, without limitation, any and all guarantees of
any of the foregoing) heretofore or hereafter entered into affecting the use,
enjoyment or occupancy of any of the Properties or any portion thereof,
including any extensions, renewals, modifications or amendments
thereof.

     

    “Legal
Requirements” shall
mean, with respect to each of the Borrowers and each Individual Property, all
federal, state, county, municipal and other governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions of
governmental authorities affecting such Borrower or such Individual Property or
any part thereof or the construction, use, alteration or operation thereof, or
any part thereof, whether now or hereafter enacted and in force, including,
without limitation, the Americans with Disabilities Act of 1990, and all
permits, licenses and authorizations and regulations relating thereto, and all
covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to such Borrower, at any time in force
affecting such Individual Property or any part thereof, including, without
limitation, any which may (i) require repairs, modifications or alterations in
or to such Individual Property or any part thereof, or (ii) in any way limit the
use and enjoyment thereof.

     

    “Lender” is
defined in the preamble.

     

    “Lien” means
any lien, mortgage, pledge, security interest, charge or encumbrance of any
kind, whether voluntary or involuntary, (including any conditional sale or other
title retention agreement, any lease in the nature thereof, and any agreement to
give any security interest).

     

    “Loan” has the
meaning set forth in Section 2.1.

     

    “Loan
Agreement” means
this Loan and Security Agreement, as same may be amended or modified from time
to time (including all schedules, exhibits, annexes and appendices
hereto).

     


    
      
        
        

      

      
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    “Loan
Documents” means
this Loan Agreement, the Note, the Mortgages, the Assignments of Leases, the
Assignment of Management Agreement, the Guaranty, the Clearing Account
Agreement, the Deposit Account Agreement, the Environmental Indemnity, the
Financing Statements, and any and all other documents and agreements accepted by
Lender for the purposes of evidencing and/or securing the Loan and any
certificates delivered in connection with the Loan.

     

    “Macomb Manor
Property” means
that certain Individual Property commonly known as Macomb Manor Apartments,
19700 Masonic Boulevard, Roseville, Michigan, the legal description of which is
set forth on Schedule A-3.

     

    “Management
Agreement” means,
individually and collectively, as the context requires, the management agreement
for the Properties in effect on the date hereof between the Borrowers and the
current Manager and any management agreement(s) which may hereafter be entered
into in accordance with the terms and conditions hereof, pursuant to which any
subsequent Manager may hereafter manage any or all of the
Properties.

     

    “Manager” means,
collectively or individually as the context may require, the Person or Persons
(approved by Lender in accordance with the terms and conditions hereof) that may
hereafter be charged with management of any Individual Property pursuant to a
Management Agreement.

     

    “Material Adverse
Effect” means
(A) a material adverse effect upon the business, operations, properties, assets
or condition (financial or otherwise) of any Borrower or any other Borrower
Party with respect to such party taken as a whole, or (B) the material
impairment of the ability of any Borrower or any other Borrower Party to perform
its material obligations under any Loan Documents, or (C) the impairment of the
ability of Lender to enforce or collect any of the Obligations. In determining
whether any individual event would result in a Material Adverse Effect,
notwithstanding that such event does not of itself have such effect, a Material
Adverse Effect shall be deemed to have occurred if the cumulative effect of such
event and all other then occurring events and existing conditions would result
in a Material Adverse Effect.

     

    “Material
Alteration” means
any improvement or alteration affecting structural elements of any Individual
Property the cost of which exceeds $200,000; provided,
however, that in
no event shall alterations performed as part of a Restoration constitute a
Material Alteration.

     

    “Maturity
Date” shall
mean the Scheduled Maturity Date, or such other date on which the final payment
of principal of the Note becomes due an payable as therein or herein provided,
whether at such Scheduled Maturity Date, by acceleration, or
otherwise.

     

    “Maximum
Rate” has the
meaning set forth in Section 2.2(D).

     

    “Minimum DSCR
Threshold” means a
Debt Service Coverage Ratio of 1.05 to 1.00 for measurement made at the end of
any Calendar Quarter.

     

    “Moody’s” means
Moody’s Investors Services, Inc. and its successors.

     

    “Monthly Debt Service
Payment” has the
meaning set forth in Section 2.4(A).

     


    
      
        
        

      

      
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    “Monthly Debt Service Payment
Amount” means
$243,120.62.

     

    “Mortgages” means,
collectively, those certain Mortgages of even date herewith from each Borrower
to Lender, constituting a Lien on the Improvements and the Properties as
Collateral for the Loan as same may be modified or amended from time to time.
“Mortgage” means
any one of the Mortgages.

     

    “Multiemployer
Plan” means a
“multiemployer plan” as defined in Section 3(37) or Section 4001(a)(3) of ERISA
to which any Borrower or any ERISA Affiliate is making, or is accruing an
obligation to make, contributions or has made, or been obligated to make,
contributions within the preceding six (6) years, or for which any Borrower or
any ERISA Affiliate has any liability, including contingent
liability.

     

    “Note” means
that certain Promissory Note, dated of even date herewith, made by Borrowers to
Lender evidencing the Loan, as amended, modified, restated or split, and any
replacement notes therefor.

     

    “O & M
Program” has the
meaning set forth in Section 5.7(D).

     

    “Obligations” means
the Loan and all other obligations, liabilities and indebtedness of every nature
of each of the Borrowers from time to time owed to Lender under the Loan
Documents, including the principal amount of all debts, claims and indebtedness,
accrued and unpaid interest and all fees, costs and expenses, whether primary,
secondary, direct, contingent, fixed or otherwise, heretofore, now and/or from
time to time hereafter owing, due or payable under the Loan Documents whether
before or after the filing of a proceeding under the Bankruptcy Code by or
against any or all of the Borrowers.

     

    “Operating
Account” means
Borrowers’ operating account(s) established for the purposes of holding and
managing Borrowers’ funds from time to time, but not the Clearing Account,
Deposit Account or any Sub-Accounts thereof.

     

    “Operating
Budget” means
Borrowers’ budget setting forth Borrowers’ best estimate, after due
consideration, of all revenue, costs, expenses and Operating Expenses for the
Properties, which budget has been reasonably approved by Lender if and to the
extent required hereunder.

     

    “Operating
Expenses” means
all costs and expenses accrued in accordance with GAAP relating to the
operation, maintenance, repair, use and management of the Properties, including,
without limitation, utilities, repairs and maintenance, insurance, property
taxes and assessments, advertising expenses, payroll and related taxes,
equipment lease payments, actual management fees and all amounts paid into
Reserves, provided,
however, such
costs and expenses shall be subject to reasonable adjustment by Lender to
normalize such costs and expenses, but excluding (i) principal, interest and
other payments made by Borrowers under the Loan Documents, and (ii) depreciation
and amortization.

     

    “Operating Expenses
Sub-Account” has the
meaning set forth in Section 7.1.

     

    “Partial
Defeasance” has the
meaning set forth in Section 2.3.

     


    
      
        
        

      

      
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    “Partial Defeasance
Amount” has the
meaning set forth in Section 2.10.

     

    “Partial Defeasance
Collateral” shall
mean U.S. Obligations, which provide payments (i) on or prior to, but as close
as possible to, all Payment Dates and other scheduled payment dates, if any,
under the Defeased Note after the Defeasance Date and up to and including the
Scheduled Maturity Date, and (ii) in amounts equal to or greater than the
respective Scheduled Defeasance Payments related to such Payment
Dates.

     

    “Partial Defeasance
Date” has the
meaning set forth in Section 2.3.

     

    “Partial
Release” has the
meaning set forth in Section 2.10.

     

    “Partial Release
Date” has the
meaning set forth in Section 2.10.

     

    “Partial Release
Parcel” has the
meaning set forth in Section 2.10.

     

    “Payment
Date” has the
meaning set forth in Section 2.4.

     

    “Pension
Plan” means
any Employee Benefit Plan, other than a Multiemployer Plan, which is subject to
the provisions of Part 3 of Title I of ERISA, Title IV of ERISA or Section 412
of the IRC and (i) which is maintained for employees of Borrower, or any of its
ERISA Affiliates, (ii) which has at any time within the preceding six (6) years
been maintained for the employees of any Borrower or any of its current or
former ERISA Affiliates, or (iii) for which any Borrower or any ERISA Affiliate
has any liability, including contingent liability.

     

    “Permitted
Encumbrances” means
(i) the Mortgages and the other Liens of the Loan Documents in favor of Lender;
(ii) as to each Individual Property, the items shown in Schedule B to the Title
Policy for such Individual Property as of Closing; (iii) future liens for
property taxes and assessments not then delinquent; (iv) Liens for Impositions
not yet due and payable or Liens arising after the date hereof which are being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted in accordance with Section 5.3(B) hereof; (v) in the case
of Liens arising after the date hereof, statutory Liens of carriers,
warehousemen, mechanics, materialmen and other similar Liens arising by
operation of law, which are incurred in the ordinary course of business and
discharged by a Borrower by payment, bonding or otherwise within thirty (30)
days after the filing thereof or which are being contested in good faith in
accordance with Section 5.3(B) hereof; (vi) as to each Individual Property,
rights of existing and future tenants, as tenants only, pursuant to the Leases
of such Individual Property; and (vii) any other Lien to which Lender may
expressly consent in writing.

     

    “Permitted
Investments” means
any one or more of the following obligations or securities acquired at a
purchase price of not greater than par (unless Borrowers deposit into the
applicable Sub-Account cash in the amount by which the purchase price exceeds
par), including those issued by any Servicer, the trustee under any
Securitization or any of their respective Affiliates, payable on demand or
having a maturity date not later than the Business Day immediately prior to the
date on which the invested sums are required for payment of an obligation for
which the related Sub-Account was created and meeting one of the appropriate
standards set forth below:

     


    
      
        
        

      

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

     

    (ii)    Federal
Housing Administration debentures;

     

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

     

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

     

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

     

    
 

    
      
        
        

      

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

     

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

     

    (viii)    units of
taxable money market funds, which funds are regulated investment companies, seek
to maintain a constant net asset value per share and have the highest rating
from each Rating Agency (or, if not rated by all Rating Agencies, rated by at
least one Rating Agency and otherwise acceptable to each other Rating Agency, as
confirmed in writing that such investment would not, in and of itself, result in
a downgrade, qualification or withdrawal of the initial or, if higher, then
current ratings assigned to any class of Certificates) for money market funds or
mutual funds; and

     


    
      
        
        

      

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

     

    provided,
however, that
such instrument continues to qualify as a “cash flow investment” pursuant to
Code Section 860G(a)(6) earning a passive return in the nature of interest and
no obligation or security shall be a Permitted Investment if (A) such obligation
or security evidences a right to receive only interest payments or (B) the right
to receive principal and interest payments on such obligation or security are
derived from an underlying investment that provides a yield to maturity in
excess of 120% of the yield to maturity at par of such underlying
investment.

     

    “Person” means
and includes natural persons, corporations, limited liability companies, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof and their respective permitted
successors and assigns (or in the case of a governmental Person, the successor
functional equivalent of such Person).

     

    “Pre-Existing
Condition” has the
meaning set forth in Section 5.5.

     

    “Prepaid
Rent” means
any base rents and other monthly recoveries under bona fide Leases at the
Properties actually received by Borrowers (including, any nonrefundable
reservation deposits) which are not currently due and owing by such tenant under
such Lease but are attributable to a future obligation under such
Lease.

     

    “Prepayment
Consideration” has the
meaning set forth in Section 2.6(C).

     

    “Principal
Balance” means
the outstanding principal balance of the Loan from time to time.

     

    “Proceeds” shall
have the meaning given in the UCC and, in any event, shall include, without
limitation, all proceeds, products, offspring, rents, profits or receipts, in
whatever form, arising from the Collateral.

     

    “Prohibited
Transaction” shall
mean a prohibited transaction as described under Section 406 of ERISA or Section
4975 of the IRC which is not the subject of a statutory exemption under Section
408(b) of ERISA or an administrative exemption granted pursuant to Section
408(a) of ERISA.

     

    “Properties” means,
collectively, each Individual Property listed on Schedule A-1 through A-4 hereto
(including land and Improvements), which serves as Collateral for the Loan and
which shall be encumbered by and are more particularly described in each of the
Mortgages as the “Mortgaged Property” (as defined in the
Mortgages).

     


    
      
        
        

      

      
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    “Property Condition
Report” and
“Property Condition
Reports” have
the meanings set forth in Section 3.1(S).

     

    “Rating
Agency” shall
mean any of S&P, Moody’s, Fitch, any successors thereto, or any other
nationally-recognized statistical rating organization designated by Lender in
its sole discretion.

     

    “Rating
Confirmation” with
respect to the transaction or matter in question, shall mean: (i) if all or any
portion of the Loan, by itself or together with other loans, has been the
subject of a Securitization, then each applicable Rating Agency shall have
confirmed in writing that such transaction or matter shall not result in a
downgrade, qualification, or withdrawal of any rating then in effect for any
class of certificates or other securities issued in connection with such
Securitization; and (ii) if the Loan or any portion thereof has not been the
subject of a Securitization, (a) the applicable Rating Agency shall have
confirmed in writing that such transaction or matter shall not result in a
downgrade, qualification, or withdrawal of any shadow rating or other rating
provided to the Loan or any portion thereof not the subject of a Securitization,
and (b) Lender shall have determined in its reasonable discretion (taking into
consideration such factors as Lender may determine, including the attributes of
the loan pool in which the Loan might reasonably be expected to be securitized)
that no rating for any certificate or other securities that would be issued in
connection with Securitization of such portion of the Loan would be downgraded,
qualified, or withheld by reason of such transaction or matter.

     

    “Rating
Criteria” with
respect to any Person, shall mean that (i) the short-term unsecured debt
obligations of such Person are rated at least “A-1” by S&P, “P-1” by Moody’s
and “F-1” by Fitch, if deposits are held by such Person for a period of less
than one month, or (ii) the long-term unsecured debt obligations of such Person
are rated at least “AA-” by S&P, “Aa3” by Moody’s and “AA-” by Fitch, if
deposits are held by such Person for a period of one month or more.

     

    “Receipts” means
all revenues, receipts and other payments of every kind arising from ownership
or operation of the Properties and received by any or all of the Borrowers or an
Affiliate of any Borrower, including, without limitation, all warrants, stock
options, or equity interests in any tenant, licensee or other Person occupying
space at, or providing services related to or for the benefit of, any Individual
Property received by any Borrower or an Affiliate of any Borrower in lieu of
rent or other payment.

     

    “Related
Person” means
in relation to any Person, any other Person that is (i) an Affiliate of the
first Person; (ii) the sibling of the first Person or of the Affiliate; (iii)
the then-current and former spouses of the first Person or of the Affiliate;
(iv) a Person that shares or has shared a residence with the first Person or
with the Affiliate; (v) the ancestor or descendant of the first Person or of any
other Person described in this items (i) through (iv) above; or (vi) any other
Person that, by reason of familial, economic, social or other relationship,
would reasonably be expected to favor the first Person or to act as requested by
the first Person. Where expressions such as “[name of party] or any Related
Person” are used, the same shall refer to the named party and any Related Person
of the named party.

     


    
      
        
        

      

      
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    “Release
Date” shall
mean the earlier of (i) the Payment Date in July, 2009, or (ii) the date that is
two (2) years from the “start up day” (within the meaning of Section 860G(a)(9)
of the IRC) of the REMIC Trust established in connection with the final
Securitization involving the Loan.

     

    “Rent Roll” has the
meaning set forth in Section 3.1.

     

    “Rents” has the
meaning set forth in the Granting Clauses of the Mortgages.

     

    “Replacement
Reserve” means
the reserve established pursuant to Section 6.4.

     

    “Replacement Reserve
Sub-Account” has the
meaning set forth in Section 7.1.

     

    “Reserves” means
the reserves held by or on behalf of Lender pursuant to this Loan Agreement or
other Loan Documents, including the reserves established pursuant to Article
VI.

     

    “Reserve
Sub-Accounts” has the
meaning set forth in Section 7.1.

     

    “Restoration” has the
meaning set forth in Section 5.5.

     

    “Restoration
Threshold” means
an amount equal to $1,000,000.

     

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

     

    “Scheduled Defeasance
Payments” shall
mean scheduled payments of interest and principal under the Note in the case of
a Total Defeasance and under the Defeased Note in the case of a Partial
Defeasance for all Payment Dates occurring after the Defeasance Date and up to
and including the Scheduled Maturity Date (including, in the case of a Total
Defeasance, the outstanding principal balance of the Loan as of the Scheduled
Maturity Date and, in the case of a Partial Defeasance, the outstanding
principal balance of the Defeased Note as of the Scheduled Maturity Date), and
all payments required after the Defeasance Date, if any, under the Loan
Documents for servicing fees, and other similar charges.

     

    “Scheduled Maturity
Date” shall
mean July 11, 2016.

     

    “Scotsdale
Property” means
that certain Individual Property commonly known as Scotsdale Apartments, 37650
Dale Drive, Westland, Michigan, the legal description of which is set forth on
Schedule A-4.

     

    “Secondary Market
Transaction” has the
meaning set forth in Section 10.1.

     

    “Securities”
(whether or not capitalized) means any stock, shares, voting trust certificates,
bonds, debentures, options, warrants, notes, or other evidences of indebtedness,
secured or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as “securities” or any certificates of interest,
shares or participations in temporary or interim certificates for the purchase
or acquisition of, or any right to subscribe to, purchase or acquire, any of the
foregoing.

     


    
      
        
        

      

      
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    “Securitization” means a
public or private rated offering of securities representing direct or indirect
interests in one or more mortgage loans or the right to receive income
therefrom.

     

    “Security
Agreement” shall
mean a security agreement in form and substance that would be satisfactory to a
prudent lender pursuant to which Borrowers grant Lender a perfected, first
priority security interest in the Defeasance Collateral Account and the
Defeasance Collateral.

     

    “Security
Deposits” shall
mean all security (whether cash, letter of credit or otherwise) given to any
Borrower or any agent or Person acting on behalf of any Borrower in connection
with any of the Leases.

     

    “Servicer” means a
servicer selected by Lender from time to time in its sole discretion to service
the Loan.

     

    “Sole
Member” shall
mean Lightstone Value Plus Real Estate Investment Trust, Inc., a Maryland
corporation, the sole member of each of the Borrowers.

     

    “Sub-Accounts” has the
meaning set forth in Section 7.1.

     

    “Successor
Borrower” has the
meaning set forth in Section 2.3.

     

    “Supplemental Debt Reserve
Sub-Account” has the
meaning set forth in Section 7.1.

     

    “Survey” has the
meaning set forth in Section 3.1(G).

     

    “Taking” means a
taking or voluntary conveyance during the term hereof of all or part of any
Individual Property, or any interest therein or right accruing thereto or use
thereof, as the result of, or in settlement of, any condemnation or other
eminent domain proceeding by any Governmental Authority affecting any Individual
Property or any portion thereof whether or not the same shall have actually been
commenced.

     

    “Tax
Liabilities” has the
meaning given to such term in Section 2.8.

     

    “Title
Company” means
Lawyers Title Insurance Corporation, or such other national title insurance
company as may be reasonably acceptable to Lender.

     

    “Title
Policies” means,
collectively, the mortgagee’s policies of title insurance pertaining to the
Mortgages issued to Lender in connection with the Closing meeting the
requirements of Section 3.1(G). “Title
Policy” means
any one of the Title Policies.

     

    “Total
Defeasance” has the
meaning set forth in Section 2.3.

     

    “Total Defeasance
Collateral” shall
mean U.S. Obligations, which provide payments (i) on or prior to, but as close
as possible to, all Payment Dates and other scheduled payment dates, if any,
under the Note after the Defeasance Date and up to and including the Maturity
Date, and (ii) in amounts equal to or greater than the respective Scheduled
Defeasance Payments related to such Payment Dates.

     


    
      
        
        

      

      
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    “Transfer and
Assumption” and
“Transferee
Borrower” have
the respective meanings set forth in Section 11.3.

     

    “UCC” means
the New York Uniform Commercial Code, as amended from time to time.

     

    “Undefeased
Note” has the
meaning set forth in Section 2.3.

     

    “Unit” means
each residential unit at the Properties containing one or more bedrooms for
occupancy by one or more residents.

     

    “U.S.
Obligations” shall
mean securities that are (i) direct obligations of the United States of America
for the full and timely payment of which its full faith and credit is pledged or
(ii) obligations of an entity controlled or supervised by and acting as an
agency or instrumentality and guaranteed as a full faith and credit obligation
which shall be fully and timely paid by the United States of America, which in
either case are not callable or redeemable at the option of the issuer thereof
(including a depository receipt issued by a bank (as defined in Section 3(a)(2)
of the United States Securities Act)) as custodian with respect to any such U.S.
Obligations or a specific payment of principal of or interest on any such U.S.
Obligations held by such custodian for the account of the holder of such
depository receipt, provided that (except as required by law) such custodian is
not authorized to make any deduction from the amount payable to the holder of
such depository receipt from any amount received by the custodian in respect of
the securities or the specific payment of principal of or interest on the
securities evidenced by such depository receipt.

     

    “Work” has the
meaning set forth in Section 6.6.

     

    Section 1.2 Accounting
Terms. 

     

    Except as
otherwise expressly provided herein, all accounting terms not otherwise defined
herein shall have the meanings assigned to such terms in conformity with
GAAP.

     

    Section 1.3 Other Definitional
Provisions. 

     

    References
to “Articles”,
“Sections”,
“Subsections”,
“Exhibits” and
“Schedules” shall
be to Articles, Sections, Subsections, Exhibits and Schedules, respectively, of
this Loan Agreement unless otherwise specifically provided. Any of the terms
defined in Section 1.1 may, unless the context otherwise requires, be used in
the singular or the plural depending on the reference. In this Loan Agreement,
“hereof”,
“herein”,
“hereto”,
“hereunder” and the
like mean and refer to this Loan Agreement as a whole and not merely to the
specific article, section, subsection, paragraph or clause in which the
respective word appears; words importing any gender include the other genders;
references to “writing” include
printing, typing, lithography and other means of reproducing words in a tangible
visible form; the words “including”,
“includes” and
“include” shall
be deemed to be followed by the words “without limitation”; and any reference to
any statute or regulation may include any amendments of same and any successor
statutes and regulations. Further, (i) any reference to any agreement or other
document shall include subsequent amendments, assignments, and other
modifications thereto, and (ii) any reference to any Person may include such
Person’s respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons.

     


    
      
        
        

      

      
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    ARTICLE II

    TERMS OF THE LOAN

     

    Section 2.1 Loan. 

     

    (A) Loan. Subject
to the terms and conditions of this Loan Agreement and in reliance upon the
representations and warranties of Borrowers contained herein, Lender agrees to
lend to Borrowers, and Borrowers agrees to borrow from Lender, the Loan, in the
aggregate amount of $40,725,000 (such loan and the obligation of Borrowers to
repay the same together with all interest and other amounts from time to time
owing hereunder are referred to collectively herein as the “Loan”).
Borrowers’ obligation to pay the principal and interest on the Loan (including
late charges, Default Rate interest, and the Prepayment Consideration, if any)
shall be evidenced by this Loan Agreement and by the Note, duly executed and
delivered by Borrowers. The Note shall be payable as to principal, interest,
late charges, Default Rate interest and Prepayment Consideration, if any, as
specified in this Loan Agreement, with a final maturity on the Maturity Date.
Borrowers shall pay all outstanding Obligations on the Maturity
Date.

     

    (B) Note. On the
Closing Date, Borrowers shall execute and deliver to Lender the Note, made by
Borrowers to the order of Lender, in the aggregate original principal amount of
$40,725,000.

     

    (C) Use of
Proceeds. The
proceeds of the Loan funded at Closing shall be used to (i) repay any existing
indebtedness secured by any mortgage encumbering all or any part of the
Properties; (ii) pay all recording fees and taxes, title insurance premiums, the
reasonable costs and expenses incurred by Lender, including the legal fees and
expenses of counsel to Lender, and other costs and expenses approved by Lender
(which approval will not be unreasonably withheld) related to the Loan and (iii)
establish the Reserves required hereunder. The remaining proceeds of the Loan,
if any, shall be disbursed to Borrowers; provided,
however, that
any and all such remaining proceeds of the Loan will be used for commercial
purposes only and will not be used for personal, family, agricultural or
household use.

     

    Section 2.2 Interest. 

     

    (A) Rate of
Interest. The
outstanding principal balance of the Loan shall bear interest at a rate per
annum equal to the Interest Rate.

     

    (B) Default
Rate.
Notwithstanding the foregoing, upon the occurrence and during the continuance of
an Event of Default and in any event from and after the Maturity Date of the
Loan, the Principal Balance of the Loan and all other outstanding Obligations
shall bear interest until paid in full at a rate per annum that is five percent
(5.0%) in excess of the Interest Rate otherwise applicable under this Loan
Agreement and the Note (the “Default
Rate”).

     

    (C) Computation of
Interest.
Interest on the Loan and all other Obligations owing to Lender shall be computed
on the basis of a 360-day year, and shall be charged for the actual number of
days elapsed during any month or other accrual period. Interest shall be payable
in arrears (except as provided in the first sentence of Section 2.4(A)
hereof).

     


    
      
        
        

      

      
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    (D) Interest
Laws.
Notwithstanding any provision to the contrary contained in this Loan Agreement
or the other Loan Documents, Borrowers shall not be required to pay, and Lender
shall not be permitted to collect, any amount of interest in excess of the
maximum amount of interest permitted by law (“Excess
Interest”). If
any Excess Interest is provided for or determined by a court of competent
jurisdiction to have been provided for in this Loan Agreement or in any of the
other Loan Documents, then in such event: (1) the provisions of this Section
shall govern and control; (2) Borrowers shall not be obligated to pay any Excess
Interest; (3) any Excess Interest that Lender may have received hereunder shall
be, at Lender’s option, (a) applied as a credit against either or both of the
Principal Balance of the Loan or accrued and unpaid interest thereunder (not to
exceed the maximum amount permitted by law), (b) refunded to the payor thereof,
or (c) any combination of the foregoing; (4) the interest rate(s) provided for
herein shall be automatically reduced to the maximum lawful rate allowed from
time to time under applicable law (the “Maximum
Rate”), and
this Loan Agreement and the other Loan Documents shall be deemed to have been
and shall be, reformed and modified to reflect such reduction; and (5) Borrowers
shall not have any action against Lender for any damages arising out of the
payment or collection of any Excess Interest. Notwithstanding the foregoing, if
for any period of time interest on any Obligation is calculated at the Maximum
Rate rather than the applicable rate under this Loan Agreement, and thereafter
such applicable rate becomes less than the Maximum Rate, the rate of interest
payable on such Obligations shall, to the extent permitted by law, remain at the
Maximum Rate until Lender shall have received or accrued the amount of interest
which Lender would have received or accrued during such period on Obligations
had the rate of interest not been limited to the Maximum Rate during such
period. If the Default Rate shall be finally determined to be unlawful, then the
applicable Interest Rate shall be applicable during any time when the Default
Rate would have been applicable hereunder, provided however that if the Maximum
Rate is greater or lesser than the applicable Interest Rate, then the foregoing
provisions of this paragraph shall apply.

     

    (E) Late
Charges. If any
payment of principal, interest or other sums shall not be made to Lender on the
date the same is due hereunder or under any of the other Loan Documents, then
Borrowers shall pay to Lender, in addition to all sums otherwise due and
payable, a late fee in an amount equal to five percent (5.0%) of such principal,
interest or other sums due hereunder or under any other Loan Document (or, in
the case of a partial payment, the unpaid portion thereof), such late charge to
be immediately due and payable without demand by Lender.

     

    (F) Additional Administrative
Fee. In
addition to the Default Rate provided for above, upon failure of any Borrower
Party to deliver any of the financial statements, reports or other information
required to be delivered to Lender as provided in Section 5.1 hereof upon their
due dates, if any such failure shall continue for five (5) Business Days
following notice thereof from Lender, Borrowers shall pay to Lender together
with the scheduled monthly payments of principal and interest on the Loan, for
each month or portion thereof that any such financial statement, report or other
information remains undelivered, an administrative fee in the amount of $7,500.
Borrowers agree that such administrative fee (i) is a fair and reasonable fee
necessary to compensate Lender for its additional administrative costs under the
circumstances, (ii) is not a penalty and (iii) is necessary to compensate Lender
for increased costs and obligations to third parties in connection with the
planned Securitization of the Loan.

     

     

    
      
        
        

      

      
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    Section 2.3 Defeasance. 

     

    (A) Total
Defeasance.
Borrowers shall have the right at any time after the Release Date and prior to
the First Open Payment Date to obtain a release of the Lien of the Mortgage
encumbering all (but not less than all) of the Properties (a “Total
Defeasance”) upon
satisfaction of the following conditions:

     

    (i) Borrowers
shall provide Lender at least thirty (30) days’ prior written notice (or such
shorter period of time if permitted by Lender in its sole discretion) specifying
a date (the “Defeasance
Date”) on
which Borrowers shall have satisfied the conditions in this Section 2.3(A) and
on which they shall effect the Defeasance;

     

    (ii) Borrowers
shall pay to Lender (A) all payments of interest due on the Loan to and
including the Defeasance Date and (B) all other sums, then due under the Note,
this Loan Agreement, the Mortgages and the other Loan Documents;

     

    (iii) Borrowers
shall irrevocably deposit the Total Defeasance Collateral into the Defeasance
Collateral Account and otherwise comply with the provisions of Sections 2.3(C)
and (D) hereof;

     

    (iv) Borrowers
shall execute and deliver to Lender a Security Agreement in respect of the
Defeasance Collateral Account and the Total Defeasance Collateral;

     

    (v) Borrowers
shall deliver to Lender an opinion of counsel for Borrowers that is customary in
commercial lending transactions and subject only to normal qualifications,
assumptions and exceptions opining, among other things, that (v) Lender has a
legal and valid perfected first priority security interest in the Defeasance
Collateral Account and the Total Defeasance Collateral, (w) if a Securitization
has occurred, the REMIC Trust formed pursuant to such Securitization will not
fail to maintain its status as a “real estate mortgage investment conduit”
within the meaning of Section 860D of the Code as a result of the defeasance
pursuant to this Section 2.3(A), (x) a defeasance pursuant to this Section
2.3(A) will not result in a deemed exchange for purposes of the Code and will
not adversely affect the status of the Note as indebtedness for federal income
tax purposes, (y) delivery of the Total Defeasance Collateral and the grant of a
security interest therein to Lender shall not constitute an avoidable preference
under Section 547 of the Bankruptcy Code or applicable state law and (z) if and
to the extent required by the Rating Agencies, a non-consolidation opinion with
respect to the Successor Borrower;

     

    (vi) Borrowers
shall deliver to Lender a confirmation in writing from the applicable Rating
Agencies to the effect that the release of the Properties from the Lien of the
Mortgages as contemplated by this Section 2.3(A) and the substitution of the
Total Defeasance Collateral will not result in a downgrading, withdrawal or
qualification of the respective ratings in effect immediately prior to such
defeasance for the Certificates issued in connection with the Securitization
which are then outstanding;

     

    (vii) Borrowers
shall deliver an officer’s certificate certifying that the requirements set
forth in this Section 2.3(A) have been satisfied;


    
      
        
        

      

      
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    (viii) Borrowers
shall deliver a certificate of a nationally recognized public accounting firm
reasonably acceptable to Lender certifying that the Total Defeasance Collateral
will generate monthly amounts equal to or greater than the Scheduled Defeasance
Payments;

     

    (ix) Borrowers
shall deliver such other certificates, opinions, documents and instruments as
Lender may reasonably request; and

     

    (x) Borrowers
shall pay all costs and expenses of Lender incurred in connection with the
defeasance, including Lender’s reasonable attorneys’ fees and expenses and
Rating Agency fees and expenses.

     

    If a
Total Defeasance occurs and all of the requirements of this Section 2.3 have
been satisfied, Lender shall execute any and all documents required to release
the Properties from the Lien of the Mortgage and the Assignments of Leases and
the Total Defeasance Collateral, pledged pursuant to the Security Agreement,
shall be the sole source of collateral securing the Note. In connection with the
release of the Lien, Borrowers shall submit to Lender, not less than thirty (30)
days prior to the Defeasance Date (or such shorter time as permitted by Lender
in its sole discretion), a release of Lien (and related Loan Documents) for each
Individual Property for execution by Lender. Such releases shall be in a form
appropriate in the jurisdiction in which the applicable Individual Property is
located and contain standard provisions protecting the rights of a releasing
lender. In addition, Borrowers shall provide all other documentation Lender
reasonably requires to be delivered by Borrowers in connection with such
release. Borrowers shall pay all costs, taxes and expenses associated with the
release of the Lien of the Mortgages and the Assignments of Leases, including
Lender’s reasonable attorneys’ fees. Except as set forth in this Section 2.3(A)
and Section 2.3(B) below, no repayment, prepayment or defeasance of all or any
portion of the Note shall cause, give rise to a right to require, or otherwise
result in, the release of the Lien of any Mortgage on any of the
Properties.

