Document:

Exhibit 10.14

	
   

  

 

FORM OF FIRST PRIORITY

 

LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY

AGREEMENT AND FINANCING STATEMENT

 

From

 

THE NEIMAN MARCUS GROUP, INC.

 

To

 

CREDIT SUISSE

 

 

Dated: October         ,
2005

Premises: [City], [State]

  
                              
County

 

	
   

  

 

1

 

THIS FIRST PRIORITY LEASEHOLD MORTGAGE, ASSIGNMENT
OF LEASES AND RENTS, SECURITY AGREEMENT AND FINANCING STATEMENT dated as of
October    , 2005 (this “Mortgage”),
by THE NEIMAN MARCUS GROUP, INC., a Delaware corporation, having an office
at One Marcus Square, 1618 Main Street, Dallas,
Texas  75201 (the “Mortgagor”),
to CREDIT SUISSE, having an office at Eleven Madison Avenue, New York, New
York 10010 (the “Mortgagee”)
as Collateral Agent for the Secured Parties (as such terms are defined below).

 

WITNESSETH THAT:

 

Reference
is made to (i) the credit agreement dated as of even date hereof (as
amended, supplemented or otherwise modified from time to time, the “Term Loan Credit Agreement”), among NEWTON
ACQUISITION MERGER SUB. INC. (“Merger Sub”
and, prior to the Merger (as defined in the Term Loan Credit Agreement, the “Borrower”), a Delaware corporation to be
merged with and into THE NEIMAN MARCUS GROUP, INC., a Delaware corporation
(“Neiman Marcus” and, after the
Merger, the “Borrower”), NEWTON
ACQUISITION, INC., a Delaware corporation (“Holdings”), the subsidiaries of Neiman Marcus from time to
time party thereto, the lenders from time to time party thereto (the “Lenders”),
including, inter alia, Credit Suisse as administrative agent (the “Administrative Agent”) for the Lenders,
(ii) the credit agreement dated as of even date hereof (as amended,
supplemented or otherwise modified from time to time, the “Revolving Facility Credit Agreement”)
among Merger Sub, Neiman Marcus, Holdings, each subsidiary of Neiman Marcus
from time to time party thereto, the lenders from time to time party thereto,
and Deutsche Bank Trust Company Americas, as administrative agent,
(iii) the Indenture, dated as of May 27, 1998 (as amended,
supplemented or otherwise modified from time to time, the “Existing Notes Indenture”), between Neiman
Marcus and The Bank of New York, (iv) the Pledge and Security
Agreement dated as of even date hereof (as amended, supplemented or otherwise
modified from time to time, the “Security
Agreement”) among Holdings, the Borrower, the Subsidiary Parties
identified therein, the Mortgagee and the Administrative Agent, (v) that
certain mortgage dated as of even date hereof by Mortgagor, in favor of
Deutsche Bank Trust Company Americas, as mortgagee (the “Second Mortgage”) granting to the Second
Mortgagee a second priority lien and security interest in the Mortgaged
Property (as described below) in connection with the Revolving Facility Credit
Agreement and (vi) the Lien Subordination and Security Agreement, dated as
of even date hereof, among Deutsche Bank Trust Company Americas, Credit Suisse,
Merger Sub, Neiman Marcus, Holdings and the subsidiaries of Neiman Marcus from
time to time party thereto as attached hereto as Exhibit B. 
Capitalized terms used but not defined herein have the meanings given to them
in the Term Loan Credit Agreement and the Security Agreement.

 

In
the Term Loan Credit Agreement, the Lenders have agreed to make term loans (the
“Loans”) to the Borrower pursuant
to, upon the terms, and subject to the conditions specified in, the Credit
Agreement.

 

2

 

Mortgagor
will be the Borrower subsequent to the Merger and will derive substantial
benefit from the making of the Loans by the Lenders.  In order to induce
the Lenders to make Loans, the Mortgagor has agreed to grant this Mortgage to
secure, among other things, the due and punctual payment and performance of all
of the Obligations of the Borrower under the Security Agreement.

 

The
obligations of the Lenders to make Loans are conditioned upon, among other
things, the execution and delivery by the Mortgagor of this Mortgage in the
form hereof to secure the Obligations (as defined in the Security Agreement).

 

As
used in this Mortgage, the term “Secured
Parties” has the meaning set forth in the Security Agreement.

 

Pursuant
to the requirements of the Term Loan Credit Agreement, the Mortgagor is
granting this Mortgage to create a lien on and a security interest in the
Mortgaged Property (as hereinafter defined) to secure the performance and
payment by the Mortgagor of the Obligations.  The Term Loan Credit
Agreement also require the granting by the Mortgagor or the other Loan Parties,
as applicable, of mortgages, deeds of trust and/or deeds to secure debt (the “Other Mortgages”) that create liens on and
security interests in certain real and personal property other than the
Mortgaged Property to secure the performance of the Obligations.

 

Granting Clauses

 

NOW,
THEREFORE, IN CONSIDERATION OF the foregoing and in order to secure the
due and punctual payment and performance of the Obligations for the benefit of
the Secured Parties, Mortgagor hereby grants, conveys, mortgages, assigns and
pledges to the Mortgagee, a mortgage lien on and a security interest in,
Mortgagor’s interest in all the following described property (the “Mortgaged Property”) whether now owned or
held or hereafter acquired:

 

(1) all of Mortgagor’s right, title and interest in and to that
certain lease covering and encumbering that certain real property described on
Exhibit A hereto (the “Land”),
which lease is more specifically described on Exhibit B hereto (as amended
or modified from time to time, the “Subject
Lease”), together with all rights of Mortgagor under the Subject
Lease;

 

(2) all of Mortgagor’s right, title and interest in and to the
leasehold estate in the Land created by the Subject Lease, all buildings,
improvements, structures, paving, parking areas, walkways and landscaping now
or hereafter erected or located upon the Land, and all fixtures of every kind
and type affixed to the Premises or attached to or forming part of any
structures, buildings or improvements and replacements thereof now or hereafter
erected or located upon the Land (the “Improvements”);

 

(3) all of Mortgagor’s right, title and interest in and to all
apparatus, movable appliances, building materials, equipment, fittings,
furnishings, furniture, machinery

 

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and
other articles of tangible personal property of every kind and nature, and
replacements thereof, now or at any time hereafter placed upon or used in any
way in connection with the use, enjoyment, occupancy or operation of the
Improvements or the Premises, including all of Mortgagor’s books and records
relating thereto and including all pumps, tanks, goods, machinery, tools,
equipment, lifts (including fire sprinklers and alarm systems, fire prevention
or control systems, cleaning rigs, air conditioning, heating, boilers,
refrigerating, electronic monitoring, water, loading, unloading, lighting,
power, sanitation, waste removal, entertainment, communications, computers,
recreational, window or structural, maintenance, truck or car repair and all
other equipment of every kind), restaurant, bar and all other indoor or outdoor
furniture (including tables, chairs, booths, serving stands, planters, desks,
sofas, racks, shelves, lockers and cabinets), bar equipment, glasses, cutlery,
uniforms, linens, memorabilia and other decorative items, furnishings,
appliances, supplies, inventory, rugs, carpets and other floor coverings,
draperies, drapery rods and brackets, awnings, venetian blinds, partitions,
chandeliers and other lighting fixtures, freezers, refrigerators, walk-in
coolers, signs (indoor and outdoor), computer systems, cash registers and
inventory control systems, and all other apparatus, equipment, furniture,
furnishings, and articles used in connection with the use or operation of the
Improvements or the Premises, it being understood that the enumeration of any
specific articles of property shall in no way result in or be held to exclude
any items of property not specifically mentioned (the property referred to in this
subparagraph (3), the “Personal
Property”);

 

(4) all of Mortgagor’s right, title and interest in and to all
general intangibles owned by Mortgagor and relating to design, development,
operation, management and use of the Premises or the Improvements, all
certificates of occupancy, zoning variances, building, use or other permits,
approvals, authorizations and consents obtained from and all materials prepared
for filing or filed with any governmental agency in connection with the
development, use, operation or management of the Premises and Improvements, all
construction, service, engineering, consulting, leasing, architectural and
other similar contracts concerning the design, construction, management,
operation, occupancy and/or use of the Premises and Improvements, all
architectural drawings, plans, specifications, soil tests, feasibility studies,
appraisals, environmental studies, engineering reports and similar materials
relating to any portion of or all of the Premises and Improvements, and all payment
and performance bonds or warranties or guarantees relating to the Premises or
the Improvements, all to the extent assignable (the “Permits, Plans and Warranties”);

 

(5) all now or hereafter existing leases or licenses (under which
Mortgagor is landlord or licensor) and subleases (under which Mortgagor is
sublandlord), concession, management, mineral or other agreements of a similar
kind that permit the use or occupancy of the Premises or the Improvements for
any purpose in return for any payment, or the extraction or taking of any gas,
oil, water or other minerals from the Premises in return for payment of any
fee, rent or royalty (collectively, “Leases”),
and all agreements or contracts for the sale or other disposition of all or

 

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any
part of the Premises or the Improvements, now or hereafter entered into by
Mortgagor, together with all charges, fees, income, issues, profits, receipts,
rents, revenues or royalties payable thereunder (“Rents”);

 

(6) all real estate tax refunds and all proceeds of the
conversion, voluntary or involuntary, of any of the Mortgaged Property into
cash or liquidated claims (“Proceeds”),
including, subject to the rights of Mortgagor under the Term Loan Agreement or
other Term Loan Security Documents, Proceeds of insurance maintained by the
Mortgagor and condemnation awards, any awards that may become due by reason of
the taking by eminent domain or any transfer in lieu thereof of the whole or
any part of the Premises or Improvements or any rights appurtenant thereto, and
any awards for change of grade of streets, together with any and all moneys now
or hereafter on deposit for the payment of real estate taxes, assessments or
common area charges levied against the Mortgaged Property, unearned premiums on
policies of fire and other insurance maintained by the Mortgagor covering any
interest in the Mortgaged Property or required by the Term Loan Credit
Agreement; and

 

(7) to the extent assignable, all extensions, improvements,
betterments, renewals, substitutes and replacements of and all additions and
appurtenances to, the Land, the Premises, the Improvements, the Personal
Property, the Permits, Plans and Warranties and the Leases, hereinafter
acquired by or released to the Mortgagor or constructed, assembled or placed by
the Mortgagor on the Land, the Premises or the Improvements, and all
conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assembling, placement or conversion, as the
case may be, and in each such case, without any further mortgage, deed of
trust, conveyance, assignment or other act by the Mortgagor, all of which shall
become subject to the lien of this Mortgage as fully and completely, and with
the same effect, as though now owned by the Mortgagor and specifically
described herein.

 

TO
HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee, its successors and
assigns, for the ratable benefit of the Secured Parties, forever, subject only
to Permitted Liens (as defined in the Term Loan Credit Agreement), and to
satisfaction and release as provided in Section 3.04.

 

ARTICLE I

 

Representations,
Warranties and Covenants of Mortgagor

 

Mortgagor
agrees, covenants, represents and/or warrants as follows:

 

SECTION 1.01.  Mortgage Lien.  Mortgagor will
forever warrant and defend its title to the Mortgaged Property, the rights of
Mortgagee therein under this Mortgage and the validity and priority of the lien
of this Mortgage thereon against the claims of all persons and parties except
those having rights under Permitted Liens (but to the extent of those rights).

 

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SECTION 1.02.  Term Loan Credit Agreement.  This
Mortgage is given pursuant to the Term Loan Credit Agreement.  Mortgagor
expressly covenants and agrees to pay when due, and to timely perform, and to
cause the other Loan Parties to pay when due, and to timely perform, the
Obligations in accordance with the terms of the Loan Documents.

 

SECTION 1.03.  Maintenance of Mortgaged Property. 
Mortgagor will maintain the Improvements and the Personal Property in the
manner required by the Term Loan Credit Agreement.

 

SECTION 1.04.  Insurance.  Mortgagor will keep
or cause to be kept the Improvements and Personal Property insured against such
risks, and in the manner, pursuant to the Term Loan Credit Agreement or the
Security Agreement and shall purchase such additional insurance as may be
required from time to time pursuant to the Term Loan Credit Agreement and the
Security Agreement.  Federal Emergency Management Agency Standard Flood
Hazard Determination Forms will be purchased by Mortgagor for each Mortgaged
Property on which Improvements are located.  If any portion of
Improvements constituting part of the Mortgaged Property is located in an area
identified as a special flood hazard area by Federal Emergency Management
Agency or other applicable agency, Mortgagor will purchase flood insurance in
an amount reasonably satisfactory to Mortgagee, but in no event less than the
maximum limit of coverage available under the National Flood Insurance Act of
1968, as amended.

 

SECTION 1.05.  Casualty Condemnation/Eminent Domain. 
Mortgagor shall give Mortgagee prompt written notice of any casualty or other
damage to the Mortgaged Property or any proceeding for the taking of the
Mortgaged Property or any portion thereof or interest therein under power of
eminent domain or by condemnation or any similar proceeding in accordance with,
and to the extent required by, the Term Loan Credit Agreement.  Any net
proceeds received by or on behalf of the Mortgagor in respect of any such
casualty, damage or taking shall constitute trust funds held by the Mortgagor
for the benefit of the Secured Parties to be applied to repair, restore or
replace the Mortgaged Property or, if a prepayment event shall occur with
respect to any such net proceeds, to be applied in accordance with the Term
Loan Credit Agreement.

 

SECTION 1.06.  Assignment of Leases and Rents. 
(a)  Mortgagor hereby irrevocably and absolutely grants, transfers and
assigns all of its right title and interest in all Leases, together with any
and all extensions and renewals thereof for purposes of securing and
discharging the performance by Mortgagor of the Obligations.  Mortgagor
has not assigned or executed any assignment of, and will not assign or execute
any assignment of, any Leases or the Rents payable thereunder to anyone other
than Mortgagee.

 

(b)  All Leases entered into by Mortgagor at
the Mortgaged Property following the date hereof shall be subordinate to the
lien of this Mortgage unless otherwise contemplated under the Term Loan Credit
Agreement.  Mortgagor will not enter into, any Lease if such Lease, as
entered into, will not be subordinate to the lien of this Mortgage unless otherwise
contemplated under the Term Loan Credit Agreement.

 

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(c)  Subject to Section 1.06(d), Mortgagor
has assigned and transferred to Mortgagee all of Mortgagor’s right, title and
interest in and to the Rents now or hereafter arising from each Lease
heretofore or hereafter made or agreed to by Mortgagor, it being intended that
this assignment establish, subject to Section 1.06(d), an absolute
transfer and assignment of all Rents and all Leases to Mortgagee and not merely
to grant a security interest therein.  Subject to Section 1.06(d),
Mortgagee may in Mortgagor’s name and stead (with or without first taking
possession of any of the Mortgaged Property personally or by receiver as
provided herein) operate the Mortgaged Property and rent, lease or let all or
any portion of any of the Mortgaged Property to any party or parties at such
rental and upon such terms as Mortgagee shall, in its sole discretion,
determine, and may collect and have the benefit of all of said Rents arising
from or accruing at any time thereafter or that may thereafter become due under
any Lease.

 

(d)  So long as an Event of Default shall not
have occurred and be continuing, Mortgagee will not exercise any of its rights
under Section 1.06(c), and Mortgagor shall receive and collect the Rents
accruing under any Lease; but after the occurrence and during the continuance
of any Event of Default, Mortgagee may, at its option, receive and collect all
Rents and enter upon the Premises and Improvements through its officers,
agents, employees or attorneys for such purpose and for the operation and
maintenance thereof.  Mortgagor hereby irrevocably authorizes and directs
each tenant, if any, and each successor, if any, to the interest of any tenant
under any Lease, respectively, to rely upon any notice of a claimed Event of
Default sent by Mortgagee to any such tenant or any of such tenant’s successors
in interest, and thereafter to pay Rents to Mortgagee without any obligation or
right to inquire as to whether an Event of Default actually exists and even if
some notice to the contrary is received from the Mortgagor, who shall have no
right or claim against any such tenant or successor in interest for any such
Rents so paid to Mortgagee.  Each tenant or any of such tenant’s
successors in interest from whom Mortgagee or any officer, agent, attorney or
employee of Mortgagee shall have collected any Rents, shall be authorized to
pay Rents to Mortgagor only after such tenant or any of their successors in
interest shall have received written notice from Mortgagee that the Event of
Default is no longer continuing, unless and until a further notice of an Event
of Default is given by Mortgagee to such tenant or any of its successors in
interest.

 

(e)  Mortgagee will not become a mortgagee in
possession so long as it does not enter or take actual possession of the
Mortgaged Property.  In addition, Mortgagee shall not be responsible or
liable for performing any of the obligations of the landlord under any Lease,
for any waste by any tenant, or others, for any dangerous or defective
conditions of any of the Mortgaged Property, for negligence in the management,
upkeep, repair or control of any of the Mortgaged Property or any other act or
omission by any other person unless and until it enters or takes actual
possession of the Mortgaged Property.