     

    (B) Partial
Defeasance.
Borrower shall, as a condition to and only in connection with a Partial Release
of an Individual Property after the Release Date and prior to the First Open
Payment Date as provided in Section 2.10 below, have the right to defease a
portion of the Loan (a “Partial
Defeasance”) equal
to the Partial Defeasance Amount for such Individual Property (determined as
provided in Section 2.10 with respect to such Partial Release) upon satisfaction
of the following conditions:

     

    (i) Borrower
shall provide Lender at least thirty (30) days’ prior written notice (or such
shorter period of time if permitted by Lender in its sole discretion) specifying
a date (the “Partial Defeasance
Date”) on
which Borrower shall have satisfied the conditions in this Section 2.3(B) and on
which it shall effect the Partial Defeasance;

     

    (ii) Borrower
shall pay to Lender (A) all payments of interest due on the Loan to and
including the Partial Defeasance Date and (B) all other sums, then due under the
Note, this Loan Agreement, the Mortgage and the other Loan
Documents;

     

    (iii) Borrower
shall irrevocably deposit the Partial Defeasance Collateral into the Defeasance
Collateral Account and otherwise comply with the provisions of Sections 2.3(C)
and (D) hereof;

     

    
 

    
      
        
        

      

      
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    (iv) Lender
shall prepare (at Borrower’s expense) all necessary documents to modify this
Loan Agreement and to amend and restate the Note and issue two substitute notes,
one note having a principal balance equal to the Partial Defeasance Amount (the
“Defeased
Note”), and
the other note having a principal balance equal to the excess of (A) the
then-outstanding principal amount of the Loan, over (B) the amount of the
Defeased Note (the “Undefeased
Note”). The
Defeased Note and Undefeased Note shall have identical terms as the Note except
for the principal balance and monthly payments. The Defeased Note and the
Undefeased Note shall be cross defaulted and cross collateralized unless the
Rating Agencies shall require otherwise or unless a Successor Borrower that is
not an Affiliate of Borrower is established pursuant to Section 2.3(D). A
Defeased Note may not be the subject of any further defeasance.

     

    (v) Borrower
shall execute and deliver to Lender a Security Agreement in respect of the
Defeasance Collateral Account and the Partial Defeasance
Collateral;

     

    (vi) Borrower
shall deliver to Lender an opinion of counsel for Borrower, if required by
Lender, that is customary in commercial lending transactions and subject only to
normal qualifications, assumptions and exceptions opining, among other things,
that (v) Lender has a legal and valid perfected first priority security interest
in the Defeasance Collateral Account and the Partial Defeasance Collateral, (w)
if a Securitization has occurred, the REMIC Trust formed pursuant to such
Securitization will not fail to maintain its status as a “real estate mortgage
investment conduit” within the meaning of Section 860D of the Code as a result
of the defeasance pursuant to this Section 2.3(B), (x) a defeasance pursuant to
this Section 2.3(B) will not result in a deemed exchange for purposes of the
Code and will not adversely affect the status of the Defeased Note and the
Undefeased Note as indebtedness for federal income tax purposes, (y) delivery of
the Partial Defeasance Collateral and the grant of a security interest therein
to Lender shall not constitute an avoidable preference under Section 547 of the
Bankruptcy Code or applicable state law and (z) if and to the extent required by
the Rating Agencies, a non-consolidation opinion with respect to the Successor
Borrower;

     

    (vii) Borrower
shall deliver to Lender a confirmation in writing from the applicable Rating
Agencies to the effect that the Partial Defeasance and the substitution of the
Partial Defeasance Collateral will not result in a downgrading, withdrawal or
qualification of the respective ratings in effect immediately prior to such
defeasance for the Certificates issued in connection with the Securitization
which are then outstanding;

     

    (viii) Borrower
shall deliver an officer’s certificate certifying that the requirements set
forth in this Section 2.3(B) have been satisfied;

     

    (ix) Borrower
shall deliver a certificate of a nationally recognized public accounting firm
reasonably acceptable to Lender certifying that the Partial Defeasance
Collateral will generate monthly amounts equal to or greater than the Scheduled
Defeasance Payments;

     

    (x) Borrower
shall deliver such other certificates, opinions, documents and instruments as
Lender may reasonably request; and

     

     

    
      
        
        

      

      
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    (xi) Borrower
shall pay all costs and expenses of Lender incurred in connection with the
defeasance, including Lender’s reasonable attorneys’ fees and expenses and
Rating Agency fees and expenses.

     

    (C) Defeasance Collateral
Account. On or
before the date on which Borrowers deliver the Defeasance Collateral, Borrowers
or Successor Borrower (as applicable) shall open at any Eligible Bank the
defeasance collateral account (the “Defeasance Collateral
Account”) which
shall at all times be an Eligible Account. The Defeasance Collateral Account
shall contain only (i) Defeasance Collateral and (ii) cash from interest and
principal paid on the Defeasance Collateral. All cash from interest and
principal payments paid on the Defeasance Collateral shall be paid over to
Lender on each Payment Date and applied to the monthly installments of interest
on the Loan and, on the Maturity Date, to accrued interest and the Principal
Balance of the Loan. Borrowers shall cause the Eligible Bank at which the
Defeasance Collateral is deposited to enter an agreement with Borrowers and
Lender, satisfactory to Lender in its sole discretion, pursuant to which such
Eligible Bank shall agree to hold and distribute the Defeasance Collateral in
accordance with this Loan Agreement. Borrowers (or Successor Borrower, as
applicable) shall be the owner of the Defeasance Collateral Account and shall
report all income accrued on Defeasance Collateral for federal, state and local
income tax purposes in its income tax return. Borrowers shall prepay all costs
and expenses associated with opening and maintaining the Defeasance Collateral
Account. Lender shall not in any way be liable by reason of any insufficiency in
the Defeasance Collateral Account.

     

    (D) Successor
Borrower. In
connection with a Total Defeasance or a Partial Defeasance under this Section
2.3, Borrowers shall, if required by the Rating Agencies or if Borrowers so
elect or Lender requires, establish or designate a successor entity (the
“Successor
Borrower”) which
shall be a single purpose bankruptcy remote entity and which shall be approved
by the Rating Agencies. Any such Successor Borrower may, at the option of
Borrowers, be an Affiliate of Borrowers unless the Rating Agencies or Lender
shall require otherwise. Borrowers shall transfer and assign all obligations,
rights and duties under and to the Note, together with the Defeasance
Collateral, to such Successor Borrower. Such Successor Borrower shall assume the
obligations under the Note and the Security Agreement. Borrowers shall pay
$1,000 to any such Successor Borrower as consideration for assuming the
obligations under the Note and the Security Agreement. Borrowers shall pay all
reasonable costs and expenses incurred by Lender, including Lender’s attorney’s
fees and expenses incurred in connection therewith, and all fees, expenses and
other charges of the Rating Agencies.

     

    Section 2.4 Payments. 

     

    (A) Payments of Interest and
Principal.
Borrowers shall make a payment to Lender of interest only on the Closing Date
for the period from the Closing Date through July 10, 2006. Commencing on August
11, 2006 (the “First Payment
Date”) and on
the eleventh (11th) day of
each calendar month thereafter (the First Payment Date and the eleventh
(11th) day of
each calendar month thereafter is herein referred to as a “Payment
Date”) to and
including the Payment Date in July, 2011, Borrowers shall make monthly payments
of interest accrued on the Principal Balance of the Loan, and on the Payment
Date in August, 2011 and on each Payment Date thereafter, Borrowers shall make
equal monthly payments of principal and interest in the amount of the Monthly
Debt Service Payment Amount (such monthly payments of interest and, on and after
the Payment Date in August, 2011, principal and interest are each referred to
herein as a “Monthly Debt Service
Payment”). Prior
to the occurrence of an Event of Default, all Monthly Debt Service Payments
shall be applied first to accrued and unpaid interest on the Loan and the
balance to the payment of principal on the Loan. During the continuance of an
Event of Default, Borrowers irrevocably waive the right to direct the
application of any and all payments at any time hereafter received by Lender
from or on behalf of Borrowers, and Borrowers irrevocably agree that Lender
shall have the continuing exclusive right to apply any and all such payments
against the then due and owing obligations of Borrowers in such order of
priority as Lender may deem advisable.

     

     

    
      
        
        

      

      
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    (B) Date and Time of
Payment.
Borrowers shall receive credit for payments on the Loan which are transferred to
the account of Lender as provided below (i) on the day that such funds are
received by Lender if such receipt occurs by 1:00 p.m. (New York time) on such
day, or (ii) on the next succeeding Business Day after such funds are received
by Lender if such receipt occurs after 1:00 p.m. (New York time). Whenever any
payment to be made hereunder shall be stated to be due on a day that is not a
Business Day, the payment may be made on the next succeeding Business
Day.

     

    (C) Manner of
Payment.
Borrowers promise to pay all of the Obligations relating to the Loan as such
amounts become due or are declared due pursuant to the terms of this Loan
Agreement. All payments by Borrowers on the Loan shall be made without
deduction, defense, set off or counterclaim and in immediately available funds
delivered to Lender by wire transfer to such accounts at such banks as Lender
may from time to time designate.

     

    Section 2.5 Maturity. To the
extent not sooner due and payable in accordance with the Loan Documents, the
then outstanding principal balance of the Loan, all accrued and unpaid interest
thereon, and all other sums then owing to Lender hereunder and under the Note,
the Mortgages and the other Loan Documents, shall be due and payable on the
Maturity Date, which shall, subject to earlier acceleration hereunder, be the
Scheduled Maturity Date.

     

    Section 2.6 Prepayment. 

     

    (A) Limitation on Prepayment;
Prepayment Consideration Due on Acceleration.
Borrowers shall have no right to prepay the Loan in whole or part at any time,
except as expressly set forth in this provision. Commencing on the First Open
Payment Date, Borrowers may prepay the Loan in whole, but not in part, without
payment of Prepayment Consideration, provided that (i) Borrowers shall provide
to Lender not less than thirty (30) days’ prior written notice of such
prepayment, (ii) together with such prepayment Borrowers also shall pay all
accrued and unpaid interest and all other Obligations and (iii) if such
prepayment occurs on any day other than a Payment Date, then together therewith
Borrowers also shall pay to Lender the amount of interest that would have
accrued on the amount being prepaid from and including the date of such
prepayment to (but excluding) the Payment Date following such date of
prepayment. Borrowers shall not be required to pay any Prepayment Consideration
with respect to an application of insurance proceeds or condemnation awards by
Lender pursuant to the Loan Agreement or Mortgages in the absence of an Event of
Default.

     

     

    
      
        
        

      

      
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    (B) Prepayment Consideration
Due. If the
Maturity Date shall be accelerated to a date prior to the First Open Payment
Date, or if any prepayment of all or any portion of the Principal Balance
hereunder occurs, whether in connection with Lender’s acceleration of the unpaid
Principal Balance of the Loan or in any other circumstances whatsoever (except
that Borrowers shall not be required to pay any Prepayment Consideration with
respect to an application of insurance proceeds or condemnation awards by Lender
pursuant to the Loan Agreement or Mortgages in the absence of an Event of
Default), or if the Mortgages are satisfied or released by foreclosure (whether
by power of sale or judicial proceeding), deed in lieu of foreclosure or by any
other means, then the Prepayment Consideration shall become immediately due and
owing and Borrowers shall forthwith pay the Prepayment Consideration to Lender.
The foregoing shall not create any right of prepayment. Borrowers shall have no
right whatsoever to prepay all or any portion of the principal balance of the
Note, except as set forth in Section 2.6(A).

     

    (C) Definitions. The
“Prepayment
Consideration” shall
be the amount equal to the sum of (i) an amount equal to the interest which
would have accrued on the Principal Balance of the Note for the period from and
including (A) the date (the “Event
Date”) which
is the earlier of (x) the date of prepayment of the Loan or (y) such earlier
date upon which the entire remaining Principal Balance of the Loan shall become
due and payable, whether as a result of acceleration of the maturity of the Loan
or otherwise, to but excluding (B) the next Payment Date following the Event
Date, plus (ii) the greater of (x) two percent of the Loan balance on the Event
Date, or (y) an amount equal to the “Present Value Yield
Differential”,
calculated as the excess, if any, of (A) the amount of the monthly interest
which would otherwise be payable on the principal balance of the Loan from (1)
the date (the “Yield Determination
Date”) which
is the Payment Date following the Event Date through and including (2) the
Scheduled Maturity Date, over (B) the amount of the monthly interest Lender
would earn if an amount equal to the Principal Balance of the Loan as of the
Event Date were invested for the period from the Yield Determination Date
through the Scheduled Maturity Date at the Yield Rate (as hereinafter defined),
such difference (the “Yield
Differential”) to be
discounted to present value at the Yield Rate using the following
formula:

    


    
      	
               

            	
               

            	
              Yield
      Differential x [1-(1+r)-n]

            	
               

            
	
               

            	
              Present
      Value Yield Differential =

            	
              r

            	
               

            
	
               

            	
               

            	
               

            	
               

            


    

     

    
      	
               

            	
              where:

            	 	
               

            
	
               

            	
              r
      =

            	
              Yield
      Rate, and

            
	
               

            	
              n
      =

            	
               the
      remaining Weighted Average Life to Maturity (as defined below) from the
      Yield Determination Date.

            


    

     

     

    The
“Yield
Rate” shall
be the annualized yield on securities issued by the United States Treasury
having a maturity corresponding to the then remaining Weighted Average Life to
Maturity (as defined below) of the Loan as determined by Lender, as quoted in
Federal Reserve Statistical
Release [H. 15(519)] under
the heading “U.S. Government Securities - Treasury Constant Maturities” for the
Yield Rate Determination Date (as defined below), converted to a monthly
equivalent yield. If yields for such securities of such maturity are not shown
in such publication, then the Yield Rate shall be determined by Lender by linear
interpolation between the yields of securities of the next longer and next
shorter maturities. If said Federal Reserve Statistical Release or any other
information necessary for determination of the Yield Rate in accordance with the
foregoing is no longer published or is otherwise unavailable, then the Yield
Rate shall be determined by Lender based on comparable data. The term
“Yield Rate Determination
Date” shall
mean the date which is five (5) Business Days prior to the Yield Determination
Date. The term “Weighted Average Life to
Maturity” shall
mean, at any date, the number of years (including fractional years, expressed as
a decimal (e.g., three years and three moths = 3.25 years)) obtained by dividing
(x) the outstanding Principal Balance of the Loan on the Event Date into (y) the
sum total of the Weighted Amortization Products (as defined below) for each
Scheduled Principal Payment (as defined below). The “Scheduled Principal
Payment(s)” shall
mean each then remaining scheduled principal payment (assuming no prepayment or
Loan acceleration), including payment of the outstanding principal balance of
the Loan on the Scheduled Maturity Date, in respect of the Loan. The
“Weighted Amortization
Product” for
each Scheduled Principal Payment shall mean the product of (A) the amount of
such Scheduled Principal Payment multiplied by (B) the number of years
(including fractional years, expressed as a decimal) which will elapse between
the Yield Determination Date and the date on which such Scheduled Principal
Payment is to be made under this Loan Agreement.

     


    
      
        
        

      

      
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    Section 2.7 Outstanding
Balance. The
balance on Lender’s books and records shall be presumptive evidence (absent
manifest error) of the amounts owing to Lender by Borrowers; provided that any
failure to record any transaction affecting such balance or any error in so
recording shall not limit or otherwise affect the obligations of Borrowers to
pay the Obligations.

     

    Section 2.8 Taxes. Any and
all payments or reimbursements made hereunder or under the Note shall be made
free and clear of and without deduction for any and all taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto
arising out of or in connection with the transactions contemplated by the Loan
Documents (all such taxes, levies, imposts, deductions, charges or withholdings
and all liabilities with respect thereto excluding taxes imposed on net income
in accordance with the following sentence are referred to herein as
“Tax
Liabilities”).
Notwithstanding the foregoing, Borrowers shall not be liable for taxes imposed
on the net income of Lender by the jurisdiction under the laws of which Lender
is organized or doing business or any political subdivision thereof and taxes
imposed on its net income by the jurisdiction of Lender’s applicable lending
office or any political subdivision thereof or federal income taxes imposed on
Lender’s net income. If Borrowers shall be required by law to deduct any such
Tax Liabilities (or amounts in estimation or reimbursement for the same) from or
in respect of any sum payable hereunder to Lender, then the sum payable
hereunder shall be increased as may be necessary so that, after making all
required deductions, Lender receives an amount equal to the sum it would have
received had no such deductions been made.

     

    Section 2.9 Reasonableness of
Charges.
Borrowers agree that (i) the actual costs and damages that Lender would suffer
by reason of an Event of Default (exclusive of the attorneys’ fees and other
costs incurred in connection with enforcement of Lender’s rights under the Loan
Documents) or a prepayment would be difficult and needlessly expensive to
calculate and establish, and (ii) the amounts of the Default Rate, the late
charges, and the Prepayment Consideration are reasonable, taking into
consideration the circumstances known to the parties at this time, and (iii)
such Default Rate and late charges and Lender’s reasonable attorneys’ fees and
other costs and expenses incurred in connection with enforcement of Lender’s
rights under the Loan Documents shall be due and payable as provided herein, and
(iv) such Default Rate, late charges, Prepayment Consideration, and the
obligation to pay Lender’s reasonable attorneys’ fees and other enforcement
costs do not, individually or collectively, constitute a penalty.

     


    
      
        
        

      

      
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    Section 2.10 Partial
Releases. After
the Release Date and prior to the First Open Payment Date, and provided no Event
of Default exists, Borrower may from time to time obtain a partial release (a
“Partial
Release”) from
the lien of the Mortgage and the Loan Documents of one or more Individual
Properties (collectively, the “Partial Release
Parcel”),
provided that all of the following conditions precedent have been satisfied with
respect to any such Partial Release of any such Partial Release
Parcel:

     

    (A)    No
Partial Release will be permitted until after the Release Date or if any Event
of Default has occurred and is continuing. No Partial Release will be permitted
on or after the First Open Payment Date.

     

    (B)    No
Partial Release will be permitted unless Borrower establishes to Lender’s
reasonable satisfaction that the Debt Service Coverage Ratio, determined using
Lender’s underwriting standards, for the remainder of the Properties (i.e.,
exclusive of any income from the Partial Release Parcel) is and shall continue
to be equal to or greater than the greater of (i) the Debt Service Coverage
Ratio for the Properties calculated immediately prior to the Partial Release
(i.e., inclusive of the income from the Partial Release Parcel, and assuming no
partial defeasance of the Loan resulting from the Partial Release), and (ii)
1.15:1.00.

     

    (C)    No
Partial Release of the Partial Release Parcel will be permitted unless Borrower
establishes to Lender’s reasonable satisfaction that the value of the remainder
of the Properties (as determined by a then-current appraisal prepared by an
appraiser selected by Lender, the fees and expenses of which shall be paid by
Borrower, which appraiser and appraisal shall conform in all respects to the
criteria for appraisals set forth in the Financial Institutions Reform and
Recovery Act of 1989 and the regulations promulgated thereunder (as if Lender
were an institution under the jurisdiction thereof) and the Uniform Standards of
Professional Appraisal Practices of the Appraisal Foundation; an appraisal of
the Partial Release Parcel confirming with the foregoing standard shall also be
prepared) is sufficient to satisfy a loan-to-value ratio (based on the
then-outstanding principal balance of the Loan, less the sum of the Allocated
Loan Amounts for the Individual Property(ies) included in the Partial Release
Parcel) not in excess of the lesser of (i) the loan-to-value ratio for the
Properties calculated immediately prior to the Partial Release (i.e., based on
the outstanding principal balance of the Loan inclusive of the Allocated Loan
Amounts for the Individual Property(ies) included in the Partial Release
Parcel), and (ii) 80%.

     

    (D)    The
Partial Release shall be allowed only in connection with a bona fide all-cash
sale of the Partial Release Parcel to an unaffiliated third party on arms-length
terms and conditions, and upon closing of such sale (and thereafter) shall not
be owned, purchased or acquired by Borrower or any Affiliate of
Borrower.

     

    (E)    Borrower
will on the date of the Partial Release (the “Partial Release
Date”)
complete a Partial Defeasance, pursuant to Section
2.3 hereof,
of a portion of the Loan (the “Partial Defeasance
Amount” for
such Partial Release Parcel) equal to 125% of the Allocated Loan Amount for the
Individual Property included in the Partial Release.

     


    
      
        
        

      

      
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    (F)    Borrower
will execute (and Guarantor will consent in writing thereto and reaffirm their
obligations under the Loan Documents to which they are a party notwithstanding
the Partial Release) and deliver all such amendments to the Loan Documents and
other instruments or documents as may be required by Lender (using commercial
standards customarily applied with respect to mortgage loans such as the Loan)
in order to continue to fully protect Lender’s lien and security interest in the
remainder of the Properties.

     

    (G)    Borrower,
at its sole cost and expense, shall obtain endorsements to Lender’s loan policy
of title insurance satisfactory in form and content to Lender, which
endorsements will (i) affirmatively evidence the continued validity of Lender’s
first lien position created by the Loan Documents through the date of
recordation of the partial release of the Partial Release Parcel, and (ii)
insure that the lien created by the Loan Documents remains a valid first lien on
the remainder of the Properties.

     

    (H)    Borrower
and Guarantor shall deliver to Lender affidavits representing that no material
adverse change concerning the Loan or the Properties has occurred.

     

    (I)    Borrower
shall have provided Lender with a Rating Confirmation with respect to the
Partial Release.

     

    (J)     Borrower
shall have paid all reasonable costs and expenses incurred by Lender in
connection with such request for a Partial Release, including, but not limited
to, the preparation, negotiation and review of any and all materials required to
be provided in connection therewith, Lender’s reasonable attorneys’ fees and
costs, survey charges, title insurance fees, appraisal fees, inspection fees,
environmental consultant’s fees and any fees or charges of the applicable Rating
Agencies. Borrower shall pay all such costs and expenses incurred by Lender in
connection with each request for a Partial Release, regardless of whether such a
Partial Release ultimately occurs.

     

    For the
avoidance of doubt, any provision in this Section 2.10 which provides for the
exercise of discretion by Lender (e.g., by requiring delivery of documents that
Lender may request or require or by requiring that documents or other items be
acceptable to Lender, or acceptable to Lender in its reasonable discretion, or
in accordance with Lender’s requirements or through use of words with similar
import) shall be construed as permitting Lender to reject a document or other
item only if such document or item fails to satisfy generally-applicable
underwriting standards for securitized commercial mortgage loans employed at the
time such partial release occurs; and similarly, Lender’s requirement for
delivery of any document or other item or the taking of any action shall be
construed as only requiring the delivery of such documents or items or the
taking of such action as would be required under generally applicable
underwriting standards for securitized commercial mortgage loans employed at the
time such Partial Release occurs.

     


    
      
        
        

      

      
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    ARTICLE III

    CONDITIONS TO
LOAN

     

    Section 3.1 Conditions to Funding of the
Loan on the Closing Date. The
obligations of Lender to fund the Loan are subject to the prior or concurrent
satisfaction or waiver of the conditions set forth below, and to satisfaction of
any other conditions specified herein or elsewhere in the Loan Documents. Where
in this Section any documents, instruments or information are to be delivered to
Lender, then the condition shall not be satisfied unless the same shall be in
form and substance satisfactory to Lender.

     

    (A)    Loan
Documents. On or
before the Closing Date, Borrowers shall execute and deliver and cause to be
executed and delivered to Lender all of the Loan Documents, each, unless
otherwise noted, of even date herewith, duly executed, in form and substance
satisfactory to Lender and in quantities designated by Lender (except for the
Note, of which only one shall be signed), which Loan Documents shall become
effective upon the Closing.

     

    (B)     Origination Fees and
Deposits. At the
Closing and retained from the proceeds of the Loan, Lender shall have received
its origination fee, if any, as set forth on the closing statement for the Loan,
and the deposits required herein, including the initial deposits into the
Reserves and Accounts, shall have been made (and at the option of Borrowers, the
same may be made from the proceeds of the Loan).

     

    (C)    Performance of Agreements,
Truth of Representations and Warranties. Each
Borrower Party and all other Persons executing any agreement on behalf of any
Borrower Party shall have performed in all material respects all agreements
which this Loan Agreement provides shall be performed on or before the Closing
Date. The representations and warranties contained herein and in the other Loan
Documents shall be true, correct and complete in all material respects on and as
of the Closing Date.

     

    (D)    Closing
Certificate. On or
before the Closing Date, Lender shall have received certificates of even date
herewith executed on behalf of Borrowers by the chief financial officer (or
similar officer of each Borrower) truly and correctly stating that: (i) on such
date, no Default or Event of Default has occurred and is continuing; (ii) no
material adverse change in the financial condition or operations of the business
of the Borrowers, Guarantor, any principal of any Borrower or any of the
Properties, and no material adverse change in the projected cash flow of any of
the Borrowers or any of the Properties has occurred since the delivery to Lender
of any financial statements, budgets, proformas, or similar materials (or if
there has been any change, specifying such change in detail), and that such
materials delivered to Lender are true and materially complete and fairly
represent the financial condition of Borrowers, Guarantor and principals of
Borrowers and the cash flow of the Properties; and (iii) there are no material
adverse facts or conditions concerning the Properties, Guarantor and principals
of Borrowers or any Borrower Party that have not been disclosed to
Lender.

     

    (E)    Opinions of
Counsel. On or
before the Closing Date, Lender shall have received from legal counsel for each
Borrower Party reasonably satisfactory to Lender, such counsel’s written opinion
as to such matters as Lender shall reasonably request, including opinions to the
effect that (i) each of the Borrower Parties is duly formed, validly existing,
and in good standing in its state of organization and, in the case of Borrowers,
in the state where the Properties are located, (ii) this Loan Agreement and the
Loan Documents have been duly authorized, executed and delivered and are
enforceable in accordance with their terms subject to customary qualifications
for bankruptcy and general equitable principles; and (iii) no Borrower would be
consolidated in bankruptcies of its constituent owners, Manager or certain other
Affiliates of Borrowers specified by Lender. Also on or before the Closing Date,
Lender shall have received an opinion of Borrowers’ local counsel in the state
where the Properties are located as to the enforceability of the Loan Documents
and such other matters as Lender may reasonably request.

     


    
      
        
        

      

      
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    (F)    Title
Policy. On or
before the Closing Date, Lender shall have received and approved pro forma Title
Policies for each of the Properties, and as of the Closing, the Title Company
shall be irrevocably committed and prepared immediately to issue the Title
Policies. The Title Policies shall be in form and substance satisfactory to
Lender. Without limitation, Lender may reasonably require that the Title
Policies be issued on the 1970 ALTA form by the Title Company, together with
such reinsurance and direct access agreements as Lender may require, insuring
that each of the Mortgages is a valid first and prior enforceable lien on the
applicable Individual Property (including any easements appurtenant thereto)
subject only to such exceptions to coverage as are acceptable to Lender. The
Title Policy shall contain such endorsements as Lender may require (to the
extent available in the state where the Properties are located) in form
reasonably acceptable to Lender, including deletion of the creditors’ rights
exception and affirmative endorsement coverage for creditors’ rights
risks.

     

    (G)    Survey. Lender
shall have received a survey of each Individual Property, certified to Lender
and its successors, assigns and designees and to the Title Company by a surveyor
reasonably satisfactory to Lender (each, a “Survey”). Each
Survey shall contain the minimum detail for land surveys as most recently
adopted by ALTA/ASCM, shall comply with Lender’s survey requirements and shall
contain Lender’s standard form certification. No Survey shall show any state of
facts or conditions reasonably objectionable to Lender.

     

    (H)    Zoning. On or
before the Closing Date, Lender shall have received evidence reasonably
satisfactory to Lender as to the zoning and subdivision compliance of each
Individual Property.

     

    (I)    Certificates of Formation
and Good Standing. On or
before the Closing Date, Lender shall have received copies of the organizational
documents and filings of each Borrower Party, together with good standing
certificates (or similar documentation) (including verification of tax status if
available) from the state of its formation, from the state in which its
principal place of business is located, and from all states in which the laws
thereof require such Person to be qualified and/or licensed to do business
(including the state in which the Properties are located for Borrowers). Each
such certificate shall be dated not more than thirty (30) days prior to the
Closing Date, as applicable, and certified by the applicable Secretary of State
or other authorized governmental entity. In addition, on or before the Closing
Date the secretary or corresponding officer of each Borrower Party, or the
secretary or corresponding officer of the partner, trustee, or other Person as
required by such Borrower Party’s organizational documents (as the case may be,
the “Borrower Party
Secretary”) shall
have delivered to Lender a certificate stating that the copies of the
organizational documents as delivered to Lender are true and complete and are in
full force and effect, and that the same have not been amended except by such
amendments as have been so delivered to Lender.

     


    
      
        
        

      

      
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    (J)    Certificates of Incumbency
and Resolutions. On or
before the Closing Date, Lender shall have received certificates of incumbency
and resolutions of each Borrower Party and its constituents as requested by
Lender, approving and authorizing the Loan and the execution, delivery and
performance of the Loan Documents, certified as of the Closing Date by the
Borrower Party Secretary as being in full force and effect without modification
or amendment.

     

    (K)    Financial
Statements. On or
before the Closing Date, Lender shall have received such financial statements
and other financial information as shall be satisfactory to Lender for each
Borrower Party and for the Properties. All such financial statements shall be
certified to Lender by the applicable Borrower Party (through its chief
financial officer), which certification shall be in form and substance
reasonably satisfactory to Lender.

     

    (L)    Agreements. On or
before the Closing Date, Lender shall have received copies of all material
operating agreements, service contracts and equipment leases, if any, relating
to Borrowers’ ownership and operation of the Properties.

     

    (M)    Management
Agreement. On or
before the Closing Date, Lender shall have received copies of the existing
Management Agreement and any leasing brokerage agreements pertaining to the
Properties and the Assignment of Management Agreement, duly executed by current
Manager and each Borrower.

     

    (N)    Operating and Capital
Expenditure Budgets. On or
before the Closing Date, Lender shall have received and reasonably approved the
Operating Budget and Capital Expenditure Budget for each of the Properties for
the remainder of the current calendar year, which Operating Budget and Capital
Expenditure Budget are attached hereto as Schedule 3.1(N).

     

    (O)    Rent Rolls, Leases,
Estoppels. Prior
to the Closing, Lender shall have received from the Borrowers a certified copy
of the current rent roll (the “Rent Roll”) for
each Individual Property in form and substance satisfactory to Lender. The Rent
Roll shall constitute a true, correct, and complete list of each and every Lease
for each Individual Property, together with all extensions and amendments
thereof, and shall accurately and completely disclose all annual and monthly
rents payable by all tenants, including expiration dates of the Leases, and the
amount of any Security Deposit being held by each Borrower under each Lease, if
any.

     

    (P)    Licenses, Permits and
Approvals. On or
before Closing Date, Lender shall have received copies of the final,
unconditional certificates of occupancy issued with respect to each of the
Individual Properties, together with all other applicable licenses, permits and
approvals required for the Borrowers to own, use, occupy, operate and maintain
the Properties.

     

    (Q)    Insurance Policies and
Endorsements. On or
before the Closing Date, Lender shall have received copies of insurance policies
required to be maintained under this Loan Agreement and the other Loan Documents
and certificates of insurance dated not more than twenty (20) days prior to the
Closing Date evidencing such insurance coverages, together with endorsements
reasonably satisfactory to Lender naming Lender as an additional insured and
loss payee, as required by Lender, under such policies. In addition, as to any
insurance matters arising under Environmental Laws or pertaining to any
environmental insurance that Borrowers maintains with respect to each of the
Individual Properties, the same shall be endorsed to Lender as required by
Lender.

     


    
      
        
        

      

      
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    (R)    Environmental
Assessment. Lender
shall have received and approved an Environmental Report relating to each of the
Individual Properties, together with a letter from the preparer thereof
entitling Lender and its successors and assigns to rely upon said Environmental
Reports (if any of the same are not addressed to Lender).

     

    (S)    Property Condition
Reports. On or
before the Closing Date, Lender shall have received a property condition report
for each of the Individual Properties addressed to Lender and its successors and
assigns, which shall be prepared by an engineer or other consultant reasonably
satisfactory to Lender and otherwise shall be in form and substance satisfactory
to Lender in its sole discretion (collectively, the “Property Condition
Reports” and
individually a “Property Condition
Report”). Each
such report shall set forth any items of deferred maintenance at the applicable
Individual Property.

     

    (T)    Appraisals. On or
before the Closing Date, Lender shall have received an independent appraisal of
each of the Individual Properties from a state certified appraiser engaged by
Lender, dated not more than sixty (60) days prior to the Closing Date, which
indicates a fair market value of the applicable Individual Property which would
reflect a loan-to-value ratio for the Loan acceptable to Lender, and is
otherwise satisfactory to Lender in its sole discretion in all respects. Each
such appraisal shall conform in all respects to the criteria for appraisals set
forth in the Financial Institutions Reform and Recovery Act of 1989 and the
regulations promulgated thereunder (as if Lender were an institution under the
jurisdiction thereof) and the Uniform Standards of Professional Appraisal
Practices of the Appraisal Foundation.

     

    (U)    Searches. Prior
to the Closing Date Lender shall have received certified copies of Uniform
Commercial Code, judgment, tax lien, bankruptcy and litigation search reports
with respect to all Borrower Parties satisfactory to Lender, all dated not more
than thirty (30) days prior to the Closing Date.

     

    (V)    Documentation Regarding
Application of Proceeds. Prior
to the Closing Date, Lender shall have received payoff demand letters and wiring
instructions from each lender or other obligee of any existing indebtedness
which is required to be repaid pursuant to this Loan Agreement and by any
Borrower regarding the application of any remaining available proceeds of the
Loan.

     

    (W)    Legal Fees; Closing
Expenses.
Borrowers shall have paid any and all reasonable legal fees and expenses of
counsel to Lender, together with all recording fees and taxes, title insurance
premiums, appraisal reports, environmental inspection reports, property
condition reports, Lender’s site inspection and processing fee, and other
reasonable costs and expenses related to the Closing.


    
      
        
        

      

      
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    (X)    Other
Review. Lender
shall have completed all other review of Borrowers, the Borrower Parties, the
Properties, and such other items as it reasonably determines relevant, and shall
have determined based upon such review to fund the Loan. Borrower Parties shall
have satisfied such other reasonable criteria as Lender may reasonably
specify.