 

(f)  Mortgagor shall furnish to Mortgagee,
within 30 days after a request by Mortgagee to do so, a written statement
containing the names of all tenants, subtenants and concessionaires of the
Premises or Improvements, and a copy of any Lease.

 

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SECTION 1.07.  Security Agreement.  This
Mortgage is both a mortgage of real property and a grant of a security interest
in personal property, and shall constitute and serve as a “Security Agreement”
within the meaning of the uniform commercial code as adopted in the state
wherein the Premises are located (“UCC”). 
Mortgagor has hereby granted unto Mortgagee a security interest in and to all
the Mortgaged Property described in this Mortgage that is not real property,
and simultaneously with the recording of this Mortgage, Mortgagor has filed or
will file UCC financing statements, and will file continuation statements prior
to the lapse thereof, at the appropriate offices in the jurisdiction of
formation of the Mortgagor to perfect the security interest granted by this
Mortgage in all the Mortgaged Property that is not real property. 
Mortgagor hereby appoints Mortgagee as its true and lawful attorney-in-fact and
agent, for Mortgagor and in its name, place and stead, in any and all
capacities, to execute any document and to file the same in the appropriate
offices (to the extent it may lawfully do so), and to perform each and every
act and thing reasonably requisite and necessary to be done to perfect the
security interest contemplated by the preceding sentence.  Mortgagee shall
have all rights with respect to the part of the Mortgaged Property that is the
subject of a security interest afforded by the UCC in addition to, but not in
limitation of, the other rights afforded Mortgagee hereunder and under the
Security Agreement.  In the case of any conflict between this Mortgage and
the Security Agreement, the Security Agreement shall govern.

 

SECTION 1.08.  Filing and Recording.  Mortgagor
will cause this Mortgage, the UCC financing statements referred to in
Section 1.09, any other security instrument creating a security interest
in or evidencing the lien hereof upon the Mortgaged Property and each UCC continuation
statement and instrument of further assurance to be filed, registered or
recorded and, if necessary, refiled, rerecorded and reregistered, in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to perfect the lien hereof upon, and the
security interest of Mortgagee in, the Mortgaged Property until this Mortgage
is terminated and released in full in accordance with Section 3.04
hereof.  Mortgagor will pay all filing, registration and recording fees,
all Federal, state, county and municipal recording, documentary or intangible
taxes and other taxes, duties, imposts, assessments and charges, and all
reasonable expenses incidental to or arising out of or in connection with the
execution, delivery and recording of this Mortgage, UCC continuation statements
any mortgage supplemental hereto, any security instrument with respect to the
Personal Property, Permits, Plans and Warranties and Proceeds or any instrument
of further assurance.

 

SECTION 1.09.  Further Assurances.  Upon demand
by Mortgagee, Mortgagor will, at the cost of Mortgagor and without expense to
Mortgagee, do, execute, acknowledge and deliver all such further acts, deeds,
conveyances, mortgages, assignments, notices of assignment, transfers and
assurances as Mortgagee shall from time to time reasonably require for the
better assuring, conveying, assigning, transferring and confirming unto
Mortgagee the property and rights hereby conveyed or assigned or intended now
or hereafter so to be, or which Mortgagor may be or may hereafter become bound
to convey or assign to Mortgagee, or for carrying out the intention or
facilitating the performance of the terms of this Mortgage, or for filing,
registering or recording this Mortgage, and on demand, Mortgagor will also

 

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execute
and deliver and hereby appoints Mortgagee, following the occurrence and during
the continuance of an Event of Default, as its true and lawful attorney-in-fact
and agent, for Mortgagor and in its name, place and stead, in any and all
capacities, to execute and file to the extent it may lawfully do so, one or
more financing statements, chattel mortgages or comparable security instruments
reasonably requested by Mortgagee to evidence more effectively the lien hereof
upon the Personal Property and to perform each and every act and thing
requisite and necessary to be done to accomplish the same.

 

SECTION 1.10.  Additions to Mortgaged Property. 
All right, title and interest of Mortgagor in and to all extensions,
improvements, betterments, renewals, substitutes and replacements of, and all
additions and appurtenances to, the Mortgaged Property hereafter acquired by or
released to Mortgagor or constructed, assembled or placed by Mortgagor upon the
Premises or the Improvements, and all conversions of the security constituted
thereby, immediately upon such acquisition, release, construction, assembling,
placement or conversion, as the case may be, and in each such case without any
further mortgage, conveyance, assignment or other act by Mortgagor, shall
become subject to the lien and security interest of this Mortgage as fully and
completely and with the same effect as though now owned by Mortgagor and
specifically described in the grant of the Mortgaged Property above, but at any
and all times Mortgagor will execute and deliver to Mortgagee any and all such
further assurances, mortgages, conveyances or assignments thereof as Mortgagee
may reasonably require for the purpose of expressly and specifically subjecting
the same to the lien and security interest of this Mortgage.

 

SECTION 1.11.  No Claims Against Mortgagee. 
Nothing contained in this Mortgage shall constitute any consent or request by
Mortgagee, express or implied, for the performance of any labor or services or
the furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof, nor as giving Mortgagor any right, power or
authority to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against Mortgagee in respect thereof.

 

SECTION 1.12.  Fixture Filing.  (a) 
Certain portions of the Mortgaged Property are or will become “fixtures” (as
that term is defined in the UCC) on the Land, and this Mortgage, upon being
filed for record in the real estate records of the county wherein such fixtures
are situated, shall operate also as a financing statement filed as a fixture filing
in accordance with the applicable provisions of said UCC upon such portions of
the Mortgaged Property that are or become fixtures.

 

(b)  The real property to which the fixtures
relate is described in Exhibit A attached hereto.  The record owner
of the real property described in Exhibit A attached hereto is
Mortgagor.  The name, type of organization and jurisdiction of
organization of the debtor for purposes of this financing statement are the
name, type of organization and jurisdiction of organization of the Mortgagor
set forth in the first paragraph of this Mortgage, and the name of the secured
party for purposes of this financing statement is the name of the Mortgagee set
forth in the first paragraph of this Mortgage.  The mailing address of the
Mortgagor/debtor is

 

9

 

the
address of the Mortgagor set forth in the first paragraph of this
Mortgage.  The mailing address of the Mortgagee/secured party from which
information concerning the security interest hereunder may be obtained is the
address of the Mortgagee set forth in the first paragraph of this
Mortgage.  Mortgagor’s organizational identification number is 95-4119509.

 

SECTION 1.13.  INTENTIONALLY OMITTED

 

SECTION 1.14.  Conflicts.  In the event of a
conflict between any provision of this First Priority Mortgage and any
provision of the Security Agreement, the Security Agreement shall govern. 
In the event of a conflict between any provision of this First Priority
Mortgage and any provision of the Term Loan Credit Agreement, the Term Loan
Credit Agreement shall govern.

 

SECTION 1.15.  Performance Under First Mortgage.  The
Mortgagor shall perform or observe all covenants and conditions to be performed
or observed by the Mortgagor under the First Mortgage and shall not permit an
Event of Default under the First Mortgage to occur and continue.

 

SECTION 1.16.  Copies of Communication.  If at
any time the Mortgagor provides the First Mortgagee with any written
communication, information, documentation, notice or demand of any kind
(including regular monthly loan payments) relevant to the First Mortgage,
including any appraisal or other similar material, then the Mortgagor shall at
the same time and by the same means provide the Mortgagee with a copy of the
same.  If at any time the Mortgagor receives any written communication,
information, documentation, notice or demand of any kind from the First
Mortgagee relevant to the First Mortgage or the loan or other obligation
secured thereby, then the Mortgagor shall immediately provide the Mortgagee
with a copy of the same.

 

SECTION 1.17.  Savings Clause.  Any
provision herein to the contrary notwithstanding, Mortgagor makes no assignment
or grant of rights with respect to any (i) personal property or
(ii) any general intangibles or any other rights to any Leases, Management
Agreements, contracts, insurance proceeds, instruments, licenses or other
documents (collectively, “Contract Rights”),
as to which the grant of a security interest therein would constitute a violation
of applicable law or of any valid and enforceable obligation in favor of a
third party relating to such personal property or under such Contract Rights.