     

    ARTICLE IV

    REPRESENTATIONS AND
WARRANTIES

     

    In order
to induce Lender to enter into this Loan Agreement and to make the Loan, each
Borrower represents and warrants to Lender that the statements set forth in this
Article IV, after giving effect to the Closing, will be, true, correct and
complete in all material respects as of the Closing Date.

     

    Section 4.1 Organization, Powers,
Capitalization, Good Standing, Business. 

     

    (A) Organization and
Powers. Each
Borrower is a limited liability company, duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each Borrower has all
requisite power and authority to own and operate its properties, to carry on its
business as now conducted and proposed to be conducted, and to enter into each
Loan Document to which it is a party and to perform the terms
thereof.

     

    (B) Qualification. Each
Borrower is duly qualified and in good standing in the state of its formation.
Each of the Borrowers and, if required by applicable law, the Sole Member, is
also duly qualified and in good standing in the state where the Properties are
located. In addition, each Borrower Party is duly qualified and in good standing
in each state where necessary to carry on its present business and
operations.

     

    (C) Organization. The
organizational chart set forth as Schedule
4.1(C)
accurately sets forth the direct and indirect ownership structure of each
Borrower.

     

    Section 4.2 Authorization of Borrowing,
etc. 

     

    (A) Authorization of
Borrowing. Each
Borrower has the power and authority to incur the Indebtedness evidenced by the
Note. The execution, delivery and performance by each Borrower Party of each of
the Loan Documents to which it is a party and the consummation of the
transactions contemplated thereby have been duly authorized by all necessary
limited liability company, partnership, trust, corporate or other action, as the
case may be.

     

    (B) No
Conflict. The
execution, delivery and performance by each Borrower Party of the Loan Documents
to which it is a party and the consummation of the transactions contemplated
thereby do not and will not: (1) violate (x) any provision of law applicable to
any Borrower Party; (y) the partnership agreement, certificate of limited
partnership, certificate of incorporation, bylaws, declaration of trust,
certificate of organization, operating agreement or other organizational
documents, as the case may be, of each Borrower Party; or (z) any order,
judgment or decree of any court or other agency of government binding on any
Borrower Party or any of its Affiliates; (2) conflict with, result in a breach
of or constitute (with due notice or lapse of time or both) a default under any
Contractual Obligation of any Borrower Party or any of its Affiliates; (3)
result in or require the creation or imposition of any material Lien (other than
the Lien of the Loan Documents) upon the property or assets of any Borrower
Party or any of its Affiliates; or (4) require any approval or consent of any
Person under any Contractual Obligation of any Borrower Party.

     


    
      
        
        

      

      
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    (C) Governmental
Consents. The
execution, delivery and performance by each Borrower Party of the Loan Documents
to which it is a party, and the consummation of the transactions contemplated
thereby do not and will not require any registration with, consent or approval
of, or notice to, or other action to, with or by, any federal, state or other
governmental authority or regulatory body except for the recording of the
Mortgages and filings and recordings required in connection with the creation or
perfection of any other security interests with respect to the Collateral
granted under this Loan Agreement or any of the other Loan
Documents.

     

    (D) Binding
Obligations. This
Loan Agreement is, and the Loan Documents, including the Note, when executed and
delivered will be, the legally valid and binding obligations of each Borrower
Party, as applicable, enforceable against the Borrower Parties, as applicable,
in accordance with their respective terms, subject to bankruptcy, insolvency,
moratorium, reorganization and other similar laws affecting creditor’s rights
generally. No Borrower Party has any defense or offset to any of its obligations
under the Loan Documents. No Borrower Party has any claim against Lender or any
Affiliate of Lender.

     

    Section 4.3 Financial
Statements. All
financial statements concerning the Borrowers, their respective Affiliates,
Guarantor and the Properties which have been or will hereafter be furnished by
or on behalf of Borrowers to Lender pursuant to this Loan Agreement have been or
will be prepared in accordance with GAAP consistently applied (except as
disclosed therein) and do (or will, as to those statements that are not yet due)
present fairly the financial condition of the Persons covered thereby as at the
dates thereof and the results of their operations for the periods then ended.
Since the date of the most recent financial statements of Borrowers, Guarantor
and the Properties delivered to Lender, there has been no material adverse
change in the financial condition, operations or business of the Borrower
Parties or any of the Individual Properties from that set forth in said
financial statements.

     

    Section 4.4 Indebtedness and Contingent
Obligations. As of
the Closing, no Borrower has Indebtedness or Contingent Obligations other than
the Obligations and any other Indebtedness expressly permitted under Section
5.17 of this Loan Agreement.

     

    Section 4.5 Title to
Properties. Each
Borrower has good marketable and insurable fee simple title to its Applicable
Individual Property, free and clear of all Liens except for Permitted
Encumbrances. Each Borrower owns and will own at all times all personal property
relating to its Applicable Individual Property, other than personal property
which is leased by such Borrower (as to which such Borrower has valid leasehold
title) or owned by tenants of the applicable Individual Property and not used or
necessary for the operation of such Individual Property), subject only to
Permitted Encumbrances. There are no pending proceedings in condemnation or
eminent domain affecting any of the Properties, and to the knowledge of
Borrower, none is threatened. No Person has any option or other right to
purchase all or any portion of any of the Properties or any interest therein.
There are no mechanic’s, materialman’s or other similar liens or claims which
have been filed for work, labor or materials affecting any of the Properties
which are or may be liens prior to, or equal or coordinate with, the lien of any
of the Mortgages. None of the Permitted Encumbrances, individually or in the
aggregate, materially interfere with the benefits of the security intended to be
provided by the Mortgages and this Loan Agreement, materially and adversely
affect the value of any of the Properties, impair the use or operations of any
of the Properties or impair any Borrower’s ability to pay its obligations in a
timely manner.

     


    
      
        
        

      

      
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    Section 4.6 Zoning; Compliance with
Laws. Each of
the Individual Properties is zoned for residential apartment use, which zoning
designation is unconditional, in full force and effect, and is beyond all
applicable appeal periods. Each of the Individual Properties and the use thereof
complies in all material respects with all applicable zoning, subdivision and
land use laws, regulations and ordinances, all applicable health, fire, building
codes, parking laws and all other laws, statutes, codes, ordinances, rules and
regulations applicable to such Individual Property, including the Americans with
Disabilities Act. To the knowledge of each Borrower, there are no illegal
activities relating to controlled substances on any of the Properties. All
certificates of occupancy or the equivalent, and all other required permits,
licenses and certificates for the lawful use and operation of each of the
Properties have been obtained and are current and in full force and effect. In
the event that all or any part of the Improvements located on any Individual
Property are destroyed or damaged, said Improvements can be legally
reconstructed to their condition prior to such damage or destruction, and
thereafter exist for the same use without violating any zoning or other
ordinances applicable thereto and without the necessity of obtaining any
variances or special permits, other than customary demolition, building and
other construction related permits. No legal proceedings are pending or, to the
knowledge of any Borrower, threatened with respect to the zoning of any of the
Properties. Neither the zoning nor any other right to construct, use or operate
any Individual Property is in any way dependent upon or related to any real
estate other than the applicable Individual Property itself. No tract map,
parcel map, condominium plan, condominium declaration, or plat of subdivision
will be recorded by any Borrower with respect to any of the Properties without
Lender’s prior written consent

     

    Section 4.7 Leases;
Agreements. 

     

    (A) Leases;
Agreements.
Borrowers have delivered to Lender true, complete and fully executed copies of
all (i) Leases and (ii) material contracts and agreements affecting the
operation and management of each of the Individual Properties, including,
without limitation, the existing Management Agreement, any leasing brokerage
agreements and any service and maintenance contracts and such Leases, contracts
and agreements have not been modified or amended except pursuant to amendments
or modifications delivered to Lender. Except for the rights of the current
Manager pursuant to the existing Management Agreement, no Person has any right
or obligation to manage any of the Properties or to receive compensation in
connection with such management. Except for the parties to any leasing brokerage
agreement(s) that has/have been delivered to Lender, no Person has any right or
obligation to lease or solicit tenants for any of the Properties, or to receive
compensation in connection with such leasing.

     

    (B) Rent Roll;
Disclosure. A true
and correct copy of the Rent Roll has been provided to Lender and except for the
Leases described in the Rent Roll none of the Properties is subject to any
Leases. Except as specified in the Rent Roll: (i) the Leases are in full force
and effect; (ii) neither any Borrower nor any Affiliate of any Borrower, has
given any notice of default to any tenant under any Lease which remains uncured;
(iii) no tenant has asserted in writing any rights of set off, claims or
defenses under any Lease and no tenant has any such rights of set off, claim or
defense to the enforcement of any Lease except as expressly set forth in the
Leases; (iv) no tenant is in arrears in the payment of rent, additional rent or
any other material charges due under any Lease, or, to the knowledge of any
Borrower, is in default in the performance of any other obligations under the
applicable Lease; (v) Borrowers have completed all work or alterations required
to be completed by the landlord or lessor under each Lease as of the date
hereof, and all of the other obligations of landlord or lessor under the Leases
required to be completed as of the date hereof, have been performed; (vi) there
are no rent concessions (whether in form of cash contributions, work agreements,
assumption of an existing tenant’s other obligations, or otherwise) or
extensions of time whatsoever not reflected in the Rent Roll; and (vii) no
tenant has an option to terminate its respective Lease. The Security Deposits
held by Borrowers with respect to each Lease are as set forth on the Rent
Roll.

     


    
      
        
        

      

      
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    (C) Lease
Issues. There
are no legal proceedings commenced (or, to the knowledge of any Borrower,
threatened) against any Borrower or any Affiliate thereof by any tenant or
former tenant. No rental in excess of one month’s rent has been prepaid under
any of the Leases (not including Security Deposits). Each of the Leases is valid
and binding on the parties thereto in accordance with its terms.

     

    Section 4.8 Condition of
Properties. Except
as set forth in the Property Condition Reports, all Improvements at the
Properties including, without limitation, the roof and all structural
components, plumbing systems, HVAC systems, fire protection systems, electrical
systems, equipment, elevators, exterior doors, parking facilities, sidewalks and
landscaping are in good condition and repair. To each Borrower’s knowledge,
there is no latent or patent structural or other material defect or deficiency
in any of the Properties. City water supply, storm and sanitary sewers, and
electrical, gas and telephone facilities are available to each Individual
Property within the boundary lines of such Individual Property, are fully
connected to the Improvements thereat and are fully operational, are sufficient
to meet the reasonable needs of the applicable Individual Property as now used
or presently contemplated to be used, and no other utility facilities are
necessary to meet the reasonable needs of such Individual Property as now used
or presently contemplated. The design and as-built conditions of each Individual
Property are such that surface and storm water does not accumulate on such
Individual Property (except in facilities specifically designed for the same)
and does not drain from such Individual Property across land of adjacent
property owners except pursuant to easements benefiting the applicable
Individual Property which are specified in and insured under the Title Policy
for such Individual Property. No part of any of the Properties is within a flood
plain and, with the exception of Permitted Encumbrances which are insured by
endorsement to a Title Policy, none of the Improvements at any Individual
Property create encroachment over, across or upon such Individual Property’s
boundary lines, rights of way or easements, and no building or other
improvements on adjoining land create such an encroachment. Access to the each
Individual Property for the current and contemplated uses thereof is provided by
means of dedicated, all weather public roads and streets which are physically
and legally open for use by the public. Any liquid or solid waste disposal,
septic or sewer system located at the Properties is in good and safe condition
and repair and in compliance with all applicable law. Each of the Properties is
in compliance in all material respects with all laws, governmental regulations
and requirements including, but not limited to, matters of sanitation, health,
fire and other hazards.

     


    
      
        
        

      

      
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    Section 4.9 Litigation; Adverse
Facts. There
are no judgments outstanding against any Borrower Party, or affecting any of the
Properties or any property of any Borrower Party, nor is there any action,
charge, claim, demand, suit, proceeding, petition, governmental investigation or
arbitration now pending or, to any Borrower’s knowledge after due inquiry,
threatened against any Borrower Party or affecting any of the
Properties.

     

    Section 4.10 Payment of
Taxes. All
federal, state and local tax returns and reports of each Borrower Party required
to be filed have been timely filed, and all taxes, assessments, fees and other
governmental charges (including any payments in lieu of taxes) upon such Person
and upon its properties, assets, income and franchises which are due and payable
have been paid when due and payable, except for those taxes which are being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established. Except as otherwise disclosed in writing to
Lender, there is not presently pending (and to each Borrower’s knowledge, there
is not contemplated) any special assessment against any of the Properties or any
part thereof. No tax liens have been filed and to the knowledge of Borrower
Parties, no claims are being asserted with respect to any such taxes. The
charges, accruals and reserves on the books of Borrower Parties in respect of
any taxes or other governmental charges are in accordance with
GAAP.

     

    Section 4.11 Adverse
Contracts. Except
for the Loan Documents, none of the Borrower Parties is a party to or bound by,
nor is any property of such Person subject to or bound by, any contract or other
agreement which restricts such Person’s ability to conduct its business in the
ordinary course or, either individually or in the aggregate, has a Material
Adverse Effect or could reasonably be expected to have a Material Adverse
Effect.

     

    Section 4.12 Performance of
Agreements. No
Borrower Party is in default in the performance, observance or fulfillment of
any of the material obligations, covenants or conditions contained in any
Contractual Obligation of any such Person beyond any applicable notice and cure
period, and no condition exists that, with the giving of notice or the lapse of
time or both, would constitute such a default.

     

    Section 4.13 Governmental
Regulation. No
Borrower Party is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act or the Investment Company Act of 1940 or to
any federal or state statute or regulation limiting its ability to incur
indebtedness for borrowed money.

     

    Section 4.14 Employee Benefit
Plans. No
Borrower Party maintains or contributes to, or has any obligation (including a
contingent obligation) under, any Employee Benefit Plans.

     

    Section 4.15 Broker’s
Fees. No
broker’s or finder’s fee, commission or similar compensation will be payable by
or pursuant to any contract or other obligation of any Borrower Party with
respect to the making of the Loan or any of the other transactions contemplated
hereby or by any of the Loan Documents. Borrowers shall, jointly and severally,
indemnify, save harmless and defend Lender from and against all claims for
brokers’ or finders’ fees and commissions in connection with the Loan, with such
indemnity to include Lender’s cost for reasonable attorneys’ fees.

     


    
      
        
        

      

      
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    Section 4.16 Environmental
Compliance. 

     

    (A) No Environmental
Claims. There
are no claims, liabilities, investigations, litigation, administrative
proceedings, pending or, to any Borrower’s knowledge, threatened, or judgments,
liens or orders relating to any Hazardous Materials (collectively, “Environmental
Claims”)
asserted or, to any Borrower’s knowledge, threatened against any Borrower or
relating to any of the Properties. Except as disclosed in the Environmental
Reports delivered to Lender prior to Closing, none of the Borrower Parties nor,
to any Borrower’s knowledge after due inquiry, any other Person has caused or
permitted any Hazardous Material to be used, generated, reclaimed, transported,
released, treated, stored or disposed of in a manner which could form the basis
for an Environmental Claim against any Borrower or relating to any of the
Properties. Additionally, but without limitation of the foregoing, no liens are
presently recorded with the appropriate land records under or pursuant to any
Environmental Law with respect to any of the Properties and no Governmental
Authority has been taking or is in the process of taking any action that could
subject any of the Properties to Liens under any Environmental Law. There have
been no environmental investigations, studies, audits, reviews or other analyses
conducted by or that are in the possession of any Borrower or its respective
Affiliates in relation to any of the Properties which have not been made
available to Lender.

     

    (B) Storage of Hazardous
Materials. Except
as disclosed in the Environmental Report delivered to Lender prior to Closing,
and except for materials customarily used or stored in connection with operation
and management of properties similar to the applicable Individual Property,
which materials at such Individual Property exist only in reasonable quantities
and are stored, contained, transported, used, released, and disposed of
reasonably and without violation of any Environmental Laws, to each Borrower’s
knowledge after due inquiry, no Hazardous Materials are or were stored or
otherwise located, and no underground storage tanks or surface impoundments are
or were located, on any of the Properties, or to the knowledge of any Borrower
after due inquiry, on adjacent parcels of real property, and no part of the
property, or to any Borrower’s knowledge no part of such adjacent parcels of
real property, including the groundwater located therein or thereunder, is
presently contaminated by Hazardous Materials. Except as disclosed in the
Environmental Reports, to the knowledge of each Borrower, none of the Properties
is listed by any Governmental Authority as containing any Hazardous Materials.
Without limiting the generality of the foregoing, there is not present at, on,
in or under any of the Properties, PCB-containing equipment, asbestos or
asbestos containing materials, underground storage tanks or surface impoundments
for Hazardous Substances, lead in drinking water (except in concentrations that
comply with all Environmental Laws), or lead based paint.

     

    (C) Compliance with
Environmental Laws. Except
as may be set forth in the Environmental Reports, each Borrower has been and is
currently in compliance in all material respects with all applicable
Environmental Laws, including obtaining and maintaining in effect all permits,
licenses or other authorizations required by applicable Environmental
Laws.

     

    Section 4.17 Solvency. None of
the Borrowers has entered into the transaction or any Loan Document with the
actual intent to hinder, delay, or defraud any creditor. Each Borrower has
received reasonably equivalent value in exchange for its obligations under the
Loan Documents. Giving effect to the Loan, the fair saleable value of Borrowers’
assets exceeds and will, immediately following the making of the Loan, exceed
Borrowers’ total liabilities, including, without limitation, subordinated,
unliquidated, disputed and Contingent Obligations. The fair saleable value of
Borrowers’ assets is and will, immediately following the making of the Loan, be
greater than Borrowers’ probable liabilities, including the maximum amount of
its Contingent Obligations on its debts as such debts become absolute and
matured. The assets of Borrowers do not and, immediately following the making of
the Loan will not, constitute unreasonably small capital to carry out Borrowers’
business as conducted or as proposed to be conducted. No Borrower intends to,
and no Borrower believes that it will, incur Indebtedness and liabilities
(including Contingent Obligations and other commitments) beyond its ability to
pay such Indebtedness and liabilities as they mature (taking into account the
timing and amounts of cash to be received by such Borrower and the amounts to be
payable on or in respect of obligations of such Borrower).

     


    
      
        
        

      

      
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    Section 4.18 Disclosure. No
financial statements, Loan Document or any other document, certificate or
written statement furnished to Lender by any Borrower Party and, to the
knowledge of each Borrower, no document or statement furnished by any third
party on behalf of any Borrower Party, for use in connection with the Loan
contains any untrue representation, warranty or statement of a material fact,
and none omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading. There is no material
fact known to any Borrower that has had or will have a Material Adverse Effect
and that has not been disclosed in writing to Lender by Borrowers.

     

    Section 4.19 Use of Proceeds and Margin
Security.
Borrowers shall use the proceeds of the Loan only for the purposes set forth
herein and consistent with all applicable laws, statutes, rules and regulations.
No portion of the proceeds of the Loan shall be used by Borrowers or any Person
in any manner that might cause the borrowing or the application of such proceeds
to violate Regulation T, Regulation U or Regulation X or any other regulation of
the Board of Governors of the Federal Reserve System.

     

    Section 4.20 Insurance.
Borrowers have in effect all of the policies of insurance required in Section
5.4 hereof, and no notice of cancellation has been received with respect to such
policies, and, to each Borrower’s knowledge after due inquiry, each Borrower is
in compliance with all conditions contained in such policies.

     

    Section 4.21 Separate Tax
Lots. Each of
the Individual Properties is comprised of one (1) or more parcels which
constitute separate tax lots. No part of any Individual Property is included or
assessed under or as part of another tax lot or parcel, and no part of any other
property is included or assessed under or as part of the tax lots or parcels
comprising any Individual Property.

     

    Section 4.22 Investments. None of
the Borrowers has any (i) direct or indirect interest in, including stock,
partnership interest or other securities of, any other Person, or (ii) direct or
indirect loan, advance or capital contribution made to any other Person,
including all indebtedness and accounts receivable from that other
Person.

     

    Section 4.23 Bankruptcy. No
Borrower Party is or has been a debtor, and no property of any of them
(including the Properties) is property of the estate, in any voluntary or
involuntary case under the Bankruptcy Code or under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect. No Borrower Party
and no property of any of them is or has been under the possession or control of
a receiver, trustee or other custodian. No Borrower Party has made any
assignment for the benefit of creditors. No such assignment or bankruptcy or
similar case or proceeding is now contemplated.

     


    
      
        
        

      

      
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    Section 4.24 Defaults. No
Default or Event of Default exists and no event has occurred which with the
passage of time or the giving of notice, or both, would be or become a Default
or Event of Default.

     

    Section 4.25 No Plan
Assets. None of
the Borrowers is and no Borrower will be (i) an employee benefit plan as defined
in Section 3(3) of ERISA which is subject to ERISA, (ii) a plan as defined in
Section 4975(e)(1) of the IRC which is subject to Section 4975 of the IRC, or
(iii) an entity whose underlying assets constitute “plan assets” of any such
employee benefit plan or plan for purposes of Title I of ERISA or Section 4975
of the IRC. None of the Borrowers is and no Borrower will be a “governmental
plan” within the meaning of Section 3(32) of ERISA and no transactions by or
with any of the Borrowers are or will be subject to state statutes applicable to
such Borrower regulating investments of and fiduciary obligations with
obligations with respect to governmental plans. Each of the Borrowers and each
of the other ERISA Affiliates have made, and shall continue to make, all
required contributions to all employee benefit plans, if any, that each Borrower
and each of the other ERISA Affiliates maintain or contribute to, within the
time periods required by the applicable provisions of ERISA and any other
federal or state law, and each Borrower and each of the other ERISA Affiliates
have no knowledge of any material liability which has been incurred by any
thereof which remains unsatisfied for any taxes or penalties with respect to any
employee benefit plan or any multi-employer plan. Each such employee benefit
plan (other than any multi-employer plan) has been administered in compliance
with its terms and the applicable provisions of ERISA and any other federal or
state law.

     

    Section 4.26 No Prohibited
Transaction. The
execution, delivery and performance of this Agreement, the Note, each Mortgage
and the other Loan Documents do not constitute a Prohibited Transaction,
assuming solely for this purpose that Lender is a party in interest as defined
in Section 3(14) of ERISA (“Party In
Interest”) or a
disqualified person as defined in Section 4975(e)(2) of the IRC (“Disqualified
Person”) with
respect to an employee benefit plan, if any, which has directly or indirectly
invested in any Borrower or Sole Member.

     

    Section 4.27 Not Foreign
Person. No
Borrower Party is a “foreign person” within the meaning of Section 1445(f)(3) of
the IRC.

     

    Section 4.28 No Collective Bargaining
Agreements. No
Borrower Party is a party to any collective bargaining agreement.

     

    Section 4.29 Compliance.
Borrowers are in compliance with all applicable Legal Requirements. No Borrower
is in default or violation of any order, writ, injunction, decree or demand of
any Governmental Authority.

     

    Section 4.30 Intellectual
Property. All
material Intellectual Property that each of the Borrowers owns or has pending,
or under which it is licensed, are in good standing and uncontested. There is no
right under any Intellectual Property necessary to the business of any of the
Borrowers as presently conducted or as any of the Borrowers contemplates
conducting its business. None of the Borrowers has infringed, nor is infringing,
and none of the Borrowers has received notice of infringement with respect to
asserted Intellectual Property of others. There is no infringement by others of
material Intellectual Property of any of the Borrowers.

     


    
      
        
        

      

      
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    Section 4.31 Pre-Closing Date
Activities. No
Borrower has conducted any business or other activity on or prior to the Closing
Date, other than in connection with the acquisition and operation of its
Applicable Individual Property.

     

    Section 4.32 Mortgage and Other
Liens. Each
Mortgage creates a valid and enforceable first priority Lien on the Individual
Property (and other property) described therein, as security for the repayment
of the Obligations, subject only to the Permitted Encumbrances applicable to
such Individual Property. Each Loan Document purporting to grant, transfer,
assign or otherwise create a Lien as security for the Loan establishes and
creates a valid, subsisting and enforceable Lien on and a security interest in,
or claim to, the rights and property described therein. All property covered by
any Loan Document purporting to grant, transfer, assign or otherwise create a
Lien as security for the Loan is subject to a UCC financing statement filed
and/or recorded, as appropriate (or irrevocably delivered to an agent for such
recordation or filing) in all places necessary to perfect a valid first priority
Lien with respect to the rights and property that are the subject of such Loan
Document to the extent governed by the UCC.

     

    Section 4.33 Management
Agreement. The
Management Agreement is in full force and effect. There is no default, breach or
violation existing thereunder by any party thereto and no event (other than
payments due but not yet delinquent) which, with the passage of time or with
notice and the expiration of any grace or cure period, would constitute a
default, breach or violation by any party thereunder.

     

    Section 4.34 No Prohibited
Persons. None of
the Borrowers, nor Guarantor, nor any of their respective offices, directors,
partners, members, Affiliates or, to the knowledge of any Borrower, shareholders
in an entity or person: (i) that is listed in the Annex to, or is otherwise
subject to the provisions of Executive Order 13224 issued on September 24, 2001
(“EO13224”); (ii)
whose name appears on the United States Treasury Department’s Office of Foreign
Assets Control (“OFAC”) most
current list of “Specifically Designated National and Blocked Persons” (which
list may be published from time to time in various mediums including, but not
limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) who
commits, threatens to commit or supports “terrorism”, as that term is defined in
EO13224; or (iv) who is otherwise affiliated with any entity or person listed
above (any and all parties or persons described in clauses (i) through (iv)
above are herein referred to as a “Prohibited
Person”).

     

    ARTICLE V

    COVENANTS OF BORROWER
PARTIES

     

    Each of
the Borrowers covenants and agrees that until payment in full of the Loan, all
accrued and unpaid interest and all other Obligations, unless Lender shall
otherwise give its prior written consent, such Person shall perform and comply
with, or cause the performance and compliance of the applicable Borrower Parties
with, all covenants in this Article V.


    
      
        
        

      

      
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    Section 5.1 Financial Statements and
Other Reports. 

     

    (A) Financial
Statements.

     

    (i) Annual
Reporting. Within
one hundred twenty (120) days after the end of each calendar year, Borrowers
shall provide true and complete copies of Borrowers’ and Guarantor’s Financial
Statements for such year to Lender. All such annual Financial Statements shall
be certified by a certified public accountant reasonably acceptable to Lender
which is employed by Borrowers or Guarantor (or an Affiliate of Borrowers or
Guarantor) and is responsible for reviewing and auditing the Financial
Statements of Borrowers and Guarantor, and shall be accompanied by a certificate
of such audit executed by such accounting firm or certified public accountant in
customary form, subject only to such exceptions as shall be reasonably approved
in writing by Lender; provided, that
annual audit of the Financial Statements for Borrowers shall not be required,
and in lieu thereof internally prepared and certified (by Borrowers) annual
Financial Statements of Borrowers shall suffice to satisfy the foregoing
requirements for annual Borrower Financial Statements, so long as Guarantor
provides, and Borrowers hereby agree to cause Guarantor to provide to Lender,
(1) within 120 days after the end of each calendar year, annual, audited
consolidated Financial Statements reflecting the consolidated assets and
liabilities of Borrower and Guarantor (among other Persons included in
Guarantor’s consolidated financial statements), and (2) copies of all reports
and filings with the Securities and Exchange Commissions that Guarantor delivers
and files, in each case within 30 days after such filings are made with the
Securities and Exchange Commission. The annual Financial Statements for
Borrowers and Guarantor shall each be accompanied by a certification executed by
the entity’s chief executive officer or chief financial officer or the
individual Guarantor, in the case of an individual Guarantor, satisfying the
criteria set forth below. The annual Financial Statements of Borrowers shall
also be accompanied by a Compliance Certificate (as defined below).

     

    (ii) Quarterly Reporting -
Borrower. Within
forty-five (45) days after the end of each Calendar Quarter, Borrowers shall
provide true and complete copies of their Financial Statements for such quarter
to Lender, together with a certification executed on behalf of Borrowers by
their respective chief executive officers or chief financial officers in
accordance with the criteria set forth below. The quarterly Financial Statements
of Borrowers also shall be accompanied by a Compliance Certificate (as defined
below).

     

    (iii) Quarterly Reporting -
Guarantor. Within
forty-five (45) days after the end of each Calendar Quarter, Borrowers shall
provide true and complete copies of Guarantor’s Financial Statements for such
quarter to Lender, together with a certification executed on behalf of Guarantor
by its chief executive officer or chief financial officer (or by the individual
Guarantor, in the ease of an individual Guarantor) in accordance with the
criteria set forth below.

     

    (iv) Debt Service Coverage
Ratio. Within
thirty (30) days after the end of each Calendar Quarter, Borrowers shall provide
to Lender Borrowers’ calculation of the Debt Service Coverage Ratio for the
twelve month period ending at the end of such Calendar Quarter, together with
the Borrowers’ method of calculation and such detail and background information
as Lender shall reasonably require and a certification executed on behalf of
Borrowers by their respective chief financial officers (or other responsible
officer(s) or representative(s) reasonably acceptable to Lender) in accordance
with the criteria set forth below.

     


    
      
        
        

      

      
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    (v) Leasing
Reports. Within
thirty (30) days after the end of each calendar month, Borrowers shall provide
to Lender a certified Rent Roll, rental status report and a schedule of Security
Deposits held under Leases, in form and substance reasonably acceptable to
Lender.

     

    (vi) Monthly
Reporting. Within
thirty (30) days after the end of each calendar month, Borrowers shall provide
to Lender (a) accrual basis operating statements, together with a statement of
cash flow, for each of the Properties, each in a form reasonably satisfactory to
Lender, (a) for such month, (b) for the year to date with a comparison and
reconciliation with the Operating Budget and Capital Expenditures Budget
indicating all variances on a line item basis and (c) for the 12 month period
ended as of the end of such calendar month, together with (b) a certification
executed on behalf of Borrowers by their respective chief financial officers (or
other responsible officer(s) or representative(s) reasonably acceptable to
Lender) in accordance with the criteria set forth below.

     

    (vii) Additional
Reporting. In
addition to the foregoing, Borrowers shall promptly provide to Lender, and cause
each other Borrower Party to promptly provide to Lender, such further documents
and information concerning its operations, properties, ownership, and finances
as Lender shall from time to time reasonably request.

     

    (viii) GAAP.
Borrowers will maintain systems of accounting established and administered in
accordance with sound business practices and sufficient in all respects to
permit preparation of Financial Statements in conformity with GAAP. All
Financial Statements shall be prepared in accordance with GAAP, consistently
applied.

     

    (ix) Certifications of Financial
Statements and Other Documents, Compliance Certificate.
Together with the Financial Statements and other documents and information
provided to Lender by or on behalf of any Borrower Party under this Section,
such Borrower Party also shall deliver to Lender a certification in form and
substance reasonably satisfactory to Lender, executed on behalf of such Borrower
Party by its chief executive officer or chief financial officer (or by the
individual Guarantor if the Guarantor is an individual) stating that, to such
officer’s or individual’s knowledge, such Financial Statements, documents, and
information are true and complete in all material respects and do not omit to
state any material information without which the same might reasonably be
misleading. In addition, where this Loan Agreement requires a “Compliance
Certificate”, the
Borrower Party required to submit the same shall deliver a certificate duly
executed on behalf of such Borrower Party by its chief executive officer or
chief financial officer, in form and substance reasonably satisfactory to
Lender, stating that there does not exist any Default or Event of Default under
the Loan Documents (or if any exists, specifying the same in
detail).

     

    (x) Fiscal
Year. Each
Borrower represents that its fiscal year ends on December 31, and agrees that it
shall not change its fiscal year.


    
      
        
        

      

      
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    (B) Accountants’
Reports.
Promptly upon receipt thereof, Borrowers shall deliver, and cause each other
Borrower Party to deliver, copies of all significant reports submitted by
independent public accountants in connection with each annual, interim or
special audit of the Financial Statements or other affairs of such Borrower
Party made by such accountants, including the comment letter submitted by such
accountants to management in connection with the annual audit.

     

    (C) Tax
Returns. Within
thirty (30) days after filing the same, Borrowers shall deliver to Lender a copy
of their Federal income tax returns (or the return of the applicable Person into
which any Borrower’s Federal income tax return is consolidated) certified on its
behalf by their chief financial officers (or similar position) to be true and
correct.

     

    (D) Material
Notices. 

     

    (i) Borrowers
shall promptly deliver, or cause to be delivered to Lender, copies of all
notices of default given or received by any Borrower Party with respect to
noncompliance related to any material Indebtedness of any Borrower
Party.

     

    (ii) Borrowers
shall promptly deliver to Lender copies of any and all material notices
(including any notice alleging any material default or breach) received by any
Borrower from any manager, any franchisors, any licensors, or any tenants for or
pertaining to any of the Properties.

     

    (E) Events of Default,
etc.
Promptly upon any Borrower obtaining knowledge of any of the following events or
conditions, such Borrower shall deliver a certificate executed on its behalf by
its chief financial officer or similar officer specifying the nature and period
of existence of such condition or event and what action such Borrower or any
Affiliate thereof has taken, is taking and proposes to take with respect
thereto: (i) any condition or event that constitutes an Event of Default or
Default; (ii) any Material Adverse Effect; or (iii) any actual or alleged breach
or default or assertion of (or written threat to assert) remedies under any
Management Agreement.

     

    (F) Litigation.
Promptly upon any Borrower’s obtaining knowledge of (1) the institution, or
threat thereof, of any action, suit, proceeding, governmental investigation or
arbitration against or affecting any Borrower or any of the Properties owned not
previously disclosed in writing by Borrowers to Lender, or (2) any material
development in any action, suit, proceeding, governmental investigation or
arbitration at any time pending against or affecting any Borrower or any of the
Properties, Borrowers will give notice thereof to Lender and provide such other
information as may be reasonably available to enable Lender and its counsel to
evaluate such matter.