 

10

 

ARTICLE II

 

Defaults
and Remedies

 

SECTION 2.01.  Events of Default.  Any Event of
Default under the Term Loan Credit Agreement (as such term is defined therein)
shall constitute an Event of Default under this Mortgage.

 

SECTION 2.02.  Demand for Payment.  If an Event
of Default shall occur and be continuing, then, upon written demand of
Mortgagee, Mortgagor will pay to Mortgagee all amounts due hereunder and under
the Term Loan Credit Agreement and the Security Agreement and such further
amount as shall be sufficient to cover the costs and expenses of collection,
including attorneys’ fees, disbursements and expenses incurred by Mortgagee,
and Mortgagee shall be entitled and empowered to institute an action or
proceedings at law or in equity for the collection of the sums so due and
unpaid, to prosecute any such action or proceedings to judgment or final
decree, to enforce any such judgment or final decree against Mortgagor and to
collect, in any manner provided by law, all moneys adjudged or decreed to be payable.

 

SECTION 2.03.  Rights To Take Possession, Operate and Apply
Revenues.  (a)  Subject to the terms of the Security
Agreement, if an Event of Default shall occur and be continuing, Mortgagor
shall, upon demand of Mortgagee, forthwith surrender to Mortgagee actual
possession of the Mortgaged Property and, if and to the extent not prohibited
by applicable law, Mortgagee itself, or by such officers or agents as it may
appoint, may then enter and take possession of all the Mortgaged Property
without the appointment of a receiver or an application therefor, exclude
Mortgagor and its agents and employees wholly therefrom, and have access to the
books, papers and accounts of Mortgagor.

 

(b)  If Mortgagor shall for any reason fail to
surrender or deliver the Mortgaged Property or any part thereof after such
demand by Mortgagee, Mortgagee may to the extent not prohibited by applicable
law, obtain a judgment or decree conferring upon Mortgagee the right to
immediate possession or requiring Mortgagor to deliver immediate possession of
the Mortgaged Property to Mortgagee, to the entry of which judgment or decree
Mortgagor hereby specifically consents.  Mortgagor will pay to Mortgagee,
upon demand, all reasonable expenses of obtaining such judgment or decree, including
reasonable compensation to Mortgagee’s attorneys and agents with interest
thereon at the rate per annum applicable to overdue amounts under the Term Loan
Credit Agreement (the “Interest Rate”);
and all such expenses and compensation shall, until paid, be secured by this
Mortgage.

 

(c)  Upon every such entry or taking of
possession, Mortgagee may, to the extent not prohibited by applicable law,
hold, store, use, operate, manage and control the Mortgaged Property, conduct
the business thereof and, from time to time, (i) make all necessary and
proper maintenance, repairs, renewals, replacements, additions, betterments and
improvements thereto and thereon, (ii) purchase or otherwise acquire
additional fixtures, personalty and other property, (iii) insure or keep
the Mortgaged Property insured,

 

11

 

(iv) manage
and operate the Mortgaged Property and exercise all the rights and powers of
Mortgagor to the same extent as Mortgagor could in its own name or otherwise
with respect to the same, or (v) enter into any and all agreements with
respect to the exercise by others of any of the powers herein granted
Mortgagee, all as may from time to time be directed or determined by Mortgagee
to be in its best interest and Mortgagor hereby appoints Mortgagee as its true
and lawful attorney-in-fact and agent, following the occurrence and during the
continuance of an Event of Default for Mortgagor and in its name, place and
stead, in any and all capacities, to perform any of the foregoing acts.
Mortgagee may collect and receive all the Rents, issues, profits and revenues
from the Mortgaged Property, including those past due as well as those accruing
thereafter, and, after deducting (i) all expenses of taking, holding, managing
and operating the Mortgaged Property (including compensation for the services
of all persons employed for such purposes), (ii) the costs of all such
maintenance, repairs, renewals, replacements, additions, betterments,
improvements, purchases and acquisitions, (iii) the costs of insurance,
(iv) such taxes, assessments and other similar charges as Mortgagee may at
its option pay, (v) other proper charges upon the Mortgaged Property or
any part thereof and (vi) the compensation, expenses and disbursements of
the attorneys and agents of Mortgagee, Mortgagee shall apply the remainder of
the moneys and proceeds so received first to the payment of the Mortgagee for
the satisfaction of the Obligations, and, if there is any surplus, to
Mortgagor, subject to the entitlement of others thereto under applicable law.

 

(d)  Whenever, before any sale of the Mortgaged
Property under Section 2.06, all Obligations that are then due shall have
been paid and all Events of Default fully cured, Mortgagee will surrender
possession of the Mortgaged Property back to Mortgagor, its successors or
assigns.  The same right of taking possession shall, however, arise again
if any subsequent Event of Default shall occur and be continuing.

 

SECTION 2.04.  Right To Cure Mortgagor’s Failure to Perform. 
Subject to the terms of the Security Agreement, should Mortgagor fail in the
payment, performance or observance of any term, covenant or condition required
by this Mortgage or the Term Loan Credit Agreement or the Existing Notes
Indenture (with respect to the Mortgaged Property), Mortgagee may pay, perform
or observe the same, and all payments made or costs or expenses incurred by
Mortgagee in connection therewith shall be secured hereby and shall be, without
demand, immediately repaid by Mortgagor to Mortgagee with interest thereon at
the Interest Rate.  Mortgagee shall be the judge using reasonable
discretion of the necessity for any such actions and of the amounts to be
paid.  Mortgagee is hereby empowered to enter and to authorize others to
enter upon the Premises or the Improvements or any part thereof for the purpose
of performing or observing any such defaulted term, covenant or condition
without having any obligation to so perform or observe and without thereby
becoming liable to Mortgagor, to any person in possession holding under
Mortgagor or to any other person.

 

SECTION 2.05.  Right to a Receiver.  If an Event
of Default shall occur and be continuing, Mortgagee, shall be entitled to make
application to a court of competent jurisdiction for, and (to the extent
permitted by law) obtain from such a court, as a matter of right to the
appointment of a receiver to take possession of and to operate the Mortgaged

 

12

 

Property
and to collect and apply the Rents.  The receiver shall have all of the
rights and powers permitted under the laws of the state wherein the Mortgaged
Property is located.  Mortgagor shall pay to Mortgagee upon demand all
reasonable expenses, including receiver’s fees, reasonable attorney’s fees and
disbursements, costs and agent’s compensation incurred pursuant to the
provisions of this Section 2.05; and all such expenses shall be secured by
this Mortgage and shall be, without demand, immediately repaid by Mortgagor to
Mortgagee with interest thereon at the Interest Rate.

 

SECTION 2.06.  Foreclosure and Sale.  (a) 
Subject to the terms of the Security Agreement, if an Event of Default shall
occur and be continuing, Mortgagee may elect to sell the Mortgaged Property or
any part of the Mortgaged Property by exercise of the power of foreclosure or
of sale granted to Mortgagee by applicable law or this Mortgage.  In such
case, Mortgagee may commence a civil action to foreclose this Mortgage, or it
may proceed and sell the Mortgaged Property to satisfy any Obligation. 
Mortgagee or an officer appointed by a judgment of foreclosure to sell the
Mortgaged Property, may sell all or such parts of the Mortgaged Property as may
be chosen by Mortgagee at the time and place of sale fixed by it in a notice of
sale, either as a whole or in separate lots, parcels or items as Mortgagee
shall deem expedient, and in such order as it may determine, at public auction
to the highest bidder.  Mortgagee or an officer appointed by a judgment of
foreclosure to sell the Mortgaged Property may postpone any foreclosure or
other sale of all or any portion of the Mortgaged Property by public
announcement at such time and place of sale, and from time to time thereafter
may postpone such sale by public announcement or subsequently noticed
sale.  Without further notice, Mortgagee or an officer appointed to sell
the Mortgaged Property may make such sale at the time fixed by the last
postponement, or may, in its discretion, give a new notice of sale.  Any
person, including Mortgagor or Mortgagee or any designee or affiliate thereof,
may purchase at such sale.

 

(b)  The Mortgaged Property may be sold subject
to unpaid taxes and Permitted Liens, and, after deducting all costs, fees and
expenses of Mortgagee (including costs of evidence of title in connection with
the sale), Mortgagee or an officer that makes any sale shall apply the proceeds
of sale in the manner set forth in Section 2.08.

 

(c)  Any foreclosure or other sale of less than
the whole of the Mortgaged Property or any defective or irregular sale made
hereunder shall not exhaust the power of foreclosure or of sale provided for
herein; and subsequent sales may be made hereunder until the Obligations have
been satisfied, or the entirety of the Mortgaged Property has been sold.

 

(d)  If an Event of Default shall occur and be
continuing, Mortgagee may instead of, or in addition to, exercising the rights
described in Section 2.06(a) above and either with or without entry
or taking possession as herein permitted, proceed by a suit or suits in law or
in equity or by any other appropriate proceeding or remedy (i) to
specifically enforce payment of some or all of the Obligations, or the
performance of any term, covenant, condition or agreement of this Mortgage or
any other Loan Document or any other right, or (ii) to pursue any other
remedy available to Mortgagee, all as Mortgagee shall determine most effectual
for such purposes.

 

13

 

(e)  Notwithstanding anything in this
Section 2.06 to the contrary, the exercise of the rights granted in this
Section 2.06 are subject to the Security Agreement.

 

SECTION 2.07.  Other Remedies.  (a) 
Subject to the terms of the Security Agreement, in case an Event of Default
shall occur and be continuing, Mortgagee may also exercise, to the extent not
prohibited by law, any or all of the remedies available to a secured party
under the UCC.

 

(b)  In connection with a sale of the Mortgaged
Property or any Personal Property and the application of the proceeds of sale
as provided in Section 2.08, Mortgagee shall be entitled to enforce
payment of and to receive up to the principal amount of the Obligations, plus
all other charges, payments and costs due under this Mortgage, and to recover a
deficiency judgment for any portion of the aggregate principal amount of the
Obligations remaining unpaid, with interest.

 

SECTION 2.08.  Application of Sale Proceeds and Rents. 
Subject to the terms of the Security Agreement, after any foreclosure sale of
all or any of the Mortgaged Property, Mortgagee shall receive and apply the
proceeds of the sale together with any Rents that may have been collected and
any other sums that then may be held by Mortgagee under this Mortgage in
accordance with the Security Agreement, subject to the terms of the Security
Agreement.

 

SECTION 2.09.  Mortgagor as Tenant Holding Over. 
Subject to the terms of the Security Agreement, if Mortgagor remains in
possession of any of the Mortgaged Property after any foreclosure sale by
Mortgagee, at Mortgagee’s election Mortgagor shall be deemed a tenant holding
over and shall forthwith surrender possession to the purchaser or purchasers at
such sale or be summarily dispossessed or evicted according to provisions of
law applicable to tenants holding over.

 

SECTION 2.10.  Waiver of Appraisement, Valuation, Stay, Extension
and Redemption Laws.  Subject to the terms of the Security
Agreement, Mortgagor waives, to the extent not prohibited by law, (i) the
benefit of all laws now existing or that hereafter may be enacted
(x) providing for any appraisement or valuation of any portion of the
Mortgaged Property and/or (y) in any way extending the time for the
enforcement or the collection of amounts due under any of the Obligations or
creating or extending a period of redemption from any sale made in collecting
said debt or any other amounts due Mortgagee, (ii) any right to at any
time insist upon, plead, claim or take the benefit or advantage of any law now
or hereafter in force providing for any homestead exemption, stay, statute of
limitations, extension or redemption, or sale of the Mortgaged Property as
separate tracts, units or estates or as a single parcel in the event of
foreclosure or notice of deficiency, and (iii) all rights of redemption,
valuation, appraisement, stay of execution, notice of election to mature or
declare due the whole of or each of the Obligations and marshaling in the event
of foreclosure of this Mortgage.

 

SECTION 2.11.  Discontinuance of Proceedings. 
Subject to the terms of the Security Agreement, in case Mortgagee shall proceed
to enforce any right, power or remedy under this

 

14

 

Mortgage
by foreclosure, entry or otherwise, and such proceedings shall be discontinued
or abandoned for any reason, or shall be determined adversely to Mortgagee,
then and in every such case Mortgagor and Mortgagee shall be restored to their
former positions and rights hereunder, and all rights, powers and remedies of
Mortgagee shall continue as if no such proceeding had been taken.

 

SECTION 2.12.  Suits To Protect the Mortgaged Property. 
Subject to the terms of the Security Agreement, Mortgagee shall have power
(a) to institute and maintain suits and proceedings to prevent any
impairment of the Mortgaged Property by any acts that may be unlawful or in
violation of this Mortgage, (b) to preserve or protect its interest in the
Mortgaged Property and in the Rents arising therefrom and (c) to restrain
the enforcement of or compliance with any legislation or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid
if the enforcement of or compliance with such enactment, rule or order
would impair the security or be prejudicial to the interest of Mortgagee
hereunder.

 

SECTION 2.13.  Filing Proofs of Claim.  Subject
to the terms of the Security Agreement, in case of any receivership,
insolvency, bankruptcy, reorganization, arrangement, adjustment, composition or
other proceedings affecting Mortgagor, Mortgagee shall, to the extent permitted
by law, be entitled to file such proofs of claim and other documents as may be
necessary or advisable in order to have the claims of Mortgagee allowed in such
proceedings for the Obligations secured by this Mortgage at the date of the
institution of such proceedings and for any interest accrued, late charges and
additional interest or other amounts due or that may become due and payable
hereunder after such date.

 

SECTION 2.14.  Possession by Mortgagee.  Subject
to the terms of the Security Agreement, notwithstanding the appointment of any
receiver, liquidator or trustee of Mortgagor, any of its property or the
Mortgaged Property, Mortgagee shall be entitled, to the extent not prohibited
by law, to remain in possession and control of all parts of the Mortgaged
Property now or hereafter granted under this Mortgage to Mortgagee in
accordance with the terms hereof and applicable law.

 

SECTION 2.15.  Waiver.  (a)  Subject to the
terms of the Security Agreement, no delay or failure by Mortgagee to exercise
any right, power or remedy accruing upon any breach or Event of Default shall
exhaust or impair any such right, power or remedy or be construed to be a
waiver of any such breach or Event of Default or acquiescence therein; and
every right, power and remedy given by this Mortgage to Mortgagee may be
exercised from time to time and as often as may be deemed expedient by
Mortgagee.  No consent or waiver by Mortgagee to or of any breach or Event
of Default by Mortgagor in the performance of the Obligations shall be deemed
or construed to be a consent or waiver to or of any other breach or Event of
Default in the performance of the same or of any other Obligations by Mortgagor
hereunder.  No failure on the part of Mortgagee to complain of any act or
failure to act or to declare an Event of Default, irrespective of how long such
failure continues, shall constitute a waiver by Mortgagee of its rights
hereunder or impair any rights, powers or remedies consequent on any future
Event of Default by Mortgagor.

 

15

 

(b)  Even if Mortgagee (i) grants some
forbearance or an extension of time for the payment of any sums secured hereby,
(ii) takes other or additional security for the payment of any sums
secured hereby, (iii) waives or does not exercise some right granted
herein or under the Loan Documents, (iv) releases a part of the Mortgaged
Property from this Mortgage, (v) agrees to change some of the terms,
covenants, conditions or agreements of any of the Loan Documents, (vi) consents
to the filing of a map, plat or replat affecting the Premises,
(vii) consents to the granting of an easement or other right affecting the
Premises or (viii) makes or consents to an agreement subordinating
Mortgagee’s lien on the Mortgaged Property hereunder; no such act or omission
shall preclude Mortgagee from exercising any other right, power or privilege
herein granted or intended to be granted in the event of any breach or Event of
Default then made or of any subsequent default; nor, except as otherwise
expressly provided in an instrument executed by Mortgagee, shall this Mortgage
be altered thereby.  In the event of the sale or transfer by operation of
law or otherwise of all or part of the Mortgaged Property, Mortgagee is hereby
authorized and empowered to deal with any vendee or transferee with reference
to the Mortgaged Property secured hereby, or with reference to any of the
terms, covenants, conditions or agreements hereof, as fully and to the same
extent as it might deal with the original parties hereto and without in any way
releasing or discharging any liabilities, obligations or undertakings.

 

SECTION 2.16.  Waiver of Trial by Jury.  To the
fullest extent permitted by applicable law, Mortgagor and Mortgagee each hereby
irrevocably and unconditionally waive trial by jury in any action, claim, suit
or proceeding relating to this Mortgage and for any counterclaim brought
therein.  Mortgagor hereby waives all rights to interpose any counterclaim
in any suit brought by Mortgagee hereunder and all rights to have any such suit
consolidated with any separate suit, action or proceeding.