     

    (G) Insurance. Within
the thirty (30) day period prior to the end of each insurance policy period of
Borrowers, Borrowers will deliver binders or certificates of insurance
evidencing renewal of any existing coverages (or copies of any new insurance
policies not previously delivered to Lender), reports, and/or other information
(all in form and substance reasonably satisfactory to Lender), (i) outlining all
material insurance coverage maintained as of the date thereof by Borrowers and
all material insurance coverage planned to be maintained by Borrowers in the
subsequent insurance policy period, and (ii) evidencing payment in full of the
premiums for such insurance policies.


    
      
        
        

      

      
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    (H) Other
Information. With
reasonable promptness, each Borrower Party will deliver such other information
and data with respect to such Person and its Affiliates or the Properties as
from time to time may be reasonably requested by Lender.

     

    Section 5.2 Existence;
Qualification. Each
Borrower will at all times preserve and keep in full force and effect its
existence as a limited partnership, limited liability company, or corporation,
as the case may be and all rights and franchises material to its business,
including its qualification to do business in each state where it is required by
law to so qualify. Without limitation of the foregoing, each Borrower and, to
the extent required by applicable law, Sole Member shall at all times be
qualified to do business in the state where the Properties are
located.

     

    Section 5.3 Payment of Impositions and
Claims. 

     

    (A) Subject
to Borrowers’ contest rights set forth in subsection (B) below, Borrowers will
pay when due (i) all Impositions; (ii) all claims (including claims for labor,
services, materials and supplies) for sums that have become due and payable and
that by law have or may become a Lien upon any of its properties or assets
(hereinafter referred to as the “Claims”); and
(iii) all federal, state and local income taxes, sales taxes, excise taxes and
all other taxes and assessments of each Borrower on its business, income or
assets; in each instance before any penalty or fine is incurred with respect
thereto.

     

    (B) Borrowers
shall not be required to pay, discharge or remove any Imposition or Claim so
long as Borrowers contest in good faith such Imposition or Claim or the
validity, applicability or amount thereof by an appropriate legal proceeding
which operates to prevent the collection of such amounts and the sale of any of
the Properties or any portion thereof, so long as: (i) no Event of Default shall
have occurred and be continuing; (ii) prior to the date on which such Imposition
or Claim would otherwise have become delinquent, Borrowers shall have given
Lender prior written notice of its intent to contest said Imposition or Claim;
(iii) prior to the date on which such Imposition or Claim would otherwise have
become delinquent, Borrowers shall have deposited with Lender (or with a court
of competent jurisdiction or other appropriate body approved by Lender) such
additional amounts as are necessary to keep on deposit at all times, an amount
equal to at least one hundred fifty percent (150%) (or such higher amount as may
be required by applicable law) of the total of (x) the balance of such
Imposition or Claim then remaining unpaid, and (y) all interest, penalties,
costs and charges accrued or accumulated thereon, together with such other
security as may be required in the proceeding, or as may be required by Lender,
to insure the payment of any such Imposition or Claim and all interest and
penalties thereon; (iv) no risk of sale, forfeiture or loss of any interest in
any of the Properties or any part thereof arises, in Lender’s judgment, during
the pendency of such contest; (v) such contest does not, in Lender’s
determination, have a Material Adverse Effect; (vi) such contest is based on
bona fide,
material, and reasonable claims or defenses; and (vii) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any other
instrument to which any Borrower is subject and shall not constitute a default
thereunder and such proceeding shall be conducted in accordance with all
applicable statutes, laws and ordinances. Any such contest shall be prosecuted
with due diligence, and Borrowers shall promptly pay the amount of such
Imposition or Claim as finally determined, together with all interest and
penalties payable in connection therewith. Lender shall have full power and
authority, but no obligation, to apply any amount deposited with Lender under
this subsection to the payment of any unpaid Imposition or Claim to prevent the
sale or forfeiture of any of the Properties for non-payment thereof, if Lender
reasonably believes that such sale or forfeiture is threatened. Any surplus
retained by Lender after payment of the Imposition or Claim for which a deposit
was made shall be promptly repaid to Borrowers unless an Event of Default shall
have occurred, in which case said surplus may be retained by Lender to be
applied to the Obligations. Notwithstanding any provision of this Section to the
contrary, Borrowers shall pay any Imposition or Claim which it might otherwise
be entitled to contest if an Event of Default shall occur, or if, in the
reasonable determination of Lender, any of the Properties is in jeopardy or in
danger of being forfeited or foreclosed. If Borrowers refuse to pay any such
Imposition or Claim, upon five (5) Business Days’ prior written notice, Lender
may (but shall not be obligated to) make such payment and Borrowers shall
reimburse Lender on demand for all such advances.


    
      
        
        

      

      
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    Section 5.4 Maintenance of
Insurance.
Borrowers will maintain or cause to be maintained, with financially sound and
reputable insurers, public liability, fire and extended coverage and property
damage, rent loss or business interruption and other types of insurance with
respect to its business and the Properties (including all Improvements now
existing or hereafter erected thereon) against all losses, hazards, casualties,
liabilities and contingencies as customarily carried or maintained by Persons of
established reputation engaged in similar businesses and as Lender shall require
and in such amounts and for such periods as Lender shall require. Without
limitation of the foregoing, Borrowers shall maintain or cause to be maintained
policies of insurance with respect to each Individual Property in the following
amounts and covering the following risks:

     

    (i) Property
damage insurance covering loss or damage to the applicable Individual Property
caused by fire, lightning, hail, hurricane, windstorm, tidal wave, explosion,
acts of terrorism, vandalism, malicious mischief, and such other losses,
hazards, casualties, liabilities and contingencies as are normally and usually
covered by fire, extended coverage and all risk policies in effect where the
applicable Individual Property is located endorsed to include all of the
extended coverage perils and other broad form perils, including the standard
“all risks” clauses, with such endorsements as Lender may from time to time
reasonably require including, without limitation, building ordinance and law
(including demolition costs and increased cost of construction coverage),
lightning, hurricane, windstorm, tidal wave, civil commotion, acts of terrorism,
hail, riot, strike, water damage, sprinkler leakage, collapse and malicious
mischief. Such policy shall be in an amount not less than that necessary to
comply with any coinsurance percentage stipulated in the policy, but not less
than 100% of the full replacement cost of all Improvements at the applicable
Individual Property (without any deduction for depreciation), and shall contain
a replacement cost and agreed amount endorsement in an amount not less than the
outstanding principal amount of the Loan. The deductible under such policy shall
not exceed an amount customarily required by institutional lenders for similar
properties in the general vicinity of the applicable Individual Property, but in
no event in excess of $5,000, or such other amount as is approved by Lender from
time to time. In addition to and without limiting the foregoing, the property
insurance required under this Section 5.4(i), and the property insurance and
business interruption and rent loss insurance required under Sections 5.4(v) and
(vi) below shall be required to cover perils of terrorism and acts of
terrorism.

     


    
      
        
        

      

      
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    (ii) Broad
form boiler and machinery insurance in an amount equal to the full replacement
cost of the Improvements at such Individual Property (without any deduction for
depreciation) in which the boiler or similar vessel is located, and including
coverage against loss or damage from (1) leakage of sprinkler systems and (2)
damage, breakdown or explosion of steam boilers, electrical machinery and
equipment, air conditioning, refrigeration, pressure vessels or similar
apparatus and mechanical objects now or hereafter installed at the applicable
Individual Property.

     

    (iii) If the
applicable Individual Property is located in area prone to geological phenomena,
including, but not limited to, sinkholes, mine subsidence, tidal waves or
earthquakes, insurance covering such risks in an amount not less than 100% of
the full replacement cost of the Improvements at such Individual Property
without any deduction for depreciation, with a maximum permissible deductible of
$5,000, or such other amount as is approved by Lender from time to
time.

     

    (iv) Flood
insurance if the applicable Individual Property is located, in whole or in part,
in an area now or hereafter designated as “flood prone” or a “special flood
hazard area” (as defined under the National Flood Insurance Act of 1968, the
Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act
of 1994 (as each may be amended, or any successor law, collectively, the
“Flood Insurance
Acts”)). Such
policy shall be in an amount equal to 100% of the full replacement cost of the
Improvements at such Individual Property, or such other amount as is approved by
Lender from time to time, and shall have a maximum permissible deductible equal
to an amount customarily required by institutional lenders for similar
properties in the general vicinity of the applicable Individual Property, but in
no event in excess of $5,000, or such other amount as is approved by Lender from
time to time.

     

    (v) Business
interruption or rent loss insurance in an amount equal to the gross income or
rentals from the applicable Individual Property for an indemnity period of
eighteen (18) months, such amount being adjusted annually. Lender shall be named
as loss payee under such insurance.

     

    (vi) During
any period of reconstruction, renovation or alteration of the applicable
Individual Property, a complete value, “All Risks” Builders Risk form or “Course
of Construction” insurance policy in non-reporting form and in an amount
reasonably satisfactory to Lender.

     

    (vii) Commercial
General Liability insurance covering claims for bodily injury, death or property
damage occurring upon, in or about the applicable Individual Property in an
amount not less than $1,000,000 per occurrence and $2,000,000 in the aggregate
with no deductible of self insurance retention, and an umbrella liability policy
in the amount of $3,000,000.

     

    (viii) If
required by applicable state laws, worker’s compensation or employer’s liability
insurance in accordance with such laws.

     

    (ix) Such
other insurance and endorsements, if any, with respect to each Individual
Property and the operation thereof as Lender may reasonably require from time to
time, provided same are customarily required by institutional lenders for
similar properties in the general vicinity of the applicable Individual
Property, or which are otherwise required by the Loan Documents.

     


    
      
        
        

      

      
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    Each
carrier providing any insurance, or portion thereof, required by this Section
shall be licensed to do business in the jurisdiction in which the applicable
Individual Property is located, and shall have a claims paying ability rating by
S&P of not less than “AA,” by Moody’s of not less than “Aa2” and by Fitch of
not less than “AA,” and an A.M. Best Company, Inc. rating of not less than A and
financial size category of not less than XIII. Except as otherwise expressly set
forth in this Loan Agreement, Borrowers shall cause all insurance (except
general public liability and excess liability, as to which Lender shall be named
as additional insured, and workers’ compensation insurance) carried in
accordance with this Section to be payable to Lender as a mortgagee and loss
payee and not as a coinsured, and, in the case of all policies of insurance
carried by each lessee, for the benefit of Borrowers (or any of them), if any,
to cause all such policies to be payable to Lender as Lender’s interest may
appear.

     

    All
insurance policies and renewals thereof (i) shall be in a form reasonably
acceptable to Lender, (ii) shall provide for a term of not less than one year,
(iii) shall provide by way of endorsement, rider or otherwise that such
insurance policy shall not be canceled, endorsed, altered, or reissued to effect
a change in coverage unless such insurer shall have first given Lender thirty
(30) days prior written notice thereof, (iv) shall include a standard
non-contributory mortgagee endorsement or its equivalent in favor of and in form
acceptable to Lender, (v) shall provide for claims to be made on an occurrence
basis, (vi) shall contain an agreed value clause updated annually (if the amount
of coverage under such policy is based upon the replacement cost of any of the
Properties) and (vii) shall designate Lender as “mortgagee and loss payee”
(except general public liability and excess liability, as to which Lender shall
be named as additional insured). All property damage insurance policies (except
for flood and earthquake policies) must automatically reinstate after each
loss.

     

    Any
insurance required by this Loan Agreement may, at the option of Borrowers, be
effected by blanket and/or umbrella policies issued to Borrowers covering the
Properties and other properties of Borrowers’ Affiliates provided that, in each
case, the policies otherwise comply with the provisions of this Loan Agreement
and allocate to each Individual Property, from time to time, the coverage
required under this Loan Agreement, without possibility of reduction or
coinsurance by reason of, or damage to, any other property (real or personal)
named therein. If the insurance required by this Loan Agreement shall be
effected by any such blanket or umbrella policies, Borrowers shall furnish to
Lender certificates or insurance evidencing same, with schedules attached
thereto showing the amount of the insurance provided under such policies which
is applicable to each Individual Property.

     

    Section 5.5 Maintenance of the
Properties; Alterations; Casualty or Taking. 

     

    (A) Maintenance of the
Properties; Alterations.
Borrowers will maintain the Properties or cause the Properties to be maintained
in good repair, working order and condition, and will make or cause to be made
all appropriate repairs, renewals and replacements thereof. Without limitation
of the foregoing, Borrowers will operate and maintain each Individual Property
substantially in accordance with the applicable Operating Budget and Capital
Expenditure Budget. In addition, unless Lender agrees otherwise, Borrowers shall
cause all items in the Capital Expenditure Budget to be performed and completed
in substantially in accordance with such plan. All work required or permitted
under this Loan Agreement shall be performed in a good and workmanlike manner
and in compliance with all applicable laws. So long as no Event of Default has
occurred and is continuing, Borrowers may, without Lender’s consent, perform
alterations to the Properties which (i) do not constitute a Material Alteration,
(ii) do not adversely affect any Borrower’s financial condition or the value or
net operating income of any of the Properties, and (iii) are in the ordinary
course of Borrowers’ business. No Borrower shall perform any Material Alteration
without Lender’s prior written consent, which consent shall not be unreasonably
withheld; provided,
however, that
Lender may, in its sole and absolute discretion, withhold consent to any
Material Alteration which Lender determines may result in a decrease of net
operating income from any of the Properties. Lender may, as a condition to
giving its consent to a Material Alteration, require that Borrowers deposit cash
with Lender for payment of the cost of such Material Alteration in an amount
equal to 125% of the cost of the Material Alteration as estimated by Lender.
Upon substantial completion of the Material Alteration, Borrowers shall provide
evidence reasonably satisfactory to Lender that (i) the Material Alteration was
constructed in accordance with all applicable laws and substantially in
accordance with plans and specifications approved by Lender (which approval
shall not be unreasonably withheld or delayed), (ii) all contractors,
subcontractors, materialmen and professionals who provided work, materials or
services in connection with the Material Alteration have been paid in full and
have delivered unconditional releases of lien and (iii) all material licenses
necessary for the use, operation and occupancy of the Material Alteration have
been issued. Borrowers shall reimburse Lender upon demand for all reasonable
out-of-pocket costs and expenses (including the reasonable fees of any
architect, engineer or other professional engaged by Lender) incurred by Lender
in reviewing plans and specifications or in making any determinations necessary
to implement the provisions of this Section 5.5(A).

     


    
      
        
        

      

      
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    (B) Casualty or
Taking. In the
event of casualty or loss or a Taking at any of the Individual Properties,
Borrowers shall give immediate written notice of the same to the insurance
carrier and to Lender and shall promptly commence and diligently prosecute to
completion, in accordance with the terms hereof, all Legal Requirements, the
repair and restoration of the affected Individual Property as nearly as possible
to the Pre-Existing Condition (hereinafter defined) (a “Restoration”).
Borrowers shall pay all costs of such Restoration whether or not such costs are
covered by insurance or Condemnation Proceeds. Borrowers hereby authorize and
empower Lender (a) to make proof of loss, to adjust and compromise or settle any
claim under insurance policies, including business interruption or rent loss
insurance, or in connection with a Taking, (b) to appear in and prosecute any
action arising from any insurance policies or Taking, (c) to collect and receive
insurance proceeds and Condemnation Proceeds, and (d) to deduct therefrom
Lender’s expenses incurred in the collection of such proceeds; provided however,
that nothing contained in this Section shall require Lender to incur any expense
or take any action hereunder. Borrowers further authorize Lender, at Lender’s
option, (i) to hold the balance of such proceeds to be used to pay for the cost
of Restoration of the applicable Individual Property or (ii) subject to Section
5.5(C), to apply such proceeds to payment of the Obligations whether or not then
due, in any order, and, provided that no Event of Default has occurred and is
continuing, upon any such application of insurance proceeds or Condemnation
Proceeds to the Obligations pursuant to the foregoing, no Prepayment
Consideration shall be due and payable. Notwithstanding the foregoing, in the
event of a casualty or Taking with respect to an Individual Property where the
loss does not exceed the Restoration Threshold for such Individual Property, and
the casualty or Taking (as applicable), in Lender’s reasonable judgment, has no
material impact on the remainder of such Individual Property, Borrowers may
settle and adjust such claim; provided that (a) no Event of Default has occurred
and is continuing and (b) such adjustment and the Restoration are carried out in
a commercially reasonable and timely manner, and further provided that Lender’s
reasonable consent shall be required for the adjustment or settlement by any
Borrower of any claim the settlement or adjustment of which may reasonably be
anticipated to result in proceeds in excess of $500,000.

     


    
      
        
        

      

      
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    (C) Proceeds Application to
Restoration. Lender
shall not exercise Lender’s option to apply insurance proceeds or Condemnation
Proceeds to payment of the Obligations and Lender shall make the proceeds
available for Restoration if all of the following conditions are met: (i) no
Event of Default then exists; (ii) Lender reasonably determines that there will
be sufficient funds to complete the Restoration of the applicable Individual
Property to at least the Pre-Existing Condition and to timely make all payments
due under the Loan Documents during the Restoration of the applicable Individual
Property; (iii) Lender reasonably determines that the fair market value of the
applicable Individual Property after Restoration will not be less than the fair
market value of such Individual Property prior to the occurrence of the loss or
casualty to the Individual Property or the Taking, and that the rental income of
the Properties, after the Restoration of the affected Individual Property to the
Pre-Existing Condition, will be sufficient to meet all Operating Expenses,
payments for Reserves and payments of principal and interest under the Loan and
maintain a Debt Service Coverage Ratio at least equal to 1.10 to 1; and (iv)
Lender reasonably determines that the Restoration of the affected Individual
Property to the Pre-Existing Condition will be completed within one (1) year of
the date of the loss or casualty to the affected Individual Property or the
Taking, but in no event later than six (6) months prior to the Maturity Date;
(v) in Lender’s reasonable judgment less than thirty percent (30%) (in the case
of a fire or other loss or casualty to an Individual Property) or fifteen
percent (15%) (in the case of a Taking) of the fair market value of the
applicable Individual Property has been damaged, destroyed or rendered unusable
as a result of such fire or other casualty or Taking; and (vi) Lender is
reasonably satisfied that the Individual Property in question can be restored
and repaired as nearly as possible to the condition it was in immediately prior
to such casualty or Taking and in compliance with all applicable zoning,
building and other laws and codes (the “Pre-Existing
Condition”), and
in the case of a Taking Lender is reasonably satisfied that the Taking will,
upon completion of the Restoration, have no material adverse effect on the use,
operation or value of the applicable Individual Property. Notwithstanding
anything to the contrary set forth in this Section 5.5, to the extent the
insurance proceeds paid or payable with respect to any casualty to any
Individual Property (either singly or when aggregated with all other then
unapplied proceeds with respect to the affected Individual Property) do not
exceed the Restoration Threshold and the estimated cost of completing the
applicable Restoration shall not be greater than the Restoration Threshold, and
provided that no Event of Default shall have occurred and be continuing, such
proceeds (other than business interruption and rent loss insurance proceeds) are
to be paid directly to Borrowers to be applied to Restoration of the affected
Individual Property in accordance with the terms hereof. Lender may retain
business interruption or rent loss insurance proceeds as a reserve, and disburse
the same on a monthly basis into the Deposit Account for application to debt
service on the Loan until such time as Restoration is complete.

     


    
      
        
        

      

      
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    (D) Disbursement for
Restoration. If
Lender elects to make the insurance proceeds or Condemnation Proceeds available
for Restoration of any Individual Property (or is required to make such proceeds
available pursuant to Section 5.5(C) above), the proceeds shall be disbursed by
Lender to, or as directed by, Borrowers from time to time during the course of
the Restoration, but not more frequently than once a month and in requested
amounts of not less than $100,000, upon receipt of evidence satisfactory to
Lender that (i) all materials installed and work and labor performed in
connection with the Restoration have been paid for in full (other than that to
be paid from the current pending disbursement), and (ii) there exist no notices
of pendency, mechanic’s or materialman’s liens or notices of intention to file
same, or any other liens or encumbrances of any nature whatsoever on the
applicable Individual Property. Borrowers agree that, if at any time during the
Restoration, the cost of completing such Restoration, as reasonably determined
by Lender, exceeds the undisbursed insurance proceeds, Borrowers shall, promptly
upon demand by Lender, deposit the amount of such excess with Lender, and Lender
shall first disburse such deposit to pay for the costs of such Restoration on
the same terms and conditions as the insurance proceeds are disbursed. If
Borrowers deposit such excess with Lender and if, after completion of the
Restoration, any funds remain from the combination of insurance proceeds or
Condemnation Proceeds and the funds so deposited with Lender by Borrowers, and
if no Event of Default shall have occurred and be continuing, then Lender shall
disburse into the Deposit Account, for application pursuant to Article VII
hereof, such remaining funds (together with any interest earned
thereon).

     

    (E) Disbursement
Conditions. Lender
may, at Lender’s option, condition disbursement of any insurance proceeds or
Condemnation Proceeds in excess of the Restoration Threshold on Lender’s
approval of plans and specifications of an independent architect licensed in the
state in which the Properties are located, having at least five (5) years of
experience as an architect and reasonably satisfactory to Lender (an
“Approved
Architect”), any
and all material contractors, subcontractors and materialmen engaged in the
Restoration and the contracts and subcontracts under which they have been
engaged, contractor’s cost estimates, architect’s certificates, waivers of
liens, sworn statements of mechanics and materialmen and such other evidence of
costs, percentage completion of construction, application of payments, and
satisfaction of liens as Lender may reasonably require. Lender shall not be
obligated to disburse insurance proceeds or Condemnation Proceeds more
frequently than once every calendar month. If insurance proceeds or Condemnation
Proceeds are applied to the payment of the Obligations, any such application of
proceeds to principal shall not extend or postpone the due dates of the monthly
payments due under the Note or otherwise under the Loan Documents, or change the
amounts of such payments. Any amount of insurance proceeds remaining in Lender’s
possession after full and final payment and discharge of all Obligations shall
be refunded to Borrowers or otherwise paid in accordance with applicable law. If
any Individual Property is sold at foreclosure or if Lender acquires title to
such Individual Property, Lender shall have all of the right, title and interest
of Borrowers in and to any insurance policies and unearned premiums thereon and
in and to the proceeds resulting from any damage to such Individual Property
prior to such sale or acquisition, and to any Condemnation
Proceeds.

     

    (F) Retainage. In no
event shall Lender be obligated to make disbursements of insurance proceeds or
Condemnation Proceeds in excess of an amount equal to the costs actually
incurred from time to time for work in place as part of the Restoration, as
certified by the Approved Architect, less a retainage equal to ten percent (10%)
of such costs incurred until the Restoration has been completed. The retainage
shall in no event be less than the amount actually held back by Borrowers (or
any of them) from contractors, subcontractors and materialmen engaged in the
Restoration. The retainage shall not be released until the Approved Architect
certifies to Lender that the Restoration has been completed substantially in
accordance with the provisions of this Section 5.5 and that all material
approvals necessary for the re-occupancy and use of the affected Individual
Property have been obtained from all appropriate Governmental Authorities, and
Lender receives evidence reasonably satisfactory to Lender that the costs of the
Restoration have been paid in full or will be paid in full out of the
retainage.

     


    
      
        
        

      

      
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    Section 5.6 Inspection.
Borrowers shall permit any authorized representatives designated by Lender to
visit and inspect during normal business hours the Properties and their
respective businesses, including their financial and accounting records, and to
make copies and take extracts therefrom, and to discuss their affairs, finances
and business with their officers and independent public accountants, at such
reasonable times during normal business hours and as often as may be reasonably
requested. Unless an Event of Default has occurred, Lender shall provide advance
written notice of at least two (2) Business Days prior to visiting or inspecting
any of the Properties or any Borrower’s offices.

     

    Section 5.7 Environmental
Compliance. 

     

    (A) Environmental
Laws.
Borrowers shall at all times comply in all material respects with all applicable
Environmental Laws. Borrowers shall not: (i) violate any applicable
Environmental Law; or (ii) generate, use, transport, handle, store, release or
dispose of any Hazardous Material in or into, on or onto, or from any of the
Properties (except in accordance with applicable law); or (iii) permit any Lien
imposed pursuant to any Environmental Law to be imposed or to remain on any of
the Properties.

     

    (B) Remedial
Action. i)
Borrowers shall promptly take and diligently prosecute any and all necessary
remedial actions upon obtaining knowledge of the presence, storage, use,
disposal, transportation, active or passive migration, release or discharge of
any Hazardous Materials on, under or about any of the Properties in violation of
any Environmental Laws; provided, however, that whether or not such action is
required under applicable Environmental Laws, Borrowers shall be required to
take all remedial action necessary to clean up and remove mold and microbial
matter from the Properties in the event that any action, suit or proceeding
shall be commenced or threatened (in writing) by any Person or Governmental
Authority with respect thereto or any investigation related to mold or microbial
matter is commenced by any Governmental Authority, which action, suit,
proceeding or investigation, if adversely determined, could reasonably be
expected to have a Material Adverse Effect. In the event any Borrower undertakes
or causes to be undertaken any remedial action with respect to any Hazardous
Materials on, under or about any of the Properties, such Borrower shall conduct
and complete such remedial action in compliance with all applicable
Environmental Laws and in accordance with the applicable policies, orders and
directives of all federal, state and local governmental
authorities.

     

    (ii) If
requested by Lender, all remedial actions under clause (i) above shall be
performed by contractors, and under the supervision of a consulting engineer,
which shall not be an Affiliate of any of the Borrowers, each approved in
advance by Lender which approval shall not be unreasonably withheld or delayed.
All costs and expenses reasonably incurred in connection with such remedial
actions shall be paid by Borrowers. If Borrowers do not timely commence and
diligently prosecute to completion the remedial actions, Lender may (but shall
not be obligated to), upon 30 days prior written notice to Borrowers of its
intention to do so, cause such remedial actions to be performed. Borrowers shall
pay or reimburse Lender on demand for all expenses (including reasonable
attorneys’ fees and disbursements, but excluding internal overhead,
administrative and similar costs of Lender) reasonably relating to or incurred
by Lender in connection with monitoring, reviewing or performing any remedial
actions in accordance herewith.

     


    
      
        
        

      

      
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    (iii) No
Borrower shall commence any remedial actions under clause (i) above without
Lender’s prior written approval which approval shall not be unreasonably
withheld or delayed. Notwithstanding the foregoing, if the presence or
threatened presence of Hazardous Material on, under or about any of the
Properties poses an immediate threat to the health, safety or welfare of any
Person or the environment, or is of such a nature that an immediate response is
necessary or required under applicable Environmental Law, then Borrowers may
commence all necessary remedial actions without Lender’s prior written approval.
In such events, Borrowers shall notify Lender as soon as practicable and, in any
event, within three Business Days, of any action taken. No Borrower shall enter
into any settlement agreement, consent decree or other compromise relating to
Hazardous Materials or Environmental Laws unless and until Lender has provided
its prior written consent thereto.

     

    (C) Further
Assurance. If
Lender at any time has a reasonable basis to believe that a violation of any
Environmental Law related to any of the Properties has occurred and is
continuing or that any basis for a material Environmental Claim affecting any
Borrower Party or related to any of the Properties exists, then Borrowers agree,
promptly after written request from Lender, to provide Lender with such reports,
certificates, engineering studies or other written material or data as Lender
may reasonably require so as to satisfy Lender that the Borrower Parties and the
applicable Properties are in material compliance with all applicable
Environmental Laws.

     

    (D) O & M
Program. In the
event the Environmental Report recommends the development of an operation and
maintenance program for any of the Properties (including, without limitation,
with respect to the presence of asbestos and/or lead-based paint) (“O & M
Program”),
Borrowers shall develop an O & M Program, as approved by Lender, in Lender’s
sole discretion, and shall, during the term of the Loan, including any extension
or renewal thereof, comply in all respects with the terms and conditions of the
O & M Program.

     

    Section 5.8 Environmental
Disclosure. 

     

    (A) Borrowers
shall promptly upon becoming aware thereof advise Lender in writing and in
reasonable detail of: (1) any release, disposal or discharge of any Hazardous
Material on, under, or about any of the Properties required to be reported to
any federal, state or local governmental or regulatory agency under the
applicable Environmental Laws except such releases, disposals or discharges
pursuant to and in compliance with valid permits, authorizations or
registrations under said Environmental Laws; (2) any and all written
communications sent or received by any Borrower with respect to any
Environmental Claims or any release, disposal or discharge of Hazardous Material
required to be reported to any federal, state or local governmental or
regulatory agency; (3) any remedial action taken by any Borrower or any other
Person in response to any Hazardous Material on, under or about any of the
Properties; (4) the discovery by any Borrower of any occurrence or condition on
any real property adjoining or in the vicinity of any of the Properties that
could cause the same (or any part thereof) to be classified as “border zone
property” or to be otherwise subject to any restrictions on the ownership,
occupancy, transferability or use thereof under any Environmental Laws the
existence of which could result in an Environmental Claim with respect to the
affected Individual Property(ies); and (5) any request for information from any
governmental agency that indicates such agency is investigating whether any
Borrower may be potentially responsible for a release, disposal or discharge of
Hazardous Materials.

     


    
      
        
        

      

      
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    (B) Borrowers
shall promptly notify Lender of any proposed action to be taken pertaining in
any way to any of the Properties to commence any operations that could
reasonably be expected to subject any Borrower or any of the Properties to
additional laws, rules or regulations, including laws, rules and regulations
requiring additional or amended environmental permits or licenses which could
reasonably be expected to subject any Borrower to any material obligations or
requirements under any Environmental Laws. Borrowers shall, at their own
expense, provide copies of such documents or information as Lender may
reasonably request in relation to any matters disclosed pursuant to this
Section.

     

    Section 5.9 Compliance with Laws and
Contractual Obligations. Each
Borrower will (A) comply with the requirements of all present and future
applicable laws, rules, regulations and orders of any governmental authority in
all jurisdictions in which it is now doing business or may hereafter be doing
business, (B) maintain all licenses and permits now held or hereafter acquired
by such Borrower, and (C) perform, observe, comply and fulfill all of its
obligations, covenants and conditions contained in any Contractual
Obligation.

     

    Section 5.10 Further
Assurances. Borrower
Parties and their Affiliates shall, from time to time, execute and/or deliver
such documents, instruments, agreements, financing statements, and perform such
acts as Lender at any time may reasonably request to evidence, preserve and/or
protect the Collateral at any time securing or intended to secure the
Obligations and/or to better and more effectively carry out the purposes of this
Loan Agreement and the other Loan Documents.

     

    Section 5.11 Performance of Agreements
and Leases. Each
Borrower Party shall duly and punctually perform, observe and comply in all
material respects with all of the terms, provisions, conditions, covenants and
agreements on its part to be performed, observed and complied with (i) hereunder
and under the other Loan Documents to which it is a party, and (ii) agreements
entered into or assumed by such Person in connection with any of the Properties,
and will not suffer or permit any default or event of default (giving effect to
any applicable notice requirements and cure periods) to exist under any of the
foregoing. Each Borrower shall comply with, observe and perform all of its
respective material obligations as landlord under the Leases to which it is a
party or by which it is bound, and shall enforce the material terms, covenants
and conditions contained in the Leases upon the part of the tenants thereunder
to be observed or performed.

     


    
      
        
        

      

      
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    Section 5.12 Leases. 

     

    (A) All
Leases entered into by Borrowers shall provide for rental rates comparable to
then-existing local market rates and terms and conditions commercially
reasonable and consistent with then-prevailing local market terms and conditions
for similar type properties, and in no event shall any Borrower, absent Lender’s
prior written consent, enter into any Leases (i) other than residential
apartment leases having lease terms not in excess of two (2) years, or (ii) with
Affiliates of any Borrower Party. Borrowers shall pay to Lender upon demand all
costs and expenses of Lender, including reasonable attorneys’ fees, incurred in
connection with Lender’s review of any Lease.

     

    (B) All
Leases entered into after the Closing Date with new tenants (i.e. not renewals
of existing tenants as of the Closing Date) shall be written on Borrowers’
standard lease form currently in use which has been approved by Lender or such
other form of Lease reasonably approved in writing by Lender; provided that
notwithstanding the foregoing, the Borrowers may modify any standard lease form
without such approval to the extent necessary to conform such form to any
applicable Legal Requirements. Borrowers shall not materially change the
standard lease form without Lender’s prior written consent, which consent shall
not be unreasonably withheld or delayed, or except as necessary to comply with
applicable Legal Requirements.

     

    (C) Each
Borrower shall comply with, observe and perform all such Borrower’s obligations
as landlord under all Leases of such Borrower’s Applicable Individual Property
and shall not do or permit to be done anything to materially impair the value of
the Leases as security for the Obligations. Borrowers shall promptly send Lender
copies of any notices of default received from the tenant under any Lease and
shall enforce all of the material terms, covenants and conditions contained in
the Leases upon the part of the lessees thereunder to be observed or performed
and shall effect a termination or diminution of the obligations of tenants under
leases only in a manner that a prudent owner of a similar property to the
Properties would enforce such terms covenants and conditions or effect such
termination or diminution in the ordinary course of business.

     

    (D) Borrowers
shall not collect any of the Rents under Leases more than one (1) month in
advance (not including Security Deposits).

     

    (E) Borrowers
shall make all Leases available to Lender or, at Lender’s request upon the
occurrence and during the continuance of an Event of Default, shall furnish
Lender with executed copies of all Leases hereafter made (to the extent not
theretofore provided to Lender). Each Lease at an Individual Property shall
specifically provide that such Lease is subordinate to the Mortgage encumbering
such Individual Property; and that in no event shall Lender, as holder of such
Mortgage or as successor landlord, be liable to the tenant for any act or
omission of any prior landlord or for any liability or obligation of any prior
landlord occurring prior to the date that Lender or any subsequent owner acquire
title to such Individual Property. Each Lease entered into after the date
hereof, shall specifically provide that the tenant attorns to Lender, such
attornment to be effective upon Lender’s acquisition of title to such Individual
Property; that the tenant agrees to execute such further evidences of attornment
as Lender may from time to time reasonably request; and that the attornment of
the tenant shall not be terminated by foreclosure.