 

SECTION 2.17.  Remedies Cumulative.  No right,
power or remedy conferred upon or reserved to Mortgagee by this Mortgage is
intended to be exclusive of any other right, power or remedy, and each and
every such right, power and remedy shall be cumulative and concurrent and in
addition to any other right, power and remedy given hereunder or now or
hereafter existing at law or in equity or by statute.

 

ARTICLE III

 

Miscellaneous

 

SECTION 3.01.  Partial Invalidity.  In the event
any one or more of the provisions contained in this Mortgage shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
validity, illegality or unenforceability shall, at the option of Mortgagee, not
affect any other provision of this Mortgage, and this Mortgage shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein or therein.

 

SECTION 3.02.  Notices.  All notices and
communications hereunder shall be in writing and given to Mortgagor in
accordance with the terms of the Term Loan Credit

 

16

 

Agreement
at the address set forth on the first page of this Mortgage and to the
Mortgagee as provided in the Term Loan Credit Agreement.

 

SECTION 3.03.  Successors and Assigns.  All of
the grants, covenants, terms, provisions and conditions herein shall run with
the Premises and the Improvements and shall apply to, bind and inure to, the
benefit of the permitted successors and assigns of Mortgagor and the successors
and assigns of Mortgagee.

 

SECTION 3.04.  Satisfaction and Cancelation. 
(a)  This Mortgage shall continue in effect until (i) the Term Loan
Credit Agreement has terminated pursuant to its express terms and (ii) all
of the Specified Obligations have been indefeasibly paid and performed in full.

 

(b)  Subject to the terms of the Security
Agreement, upon any sale or other transfer by Mortgagor of the Mortgaged
Property that is permitted under Section 4.1(d) of the Security
Agreement to any Person that is not another Grantor or, upon the effectiveness
of any written consent to the release of the security interest granted hereby
in the Mortgaged Property pursuant to Section 10.02 of the Term Loan
Credit Agreement, the security interest in the Mortgaged Property shall be
automatically released.

 

(c)  In connection with any termination or
release pursuant to paragraph (a) or (b), the Mortgage shall be
marked “satisfied” by the Mortgagee, and this Mortgage shall be canceled of
record at the request and at the expense of the Mortgagor.  Mortgagee
shall execute any documents reasonably requested by Mortgagor to accomplish the
foregoing or to accomplish any release contemplated by this Section 3.04
and Mortgagor will pay all costs and expenses, including reasonable attorneys’
fees, disbursements and other charges, incurred by Mortgagee in connection with
the preparation and execution of such documents.

 

SECTION 3.05.  Definitions.  As used in this
Mortgage, the singular shall include the plural as the context requires and the
following words and phrases shall have the following meanings: (a) “including” shall mean “including but not
limited to”; (b) “provisions”
shall mean “provisions, terms, covenants and/or conditions”; (c) “lien” shall mean “lien, charge,
encumbrance, security interest, mortgage or deed of trust”; (d) “obligation” shall mean “obligation, duty,
covenant and/or condition”; and (e) “any of the Mortgaged Property” shall mean
“the Mortgaged Property or any part thereof or interest therein”.  Any act
that Mortgagee is permitted to perform hereunder may be performed at any time
and from time to time by Mortgagee or any person or entity designated by
Mortgagee.  Any act that is prohibited to Mortgagor hereunder is also
prohibited to all lessees of any of the Mortgaged Property.  Each
appointment of Mortgagee as attorney-in-fact for Mortgagor under the Mortgage
is irrevocable, with power of substitution and coupled with an interest. 
Subject to the applicable provisions hereof, Mortgagee has the right to refuse
to grant its consent, approval or acceptance or to indicate its satisfaction,
in its sole discretion, whenever such consent, approval, acceptance or
satisfaction is required hereunder.

 

SECTION 3.06.  Multisite Real Estate Transaction. 
Mortgagor acknowledges that this Mortgage is one of a number of Other Mortgages
and Term Loan Security Documents that secure the Obligations.  Mortgagor
agrees that the lien of this Mortgage shall be absolute

 

17

 

and
unconditional and shall not in any manner be affected or impaired by any acts
or omissions whatsoever of Mortgagee, and without limiting the generality of
the foregoing, the lien hereof shall not be impaired by any acceptance by the
Mortgagee of any security for or guarantees of any of the Obligations hereby
secured, or by any failure, neglect or omission on the part of Mortgagee to
realize upon or protect any Secured Obligation or indebtedness hereby secured
or any collateral security therefor including the Other Mortgages and other
Term Loan Security Documents.  The lien hereof shall not in any manner be
impaired or affected by any release (except as to the property released), sale,
pledge, surrender, compromise, settlement, renewal, extension, indulgence,
alteration, changing, modification or disposition of any of the Obligations
secured (unless all Specified Obligations are satisfied) or of any of the
collateral security therefor, including the Other Mortgages and other Term Loan
Security Documents or of any guarantee thereof, and Mortgagee may at its
discretion foreclose, exercise any power of sale, or exercise any other remedy
available to it under any or all of the Other Mortgages and other Term Loan
Security Documents without first exercising or enforcing any of its rights and
remedies hereunder.  Such exercise of Mortgagee’s rights and remedies
under any or all of the Other Mortgages and other Term Loan Security Documents
shall not in any manner impair the indebtedness hereby secured or the lien of
this Mortgage and any exercise of the rights or remedies of Mortgagee hereunder
shall not impair the lien of any of the Other Mortgages and other Term Loan
Security Documents or any of Mortgagee’s rights and remedies thereunder. 
Mortgagor specifically consents and agrees that Mortgagee may exercise its
rights and remedies hereunder and under the Other Mortgages and other Term Loan
Security Documents separately or concurrently and in any order that it may deem
appropriate and waives any rights of subrogation.

 

SECTION 3.07.  No Oral Modification.  This
Mortgage may not be changed or terminated orally.

 

SECTION 3.08.  Subject to Security Agreement. 
Notwithstanding anything herein to the contrary, the second-priority lien and
security interest granted to the Collateral Agent pursuant to this First
Priority Mortgage and the exercise of any right or remedy by the Collateral
Agent hereunder are subject to the provisions of the Security Agreement. 
In the event of any conflict between the terms of the Security Agreement and
this First Priority Mortgage, the terms of the Security Agreement shall
govern.  So long as the First Mortgage, or other senior mortgages are,
outstanding, Mortgagor shall not be in default hereunder for the failure to
comply with any term or provision contained in this First Priority Mortgage if
such compliance would result in a default under the terms and provisions of the
First Mortgage or other senior mortgages.

 

18

 

ARTICLE IV

 

Particular
Provisions

 

This
Mortgage is subject to the following provisions relating to the particular laws
of the state wherein the Premises are located:

 

SECTION 4.01.  Applicable Law; Certain Particular Provisions. 
This Mortgage shall be governed by and construed in accordance with the
internal law of the state where the Mortgaged Property is located, except that
Mortgagor expressly acknowledges that by their terms, the Term Loan Credit
Agreement and other Loan Documents (aside from those Other Mortgages to be
recorded outside New York) shall be governed by the internal law of the
State of New York, without regard to principles of conflict of law. 
Mortgagor and Mortgagee agree to submit to jurisdiction and the laying of venue
for any suit on this Mortgage in the state where the Mortgaged Property is
located.  The terms and provisions set forth in Appendix A attached
hereto are hereby incorporated by reference as though fully set forth herein. 
In the event of any conflict between the terms and provisions contained in the
body of this Mortgage and the terms and provisions set forth in
Appendix A, the terms and provisions set forth in Appendix A shall
govern and control.

 

ARTICLE V

 

Subject
Lease

 

SECTION 5.01.  The Subject Lease.  (a)  The
Subject Lease is a valid and subsisting lease of that portion of the Premises
demised thereunder for the term therein set forth, is in full force and effect
in accordance with the terms thereof, and has not been modified except as
expressly set forth herein.  No material default exists, and to the best
knowledge of Mortgagor, no event or act has occurred and no condition exists
which with the passage of time or the giving of notice or both would constitute
a material default, under the Subject Lease.

 

(b)  Without the prior written consent of
Mortgagee, Mortgagor will not modify, amend, or in any way alter the terms of
the Subject Lease if such modification, amendment or alteration would increase
the monetary obligations of the Mortgagor under the Subject Lease in any
material respect or otherwise be adverse in any material respect to the
interests of Mortgagee or the value of the Mortgaged Property.  Except to
the extent permitted under the Term Loan Credit Agreement, without the prior
written consent of Mortgagee, Mortgagor will not (i) in any way cancel,
release, terminate, surrender or reduce the term of the Subject Lease,
(ii) fail to exercise any option to renew or extend the term of the
Subject Lease, (iii) waive, excuse, condone or in any way release or
discharge the lessor under the Subject Lease of or from any material
obligations, covenants, conditions and agreements by said lessor to be done and
performed and (iv) consent to the subordination of the Subject Lease to
any mortgage unless such subordination is conditioned upon the non-disturbance
of

 

19

 

Mortgagor,
as tenant, by the applicable mortgagee.  Any attempt on the part of
Mortgagor to do any of the foregoing without such written consent of Mortgagee
shall be null and void and of no effect and shall constitute a default
hereunder.

 

(c)  Mortgagor shall at all times promptly and
faithfully keep and perform in all material respects, or cause to be kept and
performed in all material respects, all the covenants and conditions contained
in the Subject Lease by the lessee therein to be kept and performed and shall
in all material respects conform to and comply with the terms and conditions of
the Subject Lease and Mortgagor further covenants that it will not do or permit
anything to be done, the doing of which, or refrain from doing anything, the
omission of which, would reasonably be expected to impair the security of this
Mortgage.

 

(d)  Mortgagor shall promptly send Mortgagee a
copy of any notice of default that it sends to the lessor under the Subject
Lease and shall promptly provide to Mortgagee a copy of any notice of default
received by Mortgagor from such lessor and this shall be done without regard to
the fact that Mortgagee may be entitled to such notice directly from the
lessor.  Mortgagor shall promptly notify Mortgagee of any default under
the Subject Lease by lessor or giving of any notice by the lessor to Mortgagor
of such lessor’s intention to end the term thereof or the exercise of an early
termination right under the Subject Lease.

 

(e)  To the extent that Mortgagee is not given
the right by the lessor to cure any defaults of Mortgagor under the Subject
Lease pursuant to the terms thereof, then notwithstanding any other provision
of this Mortgage, following written notice of default sent by the lessor to
Mortgagor and the completion of one-half of Mortgagor’s cure period with
respect to such default, Mortgagee may (but shall not be obligated to) take any
such action Mortgagee deems reasonably necessary or desirable to cure, in whole
or in part, any failure of compliance by Mortgagor under the Subject Lease; and
upon the receipt by Mortgagee from Mortgagor or the lessor under the Subject
Lease of any written notice of default by Mortgagor as the lessee thereunder,
Mortgagor may rely thereon, and such notice and conclusion of one-half of
Mortgagor’s cure period shall constitute full authority and protection to
Mortgagee for any action taken or omitted to be taken in good faith reliance
thereon.  All sums, including reasonable attorneys’ fees, so reasonably
expended by the Mortgagee to cure or prevent any such default, or expended to
sustain the lien of this Mortgage or its priority, shall be deemed secured by
this Mortgage and shall be paid by the Mortgagor on demand, with interest
accruing thereon at the Interest Rate.  Upon the vesting of Mortgagee’s
right to cure defaults under the Subject Lease as set forth pursuant to this
paragraph, Mortgagor hereby expressly grants to Mortgagee (subject to the terms
of the Subject Lease), and agrees that Mortgagee shall, upon prior notice to
Mortgagor, have, the absolute and immediate right to enter in and upon the Land
and the Improvements or any part thereof to such extent and as often as
Mortgagee, deems reasonably necessary or desirable in order to cure any such
default or alleged default by Mortgagor, provided, that, Mortgagee agrees that
it shall not interfere with Mortgagor’s business conducted on the Land and Improvements
and shall comply with Mortgagor’s reasonable security requirements.

 

20

 

(f)  Upon the occurrence and during the
continuance of any Event of Default, all options, election, consents and
approval rights conferred upon Mortgagor as lessee under the Subject Lease,
together with the right of termination, cancelation, modification, change,
supplement, alteration or amendment of the Subject Lease, all of which have
been assigned for collateral purposes to Mortgagee, shall automatically vest
exclusively in and be exercisable solely by Mortgagee, provided, that, if the
lessor under the Subject Lease is not obligated to accept Mortgagee’s exercise
of such options, elections, consents and approval rights, then Mortgagor shall
have the right to exercise the same, subject to Mortgagee’s consent.

 

(g)  Mortgagor will give Mortgagee prompt written
notice of the commencement of any arbitration or appraisal proceeding under and
pursuant to the provisions of the Subject Lease.  Following the occurrence
and during the continuance of an Event of Default, Mortgagee shall have the
right, but not the obligation, to intervene and participate in any such
proceeding and Mortgagor shall confer with Mortgagee to the extent which
Mortgagee deems reasonably necessary for the protection of Mortgagee. 
Mortgagor may compromise any dispute or approval which is the subject of an
arbitration or appraisal proceeding, provided that Mortgagor shall first get
the prior written consent of Mortgagee which approval will not be unreasonably
withheld or delayed with respect to any such material disputes or approvals.

 

(h)  So long as this Mortgage is in effect,
there shall be no merger of the Subject Lease or any interest therein, or of
the leasehold estate created thereby, with the fee estate in the Land or any
portion thereof by reason of the fact that the Subject Lease or such interest
therein may be held directly or indirectly by or for the account of any person
who shall hold the lessor’s fee estate in the Land or any portion thereof or
any interest of the lessor under the Subject Lease.  In case the Mortgagor
acquires fee title to the Land, this Mortgage shall attach to and cover and be
a lien upon the fee title acquired, and such fee title shall, without further
assignment, mortgage or conveyance, become and be subject to the lien of and
covered by this Mortgage.  Mortgagor shall notify Mortgagee of any such
acquisition and, on written request by Mortgagee, shall cause to be executed
and recorded all such other and further assurances or other instruments in
writing as may in the reasonable opinion of Mortgagee be necessary or
appropriate to effect the intent and meaning hereof and shall deliver to
Mortgagee an endorsement to Mortgagee’s loan title insurance policy insuring
that such fee title or other estate is subject to the lien of this Mortgage.

 

(i)  If any action or proceeding shall be
instituted to evict Mortgagor or to recover possession of any leasehold parcel
or any part thereof or interest therein or any action or proceeding otherwise
affecting the Subject Lease or this Mortgage shall be instituted, then Mortgagor
will, promptly upon service thereof on or to Mortgagor, deliver to Mortgagee
copies of any notice of motion, order to show cause and of all other
provisions, pleadings, and papers, however designated, served in any such
action or proceeding.

 

(j)  The lien of this Mortgage shall attach to
all of Mortgagor’s rights and remedies at any time arising under or pursuant to
Subsection 365(h) of the Bankruptcy Code, 11

 

21

 

U.S.C. 365(h),
as the same may hereafter be amended (the “Bankruptcy Code”), including,
without limitation, all of Mortgagor’s rights to remain in possession of each
leasehold parcel.

 

(k)  Mortgagor hereby unconditionally assigns,
transfers and sets over to Mortgagee all of Mortgagor’s claims and rights to
the payment of damages arising from any rejection of the Subject Lease by the
lessor or any other fee owner of any leasehold parcel or any portion thereof
under the Bankruptcy Code. Mortgagee shall have the right to proceed in its own
name or in the name of Mortgagor in respect of any claim, suit, action or
proceeding relating to the rejection of the Subject Lease, including, without
limitation, the right to file and prosecute, without joining or the joinder of
Mortgagor, any proofs of claim, complaints, motions, applications, notices and
other documents, in any case with respect to the lessor or any fee owner of all
or a portion of any leasehold parcel under the Bankruptcy Code.  This
assignment constitutes a present, irrevocable and unconditional assignment of
the foregoing claims, rights and remedies, and shall continue in effect until
all of the Obligations shall have been satisfied and discharged in full. 
Mortgagor shall promptly make, execute, acknowledge and deliver, in form and substance
satisfactory to Mortgagee, a UCC financing statement (Form UCC-1) and all
such additional instruments, agreements and other documents, as may at any time
hereafter be required by Mortgagee to effectuate and carry out the assignment
pursuant to this paragraph.  Notwithstanding the foregoing,  so long
as no Event of Default has occurred and is continuing, in the event of a
rejection of the Subject Lease by the lessor or any other fee owner of any
leasehold parcel or any portion thereof under the Bankruptcy Code,
(a) Mortgagee shall not seek to treat the Subject Lease as terminated
without the prior written consent of Mortgagor and any such termination by
Mortgagee without Mortgagor’s consent shall be void, and (b)  Mortgagee
shall have the right to retain any amounts it receives as damages arising out
of the rejection of the Subject Lease and Mortgagee shall promptly pay to
Mortgagor any such amounts it receives.