     


    
      
        
        

      

      
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    Section 5.13 Management and
Leasing. 

     

    (A) Borrowers
shall cause Manager to manage the each Individual Property in accordance with
the Management Agreement. Each Borrower shall (i) diligently perform and observe
all of the material terms, covenants and conditions of the Management Agreement
to which it is a party on the part of such Borrower to be performed and observed
and (ii) promptly notify Lender of any notice to any Borrower of any default
under any of the Management Agreement of which it is aware. If any Borrower
shall default in the performance or observance of any material term, covenant or
condition of the Management Agreement on the part of such Borrower to be
performed or observed beyond applicable notice and cure periods, then, without
limiting Lender’s other rights or remedies under this Agreement or the other
Loan Documents, and without waiving or releasing Borrowers from any of its
obligations hereunder or under the Management Agreement upon five (5) Business
Days’ notice to Borrowers, Lender shall have the right, but shall be under no
obligation, to pay any sums and to perform any act as may be appropriate to
cause all the material terms, covenants and conditions of the Management
Agreement on the part of such Borrower to be performed or observed. Borrowers
shall cause any new Manager to execute and deliver a subordination agreement
reasonably satisfactory to Lender at the time of execution and delivery of any
Management Agreement.

     

    (B) No
Borrower shall surrender, terminate, cancel, materially modify, renew or extend
such Management Agreement, or enter into any other Management Agreement with
Manager or any other Person, or consent to the assignment by the Manager of its
interest under the Management Agreement, in each case without the express
consent of Lender, which consent may be conditioned upon Borrowers delivering a
Rating Confirmation. If at any time Lender consents to the appointment of a new
Manager (which consent shall not be unreasonably withheld in the absence of an
Event of Default if a Rating Confirmation is obtained, or if Lender does not
require a Rating Confirmation), such new Manager and Borrowers shall, as a
condition of Lender’s consent, execute a subordination of management agreement
in the form delivered in connection with the closing of the Loan.

     

    (C) Lender
shall have the right to require Borrowers to replace the Manager with a Person
chosen by Lender, upon the earliest to occur of any one or more of the following
events: (i) the occurrence and continuance of an Event of Default; (ii) thirty
(30) days after notice from Lender to Borrowers that Manager has engaged in
fraud, gross negligence, malfeasance or willful misconduct arising from or in
connection with its performance under the Management Agreement, or Manager’s
default under the Management Agreement which is not cured within any applicable
cure period provided under the Management Agreement; (iii) a change in control
of Manager, or (iv) if the Debt Service Coverage Ratio shall be less than the
Minimum DSCR Threshold.

     

    Section 5.14 Material
Agreements. Except
for Leases complying with the Loan Documents and any Management Agreement
complying with the foregoing, no Borrower shall enter into or become obligated
under any material agreement pertaining to any of the Properties, including
brokerage agreements, unless the same may be terminated without cause and
without payment of a penalty or premium, on not more than thirty (30) days’
prior written notice.

     


    
      
        
        

      

      
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    Section 5.15 Certain VCOC
Provisions. Lender,
and its assignees and participants, shall have, the following additional rights
relating to the management of Borrowers: (i) the rights to discuss the business
operations, properties and financial and other condition of Borrowers including
significant business activities and business and financial developments, with
Borrowers’ officers, employees and directors; (ii) the right to submit proposals
or suggestions to Borrowers’ management with the requirement that Borrowers’
management discuss such advice, proposals or suggestions with the Lender within
a reasonable period after such submission considering them in good faith, in
meetings which shall occur no less frequently than bi-monthly; (iii) the right
to examine the books and records, operating reports, budgets and other financial
reports of the Borrowers on a regular basis, and to visit and inspect Borrowers’
facilities and to reasonably require information at reasonable times and
intervals concerning the general status of the Borrowers’ financial condition
and operations; (iv) the right to be notified of any material development to or
affecting Borrowers’ business and to consult with and advise management with
respect to such matters; (v) the right to discuss with management of Borrowers,
including management’s proposed reorganization plans and operating plan for
going forward after such plan of reorganization has been effected; and (vi) the
right to request from Borrowers in addition to the information provided pursuant
to this Agreement, when available, copies of all financial statements, forecasts
and projections provided to or approved by Borrowers’ management to its members
and/or such other business and financial data may be reasonably
requested.

     

    Section 5.16 Estoppel
Certificates. Within
ten (10) Business Days following a request by Lender, Borrowers shall provide to
Lender a duly acknowledged written statement confirming (i) the amount of the
outstanding principal balance of the Loan, (ii) the terms of payment and
maturity date of the Note, (iii) the date to which interest has been paid, (iv)
to the knowledge of Borrowers, whether any offsets or defenses exist against the
Obligations, and if any such offsets or defenses are alleged to exist, the
nature thereof shall be set forth in detail, (v) that this Loan Agreement, the
Note, the Mortgages and the other Loan Documents are valid, legal and binding
obligations of Borrowers and have not been modified or amended, or, if modified
or amended, giving particulars of any such modification or amendment, and (vi)
such other factual matters as Lender shall reasonably request.

     

    Section 5.17 Indebtedness. So long
as the Loan is outstanding, no Borrower shall, directly or indirectly create,
incur, assume, guaranty, or otherwise become or remain directly or indirectly
liable with respect to any Indebtedness except:

     

    (A) the
Obligations; and

     

    (B) unsecured
trade payables not evidenced by a note and arising out of purchases of goods or
services in the ordinary course of business and operation of the Properties;
provided that (i) each such trade payable is payable not later than sixty (60)
days after the original invoice date and is paid on or before the date when due
and (ii) the aggregate amount of such trade payables outstanding, with respect
to all of the Borrowers and all of the Properties taken as a whole, does not, at
any time, exceed $1,000,000. In no event shall any Indebtedness other than the
Loan be secured, in whole or in part, by any of the Properties or any portion
thereof or interest therein.

     


    
      
        
        

      

      
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    Section 5.18 Liens and Related
Matters. The
obligations of Borrower Parties under this Section are in addition to and not in
limitation of their obligations under Article XI herein. So long as the Loan is
outstanding:

     

    (A) No
Liens. No
Borrower shall directly or indirectly create, incur, assume, suffer, or permit
to exist any Lien on or with respect to any of the Properties, any other
Collateral or any direct or indirect ownership interest in any Borrower, except
Permitted Encumbrances.

     

    (B) No Negative
Pledges. No
Borrower shall enter into or assume any agreement (other than the Loan
Documents) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired.

     

    Section 5.19 Contingent
Obligations. No
Borrower shall directly or indirectly create or become or be liable with respect
to any Contingent Obligation

     

    Section 5.20 Restriction on Fundamental
Changes. Except
as otherwise expressly permitted under this Loan Agreement (or with the prior
written consent of Lender):

     

    (A) No
Borrower shall permit any other Person to, (i) amend, modify or waive any term
or provision of such Borrower’s partnership agreement, certificate of limited
partnership, articles of incorporation, by-laws, articles of organization,
certificate of formation, limited liability company agreement, operating
agreement, or other organizational documents relating to any of the
representations, warranties or covenants of Article IX of this Loan Agreement or
this Section 5.20 or any other material term or provision of such Borrower’s
organizational documents unless required by law; or (ii) liquidate, terminate,
wind up or dissolve such Borrower; or (iii) merge with or consolidate such
Borrower into another Person.

     

    (B) No
Borrower shall cancel or otherwise forgive or release any material claim or debt
owed to such Borrower by any Person, except for adequate consideration or in the
ordinary course of such Borrower’s business.

     

    (C) No
Borrower shall enter into any agreement which expressly restricts the ability of
such Borrower to enter into amendments, modifications or waivers of any of the
Loan Documents.

     

    (D) No
Borrower shall assign or transfer any of its interest in any licenses, permits,
variances and certificates obtained by such Borrower and used in connection with
the ownership, operation, use or occupancy of any of the Properties (including,
without limitation, business licenses, state health department licenses,
licenses to conduct business and all such other permits, licenses and rights,
obtained from any Governmental Authority or private Person concerning ownership,
operation, use or occupancy of the Properties).

     

    (E) Except as
specifically permitted herein pursuant to Article XI hereof, no Borrower shall,
nor shall any Borrower permit or suffer any other Person on its behalf, to (i)
issue, sell, assign, pledge, convey, dispose or otherwise encumber any stock,
membership interest, partnership interest, or other equity or beneficial
interest in such Borrower or (ii) grant any options, warrants, purchase rights
or other similar agreements or understandings with respect thereto.

     


    
      
        
        

      

      
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    (F) No
Borrower shall acquire by purchase or otherwise all or any part of the business
or assets of, or stock or other evidence of beneficial ownership of, any
Person.

     

    Section 5.21 Transactions with Related
Persons. Except
for fees payable to Manager under the Management Agreement, no Borrower shall
pay any management, consulting, director or similar fees to any Related Person
of any Borrower or to any director or manager (other than any customary fees of
the Independent Director), officer or employee of any Borrower. No Borrower
shall directly or indirectly enter into or permit to exist any transaction
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Related Person of any Borrower or with any
director, officer or employee of any Borrower Party, except transactions in the
ordinary course of and pursuant to the reasonable requirements of the business
of such Borrower and upon fair and reasonable terms which are no less favorable
to such Borrower than would be obtained in a comparable arm’s length transaction
with a Person that is not a Related Person of such Borrower. No Borrower shall
make any payment or permit any payment to be made to any Related Person of
Borrower when or as to any time when any Event of Default shall
exist.

     

    Section 5.22 ERISA. 

     

    (A) No ERISA
Plans. No
Borrower shall establish any Employee Benefit Plan, Pension Plan or
Multiemployer Plan, or will commence making contributions to (or become
obligated to make contributions to) any Employee Benefit Plan, Pension Plan or
Multiemployer Plan.

     

    (B) Compliance with
ERISA. No
Borrower shall: (i) engage in any Prohibited Transaction; or (ii) permit the
establishment of any Employee Benefit Plan providing post-retirement welfare
benefits or establish or amend any Employee Benefit Plan which establishment or
amendment could result in liability to any Borrower or any ERISA Affiliate or
increase the obligation of any Borrower. In addition to the prohibitions set
forth in Article XI hereof, and not in limitation thereof, no Borrower shall
Transfer its interest or rights in this Agreement or in any of the Properties,
or attempt to do any of the foregoing or suffer any of the foregoing, nor shall
any Person owning a direct or indirect interest in any Borrower Transfer any of
its rights or interest (direct or indirect) in any Borrower, attempt to do any
of the foregoing or suffer any of the foregoing, nor shall any Borrower or any
Person owning a direct or indirect interest in any Borrower take, without
limitation, any action or fail to take any action, if, in any such case, doing
so would (i) cause the Loan or the exercise of any of Lender’s rights in
connection therewith to constitute a Prohibited Transaction (unless Borrowers
furnish a legal opinion reasonably satisfactory to Lender that the same is
exempt from the Prohibited Transaction provisions or ERISA and the IRC or
otherwise does not constitute a Prohibited Transaction), assuming solely for
this purpose that Lender is a Party In Interest or a Disqualified Person with
respect to an employee benefit plan, if any, which has directly or indirectly
invested in any Borrower or Sole Member, or (ii) otherwise result in Lender
being deemed in violation of any applicable provisions of ERISA with respect to
the Loan. Each Borrower and Sole Member shall take such steps as are necessary
to assure that each of them (and their respective shareholders, partners and
members) does not commit any act, or fail to commit any act, the occurrence of
which or the failure of which to occur would cause the Loan to be Prohibited
Transaction.

     


    
      
        
        

      

      
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    (C) No Plan
Assets.
No Plan
Assets. No
Borrower shall at any time during the term of this Loan Agreement become (1) an
employee benefit plan defined in Section 3(3) of ERISA which is subject to
ERISA, (2) a plan as defined in Section 4975(e)(1) of the IRC which is subject
to Section 4975 of the IRC, (3) a “governmental plan” within the meaning of
Section 3(32) of ERISA or (4) an entity any of whose underlying assets
constitute “plan assets” of any such employee benefit plan, plan or governmental
plan for purposes of Title I or ERISA, Section 4975 of the IRC or any state
statutes applicable to any Borrower regulating investments of governmental
plans. Borrowers shall deliver to Lender such certification or other evidence
from time to time throughout the term of the Loan, as reasonably requested by
Lender that the assets of each Borrower do not and will not constitute “plan
assets” for the purposes of Title I of ERISA of any “employee benefit plan” as
defined in Section 3 (3) of ERISA, which is subject to Title I or ERISA because
any Borrower is a Real Estate Operating Company as defined in the U.S.
Department of Labor Asset Regulation (29 C.F.R. 2510.3-101(e)). For so long as
any portion of the Loan is outstanding, each Borrower shall comply with all
requirements and take all actions necessary to maintain such Borrower’s status
as a “Real Estate Operating Company” under the U.S. Department of Labor Plan
Asset Regulations and to otherwise operate so as to continue to qualify as a
“Real Estate Operating Company” under the Plan Asset Regulations (29 C.F.R.
2510.3-101(e)) such that such Borrower will not be deemed to be an “employee
benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I
of ERISA, and the assets of such Borrower will not be deemed to constitute “plan
assets” of one or more such plans for the purposes of Title 1 of ERISA.
Notwithstanding the foregoing, for so long as long as any portion of the Loan is
outstanding, no transfer, restructuring, mergers or changes of control with
respect to any Borrower shall be permitted to the extent same would cause any
Borrower to no longer be a ‘Real Estate Operating Company’ under the Plan Asset
Regulations.

     

    (D) Indemnification. If the
provisions of this Section 5.22 are violated, Borrowers agree, at their own cost
and expense, to take such steps Lender shall reasonably request to prevent the
occurrence of a Prohibited Transaction or to correct the occurrence of a
Prohibited Transaction. Borrowers agree, jointly and severally, to indemnify,
defend and hold the Indemnified Parties free and harmless from and against all
loss, costs (including, without limitation, reasonable attorney’s fees and
expenses), taxes, penalties, damages and expenses any Indemnified Party may
suffer by reason of the investigation, defense and settlement of claims based
upon a breach of the foregoing provisions. The foregoing indemnification shall
survive repayment of the Loan.

     

    Section 5.23 Lender’s
Expenses.
Borrowers shall pay, on demand by Lender, all reasonable expenses, charges,
costs and fees (including reasonable attorneys’ fees and expenses) in connection
with the negotiation, documentation, closing, administration, servicing,
enforcement, interpretation, and collection of the Loan and the Loan Documents,
and in the preservation and protection of Lender’s rights hereunder and
thereunder. Without limitation of the foregoing, the Borrowers shall pay all
costs and expenses, including reasonable attorneys’ fees, incurred by Lender in
any case or proceeding under Title 11 of the United States Code (or any law
succeeding or replacing any of the same). At the Closing, Lender is authorized
to pay directly from the proceeds of the Loan any or all of the foregoing
expenses then or theretofore incurred.

     

    Section 5.24 Environmental Matters;
Inspection. 

     

    (A) Borrowers
shall not permit any Hazardous Materials to be present on, under or to emanate
from any of the Properties, or migrate from adjoining property controlled by any
Borrower onto or into any of the Properties, except under conditions permitted
by applicable Environmental Laws and, in the event that such Hazardous Materials
are present on, under or emanate from any of the Properties, or migrate onto or
into any of the Properties, Borrowers shall cause the removal or remediation of
such Hazardous Materials, in accordance with this Loan Agreement and
Environmental Laws (including, where applicable, the National Contingency Plan
promulgated pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act). Borrowers shall use their best efforts to prevent, and to
seek the remediation of, any migration of Hazardous Materials onto or into any
of the Properties from any adjoining property.

     


    
      
        
        

      

      
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    (B) Upon
reasonable prior written notice, Lender shall have the right at all reasonable
times to enter upon and inspect all or any portion of any of the Individual
Properties, provided that such inspections shall not unreasonably interfere with
the operation or the tenants, residents or occupants of the applicable
Individual Property. If Lender has reasonable grounds to suspect that remedial
actions may be required, Lender shall notify Borrowers and, thereafter, may
select a consulting engineer to conduct and prepare reports of such inspections
(with notice to Borrowers prior to the commencement of such inspection).
Provided no Event of Default exists, Borrowers shall be given a reasonable
opportunity to review any reports, data and other documents or materials
reviewed or prepared by the engineer, and to submit comments and suggested
revisions or rebuttals to same. The inspection rights granted to Lender in this
Section 5.24 shall be in addition to, and not in limitation of, any other
inspection rights granted to Lender in this Loan Agreement, and shall expressly
include the right (if Lender suspects that remedial actions may be required) to
conduct soil borings, establish ground water monitoring wells and conduct other
customary environmental tests, assessments and audits.

     

    (C) Borrowers
agrees to bear and shall pay or reimburse Lender on demand for all sums advanced
and expenses incurred (including reasonable attorneys’ fees and disbursements,
but excluding internal overhead, administrative and similar costs of Lender)
reasonably relating to, or incurred by Lender in connection with, the
inspections and reports described in this Section 5.24 (to the extent such
inspections and reports relate to any of the Properties) in the following
situations:

     

    (i) If Lender
has reasonable grounds to believe, at the time any such inspection is ordered,
that there exists an occurrence or condition that could lead to an Environmental
Claim;

     

    (ii) If any
such inspection reveals an occurrence or condition that is reasonably likely to
lead to an Environmental Claim; or

     

    (iii) If an
Event of Default exists at the time any such inspection is ordered, and such
Event of Default relates to any representation, covenant or other obligation
pertaining to Hazardous Materials, Environmental Laws or any other environmental
matter.

     

    Section 5.25 Environmental
Claims. Lender
may join and participate in, as a party if Lender so determines, any legal or
administrative proceeding or action concerning the Properties or any portion
thereof under any Environmental Law, if, in Lender’s reasonable judgment, the
interests of Lender shall not be adequately protected by Borrowers; provided,
however, that Lender shall not participate in day-to-day decision making with
respect to environmental compliance. Borrowers shall pay or reimburse Lender on
demand for all reasonable sums advanced and expenses incurred (including
reasonable attorneys’ fees and disbursements, but excluding internal overhead,
administrative and similar costs of Lender) incurred by Lender in connection
with any such action or proceeding.

     


    
      
        
        

      

      
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    Section 5.26 Environmental
Indemnification.
Borrowers shall, jointly and severally, indemnify, reimburse, defend, and hold
harmless Lender and its parent, subsidiaries, Affiliates, shareholders,
directors, officers, employees, representatives, agents, successors, assigns and
attorneys (collectively, the “Indemnified
Parties”) for,
from, and against all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs and expenses (including, without limitation,
interest, penalties, reasonable attorneys’ fees, disbursements and expenses, and
reasonable consultants’ fees, disbursements and expenses (but excluding internal
overhead, administrative and similar costs of Lender)), asserted against,
resulting to, imposed on, or incurred by any Indemnified Party, directly or
indirectly, in connection with any of the following (except to the extent same
are directly and solely caused by the fraud, bad faith, gross negligence or
willful misconduct of any Indemnified Party:

     

    (i) events,
circumstances, or conditions which are alleged to, or do, form the basis for an
Environmental Claim;

     

    (ii) any
pollution or threat to human health or the environment that is related in any
way to any Borrower’s or any previous owner’s or operator’s management, use,
control, ownership or operation of any of the Properties (including, without
limitation, all on-site and off-site activities involving Hazardous Materials),
and whether occurring, existing or arising prior to or from and after the date
hereof, and whether or not the pollution or threat to human health or the
environment is described in the Environmental Reports;

     

    (iii) any
Environmental Claim against any Person whose liability for such Environmental
Claim any Borrower has or may have assumed or retained either contractually or
by operation of law; or

     

    (iv) the
breach of any representation, warranty or covenant set forth in Section 5.7 or
any of Sections 5.24 through 5.26, inclusive.

     

    The
provisions of and undertakings and indemnification set forth in this Section
5.26 shall survive the satisfaction and payment of the Indebtedness and
termination of this Loan Agreement.

     

    Section 5.27 Operation of
Properties.
Borrowers shall cause the operation of each Individual Property to be conducted
at all times in a manner consistent with at least the level of operation of such
Individual Property as of the Closing Date for the Loan, including, without
limitation, the following:

     


    
      
        
        

      

      
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    (i) to
maintain or cause to be maintained the standard of each Individual Property at
all times at a level not lower than that maintained by prudent managers of
similar facilities or land in the region where the Individual Property in
question is located;

     

    (ii) to
operate or cause to be operated each Individual Property in a prudent manner in
compliance in all material respects with applicable Legal Requirements and
Insurance Requirements relating thereto and maintain or cause to be maintained
all licenses, permits and any other agreements necessary for the continued use
and operation of the Individual Property in question; and

     

    (iii) to
maintain or cause to be maintained sufficient inventory, equipment and other
personal property of types and quantities at each Individual Property to enable
Borrowers to operate the Individual Property in question and to comply with all
Leases affecting such Individual Property.

     

    Section 5.28 Taxes on
Security.
Borrowers shall pay all taxes, charges, filing, registration and recording fees,
excises and levies payable with respect to the Note or the Lien created or
secured by the Loan Documents, other than income, franchise, doing business and
other analogous taxes imposed on Lender. If there shall be enacted any law (1)
deducting the Loan from the value of the Collateral for the purpose of taxation,
(2) affecting Lender’s Lien on the Collateral or (3) changing existing laws of
taxation of mortgages, deeds of trust, security deeds, or debts secured by
realty, or changing the manner of collecting any such taxes, then Borrowers
shall promptly pay to Lender, on demand, all taxes, costs and charges for which
Lender is or may be liable as a result thereof; provided, however, if such
payment would be prohibited by law or would render the Loan usurious, then
instead of collecting such payment, Lender may declare all amounts owing under
the Loan Documents to be immediately due and payable.

     

    Section 5.29 Cooperate in Legal
Proceedings.
Borrowers shall reasonably cooperate with Lender with respect to any proceedings
before any Governmental Authority which may in any way materially affect the
rights of Lender hereunder or any rights obtained by Lender under any of the
Loan Documents and, in connection therewith, shall not prohibit Lender, at its
election, from participating in any such proceedings.

     

    Section 5.30 Insurance
Benefits.
Borrowers shall reasonably cooperate with Lender in obtaining for Lender the
benefits of any insurance proceeds lawfully or equitably payable to Lender in
connection with any of the Properties. Lender shall be reimbursed for any
expenses reasonably incurred in connection therewith (including reasonable
attorneys’ fees and disbursements and the payment by the Borrowers of the
expense of an appraisal on behalf of Lender in case of a fire or other casualty
affecting any of the Properties or any part thereof, but excluding internal
overhead, administrative and similar costs of Lender) out of such insurance
proceeds, all as more specifically provided in this Loan Agreement.

     

    Section 5.31 Prohibited
Persons.
Borrowers covenant and agree that none of Borrowers, Guarantor, nor any of their
respective Affiliates, officers, directors, partners or members will knowingly:
(i) conduct any business, nor engage in any transaction or dealing, with any
Prohibited Person, including, but not limited to, the making or receiving of any
contribution of funds, goods, or services, to or for the benefit of a Prohibited
Person; or (ii) engage in or conspire to engage in any transaction that evades
or avoids, or has the purpose of evading or avoiding, or attempts to violate,
any of the prohibitions set forth in EO13224. Borrowers further covenant and
agree to deliver (from time to time) to Lender any such certification or other
evidence as may be requested by Lender in its sole and absolute discretion,
confirming that: (x) none of Borrowers, Guarantor, nor their respective
officers, directors, partners, members or Affiliates is a Prohibited Person; and
(y) none of Borrowers, Guarantor, nor their respective officers, directors,
partners, members or Affiliates has to its knowledge engaged in any business
transaction or dealings with a Prohibited Person, including, but not limited to,
the making or receiving of any contribution of funds, goods, or services, to or
for the benefit of a Prohibited Person.

     


    
      
        
        

      

      
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    ARTICLE VI

    RESERVES

     

    Section 6.1 Security Interest in
Reserves; Other Matters Pertaining to Reserves. 

     

    (A) Each
Borrower hereby pledges, assigns and grants to Lender a security interest in and
to all of such Borrower’s right, title and interest in and to the Reserves, as
security for payment and performance of all of the Obligations hereunder and
under the Note and the other Loan Documents. The Reserves constitute Account
Collateral and are subject to the security interest in favor of Lender created
herein and all provisions of this Loan Agreement and the other Loan Documents
pertaining to Account Collateral.

     

    (B) In
addition to the rights and remedies provided in Article VII and elsewhere
herein, upon the occurrence of any Event of Default, Lender shall have all
rights and remedies pertaining to the Reserves as are provided for in any of the
Loan Documents or under any applicable law. Without limiting the foregoing, upon
and at all times after the occurrence and during the continuance of any Event of
Default, Lender in its sole and absolute discretion, may use the Reserves (or
any portion thereof) for any purpose, including but not limited to any
combination of the following: (i) payment of any of the Obligations including
the Prepayment Consideration applicable upon such payment in such order as
Lender may determine in its sole discretion; provided,
however, that
such application of funds shall not cure or be deemed to cure any default; (ii)
reimbursement of Lender for any losses or expenses (including, without
limitation, reasonable legal fees) suffered or incurred as a result of such
Event of Default; (iii) payment for the work or obligation for which such
Reserves were reserved or were required to be reserved; and (iv) application of
the Reserves in connection with the exercise of any and all rights and remedies
available to Lender at law or in equity or under this Loan Agreement or pursuant
to any of the other Loan Documents.

     

    Section 6.2 Funds Deposited with
Lender. 

     

    (A) Interest,
Offsets. Except
only as expressly provided otherwise herein, all funds of any Borrower which are
deposited with Lender as Reserves hereunder shall be held by Lender in one or
more Permitted Investments. Lender is authorized to commingle any of the
Reserves with each other and with any other funds held by Lender. All interest
which accrues on the Reserves shall be taxable to Borrowers and shall be added
to and disbursed in the same manner and under the same conditions as the
principal sum on which said interest accrued. Additional provisions pertaining
to investments are set forth in Article VII.

     


    
      
        
        

      

      
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    (B) Funding at
Closing.
Borrowers shall deposit with Lender the amounts necessary to fund each of the
Reserves as set forth below. Deposits into the Reserves at Closing may occur by
deduction from the amount of the Loan that otherwise would be disbursed to
Borrowers, followed by prompt deposit of the same into the applicable
Sub-Account of the Deposit Account in accordance with the terms hereof.
Notwithstanding such deductions, the Loan shall be deemed for all purposes to be
fully disbursed at Closing.

     

    Section 6.3 Impositions and Insurance
Reserve. On the
Closing Date, Borrowers shall deposit with Lender (or such agent of Lender as
Lender may designate in writing to Borrowers from time to time) $___________,
and thereafter Borrowers shall deposit with Lender monthly, on each Payment Date
commencing with the First Payment Date, 1/12th of the annual charges (as
estimated by Lender) for all Impositions and Insurance Premiums payable with
respect to the Properties hereunder (said funds, together with any interest
thereon and any additions thereto, the “Impositions and Insurance
Reserve”).
Borrowers shall also deposit with Lender on demand, to be added to and included
within such reserve, a sum of money which Lender reasonably estimates, together
with such monthly deposits, will be sufficient to make the payment of each such
charge at least thirty (30) days prior to the date initially due. Borrowers
shall provide Lender with bills and all other documents necessary for the
payment of the foregoing charges at least thirty (30) days prior to the date on
which each payment shall first become due. So long as (i) no Event of Default
has occurred and is continuing, (ii) Borrowers have provided Lender with the
foregoing bills and other documents in a timely manner, and (iii) sufficient
funds are held by Lender for the payment of the Impositions and Insurance
Premiums (if applicable) relating to the Properties, Lender shall pay said items
or disburse to Borrowers from such Reserve amounts sufficient to pay said
items.

     

    Section 6.4 Replacement
Reserve.
Borrowers shall deposit with Lender monthly, on each Payment Date commencing
with the First Payment Date, $25,425 for the purpose of creating a reserve for
Capital Expenditures (said funds, together with any interest thereon and
additions thereto, the “Replacement
Reserve”). The
funds contained in the Replacement Reserve shall be utilized solely to reimburse
Borrowers for the actual bona fide out-of-pocket cost of Capital Expenditures
performed during the term of the Loan in accordance with the schedule of
permitted capital expenditures attached hereto as Schedule
6.4, or for
such other Capital Expenditures as are approved by Lender for disbursements from
the Replacement Reserve (“Approved Capital
Expenditures”), and
shall not be used by any Borrower for purposes for which any other Reserve is
established. Upon Borrowers’ written request for disbursement, Lender shall
disburse funds from the Replacement Reserve to or for the account of Borrowers,
to reimburse Borrowers for such Approved Capital Expenditures, on the Payment
Date following such request, upon satisfaction of each of the conditions listed
on Schedule
6.6 and each
of the conditions set forth in Section 6.6.

     

    Section 6.5 Security
Deposits. 

     

    (A) To the
extent any of the Borrowers elect to collect Security Deposits, such Security
Deposits shall be held by each such Borrower in a segregated account at the
Clearing Account Bank and disbursed by such Borrower in accordance with the
terms of the applicable Lease and all Legal Requirements.

     


    
      
        
        

      

      
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    (B) If any
tenant under any Lease with respect to which Lender holds a Security Deposit
defaults such that the Security Deposit is to be drawn upon on account of such
default, Borrower shall promptly deposit such Security Deposit into the Clearing
Account and such Security Deposit shall be included as a Receipt.

     

    (C) Upon the
occurrence of an Event of Default, Borrowers or Manager shall deposit all
Security Deposits being held or received by Borrowers or Manager into the
Deposit Account for allocation to the Security Deposit Sub-Account.

     

    Section 6.6 Conditions to Disbursements
from the Replacement Reserve; Performance of Work. 

     

    (A) Disbursements from the
Replacement Reserve. Upon
Borrowers’ request for disbursement, Lender shall disburse funds from the
Replacement Reserve to or for the account of Borrowers, to reimburse Borrowers
for Approved Capital Expenditures (the “Approved
Expenditures”; and
the related Capital Expenditures to which any such request for disbursement
relates shall be referred to as the “Work”), on
the Payment Date following such request, upon satisfaction of each of the
conditions listed on Schedule
6.6 and each
of the conditions set forth below:

     

    (i) Except as
provided in this Section 6.6, each request for disbursement from the Replacement
Reserve shall be made only after completion of the Approved Expenditures for
which disbursement is requested.

     

    (ii) If (1)
the cost of a particular item of the Approved Expenditures exceeds $25,000, (2)
the contractor performing such item of the Approved Expenditures requires
periodic payments pursuant to the terms of a written contract, and (3) Lender
has approved in writing in advance such periodic payments (such approval not to
be unreasonably withheld or delayed), a request for disbursement from the
Replacement Reserve may be made after completion of a portion of the work under
such contract, provided (v) such contract requires payment upon completion of
such portion of the work, (w) the materials for which the request is made are on
site at the Individual Property at which the Work is performed and are properly
secured or have been installed in such Individual Property, (x) all other
conditions in this Loan Agreement for disbursement have been satisfied, (y)
funds remaining in the Replacement Reserve together with the amounts that are
scheduled to be deposited therein by Borrowers are, in Lender’s reasonable
judgment, sufficient to complete such item of Approved Capital Expenditures, and
(z) if required by Lender, each contractor or subcontractor receiving payments
under such contract shall provide a waiver of lien with respect to amounts which
have been paid to that contractor or subcontractor.

     

    (iii) Each
disbursement from the Replacement Reserve, except for a final disbursement,
shall be in the amount of actual costs incurred for completed Work (as certified
by an Approved Architect) less a retainage equal to ten percent (10%) of such
costs incurred until such Work has been completed. The retainage shall in no
event be less than the percentage of such costs that the contract with the
relevant contractor or supplier specifies to be retained and advanced as part of
the final disbursement. No funds will be advanced for materials stored at any
Individual Property unless such materials are properly stored and secured at
such Individual Property in accordance with the Borrowers’ customary procedures
and sound construction practices as reasonably determined by Lender. The
retainage shall not be released until the Approved Architect certifies to Lender
that the Work has been completed substantially in accordance with the provisions
of this Section 6.6 and that all material approvals necessary for occupancy and
use of the subject leased space at the applicable Individual Property have been
obtained from all appropriate Governmental Authorities, and Lender receives
evidence reasonably satisfactory to Lender that the costs of the Work have been
paid in full or will be paid in full out of the retainage.

     


    
      
        
        

      

      
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    (iv) The
amount of all invoices in connection with the Work with respect to which a
disbursement is requested and which has been approved by Lender shall be
disbursed by Lender either directly to Borrowers (in which event, Borrowers
covenant and agree to promptly pay such invoices) or, if an Event of Default has
occurred and is continuing, at Lender’s option and in Lender’s sole and absolute
discretion, directly to the contractor, supplier, materialman, mechanic or
subcontractor indicated on said invoices unless already paid by Borrowers and
Lender has received satisfactory evidence of such payment in which case Lender
shall reimburse Borrowers. In the event that Borrowers request that any amounts
be disbursed directly to Borrowers pursuant to the foregoing sentence, Borrowers
shall be required to deliver evidence reasonably acceptable to Lender of payment
of all invoices for which disbursements were previously made to Borrowers as a
condition to such requested disbursement.

     

    (v) No more
than one disbursement will be made by Lender from the Replacement Reserve in any
calendar month, and no disbursement will be made on any day other than a Payment
Date. Lender shall not be required to make any disbursement from the Replacement
Reserve with respect to any Individual Property unless such requested
disbursement is in an amount equal to or greater than $10,000.

     

    (vi) Lender
reserves the right, at its option and as a condition to any disbursement from
the Replacement Reserve, to approve (1) all drawings and plans and
specifications, if any, for any Work which require aggregate payments in amounts
exceeding $25,000, and (2) all contracts and work orders with materialmen,
mechanics, suppliers, subcontractors, contractors and other parties providing
labor or materials in connection with any Work which require aggregate payments
in amounts exceeding $25,000. Any such approval shall not be unreasonably
withheld, conditioned or delayed and shall be deemed given if Lender fails to
respond within ten (10) Business Days after Lender receives all information
reasonably required to adequately review such drawings, plans and
specifications, contracts or work orders.

     

    (vii) For any
Work which requires aggregate payments in amounts exceeding $25,000 or is
structural in nature or relates to the fire life safety systems at any of the
Individual Properties, Lender may require an inspection of the applicable
Individual Property prior to making a monthly disbursement from the Replacement
Reserve in order to verify completion of the Work for which disbursement is
sought. Lender may require that such inspection be conducted by an appropriate
independent qualified architect or engineer selected by Lender and/or may
require a copy of a certificate of completion by an independent qualified
architect or engineer licensed in the state where the applicable Individual
Property is located and otherwise acceptable to Lender prior to the disbursement
of any amounts from the Replacement Reserve. Borrowers shall pay the reasonable,
out-of-pocket expense of such inspections as required hereunder, whether such
inspections are conducted by Lender or by an independent qualified professional,
up to a maximum of four (4) such inspections during any calendar year. If Lender
should require more than four (4) such inspections during any calendar year,
unless an Event of Default has occurred during such calendar year, the expense
of each additional inspection in any calendar year (over the four maximum) shall
be borne by Lender.

     


    
      
        
        

      

      
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    (B) Performance of
Work.

     

    (i) Borrowers
shall complete all Work in a good and workmanlike manner as soon as practicable
following the commencement thereof in accordance with all Legal Requirements.
The insufficiency of the balance in the Replacement Reserve shall not relieve
Borrowers from its obligation to perform and complete the related Work as herein
provided or to fulfill all other preservation and maintenance covenants in the
Loan Documents.

     

    (ii) In the
event Lender determines in its reasonable discretion that any Work is not being
performed in a workmanlike or timely manner or that any Work has not been
completed in a workmanlike manner, Lender shall have the option to withhold
disbursement for such unsatisfactory work and so notify Borrowers with
reasonable detail regarding the basis for Lender’s dissatisfaction and, after
the expiration of thirty (30) days from the giving of such notice by Lender to
Borrowers of such unsatisfactory work without the cure thereof (or, if such
unsatisfactory work is susceptible of a cure but cannot reasonably be cured
within said thirty (30) day period and provided that Borrowers shall have
commenced to cure such unsatisfactory work within said thirty (30) day period
and thereafter diligently and expeditiously proceeds to cure the same, after the
expiration of such longer period as is reasonably necessary for Borrowers in the
exercise of due diligence to cure such unsatisfactory work, up to a maximum of
an additional sixty (60) days, without the cure thereof), Lender may proceed
under existing contracts or contract with third parties to complete such Work,
as the case may be, and apply amounts contained in the Replacement Reserve
toward the labor and materials necessary to complete the same, without providing
any additional prior notice to Borrowers, and exercise any and all other
remedies available to Lender upon and during the continuance of an Event of
Default hereunder.

     

    (iii) In order
to facilitate Lender’s completion or making of any Work pursuant to Section
6.6(B)(ii) above, Borrowers grant Lender the right to enter onto the Properties
after the expiration of the notice specified above and perform any and all work
and labor necessary to complete the applicable Work and/or employ watchmen to
protect the Properties from damage. All sums so expended by Lender shall be
deemed to have been advanced under the Loan to Borrowers and secured by the
Mortgages. For this purpose, each Borrower constitutes and appoints Lender its
true and lawful attorney-in-fact with full power of substitution to complete or
undertake the applicable Work in the name of such Borrower pursuant to Section
6.6(B)(ii) above. Such power of attorney shall be deemed to be a power coupled
with an interest and cannot be revoked. Each Borrower empowers said
attorney-in-fact as follows: (1) to use any funds in the Replacement Reserve for
the purpose of making or completing any Work; (2) to make such additions,
changes and corrections to any Work as shall be reasonably necessary or
desirable to complete the same; (3) to employ such contractors, subcontractors,
agents, architects and inspectors as shall be required for such purposes; (4) to
pay, settle or compromise all existing bills and claims which are or may become
Liens against any of the Properties, or as may be necessary or desirable for the
completion of any Work, or for clearance of title; (5) to execute all
applications and certificates in the name of such Borrower which may be required
by any of the contract documents; (6) in its reasonable discretion, to prosecute
and defend all actions or proceedings in connection with the Properties or the
rehabilitation and repair of the Properties; and (7) to do any and every act
which such Borrower might do in its own behalf to fulfill the terms of this Loan
Agreement.

     


    
      
        
        

      

      
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    (iv) Nothing
in this Section shall: (1) make Lender responsible for making or completing any
Work; (2) require Lender to expend funds in addition to the amounts on deposit
in the Replacement Reserve to make or complete any Work; (3) obligate Lender to
proceed with any Work; or (4) obligate Lender to demand from any Borrower
additional sums to make or complete any Work.

     

    (v) Borrowers
shall permit Lender and Lender’s agents and representatives (including, without
limitation, Lender’s engineer, architect or inspector) or third parties
performing any Work pursuant to this Section 6.6 to enter onto the Properties
during normal business hours upon reasonable prior notice (subject to the rights
of tenants under their Leases) to inspect the progress of any Work and all
materials being used in connection therewith, to examine all plans and shop
drawings relating thereto which are or may be kept at the Properties, and to
complete any Work made pursuant to Section 6.6(B)(ii). Borrowers shall cause all
contractors and subcontractors to cooperate with Lender or Lender’s
representatives or such other persons described above in connection with
inspections described in this Section 6.6(B) or the completion of the Work
pursuant to this Section 6.6(B).

     

    (vi) All Work
and all materials, equipment, fixtures and any other item comprising a part
thereof shall be constructed, installed or completed, as applicable, free and
clear of all mechanic’s, materialman’s or other liens (except for the Permitted
Encumbrances).

     

    (vii) All Work
performed at an Individual Property shall comply with all applicable legal
requirements of all Governmental Authorities having jurisdiction over such
Individual Property and applicable insurance requirements, including, without
limitation, applicable building codes, special use permits, environmental
regulations and requirements of insurance underwriters.

     

    (C) Indemnification.
Borrowers shall, jointly and severally, indemnify Lender and hold Lender
harmless from and against any and all actions, suits, claims, demands,
liabilities, losses, damages, obligations, costs and expenses (including,
without limitation, litigation costs and reasonable attorneys fees and expenses)
arising from or in any way connected with the performance of the Work, except to
the extent caused by the bad faith, willful misconduct or gross negligence of
Lender. Each Borrower shall assign to Lender all rights and claims such Borrower
may have against all Persons supplying labor or materials in connection with the
Work; provided,
however, that
Lender may not pursue any such right or claim unless an Event of Default has
occurred and remains uncured.

     


    
      
        
        

      

      
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    Section 6.7 Completion/Repair
Reserve. At
Closing, Borrowers shall reserve from the proceeds of the Loan and shall deposit
with Lender (or such agent of Lender as Lender may designate in writing from
time to time), an amount equal to $850,527 (said funds, together with any
interest thereon and additions thereto, the “Completion/Repair
Reserve”) for
certain work related to immediate physical repairs required on the Properties as
indicated in the Property Condition Reports and/or Environmental Reports for the
Individual Properties prepared and delivered prior to the Closing and as such
work is more particularly described on Schedule
6.7 (the
“Immediate
Repairs”).
Within 120 days after the Closing, Borrowers shall complete such Immediate
Repairs and shall provide to Lender such documentation, and other evidence of
compliance with law as Lender may reasonably require. The funds contained in the
Completion/Repair Reserve shall be utilized by Borrowers solely for performance
of the Immediate Repairs in accordance with the recommendations of the Property
Condition Reports or Environmental Reports, as applicable, and in accordance
with Lender’s reasonable requirements with respect to such Immediate Repairs,
and shall not be used by any Borrower for purposes for which any other Reserve
is established. Upon written application of Borrowers, Borrowers shall be
entitled to draw upon the Completion/Repair Reserve to pay for costs that have
been incurred by Borrowers for such Immediate Repairs, provided that (i) no
Event of Default has occurred and is continuing, (ii) Borrowers shall provide to
Lender such documentation and certifications as Lender may reasonably request to
substantiate the requirement for and entitlement to such disbursement, (iii)
Borrowers shall provide Lender with all invoices, receipts, lien waivers and
other documentation of lawful and workmanlike progress or completion, lien-free
status, and availability of sufficient funds, all as may be reasonably requested
by Lender, and (iv) Borrowers shall provide Lender such evidence as may be
reasonably satisfactory to Lender that after payment of any draw for Immediate
Repairs, the funds remaining in such Reserve shall be sufficient to pay for the
remainder of such Immediate Repairs. Subject to the foregoing conditions,
Borrowers shall be entitled to draw any remaining balance in the
Completion/Repair Reserve when all such Immediate Repairs have been completed to
Lender’s reasonable satisfaction and have been paid for.

     

    ARTICLE VII

    DEPOSIT ACCOUNT; CASH
MANAGEMENT

     

    Section 7.1 Establishment of
Accounts. 

     

    (A) Clearing Account/Deposit
Account.
Borrowers acknowledge and confirm that, on or before the Closing Date and
pursuant to the terms hereof, Borrowers have established and will maintain (i)
one or more an Eligible Accounts for the benefit of the Lender, as secured party
hereunder, to serve (collectively, if more than one) as the “Clearing Account”
(said account(s), and any account(s) replacing the same in accordance with this
Loan Agreement, the “Clearing
Account”; and
the depositary institution in which the Clearing Account is maintained is
referred to as the “Clearing Account
Bank”) and
(ii) an Eligible Account for the benefit of Lender, as secured party hereunder,
to service as the “Deposit Account” (said account, and any account replacing the
same in accordance with this Loan Agreement, the “Deposit
Account”; and
the depositary institution in which the Deposit Account is maintained, the
“Deposit Account
Bank”; the
Clearing Account Bank and the Deposit Account Bank are sometimes collectively
referred to herein as the “Account
Banks”). The
Clearing Account and the Deposit Account shall be under the sole dominion and
control of Lender (which dominion and control may be exercised by Servicer); and
except as expressly provided hereunder, Borrowers shall have no rights to
control or direct the investment or payment of funds therein. Lender may elect
to change any financial institution in which any of the Clearing Account and/or
the Deposit Account shall be maintained. The Deposit Account shall be deemed to
contain such sub-accounts as Lender may designate (“Sub-Accounts”), which
may be maintained as separate ledger accounts and need not be separate Eligible
Accounts. The Sub-Accounts shall include the following:

     


    
      
        
        

      

      
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    (i) “Debt Service
Sub-Account” shall
mean the Sub-Account of the Deposit Account established for the purposes of
reserving for payments of the Monthly Debt Service Payments and other amounts
due Lender under the Loan Documents.

     

    (ii) “Reserve
Sub-Accounts” shall
mean the Sub-Accounts of the Deposit Account established for the purpose of
holding funds in the Reserves including: (a) the “Impositions and Insurance
Reserve Sub-Account” (which
shall hold the Impositions and Insurance Reserve); (b) the “Replacement Reserve
Sub-Account” (which
shall hold the Replacement Reserve); (c) the “Completion/Repair Reserve
Sub-Account” (which
shall hold the Completion/Repair Reserve); and (d) “Supplemental Debt Reserve
Sub-Account”.

     

    (iii) “Operating Expenses
Sub-Account” shall
mean the Sub-Account of the Deposit Account established for the purposes of
reserving for payments for Operating Expenses.

     

    (iv) “Security Deposit
Sub-Account” shall
mean the Sub-Account of the Deposit Account established for the purpose of
holding Security Deposits.

     

    (B) Account
Name. The
Accounts shall each be in the name of Lender, as secured party, or, at Lender’s
option, in the name of the Borrowers for the benefit of Lender, as secured
party; provided, however, that in the event Lender transfers or assigns the
Loan, the Account Banks, at Lender’s request, shall change the name of each
Account or the beneficiary thereof to the name of the transferee or assignee. In
the event Lender retains a Servicer to service the Loan, the Account Banks, at
Lender’s request, shall change the name of each Account or the beneficiary
thereof to the name of Servicer, as agent for Lender.

     

    (C) Eligible
Accounts/Characterization of Accounts.
Borrowers and Clearing Account Bank shall maintain the Clearing Account as an
Eligible Account, and Borrowers and Deposit Account Bank shall maintain each the
Deposit Account and each Sub-Account as an Eligible Account. Each Account is and
shall be treated as a “securities account” as such term is defined in Section
8-501(a) of the UCC or a “deposit account” as such term is defined in Section
9-102(a)(29) of the UCC, as the context may require. Each item of property
(whether investment property, financial asset, securities, instrument, cash or
other property) credited to each Account shall be treated as a “financial asset”
within the meaning of Section 8-102(a)(9) of the UCC. Borrowers agree that each
Account Bank shall, subject to the terms of this Agreement, treat Lender as
entitled to exercise the rights that comprise any financial asset credited to
each Account. All securities or other property underlying any financial assets
credited to each Account (other than cash) shall be registered in the name of
the applicable Account Bank, indorsed to the applicable Account Bank or in blank
or credited to another securities account maintained in the name of the
applicable Account Bank and in no case will any financial asset credited to any
Account be registered in the name of any Borrower, payable to the order of any
Borrower or specially indorsed to any Borrower.

     


    
      
        
        

      

      
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    (D) Permitted
Investments. Sums on
deposit in the Accounts shall not be invested except in Permitted Investments.
Funds in the Clearing Account shall not bear interest or be subject to
investment. Except during the existence of any Event of Default, Borrowers shall
have the right to direct Deposit Account Bank to invest sums on deposit in the
Deposit Account (including the Sub-Accounts) in Permitted Investments approved
by the Deposit Account Bank; provided, however, in no event shall Borrowers
direct Deposit Account Bank to make a Permitted Investment if the maturity date
of that Permitted Investment is later than the date on which the invested sums
are required for payment of an obligation for which the Account was created.
After an Event of Default and during the continuance thereof, Lender may direct
the Deposit Account Bank to invest sums on deposit in the Deposit Account
(including the Sub-Accounts) in Permitted Investments as Lender shall determine
in its sole discretion. Each Borrower hereby irrevocably authorizes and directs
the Deposit Account Bank to apply any income earned from Permitted Investments
to the respective Accounts. The amount of actual losses sustained on a
liquidation of a Permitted Investment shall be deposited into the Deposit
Account by Borrowers no later than one (1) Business Day following such
liquidation to the extent required to meet current obligations. Borrowers shall
be responsible for payment of any federal, state or local income or other tax
applicable to income earned from Permitted Investments. The Accounts shall be
assigned the federal tax identification numbers of Borrowers. Any interest,
dividends or other earnings which may accrue on the Accounts shall be added to
the balance in the applicable Account and allocated and/or disbursed in
accordance with the terms hereof; provided that any interest, dividends or other
earnings from funds deposited as part of the Impositions and Insurance Reserve
shall be retained by Lender or its designee (such as the Servicer) as its
property and supplemental compensation.

     

    Section 7.2 Deposit of Receipts into the
Clearing Account and the Deposit Account.
Borrowers shall and shall cause Manager to direct any and all Rents and other
Receipts to be deposited promptly into the Clearing Account and in no event
later than two (2) Business Days after the same are paid to or for the benefit
of Borrowers. To the extent that Borrowers or any Person on any Borrower’s
behalf holds any Receipts or Security Deposits, whether in accordance with this
Loan Agreement or otherwise, (i) such amounts shall be deemed to be Collateral
and shall be held in trust for the benefit, and as the property, of Lender, (ii)
such amounts shall not be commingled with any other funds or property of
Borrowers or Manager, and (iii) Borrowers or Manager shall deposit such amounts
in the Clearing Account within two (2) Business Days of receipt. So long as the
Loan shall be outstanding, neither Borrowers nor Manager shall open any other
property accounts other than the Operating Account and the other Accounts for
the deposit of Rent, Security Deposits or revenues from the Properties.
Borrowers represent, warrant and covenant that there are no other accounts
maintained by Borrowers or Manager into which revenues from the ownership and
operation of the Properties are deposited.

     

    Section 7.3 Application of Funds in
Accounts. 

     

    (A) Allocations. If any
Event of Default shall occur and be continuing, then notwithstanding anything to
the contrary in this Section or elsewhere, Lender shall have all rights and
remedies available under applicable law and under the Loan Documents. Prior to
the occurrence of a Cash Trap Condition, Borrower shall be permitted pursuant to
the Clearing Account Agreement to access and direct the withdrawal and
disposition of funds in the Clearing Account. Upon and after the occurrence of a
Cash Trap Condition and unless and until a Cash Trap Cure with respect thereto,
Lender may direct the Clearing Account Bank to transfer all funds deposited in
to the Clearing Account into the Deposit Account on a daily basis, and Lender
shall direct the Deposit Account Bank to allocate all available funds on deposit
in the Deposit Account (other than those previously allocated to Sub-Accounts,
and excepting any Rent that is paid more than one (1) month in advance, which
shall be retained in the Deposit Account until payment thereof is due under the
applicable Lease) on each Payment Date in the following amounts and order of
priority:

     


    
      
        
        

      

      
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    (i) First, to
the Impositions and Insurance Reserve Sub-Account in the amount of the monthly
deposit required to be made into the Impositions and Insurance Reserve pursuant
to Section 6.3 hereof on such Payment Date;

     

    (ii) Second,
to the Debt Service Sub-Account in the amount of the Monthly Debt Service
Payment due on such Payment Date, for application on such Payment Date in
accordance with Section 2.4(A) hereof;

     

    (iii) Third, to
Lender to pay any other amounts, if any, then due Lender under the Loan
Documents;

     

    (iv) Fourth,
to the Replacement Reserve Sub-Account in the amount of the monthly deposit
required to be made into the Replacement Reserve pursuant to Section 6.4 hereof
on such Payment Date;

     

    (v) Fifth, an
amount equal to the applicable monthly operating expenses (other than repairs,
replacements and capital expenditures, unless specifically approved by Lender
for purposes of disbursements) provided in the Approved Operating Budget (or
such other amount as shall be approved by Lender) shall be transferred to the
Operating Expenses Sub-Account under the control of Lender; and

     

    (vi) Sixth,
all available amounts on each Payment Date after allocation for items (i)
through (v) above shall be deposited into the Supplemental Debt Reserve
Sub-Account and held as additional collateral for the Obligations.

     

    (B) Cure of Cash Trap
Condition. So long
as no Event of Default exists, a Cash Trap Condition occurring due to a Debt
Service Coverage Ratio of less than the Minimum DSCR Threshold shall be deemed
cured if the Properties achieve a Debt Service Coverage Ratio of not less than
the Minimum DSCR Ratio for two consecutive Calendar Quarters after the
occurrence of the Cash Trap Condition, measured at the end of each such two
consecutive Calendar Quarters (each a “Cash Trap
Cure”). From
and after a Cash Trap Cure and until the occurrence of a subsequent Cash Trap
Condition, if any, Lender shall direct the Deposit Account Bank to disburse any
balance in the Supplemental Debt Reserve Sub-Account to Borrower.

     

    (C) Required
Payments.
Borrowers shall in all events be required to pay when due hereunder the Monthly
Debt Service Payments, any required monthly deposits into Reserves and all other
amounts due under this Loan Agreement and the other Loan Documents, regardless
of whether funds are deposited or held in sufficient amount in the Deposit
Account or any other Accounts for such payments.

     


    
      
        
        

      

      
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    (D) Operating Expenses
Disbursements. Funds
deposited into the Operating Expenses Sub-Account on or prior to any Payment
Date shall be disbursed to Borrowers on or promptly following such Payment Date,
and Borrowers shall use such funds for the payment of Operating Expenses and
Capital Expenditures approved by Lender and not funded by the Replacement
Reserve, in accordance with the Approved Operating Budget, provided, that Lender
may require compliance with reasonable conditions prior to disbursement of
amounts for Operating Expenses held in the Operating Expenses Sub-Account
including, without limitation, the following:

     

    (i) Borrowers
shall submit a request for payment not more frequently than twice per calendar
month, which request shall include invoices, receipts, comparison with the
Approved Operating Budget and other evidence reasonably required by Lender with
respect to the Operating Expenses or other permitted expenditures which are the
subject of such request;

     

    (ii) Such
request for payment shall be signed by Borrowers, certifying that the requested
funds are to be used to pay Operating Expenses in accordance with the Approved
Operating Budget for the Properties and for no other purpose, and that all
information in such request is true and complete;

     

    (iii) Such
request shall include a line-item accounting comparing Operating Expenses
incurred in the subject month and on a year-to-date basis with the Approved
Operating Budget;

     

    (iv) There
shall be sufficient funds for such disbursement in the Operating Expense
Sub-Account;

     

    (v) Lender
shall have received evidence reasonably satisfactory to Lender, and Lender shall
have determined that sufficient funds will be available for unincurred or
unfunded remaining Operating Expenses in the Approved Operating Budget for such
calendar month and any additional expenses then reasonably foreseen (and in the
case of an imbalance, Lender may require a deposit of additional funds in the
amount of the shortfall); and

     

    (vi) At
Lender’s option, Lender may issue payment directly to Borrowers or to
Manager.

     

    (E) Event of
Default.
Notwithstanding anything herein to the contrary, upon the occurrence and during
the continuance of an Event of Default, all funds on deposit in the Clearing
Account, the Deposit Account and/or the Sub-Accounts shall be disbursed to or as
directed by Lender. Without in any way limiting the foregoing or Lender’s rights
and remedies upon an Event of Default, and subject to Lender’s direction
otherwise from time to time, in whole or in part, in Lender’s sole and absolute
discretion, after and during the continuance of an Event of Default Lender may
direct the Account Banks to allocate all available funds on deposit in the
Clearing Account and the Deposit Account, or any of them to: (a) any debt
service or other Obligation due under this Loan Agreement or the other Loan
Documents; (b) any reserve account or sub-account established under this Loan
Agreement for, or otherwise as a reserve for, operating expenses, taxes,
insurance, capital expenses, costs and expenses of maintenance, repairs and
restoration, and other expenditures relating to the use, management, operation
or leasing of the Properties; and/or (c) any costs and expenses incurred by
Lender in connection with such Event of Default, or expended by Lender to
protect or preserve the value of the Properties.

     


    
      
        
        

      

      
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    Section 7.4 Budget
Approvals. No later
than thirty (30) days prior to the expiration of each calendar year, Borrowers
shall deliver to Lender the proposed Operating Budget and the Capital
Expenditure Budget (in each case presented on a monthly and annual basis) for
the Properties for the following calendar year. Each such proposed Operating
Budget shall identify and set forth Borrowers’ best estimate, after due
consideration, of all revenue, costs, and expenses for the Properties, and shall
specify gross revenues and Operating Expenses. The Capital Expenditure Budget
shall identify and set forth Borrowers’ best estimate, after due consideration,
of all costs and expenses contemplated to be necessary in the related budget
year (and, as to projects initiated or to be initiated in or prior to the budget
year but not completed in the budget year, the estimated cost and completion
schedule) for capital improvements and leasehold improvements, leasing
commissions and other leasing costs not included in the Operating Budget, and
the contemplated sources of payment of the same. In the event that either a Cash
Trap Condition or an Event of Default exists, the Operating Budget shall be
subject to Lender’s reasonable approval, and upon such approval shall, with any
amendments thereto approved by Lender from time to time, constitute the
“Approved Operating
Budget”
hereunder. Borrower shall provide a proposed Approved Operating Budget to Lender
for the then-remaining calendar year within five (5) Business Days after the
occurrence of a Cash Trap Condition, and thereafter while a Cash Trap Condition
exists shall provide a proposed Approved Operating Budget to Lender for each
succeeding calendar year at least thirty (30) days prior to the end of each
calendar year. If a proposed Approved Operating Budget is not in form and
substance reasonably satisfactory to Lender, Lender may disapprove the same and
specify the reasons therefor, and Borrowers shall promptly amend and resubmit
for approval a revised budget, making such changes as are necessary to comply
with the reasonable requirements of Lender; provided that until such time as
Borrowers have resubmitted the revised budget and Lender has approved such
revised budget, the parties shall operate under the provisions of this Article
VII using the budget submitted to Lender as proposed to be revised by Lender,
except that actual amounts shall be used for real estate taxes, insurance
premiums for insurance required hereunder and utilities expenses. Capital
Expenditures shall not be included in the Approved Operating Budget unless
Lender shall approve the same in writing in its sole and absolute
discretion.

     

    Section 7.5 Sole Dominion and
Control.
Borrowers acknowledge and agree that the Accounts are subject to the sole
dominion, control and discretion of Lender, its authorized agents or designees,
subject to the terms hereof. Notwithstanding anything set forth herein to the
contrary, neither any Borrower nor any other Person, through or under any
Borrower, shall have any control over the use of, or any right to withdraw any
amount from, any Account, and each Borrower acknowledges that the Deposit
Account Bank shall comply with all instructions originated by Lender without
further consent by any Borrower. Each Borrower acknowledges and agrees the
Account Banks shall comply with the instructions of Lender with respect to the
Accounts without the further consent of any Borrower or Manager. Each Borrower
acknowledges and agrees that the Account Banks shall comply with all
“entitlement orders” (as defined in Section 8-102(a)(8) of the UCC) and
instructions originated by Lender without further consent by any Borrower or any
other Person.

     


    
      
        
        

      

      
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    Section 7.6 Pledge of
Accounts. 

     

    (A) Security for
Obligations. To
secure the full and punctual payment and performance of all Obligations of
Borrowers under this Loan Agreement, the Note, the Mortgages, and all other Loan
Documents, each Borrower hereby grants to Lender a first priority continuing
security interest in and to the following property of such Borrower, whether now
owned or existing or hereafter acquired or arising and regardless of where
located (all of the same constituting part of the Account Collateral
hereunder:

     

    (i) the
Clearing Account, the Deposit Account and each of the Sub-Accounts, and all
cash, checks, drafts, certificates and instruments, if any, from time to time
deposited or held in the Accounts, including, without limitation, all deposits
or wire transfers made to the Accounts; and any and all Account
Collateral;

     

    (ii) any and
all amounts invested in Permitted Investments;

     

    (iii) all
interest, dividends, cash, instruments and other property from time to time
received, receivable or otherwise payable in respect of, or in exchange for, any
or all of the foregoing; and

     

    (iv) to the
extent not covered by clauses (i), (ii) or (iii) above, all “proceeds” (as
defined under the UCC) of any or all of the foregoing.

     

    Lender
shall have with respect to the foregoing collateral, in addition to the rights
and remedies herein set forth, all of the rights and remedies available to a
secured party under the UCC, as if such rights and remedies were fully set forth
herein.

     

    (B) Rights on
Default. Upon
the occurrence and during the continuance of an Event of Default, Lender may
notify each of the Account Banks of such Event of Default and, without notice
from Account Banks or Lender, (a) Borrowers shall have no further right in
respect of (including, without limitation, the right to instruct Lender or any
Account Bank to transfer from) the Accounts, (b) Lender may direct the Account
Banks to liquidate and transfer any amounts then invested in Permitted
Investments to the Accounts or reinvest such amounts in other Permitted
Investments as Lender may reasonably determine is necessary to perfect or
protect any security interest granted or purported to be granted hereby or to
enable Account Banks, as agent for Lender, or Lender to exercise and enforce
Lender’s rights and remedies hereunder with respect to any Account Collateral,
and (c) Lender may apply any Account Collateral to any Obligations in such order
of priority as Lender may determine. The proceeds of any disposition of the
Account Collateral, or any part thereof, may be applied by Lender to the payment
of the Obligations in such priority and proportions as Lender in its discretion
shall deem proper.

     

    (C) Financing Statement; Further
Assurances. Each
Borrower hereby irrevocably authorizes Lender at any time and from time to time
to file in any filing office in any jurisdiction any initial financing
statements and amendments thereto that (1) indicate the Account Collateral and
other Collateral (i) as all assets of such Borrower or words of similar effect,
regardless of whether any particular asset comprised in the Account Collateral
or other Collateral falls within the scope of Article 9 of the UCC or such
jurisdiction, or (ii) as being of an equal or lesser scope or with greater
detail, and (2) contain any other information required by Part 5 of Article 9 of
the UCC for the sufficiency or filing office acceptance of any financing
statement or amendment, including (x) whether such Borrower is an organization,
the type of organization and any organization identification number issued to
such Borrower, and (y) a sufficient description of real property to which the
Collateral relates. Each Borrower agrees to furnish any such information to
Lender promptly upon request. Each Borrower also ratifies its authorization for
Lender to have filed in any jurisdiction any initial financing statements or
amendments thereto if filed prior to the date hereof. Each Borrower agrees that
at any time and from time to time, at the expense of such Borrower, such
Borrower will promptly execute and deliver all further instruments and
documents, and take all further action, that may be reasonably necessary or
desirable, or that Lender may reasonably request, in order to perfect and
protect any security interest granted or purported to be granted hereby
(including, without limitation, any security interest in and to any Permitted
Investments) or to enable Lender to exercise and enforce its rights and remedies
hereunder with respect to any Account Collateral. In the event of any change in
name, identity or structure of any Borrower, such Borrower shall notify Lender
thereof and promptly after Lender’s request shall execute, file and record such
UCC financing statements as are necessary to maintain the priority of Lender's
lien upon and security interest in the Account Collateral, and shall pay all
expenses and fees in connection with the filing and recording thereof. If Lender
shall require the filing or recording of additional UCC financing or
continuation statements, each Borrower shall, promptly after request, execute,
file and record such UCC financing or continuation statements as Lender shall
deem necessary, and shall pay all expenses and fees in connection with the
filing and recording thereof.

     


    
      
        
        

      

      
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    (D) Termination of
Agreement. This
Loan Agreement shall create a continuing security interest in the Account
Collateral and shall remain in full force and effect until payment in full of
the Obligations. Upon payment and performance in full of the Obligations, this
Loan Agreement shall terminate and Borrowers shall be entitled to the return,
upon its request and at their expense, of such of the Account Collateral as
shall not have been sold or otherwise applied pursuant to the terms hereof, and
Lender shall execute such instruments and documents as may be reasonably
requested by Borrowers to evidence such termination and the release of the lien
hereof.

     

    Section 7.7 Lender Appointed
Attorney-In-Fact. Each
Borrower hereby irrevocably constitutes and appoints Lender as such Borrower’s
true and lawful attorney-in-fact, coupled with an interest and with full power
of substitution, to execute, acknowledge and deliver after an Event of Default
any instruments and to exercise and enforce every right, power, remedy, option
and privilege of such Borrower with respect to the Account Collateral, and do in
the name, place and stead of such Borrower, all such acts, things and deeds for
and on behalf of and in the name of such Borrower, which such Borrower is
required to do hereunder or under the other Loan Documents or which Lender may
deem necessary or desirable to more fully vest in Lender the rights and remedies
provided for herein and to accomplish the purposes of this Loan Agreement
including the filing of any UCC financing statements or continuation statements
in appropriate public filing offices on behalf of such Borrower, in any of the
foregoing cases, upon such Borrower’s failure to take any of the foregoing
actions within five (5) Business Days after notice from Lender. The foregoing
powers of attorney are irrevocable and coupled with an interest. If any Borrower
fails to perform any agreement herein contained and such failure shall continue
for five (5) Business Days after notice of such failure is given to Borrowers,
Lender may perform or cause performance of any such agreement, and any
reasonable expenses of Lender and any Account Banks in connection therewith
shall be paid by Borrowers.

     


    
      
        
        

      

      
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    ARTICLE VIII

    DEFAULT, RIGHTS AND
REMEDIES

     

    Section 8.1 Event of
Default. 

     

    “Event of
Default” shall
mean the occurrence or existence of any one or more of the
following:

     

    (A) Scheduled
Payments. Failure
of Borrowers to pay any scheduled payment amount when the same is due under this
Loan Agreement, the Note, or any other Loan Documents (whether such amount is
interest, principal, Reserves, or otherwise), including the failure to pay all
outstanding Obligations on the Maturity Date; or

     

    (B) Other
Payments. Failure
of Borrowers to pay any amount from time to time owing under this Loan
Agreement, the Note, or any other Loan Documents (other than amounts subject to
the preceding paragraph) within ten (10) days after written notice from Lender
to Borrowers that same is due; or

     

    (C) Breach of Reporting
Provisions. Failure
of any Borrower Party to perform or comply with any term or condition contained
in Section 5.1 which continues for a period of thirty (30) days after written
notice; or

     

    (D) Breach of Provisions
Regarding Insurance, Transfers, Liens, Single Purpose. (i)
Failure to keep in force the insurance required by Section 5.4 hereof; (ii) the
failure to comply with any other covenant of Section 5.4 which failure under
this clause (ii) continues for five (5) Business Days after notice from Lender;
(iii) breach of Article IX or Article XI hereof; (iv) breach or default under
any of Sections 5.13(B), 5.17, 5.18 or 5.19 hereof; or (v) breach or default
under Section 6.5 hereof or Section 7.2 hereof; or

     

    (E) Breach of
Warranty. Any
representation, warranty, certification or other statement made by any Borrower
Party or Affiliate thereof in any Loan Document or in any statement or
certificate at any time given in writing pursuant to or in connection with any
Loan Document is false or misleading in any material respect as of the date
made; or

     

    (F) Other Defaults Under Loan
Documents. A
default shall occur in the performance of or compliance with any term contained
in this Loan Agreement or the other Loan Documents and such default is not fully
cured within thirty (30) days after receipt by Borrowers of notice from Lender
of such default (other than occurrences described in other provisions of this
Section 8.1 or the Loan Documents for which a different grace or cure period is
specified or which constitute immediate Events of Default); provided however
that if (i) the default is capable of cure but with diligence cannot be cured
within such period of thirty (30) days, (ii) Borrowers have commenced the cure
of same within such thirty (30)-day period and at all times after such
commencement has pursued such cure diligently, and (iii) Borrowers deliver to
Lender promptly following demand (which demand may be made from time to time by
Lender) evidence satisfactory to Lender of the foregoing, then such period shall
be extended for so long as is reasonably necessary for Borrowers in the exercise
of due diligence to cure such default, but in no event beyond the ninetieth
(90th) day
after the original notice of default; or

     


    
      
        
        

      

      
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    (G) Involuntary Bankruptcy;
Appointment of Receiver, etc. (i) A
court enters a decree or order for relief with respect to any Borrower in an
Involuntary Borrower Party Bankruptcy, which decree or order is not stayed or
other similar relief is not granted under any applicable federal or state law;
(ii) the occurrence and continuance of any of the following events for sixty
(60) days unless dismissed or discharged within such time: (x) an Involuntary
Borrower Party Bankruptcy is commenced, (y) a decree or order of a court for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or other
officer having similar powers over any Borrower or over all or a substantial
part of its property, is entered, or (z) an interim receiver, trustee or other
custodian is appointed without the consent of any Borrower, for all or a
substantial part of the property of such Person; or

     

    (H) Voluntary Bankruptcy;
Appointment of Receiver, etc. (i) An
order for relief is entered with respect to any Borrower, or any such Person
commences a voluntary case under the Bankruptcy Code or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case or to the
conversion of an involuntary case to a voluntary case under any such law or
consents to the appointment of or taking possession by a receiver, trustee or
other custodian for any Borrower or for all or a substantial part of the
property of any Borrower; (ii) any Borrower makes any assignment for the benefit
of creditors; or (iii) the Board of Directors or other governing body of any
Borrower adopts any resolution or otherwise authorizes action to approve any of
the actions referred to in this Section 8.1(H); or

     

    (I) Bankruptcy Involving
Ownership Interests or Property. Other
than as described in either of Sections 8.1(G) or (H), all or any portion of the
Collateral becomes property of the estate or subject to the automatic stay in
any case or proceeding under the Bankruptcy Code or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect (provided that if the
same occurs in the context of an involuntary proceeding, it shall not constitute
an Event of Default if it is dismissed or discharged within sixty (60) days
following its occurrence); or

     

    (J) Solvency. Any
Borrower ceases to be solvent or admits in writing its inability to pay its
debts as they become due; or

     

    (K) Injunction. Any
Borrower is enjoined, restrained or in any way prevented by the order of any
court or any administrative or regulatory agency from conducting all or any
material part of its business; or

     

    (L) Invalidity of Loan
Documents. This
Loan Agreement, any Mortgage or any other Loan Document for any reason ceases to
be in full force and effect or ceases to be a legally valid, binding and
enforceable obligation of any Borrower or any Lien securing the Obligations
shall, in whole or in part, cease to be a perfected first priority Lien, subject
to the Permitted Encumbrances (except in any of the foregoing cases in
accordance with the terms hereof or under any other Loan Document), or any
Person who is a party thereto, other than Lender, denies that it has any further
liability (as distinguished from denial of the existence of a Default or Event
of Default) under any Loan Documents to which it is party, or gives notice to
such effect; or

     


    
      
        
        

      

      
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    (M) Cross-Default with Other
Loan Documents. A
default beyond any applicable grace periods shall occur under any of the other
Loan Documents; or

     

    (N) Default under Management
Agreement. Any
event of default on the part of any Borrower shall occur and be continuing under
any Management Agreement.

     

    If more
than one of the foregoing paragraphs shall describe the same condition or event,
then Lender shall have the right to select which paragraph or paragraphs shall
apply. In any such case, Lender shall have the right (but not the obligation) to
designate the paragraph or paragraphs which provide for non-written notice (or
for no notice) or for a shorter time to cure (or for no time to
cure).

     

    Section 8.2 Acceleration and
Remedies. 

     

    (A) Upon the
occurrence of any Event of Default described in any of Sections 8.1(G), (H), or
(I), the unpaid principal amount of and accrued interest and fees on the Loan
and all other Obligations shall automatically become immediately due and
payable, without presentment, demand, protest, notice of intent to accelerate,
notice of acceleration or other requirements of any kind, all of which are
hereby expressly waived by each Borrower Party. Upon and at any time after the
occurrence of any other Event of Default, at the option of Lender, which may be
exercised without notice or demand to anyone, all or any portion of the Loan and
other Obligations shall immediately become due and payable.

     

    (B) Upon the
occurrence of an Event of Default, all or any one or more of the rights, powers,
privileges and other remedies available to Lender against Borrowers under this
Loan Agreement or any of the other Loan Documents, or at law or in equity, may
be exercised by Lender at any time and from time to time, whether or not all or
any of the Obligations shall be declared due and payable, and whether or not
Lender shall have commenced any foreclosure proceeding or other action for the
enforcement of its rights and remedies under any of the Loan Documents with
respect to any of the Properties. Any such actions taken by Lender shall be
cumulative and concurrent and may be pursued independently, singly,
successively, together or otherwise, at such time and in such order as Lender
may determine in its sole discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies of Lender
permitted by law, equity or contract or as set forth herein or in the other Loan
Documents. Without limiting the generality of the foregoing, if an Event of
Default is continuing (i) to the fullest extent permitted by law, Lender shall
not be subject to any “one action” or “election of remedies” law or rule, and
(ii) all liens and other rights, remedies or privileges provided to Lender shall
remain in full force and effect until Lender has exhausted all of its remedies
against the Properties and the Mortgages have been foreclosed, sold and/or
otherwise realized upon in satisfaction of the Obligations or the Obligations
have been paid in full.

     


    
      
        
        

      

      
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    (C) Lender
shall have the right from time to time to partially foreclose any or all of the
Mortgages in any manner and for any amounts secured by such Mortgage(s) then due
and payable as determined by Lender in its sole discretion including, without
limitation, the following circumstances: (i) in the event Borrowers default
beyond any applicable grace period in the payment of one or more scheduled
payments of principal and interest, Lender may foreclose any of the Mortgages to
recover such delinquent payments, or (ii) in the event Lender elects to
accelerate less than the entire outstanding principal balance of the Loan,
Lender may foreclose any Mortgage to recover so much of the principal balance of
the Loan as Lender may accelerate and such other sums secured by such Mortgage
as Lender may elect. Notwithstanding one or more partial foreclosures, the
Properties shall remain subject to the Mortgages to secure payment of sums
secured by the Mortgages and not previously recovered.

     

    (D) Any
amounts recovered from the Properties or any other collateral for the Loan after
an Event of Default may be applied by Lender toward the payment of any interest
and/or principal of the Loan and/or any other amounts due under the Loan
Documents in such order, priority and proportions as Lender in its sole
discretion shall determine.

     

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

     

    Section 8.3 Performance by
Lender. 

     

    (A) If any
Borrower Party shall fail to perform, or cause to be performed, any covenant,
duty or agreement contained in any of the Loan Documents beyond any applicable
notice and cure period, Lender may (but shall have no obligation to) perform or
attempt to perform such covenant, duty or agreement on behalf of such Borrower
Party. In such event, Borrowers shall, at the request of Lender, promptly pay to
Lender any amount reasonably expended by Lender in such performance or attempted
performance, together with interest thereon at the Default Rate, from the date
of such expenditure until paid. Any amounts advanced or expended by Lender to
perform or attempt to perform any such matter shall be added to and included
within the indebtedness evidenced by the applicable Note and shall be secured by
all of the Collateral securing the applicable Loan. Notwithstanding the
foregoing, it is expressly agreed that Lender shall not have any liability or
responsibility for the performance of any obligation of any Borrower Party under
this Loan Agreement or any other Loan Document.

     

    (B) Lender
may cease or suspend any and all performance required of Lender under the Loan
Documents upon and during the continuance of any Event of Default.

     


    
      
        
        

      

      
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    ARTICLE IX

    SINGLE-PURPOSE, BANKRUPTCY-REMOTE
REPRESENTATIONS,

    WARRANTIES AND
COVENANTS

     

    Section 9.1 Applicable to
Borrowers. Each
Borrower hereby represents, warrants and covenants as of the Closing Date and
until such time as all Obligations are paid in full, that absent express advance
written waiver from Lender, which may be withheld in Lender’s sole discretion,
such Borrower:

     

    (A) was
organized solely for purpose of owning and operating its Applicable Individual
Property;

     

    (B) has not
owned, does not own and will not own any assets other than its Applicable
Individual Property (including incidental personal property necessary for the
operation thereof and proceeds therefrom);

     

    (C) is not
engaged and will not engage in any business, directly or indirectly, other than
the ownership, management and operation of its Applicable Individual
Property;

     

    (D) has not
entered into and will not enter into any contract or agreement with any partner,
member, shareholder, trustee, beneficiary, principal, joint venturer or
Affiliate of any Borrower except in the ordinary course of its business pursuant
to written agreements upon terms and conditions that are intrinsically fair and
substantially similar to those that would be available on an arms-length basis
with third parties other than such Affiliate;

     

    (E) has not
incurred and will not incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than (i) the Obligations, and
(ii) subject to the terms and conditions of Section
5.17,
unsecured trade payables incurred in the ordinary course of business of
operating its Applicable Individual Property;

     

    (F) has not
made and will not make any loan or advances to any Person (including any of its
Affiliates);

     

    (G) has
remained and as of the Closing Date reasonably expects to remain, solvent, and
has maintained, and as of the Closing Date reasonably expects to maintain
adequate capital for the normal obligations reasonably foreseeable in a business
of its size and character and in light of its contemplated business
operations;

     

    (H) has not
acquired and will not acquire obligations or securities of any
Person;

     

    (I) has not
failed and will not fail to correct any known misunderstanding regarding its
separate identity;

     

    (J) has done
or caused to be done and will do all things necessary to preserve its
existence;

     


    
      
        
        

      

      
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    (K) shall
continuously maintain its existence and be qualified to do business in all
states necessary to carry on its business, including the state in which its
Applicable Property is located;

     

    (L) will
conduct and operate its business as presently conducted and operated and in its
own name;

     

    (M) has
maintained and will maintain books, records, bank accounts, accounting records
and other entity documents separate from those of its partners, members,
shareholders, trustees, beneficiaries, principals, Affiliates, and any other
Person;

     

    (N) has been
and will be, and at all times has held and will hold itself out to the public
as, a legal entity separate and distinct from any other Person (including any of
its partners, members, shareholders, trustees, beneficiaries, principals and
Affiliates, and any Affiliates of any of the same), and not as a department or
division of any Person;

     

    (O) will file
such tax returns with respect to itself as may be required under applicable law
and has prepared and will prepare separate tax returns and financial statements,
or if part of a consolidated group, is shown as a separate member of such
group;

     

    (P) has paid
and shall pay its own liabilities, indebtedness, and obligations of any kind, as
the same shall become due, from its own separate assets, rather than from those
of other Persons;

     

    (Q) will not
enter into any transaction of merger or consolidation, or acquire by purchase or
otherwise all or substantially all of the business or assets of, or any stock or
beneficial ownership of, any Person;

     

    (R) has not
commingled and will not commingle or permit to be commingled its funds or other
assets with those of any other Person; and has held and will hold its assets in
its own name;

     

    (S) has
maintained and will maintain its assets in such a manner that it is not costly
or difficult to segregate, ascertain or identify its individual assets from
those of any other Person;

     

    (T) has not,
does not and will not hold itself out to be responsible for the debts or
obligations of any other Person;

     

    (U) has not
and will not guarantee or otherwise become liable on or in connection with any
obligation of any other Person;

     

    (V) except
for funds deposited into the Accounts in accordance with the Loan Documents,
shall not hold title to its assets other than in its name;

     

    (W) complies
and shall at all times hereafter comply with all of the assumptions, statements,
certifications, representations, warranties and covenants regarding or made by
it contained in or appended to the nonconsolidation opinion delivered pursuant
hereto;

     


    
      
        
        

      

      
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    (X) has paid
and will pay its own liabilities and expenses, out of its own
funds;

     

    (Y) has held
and will hold regular meetings, as appropriate to conduct its business and has
observed and will observe all limited liability company formalities and record
keeping;

     

    (Z) has
allocated and will allocate fairly and reasonably the costs associated with
common employees and any overhead for shared office space and has used and will
use separate stationary, invoices and checks;

     

    (AA) has not
and will not identify its Sole Member, any other member of any Borrower or any
Affiliate of any Borrower or any member of any Borrower, or any other Person, as
a division or part of it;

     

    (BB) has paid
and will pay the salaries of its own employees and has maintained and will
maintain a sufficient number of employees in light of its contemplated business
operations;

     

    (CC) maintains,
and will continue to maintain its books and records and financial statements
separate from those of any other Person;

     

    (DD) maintains,
and will continue to maintain, its own bank accounts separate from any other
Person;

     

    (EE) does not
and will not commingle its funds or assets with those of any other Person, and
holds and will hold its assets in its own name;

     

    (FF) shall not
(i) liquidate or dissolve, in whole or in part; (ii) consolidate, merge or enter
into any form of consolidation with or into any other Person, nor convey,
transfer or lease its assets substantially as an entirety to any Person nor
permit any Person to consolidate, merge or enter into any form of consolidation
with or into itself, nor convey, transfer or lease its assets substantially as
an entirety to any Person; or (iii) amend any provisions of its organizational
documents containing provisions similar to those contained in this Article
IX;

     

    (GG) is a
limited liability company formed under the laws of the State of Delaware with
the Sole Member as the sole member thereof, in addition to the Independent
Director (as defined below), whose certificate of formation and operating
agreement (the “Borrower Organizational
Documents”)
contain each of the representations, covenants and warranties set forth in this
Article 9 and
require such Borrower to at all times cause there to be at least one (1) duly
appointed independent manager of such Borrower who is a natural person and also
a non-economic member of such Borrower (each an “Independent
Director”) whose
affirmative vote will be required in order for a voluntary filing for protection
under the Bankruptcy Code or similar action by such Borrower and who is not at
the time of such individual’s initial appointment, appointment as Independent
Director, shall not be during such individual’s tenure as Independent Director,
and may not have been at any time during the preceding five years, (i) a
shareholder, member or partner of, or an officer, director, except in his or her
capacity as Independent Director of such Borrower, paid consultant or employee
of, customer of or supplier to or a member of the immediate family of such
Borrower (except in his or her capacity as Independent Director of such
Borrower) or any of its shareholders, members, partners, subsidiaries or
affiliates or any person or other entity controlling or under common control
with any such shareholder, member, partner, supplier or customer or any member
of the immediate family of any of them. As used herein, the term “control” means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person or entity, whether through
ownership of voting securities, by contract or otherwise.

     


    
      
        
        

      

      
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    (HH) is and
shall at all times be governed by Borrower Organizational Documents which
provide and shall at all times continue to provide that upon the occurrence of
any event that causes the Sole Member to cease to be a member of such Borrower,
the Independent Director shall, without action of any person and simultaneously
with the Sole Member ceasing to be a member of such Borrower, automatically
continue as a member of such Borrower and shall continue such Borrower without
dissolution.

     

    (II) shall
cause reputable Delaware counsel acceptable to Lender (the “Delaware Law
Firm”) to
deliver to Lender an opinion letter reasonably satisfactory to Lender, whereby
the Delaware Law Firm opines (which opinion may be subject to standard
assumptions, qualifications, limitations and exceptions acceptable to Lender),
among other requirements of Lender, that: (1) the unanimous consent of the Sole
Member and the Independent Director is required in order for such Borrower to
file a voluntary bankruptcy petition; (2) the provision in such Borrower’s
Borrower Organizational Documents that requires unanimous consent as a condition
to filing a voluntary bankruptcy petition is enforceable against the Sole
Member; (3) the bankruptcy, dissolution, liquidation or death of the Sole Member
will not cause such Borrower to be dissolved; (4) no creditor of the Solo Member
shall have the right to obtain possession of, or otherwise exercise legal or
equitable remedies with respect to, any of such Borrower’s property; and (5)
Delaware law, not federal law, governs the determination of what persons or
entities have the authority to file a voluntary bankruptcy petition on behalf of
such Borrower.

     

    (JJ) is and
shall at all times be governed by Borrower Organizational Documents which
provide and shall at all times continue to provide that such Borrower shall not
cause, permit, or empower the members, board of managers, or any other person to
vote on, authorize or take any Material Action (as defined below) without the
unanimous written consent of the Sole Member and the Independent Director. As
used herein, “Material
Action” shall
mean to consolidate or merge such Borrower into any other entity, or to
institute proceedings to have such Borrower adjudicated bankrupt or insolvent,
or consent to the institution of bankruptcy or insolvency proceedings against
such Borrower or file a petition seeking or consent to, reorganization or relief
with respect to such Borrower under any applicable federal or state law relating
to bankruptcy, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of such Borrower or
a substantial part of such Borrower’s property, or make any assignment for the
benefit of creditors of such Borrower, or admit in writing such Borrower’s
inability to pay its debts generally as they become due, or take action in
furtherance of any such action.

     

    ARTICLE X

    RESTRUCTURING LOAN, SECONDARY MARKET
TRANSACTIONS

     

    Section 10.1 Secondary Market
Transactions Generally. Lender
shall have the right to engage in one or more Secondary Market Transactions with
respect to the Loan, and to structure and restructure all or any part of the
Loan, including in multiple tranches, as a wraparound loan, or for inclusion in
a Securitization. Without limitation, Lender shall have the right to cause the
Note and the Mortgages to be split into a first and a second mortgage loan, or
into a one or more loans secured by mortgages and by ownership interests in
Borrowers in whatever proportion Lender determines, and thereafter to engage in
Secondary Market Transactions with respect to all or any part of the
indebtedness and loan documentation. Each Borrower acknowledges that it is the
intention of the parties that all or a portion of the Loan will be securitized
and that all or a portion of the Loan will be rated by one or more Rating
Agencies. Each Borrower further acknowledges that additional structural
modifications may be required to satisfy issues raised by any Rating Agencies.
As used herein, “Secondary Market
Transaction” means
any of (i) the sale, assignment, or other transfer of all or any portion of the
Obligations or the Loan Documents or any interest therein to one or more
investors, (ii) the sale, assignment, or other transfer of one or more
participation interests in the Obligations or Loan Documents to one or more
investors, (iii) the transfer or deposit of all or any portion of the
Obligations or Loan Documents to or with one or more trusts or other entities
which may sell certificates or other instruments to investors evidencing an
ownership interest in the assets of such trust or the right to receive income or
proceeds therefrom or (iv) any other Securitization backed in whole or in part
by the Loan or any interest therein.

     


    
      
        
        

      

      
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    Section 10.2 Cooperation;
Limitations.
Borrowers shall use all reasonable efforts and cooperate in good faith with
Lender in effecting any such restructuring or Secondary Market Transaction. Such
cooperation shall include without limitation, executing and delivering such
amendments to the Loan Documents and the organizational documents of any
Borrower as Lender may request at no material out-of-pocket cost to Borrowers,
provided however that no such amendment shall modify (i) the aggregate weighted
average of the interest rate payable under the Loan, (ii) the stated maturity
date of the Loan, (iii) the aggregate amortization of the principal amount of
the Loan, (iv) the non-recourse provisions of the Loan or (v) any provision, the
effect of which would materially and substantively increase Borrowers’
obligations or materially and substantively decrease Borrowers’ rights under the
Loan Documents. Such cooperation also shall include using reasonable efforts to
obtain such certificates and assurances from governmental entities and others as
Lender may reasonably request.

     

    Section 10.3 Information.
Borrowers shall provide such access to the Properties, personnel of the Manager
and of Borrowers’ constituent members and such information, reports, copies of
notices and documents relating to Borrower Parties, Manager, the Properties and
Collateral and the business and operations of all of the foregoing and such
opinions of counsel (including, without limitation, nonconsolidation opinions)
as Lender may reasonably request or as any Rating Agency may request in
connection with any such Secondary Market Transaction including, without
limitation, updated financial information, appraisals, market studies,
environmental reviews (Phase Is and, if appropriate, Phase IIs), property
condition reports and other due diligence investigations together with
appropriate verification of such updated information and reports through letters
of auditors and consultants and, as of the closing date of the Secondary Market
Transaction, updated representations and warranties made in the Loan Documents
and such additional representations and warranties any Rating Agency may request
or Lender or any purchaser, transferee, assignee, trustee, servicer or potential
investor (the Rating Agencies and all of the foregoing parties, collectively,
“Interested
Parties”) may
reasonably request. Within ten (10) days after request by Lender, Borrowers
shall provide an opinion of counsel reasonably satisfactory to Lender to the
effect that the description of the Loan and the terms of the Loan Documents
contained in the Disclosure Documents (hereinafter defined) and such other legal
matters contained therein as Lender may reasonably require do not contain any
untrue statement of any material fact or omit to state any material fact
necessary to make the statements therein not misleading and if required by any
Rating Agency or reasonably required by Lender, shall provide revisions or
“bringdowns” to the opinions delivered at Closing (including nonconsolidation
opinions), or if required new versions of such opinions, addressed to Lender,
any trustee under any Securitization backed in whole or in part by the Loan, any
Rating Agency that assigns a rating to any securities in connection therewith
and any investor purchasing securities therein. Lender shall be permitted to
share all such information with the investment banking firms, Rating Agencies,
accounting firms, law firms, other third party advisory firms, potential
investors, servicers and other service providers and other parties involved in
any proposed Secondary Market Transaction. Borrowers understand that any such
information may be incorporated into any offering circular, prospectus,
prospectus supplement, private placement memorandum or other offering documents
for any Secondary Market Transaction. Lender and all of the aforesaid
third-party advisors and professional firms and investors shall be entitled to
rely upon such information. Without limiting the foregoing, Borrowers and
Guarantor shall provide in connection with each of (i) a preliminary and a final
private placement memorandum or (ii) a preliminary and final prospectus or
prospectus supplement, as applicable (the documents referred to in the foregoing
clauses (i) and (ii), collectively, the “Disclosure
Documents”), an
agreement certifying that Borrowers and Guarantor have examined such Disclosure
Documents specified by Lender and that each such Disclosure Document, as it
relates to Borrowers, Guarantor, any Affiliates, the Properties, Manager and all
other aspects of the Loan, does not, and as to information provided in third
party reports of engineers and environmental consultants, to Borrowers’ and
Guarantor’s knowledge after due inquiry, does not contain any untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements made, in the light of the circumstances under which they were
made, not misleading (a “Disclosure
Certificate”).
Borrowers and Guarantor shall, jointly and severally, indemnify, defend, protect
and hold harmless Lender, its Affiliates, directors, employees, agents and each
Person, if any, who controls Lender or any such Affiliate within the meaning of
Section 15 of the Securities Act of 1933 or Section 20 of the Securities
Exchange Act of 1934, and any other placement agent or underwriter with respect
to any Securitization or Secondary Market Transaction from and against any
losses, claims, damages, liabilities, costs and expenses (including, without
limitation, reasonable attorneys’ fees and disbursements) that arise out of or
are based upon any untrue statement of any material fact contained in any
Disclosure Certificate or other information or documents furnished by any
Borrower, Guarantor or their Affiliates or in any representation or warranty of
any Borrower Party contained herein or in the other Loan Documents or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated in such information or necessary in order to
make the statements in such information not materially misleading. Lender and
its Affiliates may publicize the existence of the Obligations in connection with
Lender’s Secondary Market Transaction activities or otherwise.

     


    
      
        
        

      

      
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    Section 10.4 Additional
Provisions. In any
Secondary Market Transaction, Lender may transfer its obligations under this
Loan Agreement and under the other Loan Documents (or may transfer the portion
thereof corresponding to the transferred portion of the Obligations), and
thereafter Lender shall be relieved of any obligations hereunder and under the
other Loan Documents arising after the date of said transfer with respect to the
transferred interest. Each transferee investor shall become a “Lender”
hereunder. The holders from time to time of the Loan and/or any other interest
of the “Lender” under this Loan Agreement and the other Loan Documents may from
time to time enter into one or more co-lender agreements, intercreditor
agreements or other agreements with each other and/or with the holder(s) of any
other loans or other Persons in their discretion. Each Borrower acknowledges and
agrees that such agreements, as the same may from time to time be amended,
modified or restated, may govern the exercise of the powers and discretionary
authority of the Lender and/or any other interest of the Lender hereunder and
under the other Loan Documents, but Borrowers shall be entitled to rely upon any
actions taken by Lender or the designated servicer(s) or agent(s) for Lender,
whether or not within the scope of its power and authority under such other
agreements.

     


    
      
        
        

      

      
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    ARTICLE XI

    RESTRICTIONS ON LIENS, TRANSFERS;
RELEASE OF PROPERTIES

     

    Section 11.1 Restrictions on Transfer and
Encumbrance. Except
as expressly permitted in this Article XI, no Borrower shall cause or suffer to
occur or exist, directly or indirectly, voluntarily or involuntarily, by
operation of law or otherwise, any sale, transfer, mortgage, pledge, Lien or
encumbrance (other than Permitted Encumbrances) of (i) all or any part of any of
the Properties or any interest therein, or (ii) any direct or indirect ownership
or beneficial interest in any Borrower or Sole Member, irrespective of the
number of tiers of ownership or any profits or proceeds of any such direct or
indirect ownership interest, or (iii) any change of control of any Borrower or
Sole Member (any of the foregoing, a “Transfer”)
without the prior written consent of Lender, which Lender may withhold in its
sole and absolute discretion.

     

    Section 11.2 Permitted Transfers of
Beneficial Interests in Sole Member.
Transfers (but not pledges, collateral assignments or encumbrances) of direct or
indirect ownership interests in the Sole Member shall be permitted without
Lender’s consent provided that (i) no Event of Default then exists, (ii)
Borrowers shall give Lender written notice of such transfer together with copies
of all instruments effecting such transfer not less than ten (10) Business Days
prior to the date of such transfer; (iii) such transfer does not and will not
result in the termination or dissolution of any Borrower, by operation of law or
otherwise; (iv) Sole Member shall continue to be the sole member of each
Borrower; (v) no Person not currently owning, directly or indirectly, more than
49% of the beneficial director or indirect ownership interests in Sole Member
acquires (together with such Person’s immediate family members and Affiliates)
more than 49% of the beneficial direct or indirect ownership interests in Sole
Member; (vi) David Lichtenstein continues to directly or indirectly control Sole
Member and each Borrower; (vii) such transfer shall not result in a change of
control of such Borrower or Sole Member or a change of Manager without Lender’s
written consent; and (viii) in each case, the single purpose nature and
bankruptcy remoteness of each Borrower after such transfer is satisfactory to
Lender and in accordance with the standards of the Rating Agencies.

     

    For
purposes of this Section 11.2, “control” shall
have the meaning given thereto in the definition of “Affiliate” in Section 1.1
and a “change of
control” of any
Person shall include the Transfer of legal or equitable ownership interests in
such Person which after giving effect to such Transfer results in any transferee
or pledgee of such interests holding more than a 49% legal or equitable
ownership interest or security interest in such Person.

     


    
      
        
        

      

      
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    Section 11.3 Assumability. In the
event that the Borrowers desire to transfer all of the Properties (it being
understood and agreed that no transfer of any Individual Property less than all
of the Properties shall be permitted pursuant to this Section 11.3) to another
party (the “Transferee
Borrower”) and
have the Transferee Borrower assume all Borrowers’ obligations under the Loan
Documents, and have replacement guarantors and indemnitors assume all of the
obligations of Guarantor under the Loan Documents from and after such transfer
(collectively, a “Transfer and
Assumption”),
Borrowers may make a written application to Lender for Lender’s consent to the
Transfer and Assumption, subject to the conditions set forth in this Section;
provided that no more than one Transfer and Assumption shall be permitted during
the term of the Loan. Together with such written application, Borrowers shall
pay to Lender the reasonable review fee then required by Lender. Borrowers also
shall pay on demand all of the out-of- pocket costs and expenses incurred by
Lender, including reasonable attorneys’ fees and expenses, and including the
fees and expenses of Rating Agencies and other outside entities, in connection
with considering any proposed Transfer and Assumption, whether or not the same
is permitted or occurs. Lender may grant or withhold its consent to a Transfer
and Assumption in its sole and absolute discretion. Completion of any Transfer
and Assumption shall be subject to such conditions as Lender may determine to
impose, and shall in any event be subject to satisfaction of the following
conditions:

     

    (i) No
Default or Event of Default shall have occurred and be continuing;

     

    (ii) Borrowers
shall have submitted to Lender true, correct and complete copies of information
and documents reasonably requested by Lender concerning the Properties, the
Transferee Borrower and any replacement guarantors and indemnitors;

     

    (iii) Evidence
satisfactory to Lender shall have been provided showing that the Transferee
Borrower and such of its Affiliates as shall be designated by Lender comply with
Article IX, as those provisions may be modified by Lender taking into account
the ownership structure of Transferee Borrower and its Affiliates;

     

    (iv) Borrowers
shall have obtained (and delivered to Lender) a Rating Confirmation with respect
to the Transfer and Assumption and all related transactions;

     

    (v) The
identity, experience, and financial condition of the Transferee Borrower and the
replacement guarantors and indemnitors shall be acceptable to Lender in its
reasonable discretion;

     

    (vi) Borrowers
shall deliver to Lender at the closing of the Transfer and Assumption an
assumption fee in the amount of one percent (1%) of the then unpaid principal
balance of the Loan;

     

    (vii) Borrowers,
Transferee Borrower, the original and replacement guarantors and indemnitors
shall execute and deliver such documents as Lender may require, in form and
substance satisfactory to Lender, to evidence the Transfer and Assumption,
including replacement guaranties and indemnities and Loan Document
modifications;

     

    (viii) Counsel
to the Transferee Borrower and replacement guarantors and indemnitors shall
deliver to Lender opinions in form and substance satisfactory to Lender as to
substantially the same matters for which opinions were required in connection
with the origination of the Loan (and as to such additional matters as the
Lender and Rating Agencies may require), including, without limitation, a
bankruptcy non-consolidation opinion;

     


    
      
        
        

      

      
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    (ix) Borrowers
shall cause to be delivered to Lender, an endorsement to Lender’s policies of
title insurance in form and substance acceptable to Lender, in Lender’s
reasonable discretion, relating to, among other things, the change in the
identity of the vestee and execution and delivery of the Transfer and Assumption
documents and the continuing priority of the Lender’s Mortgages and the
continuing effect of the title insurance and all endorsements thereto;
and

     

    (x) Borrowers
shall pay to Lender all reasonable out-of-pocket costs and expenses incurred by
Lender in connection with the Transfer and Assumption, including but not limited
to, Lender’s reasonable attorneys’ fees and expenses, all recording fees, Rating
Agency fees and expenses, and all fees payable to the title company in
connection with the Transfer and Assumption.

     

    Upon
completion of a Transfer and Assumption permitted under this Section 11.3 and
execution of replacement guaranties and indemnities by replacement guarantors
and indemnitors approved by Lender as provided in this Section 11.3, Borrower
and any original Guarantors shall, as part of the documentation executed at the
closing of the Transfer and Assumption, be released from liability under the
Loan Documents accruing from and after the completion of the Transfer and
Assumption, but not from any liabilities for acts and occurrences taking place
prior thereto.

     

    ARTICLE XII

    RECOURSE; LIMITATIONS ON
RECOURSE

     

    Section 12.1 Limitations on
Recourse. Subject
to the provisions and qualifications of this Article, Lender shall not enforce
the liability and obligation of the Borrowers to perform and observe any of
their obligations that may be contained in the Note, this Loan Agreement, the
Mortgages or any other Loan Document by any action or proceeding wherein a money
judgment shall be sought against Borrowers, except that Lender may bring a
foreclosure action, an action for specific performance or any other appropriate
action or proceeding to enable Lender to enforce and realize upon its interest
under the Note, this Loan Agreement, the Mortgages and the other Loan Documents,
or in the Properties, the Rents, or any other Collateral pursuant to the Loan
Documents; provided,
however, that,
except as specifically provided herein, any judgment in any such action or
proceeding shall be enforceable against Borrowers only to the extent of
Borrowers’ interest in the Properties, in the Rents and in any other Collateral.
Lender, by accepting the Note, this Loan Agreement, the Mortgages and the other
Loan Documents, shall not sue for, seek or demand any monetary judgment against
any Borrower in any such action or proceeding under or by reason of or under or
in connection with the Note, this Loan Agreement, the Mortgage or the other Loan
Documents. Notwithstanding anything to the contrary in this Loan Agreement, the
Mortgages or any of the Loan Documents, the provisions of this Section 12.1 and
the other provisions of the Loan Documents shall not, however: (a) constitute a
waiver of any right which Lender may have under Sections 506(a), 506(b), 1111(b)
or any other provisions of the Bankruptcy Code to file a claim for the full
amount of the Obligations secured by the Mortgages or to require that all
Collateral shall continue to secure all of the Obligations owing to Lender in
accordance with the Loan Documents; (b) constitute a waiver, release or
impairment of any obligation evidenced or secured by any of the Loan Documents;
(c) impair the right of Lender to name any Borrower as a party defendant in any
action or suit for foreclosure and sale under any of the Mortgages or other Loan
Documents; (d) impair the right of Lender to obtain the appointment of a
receiver; (e) impair the enforcement of any of the Assignments of Leases; or (f)
constitute a prohibition against Lender to seek a deficiency judgment against
Borrowers in order to fully realize the security granted by the Mortgages and
other Loan Documents or to commence any other appropriate action or proceeding
in order for Lender to exercise its remedies against the Properties or any other
Collateral.

     


    
      
        
        

      

      
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    Section 12.2 Recourse to Borrowers and
Guarantor.
Notwithstanding the provisions of Section 12.1 or anything contained herein to
the contrary, Borrowers and Guarantor shall be personally liable for, and the
provisions of Section 12.1 shall not in any way limit or constitute a waiver of
the right of Lender to enforce the liability and obligation of Borrowers and
Guarantor, by money judgment or otherwise, for the following, all of which shall
be the personal obligation and liability of Borrowers under this Loan Agreement
and of Guarantor under the Guaranty: (A) the entire Loan and all the other
Obligations in the event of (i) a voluntary bankruptcy filing or other similar
event by any Borrower; (ii) any Involuntary Borrower Party Bankruptcy which is
solicited, procured, consented to or acquiesced in by any Borrower Party or any
Affiliate of any of them; (iii) any failure of any Borrower to comply with
Section 9.1 of this Agreement such that such failure was considered by a court
as a factor in the court’s finding for a consolidation of the assets of Borrower
with the assets of another Person; (iv) any transfer of, or grant by any
Borrower of a lien upon, the Property or any portion thereof in violation of
Section 11.1 of this Agreement, or any transfer or grant of a lien upon any
direct or indirect interest in any Borrower in violation of Section 11.1, or any
other intentional violation of Section 11.1 of this Agreement; or (v) the
failure of any Borrower to pay to Lender the first regularly scheduled
installment of principal and interest on the Loan on the First Payment Date; and
(B) without limiting the provisions of clause (A) above, any liability, loss,
damage, cost or expense (including, without limitation, attorneys’ fees and
expenses) suffered or incurred by Lender resulting from any and all of the
following: (i) the occurrence of any of the events described in the foregoing
clauses (A)(i) or (A)(ii), or any breach of Section 9.1 or Section 11.1 of this
Agreement (in each case without a duplication of recovery by virtue of such
matters resulting in recourse under both the foregoing clause (A) and this
clause (B)); (ii) fraud or intentional misrepresentation by any Borrower Party
or any Affiliate thereof in this Loan Agreement or any other Loan Document or
otherwise in connection with the Loan; (iii) misappropriation of, or other
failure by any Borrower Party or any Affiliate thereof to apply in accordance
with the provisions of the Loan Documents, any insurance proceeds, condemnation
awards or other sums or payments relating to the Properties or the insurance
required hereunder, or any rents, profits, issues, products and income of the
Properties, Security Deposits, Lease termination payments or recoveries upon
Leases, Prepaid Rents or any other funds received or collected by or on behalf
of any Borrower or any Borrower Party or any Affiliate, including any failure or
refusal to deliver Security Deposits to Lender as required under this Loan
Agreement; (iv) any payments made by any Borrower to any Affiliate thereof in
violation of the Loan Documents after the occurrence and during the continuance
of an Event of Default; (v) any removal or disposal of any portion of any of the
Properties by any Borrower Party, its agents, Affiliates, officers, employees or
property manager to the extent such portion of the Properties is not replaced by
the Borrowers with like property of equivalent value; (vi) intentional waste of
any of the Properties; (vii) any Borrower Party or any Affiliate of any of them
contests or in any way interferes with, directly or indirectly, any foreclosure
action or sale commenced by Lender or with any other enforcement of Lender’s
rights, powers or remedies under any of the Loan Documents or under any document
evidencing, securing or otherwise relating to any of the Properties or any other
collateral for the Obligations (whether by making any motion, bringing any
counterclaim, claiming any defense, seeking any injunction or other restraint,
commencing any action seeking to consolidate any such foreclosure or other
enforcement with any other action, or otherwise), other than contests brought in
good faith by any Borrower upon which such Borrower ultimately prevails pursuant
to a final, non-appealable judgment entered against Lender; (viii) the seizure
or forfeiture of any of the Properties, or any portion thereof, or Lender’s
interest therein, resulting from criminal wrongdoing by any Borrower, its
respective agents, Affiliates, officers or employees; (ix) any claims for
payment of any commission, charge or brokerage fee to anyone which may be
payable in connection with the Closing and funding of the Loan; (x) any
Borrower’s failure to pay transfer fees and charges due Lender under the Loan
Documents in connection with any transfer of all or any part of any of the
Properties, or any interest therein, from such Borrower to such Borrower’s
transferee, or transfer of any beneficial interest in such Borrower; (xi)
failure by any Borrower to comply with the covenants, obligations, liabilities,
warranties and representations contained in the Environmental Indemnity or
otherwise pertaining to environmental matters; (xii) in the event Lender has
waived (or any Borrower has failed to pay) the monthly collection for real and
personal property taxes, assessments, insurance premiums, or ground rents, then
failure by any Borrower to pay any or all such taxes, assessments, premiums and
rents to the extent that income from the Properties is available for such
purpose; (xiii) in the event that an Affiliate of any Borrower is the Manager,
then any management fee taken by such Manager after the occurrence and during
the continuation of an Event of Default unless otherwise approved by Lender in
writing; or (xiv) willful misconduct by any Borrower, its agents, Affiliates,
officers or employees which causes or results in a material diminution, or
material loss of value, of any of the Properties that is not reimbursed by
insurance or which willful misconduct exposes Lender to claims, liability or
costs of defense in any litigation or other legal proceeding. In addition,
Borrowers and Guarantors shall be personally liable for, and the provisions of
Section 12.1 shall not in any way limit or constitute a waiver of the right of
Lender to enforce the liability and obligation of Borrowers and Guarantor, by
money judgment or otherwise, for all reasonable costs and expenses, including
attorneys’ fees and expenses, incurred in collecting any amount due under the
Loan Documents which, as to Borrowers, are recourse obligations of Borrowers as
described in this Section 12.2 or, as to Guarantor, are recourse obligations of
Guarantor under the Guaranty, or is an obligation of Borrowers and/or Guarantor
under the Environmental Indemnity.

     

     

    
      
        
        

      

      
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    Section 12.3 Miscellaneous. No
provision of this Article shall (i) affect (A) the enforcement of, or (B) the
personal liability of and recourse against any guarantor or indemnitor
(including the Guarantor) and the assets of any such guarantor and indemnitor
for all liabilities and obligations under, the Environmental Indemnity, the
Guaranty or any guaranty or similar agreement executed in connection with the
Loan, (ii) release or reduce the debt evidenced by the Note, (iii) impair the
lien of the Mortgages, this Loan Agreement or any other Loan Document, (iv)
impair the rights of Lender to enforce any provisions of the Loan Documents, or
(v) limit Lender’s ability to obtain a deficiency judgment or judgment on the
Loan or otherwise against any Borrower Party to the extent necessary to obtain
any amount for which such Borrower Party may be personally liable in accordance
with this Article or any other Loan Document.

     

     

    
      
        
        

      

      
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    ARTICLE XIII

    MISCELLANEOUS

     

    Section 13.1 Expenses and Attorneys’
Fees. Whether
or not the transactions contemplated hereby shall be consummated, Borrowers
agree to promptly pay all reasonable out-of-pocket fees, costs and expenses
incurred by Lender in connection with any matters contemplated by or arising out
of this Loan Agreement, including the following, and all such fees, costs and
expenses shall be part of the Obligations, payable on demand: (A) reasonable
fees, costs and expenses (including reasonable attorneys’ fees, and other
professionals retained by Lender) incurred in connection with the examination,
review, due diligence investigation, documentation and closing of the financing
arrangements evidenced by the Loan Documents; (B) reasonable fees, costs and
expenses (including reasonable attorneys’ fees and other professionals retained
by Lender) incurred in connection with the administration of the Loan Documents
and the Loan and any amendments, modifications and waivers relating thereto; (C)
reasonable fees, costs and expenses (including reasonable attorneys’ fees)
incurred in connection with the review, documentation, negotiation and
administration of any requests initiated by any Borrower under or in connection
with the Loan Documents (including, without limitation, requests for lease,
budget and management approvals and subordination, non disturbance and/or
attornment agreements); and (D) reasonable fees, costs and expenses (including
attorneys’ fees and fees of other professionals retained by Lender) incurred in
any action to enforce or interpret this Loan Agreement or the other Loan
Documents or to collect any payments due from any Borrower under this Loan
Agreement, the Note or any other Loan Document or incurred in connection with
any refinancing or restructuring of the credit arrangements provided under this
Loan Agreement, whether in the nature of a “workout” or in connection with any
insolvency or bankruptcy proceedings or otherwise. Any costs and expenses due
and payable to Lender after the Closing Date may be paid to Lender pursuant to
the terms hereof.

     

    Section 13.2 Indemnity. In
addition to the payment of expenses as required elsewhere herein, whether or not
the transactions contemplated hereby shall be consummated, Borrowers agree,
jointly and severally, to indemnify, defend, protect, pay and hold Lender, its
successors and assigns (including, without limitation, the trustee and/or the
trust under any trust agreement executed in connection with any Securitization
backed in whole or in part by the Loan and any other Person which may hereafter
be the holder of the Note or any interest therein), and the officers, directors,
stockholders, partners, members, employees, agents and Affiliates of Lender and
such successors and assigns (collectively called the “Indemnitees”)
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, Tax Liabilities, broker’s or
finders fees, reasonable costs, expenses and disbursements of any kind or nature
whatsoever (including the reasonable fees and disbursements of counsel for such
Indemnitees in connection with any investigative, administrative or judicial
proceeding commenced or threatened, whether or not such Indemnitee shall be
designated a party thereto) that may be imposed on, incurred by, or asserted
against that Indemnitee, in any manner relating to or arising out of any of the
following (to the extent that insurance proceeds paid on account of same shall
be inadequate) (A) the enforcement of any of the Loan Documents; (B) any breach
by any Borrower of any representation, warranty, covenant, or other agreement
contained in any of the Loan Documents; (C) the presence, release, threatened
release, disposal, removal, or cleanup of any Hazardous Material located on,
about, within or affecting any of the Properties or any violation of any
applicable Environmental Law for which any Borrower is liable; (D) any claim
brought by any third party arising out of any condition or occurrence at or
pertaining to any of the Properties; (E) any design, construction, operation,
repair, maintenance, use, non-use or condition of any of the Properties or
Improvements, including claims or penalties arising from violation of any
applicable laws or insurance requirements, as well as any claim based on any
patent or latent defect, whether or not discoverable by Lender; (F) any
performance of any labor or services or the furnishing of any materials or other
property in respect of any of the Properties or any part thereof; (G) any
contest referred to in Section 5.3(B) hereof; (H) any obligation or undertaking
relating to the performance or discharge of any of the terms, covenants and
conditions of the landlord contained in the Leases; or (I) the use or intended
use of the proceeds of any of the Loan (the foregoing liabilities herein
collectively referred to as the “Indemnified
Liabilities”),
except to the extent caused by Lender’s gross negligence or willful misconduct.
Any amounts payable to any Indemnitee by reason of the application of this
Section 13.2 shall be payable on demand and shall bear interest at the Default
Rate from the date such loss or damage is sustained by any Indemnitee until
paid. The obligations and liabilities of Borrowers under this Section 13.2 shall
survive the term of the Loan and the exercise by Lender of any of its rights or
remedies under the Loan Documents, including the acquisition of the Properties
(or any of them) by foreclosure or a conveyance in lieu of
foreclosure.

     

     

    
      
        
        

      

      
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    Section 13.3 Amendments and
Waivers. Except
as otherwise provided herein, no amendment, modification, termination or waiver
of any provision of this Loan Agreement, the Note or any other Loan Document, or
consent to any departure therefrom, shall in any event be effective unless the
same shall be in writing and signed by Lender and any other party to be charged.
Each amendment, modification, termination or waiver shall be effective only in
the specific instance and for the specific purpose for which it was given. No
notice to or demand on Borrowers in any case shall entitle any Borrower or other
Person to any other or further notice or demand in similar or other
circumstances (except for any notices as expressly required herein or under the
other Loan Documents).

     

    Section 13.4 Retention of Borrowers’
Documents. Lender
may, in accordance with Lender’s customary practices, destroy or otherwise
dispose of all documents, schedules, invoices or other papers, delivered by
Borrowers to Lender unless Borrowers request in writing that same be returned.
Upon such request and at Borrowers’ expense, Lender shall return such papers
when Lender’s actual or anticipated need for same has terminated.

     

    Section 13.5 Notices. Unless
otherwise specifically provided herein, any notice or other communication
required or permitted to be given shall be in writing and addressed to the
respective party as set forth below. Notices shall be effective (i) three (3)
Business Days after the date such notice is mailed, (ii) on the next Business
Day if sent by a nationally recognized overnight courier service, (iii) on the
date of delivery by personal delivery and (iv) on the date of transmission if
sent by telefax during business hours on a Business Day (otherwise on the next
Business Day) (with receipt of confirmation). Notices shall be addressed as
follows:

     

    

      
        
          
          

        

        
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    If to
Borrowers or any Borrower Party:

     

    c/o
Lightstone Holdngs LLC

    326 Third
Street

    Lakewood,
New Jersey 08701

    Attention:
David Lichtenstein

    Facsimile:
732-363-7183

     

    With
copies to:

     

    Herrick,
Feinstein LLP

    2 Park
Avenue

    New York,
New York 10016

    Attention:
Sheldon Chanales, Esq.

    Facsimile:
212-545-3313

     

    If to
Lender:

     

    Citigroup
Global Markets Realty Corp.

    388
Greenwich Street, 19th
Floor

    New York,
New York 10013

    Attn:
Elisa DePalma

    Facsimile:
212-816-4197

     

    With
copies to:

     

    Sidley
Austin LLP

    One South
Dearborn Street

    Chicago,
Illinois 60603

    Attn:
Charles Schrank

    Facsimile:
(312) 853-7036

     

    Any party
may change the address at which it is to receive notices to another address in
the United States at which business is conducted (and not a post-office box or
other similar receptacle), by giving notice of such change of address in
accordance with the foregoing. This provision shall not invalidate or impose
additional requirements for the delivery or effectiveness of any notice (i)
given in accordance with applicable statutes or rules of court, or (ii) by
service of process in accordance with applicable law. If there is any assignment
or transfer of Lender interest in the Loan, then the new Lender may give notice
to the parties in accordance with this Section, specifying the addresses at
which the new Lender shall receive notice, such new Lender shall be entitled to
notice at such address in accordance with this Section. In the event that the
Borrowers hereunder shall at any time consist of more than one (1) person or
entity, then (x) any notice sent to the foregoing address(es) for notice for
Borrowers shall be binding on each and all of the Borrowers, and (y) any notice
sent by any of the persons or entities so comprising the Borrowers shall be
binding on the Borrowers hereunder and all of the persons or entities so
comprising the Borrowers (and, in the event of conflicting notices from the
persons or entities comprising the Borrowers, Lender shall be permitted to rely
on the first notice received by Lender from any person or entity comprising the
Borrowers with respect to the subject matter of such conflict, without
inquiry).

     

     

    
      
        
        

      

      
        98

        
          

        

      

      
        
        

      

    

     

     

    Section 13.6 Survival of Warranties and
Certain Agreements. All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Loan Agreement, the making of the Loan hereunder
and the execution and delivery of the Note. Notwithstanding anything in this
Loan Agreement or implied by law to the contrary, the agreements of Borrower
Parties to indemnify or release Lender or Persons related to Lender, or to pay
Lender’s costs, expenses, or taxes shall survive the payment of the Loan and the
termination of this Loan Agreement.

     

    Section 13.7 Failure or Indulgence Not
Waiver; Remedies Cumulative. No
failure or delay on the part of Lender in the exercise of any power, right or
privilege hereunder or under the Note or any other Loan Document shall impair
such power, right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any such
power, right or privilege preclude other or further exercise thereof or of any
other right, power or privilege. All rights and remedies existing under this
Loan Agreement, the Note and the other Loan Documents are cumulative to, and not
exclusive of, any rights or remedies otherwise available.

     

    Section 13.8 Marshaling; Payments Set
Aside. Lender
shall not be under any obligation to marshal any assets in favor of any Person
or against or in payment of any or all of the Obligations. To the extent that
any Person makes a payment or payments to Lender, or Lender enforces its
remedies or exercises its rights of set off, and such payment or payments or the
proceeds of such enforcement or set off or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then to the
extent of such recovery, the Obligations or part thereof originally intended to
be satisfied, and all Liens, if any, and rights and remedies therefor, shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or set off had not occurred.

     

    Section 13.9 Severability. The
invalidity, illegality or unenforceability in any jurisdiction of any provision
in or obligation under this Loan Agreement, the Note or other Loan Documents
shall not affect or impair the validity, legality or enforceability of the
remaining provisions or obligations under this Loan Agreement, the Note or other
Loan Documents or of such provision or obligation in any other
jurisdiction.

     

    Section 13.10 Headings. Section
and subsection headings in this Loan Agreement are included herein for
convenience of reference only and shall not constitute a part of this Loan
Agreement for any other purpose or be given any substantive effect.

     

    Section 13.11 APPLICABLE
LAW. THE PARTIES HEREBY AGREE AND
IRREVOCABLY ELECT THAT THIS LOAN AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE
OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND PERFORMED IN THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES, AND PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW) AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA EXCEPT THAT AT ALL
TIMES THE PROVISIONS FOR THE CREATION, PERFECTION AND ENFORCEMENT OF THE LIENS
AND SECURITY INTERESTS CREATED PURSUANT TO THE MORTGAGE AND THE ASSIGNMENT OF
LEASES SHALL BE GOVERNED BY THE LAWS OF THE STATE WHERE THE PROPERTIES ARE
LOCATED, EXCEPT THAT THE SECURITY INTERESTS IN ACCOUNT COLLATERAL SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

     

    
      
        
        

      

      
        99

        
          

        

      

      
        
        

      

    

     

     

    Section 13.12 Successors and
Assigns. This
Loan Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns except that no Borrower Party
may assign its rights or obligations hereunder or under any of the other Loan
Documents except as expressly provided in Article XI.

     

    Section 13.13 Sophisticated Parties,
Reasonable Terms, No Fiduciary Relationship. Each
Borrower represents, warrants and acknowledges that (i) it is a sophisticated
real estate investor, familiar with transactions of this kind, and (ii) it has
entered into this Loan Agreement and the other Loan Documents after conducting
its own assessment of the alternatives available to it in the market, and after
lengthy negotiations in which it has been represented by competent legal counsel
of its choice. Each Borrower also acknowledges and agrees that the rights of
Lender under this Loan Agreement and the other Loan Documents are reasonable and
appropriate, taking into consideration all of the facts and circumstances
including the quantity of the Loan, the nature of the Properties, and the risks
incurred by Lender in this transaction. No provision in this Loan Agreement or
in any of the other Loan Documents and no course of dealing between the parties
shall be deemed to create (i) any partnership or joint venture between Lender
and any Borrower or any other Person, or (ii) any fiduciary or similar duty by
Lender to any Borrower or any other Person. The relationship between Lender and
Borrowers is exclusively the relationship of a creditor and a debtor, and all
relationships between Lender and any other Borrower Party are ancillary to such
creditor/debtor relationship.

     

    Section 13.14 Reasonableness of
Determinations. In any
instance where any consent, approval, determination or other action by Lender
is, pursuant to the Loan Documents or applicable law, required to be done
reasonably or required not to be unreasonably withheld, Borrowers shall bear the
burden of proof of showing that the same was not reasonable. In all cases Lender
shall conclusively be deemed to be acting reasonably when implementing any
standard or requirement of any applicable Rating Agency, or in refusing or
delaying any consent due to the existence of any Event of Default. In no event
shall references herein or in the other Loan Documents to the “existence” or
“continuance” of an Event of Default imply that any Event of Default, or any
Default, once maturing into an Event of Default due to the expiration of any
applicable cure period or by operation of this Loan Agreement in the event no
cure period is provided hereunder, shall be further susceptible of cure by
Borrowers or otherwise cease to be an Event of Default in the absence of a
written waiver of such Event of Default by the Lender. In the event that a claim
or adjudication is made that Lender or its agents have acted unreasonably or
unreasonably delayed acting in any case where, by law or under this Loan
Agreement or the other Loan Documents, Lender or such agent, as the case may be,
has an obligation to act reasonably or promptly, neither Lender nor its agents
shall be liable for any monetary damages, and Borrowers’ sole remedy shall be
limited to commencing an action seeking injunctive relief or declaratory
judgment. Any action or proceeding to determine whether Lender has acted
reasonably shall be determined by an action seeking declaratory
judgment.

     

     

    
      
        
        

      

      
        100

        
          

        

      

      
        
        

      

    

     

     

    Section 13.15 No
Duty. All
attorneys, accountants, appraisers, and other professional Persons and
consultants retained by Lender shall have the right to act exclusively in the
interest of Lender and shall have no duty of disclosure, duty of loyalty, duty
of care, or other duty or obligation of any type or nature whatsoever to any
Borrower Party or Affiliates thereof, or any other Person.

     

    Section 13.16 Entire
Agreement. This
Loan Agreement, the Note, and the other Loan Documents referred to herein embody
the final, entire agreement among the parties hereto and supersede any and all
prior commitments, agreements, representations, and understandings, whether
written or oral, relating to the subject matter hereof and may not be
contradicted or varied by evidence of prior, contemporaneous, or subsequent oral
agreements or discussions of the parties hereto. There are no oral agreements
among the parties to the Loan Documents.

     

    Section 13.17 Construction; Supremacy of
Loan Agreement.
Borrowers and Lender acknowledge that each of them has had the benefit of legal
counsel of its own choice and has been afforded an opportunity to review this
Loan Agreement and the other Loan Documents with its legal counsel and that this
Loan Agreement and the other Loan Documents shall be construed as if jointly
drafted by Borrowers and Lender. If any term, condition or provision of this
Loan Agreement shall be inconsistent with any term, condition or provision of
any other Loan Document, then this Loan Agreement shall control.

     

    Section 13.18 Consent to
Jurisdiction. EACH BORROWER HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW
YORK, STATE OF NEW YORK OR, AS APPLICABLE, WITHIN THE COUNTY AND STATE IN WHICH
THE PROPERTIES ARE LOCATED AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER’S
ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH
BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH THE PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS LOAN AGREEMENT, THE
NOTE, SUCH OTHER LOAN DOCUMENTS OR SUCH OBLIGATION. NOTHING HEREIN SHALL AFFECT
THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT
THE RIGHT OF LENDER TO BRING PROCEEDINGS AGAINST ANY BORROWER PARTY IN THE
COURTS OF ANY OTHER JURISDICTION.

     

    Section 13.19 Waiver of Jury
Trial.  EACH OF BORROWERS AND LENDER HEREBY
WAIVES ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS LOAN AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR
ANY DEALINGS BETWEEN BORROWERS AND LENDER RELATING TO THE SUBJECT MATTER OF THIS
LOAN TRANSACTION AND LENDER/BORROWER RELATIONSHIP THAT IS BEING ESTABLISHED.
EACH OF BORROWERS AND LENDER ALSO WAIVES ANY BOND OR SURETY OR SECURITY UPON
SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF IT. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. EACH OF BORROWERS AND LENDER ACKNOWLEDGES THAT
THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO THIS LOAN AGREEMENT, THAT
EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS LOAN AGREEMENT AND
THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THE FUTURE. EACH OF BORROWERS
AND LENDER FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS WAIVER WITH
ITS LEGAL COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A
MUTUAL WRITTEN WAIVER SPECIFICALLY REFERRING TO THIS SECTION 13.19 AND EXECUTED
BY EACH OF THE PARTIES HERETO), AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS LOAN AGREEMENT, THE
LOAN DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOAN. IN
THE EVENT OF LITIGATION, THIS LOAN AGREEMENT MAY BE FILED AS A WRITTEN CONSENT
TO A TRIAL BY THE COURT.

     

     

    
      
        
        

      

      
        101

        
          

        

      

      
        
        

      

    

     

     

    Section 13.20 Counterparts;
Effectiveness. This
Loan Agreement and other Loan Documents and any amendments or supplements
thereto may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed and delivered
shall be deemed an original, but all of which counterparts together shall
constitute but one and the same instrument. This Loan Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto.

     

    Section 13.21 Servicer. Lender
shall have the right from time to time to designate and appoint one or more
Servicers, and to change or replace any Servicer. All rights of the Lender
hereunder may exercised by Servicer. Servicer shall be entitled to the benefit
of all obligations of any of Borrower Party in favor of Lender.

     

    Section 13.22 Waiver of
Notice.
Borrowers shall not be entitled to any notices of any nature whatsoever from
Lender except with respect to matters for which this Agreement or another Loan
Document specifically and expressly provides for the giving of notice by Lender
to Borrowers and except with respect to matters for which Borrowers are not,
pursuant to applicable Legal Requirements, permitted to waive the giving of
notice. Each Borrower hereby expressly waives the right to receive any notice
from Lender with respect to any matter for which this Loan Agreement or other
Loan Documents does not specifically and expressly provide for the giving of
notice by Lender to Borrowers.

     

     

    
      
        
        

      

      
        102

        
          

        

      

      
        
        

      

    

     

     

    Section 13.23 Offsets, Counterclaims and
Defenses. Any
assignee of Lender’s interest in and to this Loan Agreement and the other Loan
Documents shall take the same free and clear of all offsets, counterclaims or
defenses which are unrelated to this Loan Agreement and the other Loan Documents
which any Borrower may otherwise have against any assignor or this Loan
Agreement and the other Loan Documents. No such unrelated counterclaim or
defense shall be interposed or asserted by any Borrower in any action or
proceeding brought by any such assignee upon this Loan Agreement or upon any
other Loan Document. Any such right to interpose or assert any such unrelated
offset, counterclaim or defense in any such action or proceeding is hereby
expressly waived by each Borrower.

     

    Section 13.24 Waiver of
Counterclaim. Each
Borrower hereby waives the right to assert a counterclaim, other than compulsory
counterclaim, in any action or proceeding brought against it by Lender or its
agents.

     

    Section 13.25 Brokers and Financial
Advisors. Each
Borrower hereby represents that neither it nor any of its Affiliates has dealt
with any financial advisors, brokers, underwriters, placement agents, agents or
finders in connection with the transactions contemplated by this Loan Agreement.
Borrowers hereby agree, jointly and severally, to indemnify and hold Lender
harmless from and against any and all claims, liabilities, costs and expenses of
any kind in any way relating to or arising from a claim by any Person that such
Person acted on behalf of the indemnifying party in connection with any Borrower
or its respective Affiliates transactions contemplated herein. The provisions of
this Section 13.25 shall survive the expiration and termination of this
Agreement and the repayment of the Obligations.

     

    Section 13.26 Joint and Several
Liability. All
representations, warranties, covenants (both affirmative and negative) and all
other obligations hereunder shall be the joint and several obligation of each
Borrower and a default or Event of Default by any Borrower shall be deemed a
default or Event of Default by all of the Borrowers. The representations,
covenants and warranties contained herein or in any other Loan Document shall be
read to apply to each Borrower when the context so requires but a breach of any
such representation, covenant or warranty or a breach of any obligation under
the Loan Documents shall be deemed a breach by all the Borrowers, entitling
Lender to exercise all of its rights and remedies under all the Loan Documents
and under applicable law.

    
 


    
      
        
        

      

      
        103

        
          

        

      

      
        
        

      

    

    
 

    IN
WITNESS WHEREOF, the parties hereto have duly executed and delivered this Loan
Agreement as of the date first written above.

     

    
      
         

        
          	 	
                  BORROWER: 

                
	 	 	 
	 	
                  SCOTSDALE MI
      LLC, a Delaware
      limited liability
      company

                
	 
 	 	 
	 	By:  	LVP Michigan
      Multifamily Portfolio LLC, a Delaware limited liability company,
  
	 	 	its sole Managing Member


        

         

        
          
            	 	 By:	/s/ David
  Lichtenstein
	 	 Name:	David
      Lichtenstein
	 	 Title:	President


          

           

          
             

            
              	 	 	 
	 	
                      CARRIAGE PARK MI
      LLC, a
      Delaware limited liability company 

                    
	 
 	 	 
	 	By:  	LVP Michigan
      Multifamily Portfolio LLC, a Delaware limited liability company,
  
	 	 	its sole Managing Member


            

             

            
              
                	 	 By:	/s/ David
  Lichtenstein
	 	 Name:	David
      Lichtenstein
	 	 Title:	President


              

               

            

          

          
            
               

              
                	 	 	 
	 	
                        MACOMB MANOR MI LLC,
      a
      Delaware limited liability company 

                      
	 
 	 	 
	 	By:  	LVP Michigan
      Multifamily Portfolio LLC, a Delaware limited liability company,
  
	 	 	its sole Managing Member


              

               

              
                
                  	 	 By:	/s/ David
  Lichtenstein
	 	 Name:	David
      Lichtenstein
	 	 Title:	President


                

                 

                
                   

                  
                    	 	 	 
	 	
                            CARRIAGE HILL MI
      LLC,
      a
      Delaware limited liability company 

                          
	 
 	 	 
	 	By:  	LVP Michigan
      Multifamily Portfolio LLC, a Delaware limited liability company,
  
	 	 	its sole Managing Member


                  

                   

                  
                    
                      	 	 By:	/s/ David
  Lichtenstein
	 	 Name:	David
      Lichtenstein
	 	 Title:	President


                    

                    


                    
                      
                        
                          
                          

                        

                        
                          
                          

                          
                            

                          

                        

                        
                          
                          

                        

                      

                    

                    
                        

                      
                        	 	LENDER:
	 	 	 
	 	/s/ CITIGROUP GLOBAL MARKETS
      REALTY CORP.,
      a New York corporation  
	 
 	 
 	 

	 	  	 
	 	
                              
	 	 


                      

                       

                    

                    

                      
                        
                          
                          

                        

                        
                          
                          

                          
                            

                          

                        

                        
                          
                          

                        

                      

                    

                  

                

              

            

          

        

      

    

    
 

    LIST OF SCHEDULES

     

     

    
      	 Schedules
      A-1 - A-4 	Individual
      Properties
	
              Schedule
      3.1(N)

            	
              Budgets

            
	
              Schedule
      4.1(C)

            	
              Organizational
      Chart for Borrower Parties

            
	
              Schedule
      6.4

            	
              Approved
      Capital Expenditures

            
	
              Schedule
      6.6

            	
              Certain
      Reserve Funding Conditions

            
	
              Schedule
      6.7

            	
              Immediate
      Repairs

            


    

    


    


     


    
      
        List
of Schedules

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    SCHEDULE A-1

     

    


    


     


    
      
        Schedule
A-1

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    SCHEDULE A-2

     

    


    


     


    
      
        Schedule
A-2

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    SCHEDULE A-3

     

     


    
      
        Schedule
A-3

      

      
        
        

        
          

        

      

      
        
        

      

    


    


     

    SCHEDULE A-4

     

     


    
      
        Schedule
A-4

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    SCHEDULE 3.1(N)

     

    Budgets

     

    


    


    


     


    
      
        Schedule
3.1(N)

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    SCHEDULE
4.1(C)


     

    Organizational
Chart

    
 

     


    
      
        Schedule
4.1(C)

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    SCHEDULE 6.4

     

    Approved Capital
Expenditures

     

     


    
      
        Schedule
6.4

      

      
        
        

        
          

        

      

      
        
        

      

    


     

    SCHEDULE 6.6

     

    REPLACEMENT RESERVE FUNDING
CONDITIONS

     

    1.    Borrowers
shall have submitted to Lender a written request for disbursement at least ten
(10) days prior to the Payment Date on which Borrowers request such disbursement
be made, specifying the specific Capital Expenditures for which the disbursement
is requested and such other information (such as the price of materials and the
cost of contracted labor or other services) as Lender may reasonably require,
which request must be on a form specified or approved by Lender;

     

    2.    On the
date such request is received by Lender and on the Payment Date such payment is
to be made, no Event of Default shall exist and remain uncured;

     

    3.     Lender
shall have received a certificate from the Borrowers stating that all Capital
Expenditures at the applicable Individual Property to be funded by the requested
disbursement have been completed in a good and workmanlike manner and in
accordance with any plans and specifications approved by Lender and all Legal
Requirements of any Governmental Authority having jurisdiction over such
Individual Property, such certificate to be accompanied, in either case, by a
copy of any license, permit or other approval by any Governmental Authority
required to commence (only for the first advance with respect to each distinct
item of work) and/or complete (only for the final advance with respect to each
distinct item of work) such Capital Expenditures;

     

    4.    Lender
shall have received a certificate from the Borrowers stating that each Person
that supplied materials or labor in connection with the Capital Expenditures to
be funded by the requested disbursement has been paid in full or will be paid in
full upon such disbursement, such certificate to be accompanied by copies of
invoices for all items or materials purchased and all contracted labor or
services provided;

     

    5.    Lender
shall have received appropriate lien waivers from each contractor, supplier,
materialman, mechanic or subcontractor who receives payment in an amount equal
to or greater than $10,000 for completion of its work or delivery of its
materials, which lien waivers shall conform to the requirements of applicable
law and shall cover all work performed and materials supplied (including
equipment and fixtures) for the applicable Individual Property by that
contractor, supplier, subcontractor, mechanic or materialman through the date
covered by the current disbursement request; and

     

    6.    At
Lender’s option, Lender shall have received a title search for the applicable
Individual Property effective to the date of the disbursement, which search
shows that no mechanic’s or materialmen’s liens or other Liens of any nature
have been placed against the applicable Individual Property since the date of
recordation of the Mortgage affecting such Individual Property and that title to
such Individual Property is free and clear of all Liens (other than the
Permitted Encumbrances).

     

     


    
      
        Schedule
6.6

      

      
        
        

        
          

        

      

      
        
        

      

    

    
 

    SCHEDULE 6.7

     

    Completion/Repair
Reserve

    
       

       

      


        
          
            Schedule
6.7