 

(l)  If pursuant to
Subsection 365(h)(1) of the Bankruptcy Code, 11 U.S.C.
§ 365(h)(1), Mortgagor shall seek to offset against the rent reserved in
the Subject Lease the amount of any damages caused by the nonperformance by the
lessor or any fee owner of any of their respective obligations under such
Subject Lease after the rejection by the lessor or any fee owner of such
Subject Lease under the Bankruptcy Code, then Mortgagor shall, prior to
effecting such offset, notify Mortgagee of its intent to do so, setting forth
the amount proposed to be so offset and the basis therefor.  Mortgagee
shall have the right to object to all or any part of such offset that, in the
reasonable judgment of Mortgagee, would constitute a breach of such Subject
Lease, and in the event of such objection, Mortgagor shall not effect any
offset of the amounts to the extent objected to by Mortgagee.  Neither
Mortgagee’s failure to object as aforesaid nor any objection relating to such
offset shall constitute an approval of any such offset by Mortgagee.

 

(m)  If any action, proceeding, motion or
notice shall be commenced or filed in respect of the lessor or any fee owner of
any leasehold parcel, or any portion thereof or interest therein, or the
Subject Lease in connection with any case under the Bankruptcy Code, then
Mortgagee shall have the option, exercisable upon written notice from Mortgagee
to Mortgagor, to conduct and control any such litigation with counsel of
Mortgagee’s choice.

 

22

 

Mortgagee
may proceed in its own name or in the name of Mortgagor in connection with any
such litigation, and Mortgagor agrees to execute any and all powers,
authorizations, consents or other documents required by Mortgagee in connection
therewith.  Mortgagor shall, upon demand, pay to Mortgagee all reasonable
costs and expenses (including attorneys’ fees) paid or incurred by Mortgagee in
connection with the prosecution or conduct of any such proceedings. 
Mortgagor shall not commence any action, suit, proceeding or case, or file any
application or make any motion, in respect of the Subject Lease in any such
case under Bankruptcy Code without the prior written consent of
Mortgagee.  Notwithstanding the foregoing, so long as no Event of Default
has occurred and is continuing, Mortgagee shall not preclude Mortgagor from
electing to retain its possessory interest and rights under the Subject Lease
pursuant to Section 365(h)(1)(A)(ii) of the Bankruptcy Code.

 

(n)  Mortgagor shall, after obtaining knowledge
thereof, promptly notify Mortgagee of any filing by or against the lessor or
fee owner of any leasehold parcel of a petition under the Bankruptcy Code.
Mortgagor shall promptly deliver to Mortgagee, following receipt, copies of any
and all notices, summonses, pleadings, applications and other documents
received by Mortgagor in connection with any such petition and any proceedings
relating thereto.

 

(o)  If there shall be filed by or against
Mortgagor a petition under the Bankruptcy Code and Mortgagor, as lessee under a
Subject Lease, shall determine to reject such Subject Lease pursuant to
Section 365(a) of the Bankruptcy Code, then Mortgagor shall give
Mortgagee not less than twenty days’ prior notice of the date on which
Mortgagor shall apply to the Bankruptcy Court for authority to reject such
Subject Lease.  Mortgagee shall have the right, but not the obligation, to
serve upon Mortgagor within such twenty day period a notice stating that
Mortgagee demands that Mortgagor assume and assign such Subject Lease to
Mortgagee pursuant to Section 365 of the Bankruptcy Code.  If
Mortgagee shall serve upon Mortgagor the notice described in the preceding
sentence, Mortgagor shall not seek to reject such Subject Lease and shall
comply with the demand provided for in the preceding sentence.

 

(p)  Effective upon the entry of an order for
relief with respect to Mortgagor under the Bankruptcy Code, Mortgagor hereby
assigns and transfers to Mortgagee a non-exclusive right to apply to the
Bankruptcy Court under subsection 365(d)(4) of the Bankruptcy Code
for an order extending the period during which the Subject Lease may be
rejected or assumed.

 

23

 

IN
WITNESS WHEREOF, this Mortgage has been duly executed and delivered to
Mortgagee by Mortgagor on the date of the acknowledgment attached hereto.

 

	
   

  	
  THE
  NEIMAN MARCUS GROUP, INC., a

  Delaware corporation,

  
	
   

  	
   

  
	
   

  	
  by:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

24

 

[ADD LOCAL FORM OF ACKNOWLEDGMENT]

 

25

 

Exhibit A

to Mortgage

 

Description of the Land

 

26

 

Exhibit B

to Mortgage

 

Description of the Subject Lease

 

27

 

Exhibit C

to Mortgage

 

Security Agreement

 

28

 

Appendix A

to Mortgage

 

Local Law Provisions

 

None

 

29Exhibit 10.15

 

 

FORM OF

 

SECOND PRIORITY MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY

AGREEMENT AND FINANCING STATEMENT

 

From

 

THE NEIMAN MARCUS GROUP, INC.

 

To

 

DEUTSCHE BANK TRUST COMPANY AMERICAS

 

 

Dated: October         ,
2005

Premises: [City], [State]

                         
County

 

 

 

 

THIS SECOND PRIORITY MORTGAGE, ASSIGNMENT OF LEASES
AND RENTS, SECURITY AGREEMENT AND FINANCING STATEMENT dated as of
October         , 2005 (this “Mortgage”), by THE NEIMAN MARCUS GROUP, INC.,
a Delaware corporation, having an office at One Marcus Square,
1618 Main Street, Dallas, Texas 75201 (the “Mortgagor”), to DEUTSCHE BANK TRUST
COMPANY AMERICAS, a
                          ,
having an office at 60 Wall Street, New York, New York 10005
(the “Mortgagee”) as Collateral
Agent for the Secured Parties (as such terms are defined below).

 

WITNESSETH THAT:

 

Reference
is made to (i) the credit agreement dated as of even date hereof (as
amended, supplemented or otherwise modified from time to time, the “Credit Agreement”), among NEWTON
ACQUISITION MERGER SUB., INC. (“Merger
Sub” and, prior to the Merger (as defined in the Credit Agreement,
the “Borrower”), a Delaware
corporation to be merged with and into THE NEIMAN MARCUS GROUP, INC., a
Delaware corporation (“Neiman Marcus”
and, after the Merger, the “Borrower”),
NEWTON ACQUISITION, INC., a Delaware corporation (“Holdings”), the subsidiaries of Neiman
Marcus from time to time party thereto, the lenders from time to time party
thereto (the “Lenders”), including, inter alia, Deutsche Bank
Trust Company Americas as administrative agent (the “Administrative Agent”) for the Lenders and as collateral
agent (the “Collateral Agent”)
for the Secured Parties, swingline lender (the “Swingline Lender”) and issuing bank (the “Issuing Bank”) with respect to any letters
of credit (the “Letters of Credit”)
issued pursuant to the terms of the Credit Agreement, (ii) the credit
agreement dated as of even date hereof (as amended, supplemented or otherwise
modified from time to time, the “Term Loan
Credit Agreement”) among Merger Sub, Neiman Marcus, Holdings, each
subsidiary of Neiman Marcus from time to time party thereto, the lenders from
time to time party thereto, and Credit Suisse, as administrative agent,
(iii) the Indenture, dated as of even date hereof (as amended from time to
time, the “New Notes Indenture”),
between Neiman Marcus and Wells Fargo Bank, National Association, as trustee,
(iv) the Indenture, dated as of May 27, 1998 (as amended,
supplemented or otherwise modified from time to time, the “Existing Notes Indenture”), between Neiman
Marcus and The Bank of New York, (v) the Pledge and Security
Agreement dated as of even date hereof (as amended, supplemented or otherwise
modified from time to time, the “Security
Agreement”) among Holdings, the Borrower, the Subsidiary Parties
identified therein and Deutsche Bank Trust Company Americas, (vi) that
certain mortgage dated as of even date hereof by Mortgagor, in favor of
                        ,
as mortgagee (the “First Mortgage”)
granting to the First Mortgagee a first priority lien and security interest in
the Mortgaged Property (as described below) in connection with the Term Loan
Credit Agreement, the New Notes Indenture and the Existing Notes Indenture and
(vii) the Lien Subordination and Intercreditor Agreement, dated as of even
date hereof, among the Collateral Agent,
[                      ],
as collateral trustee, Merger Sub, Neiman Marcus, Holdings and the subsidiaries
of Neiman Marcus from time to time party thereto as attached hereto as
Exhibit B.  Capitalized terms used but not defined herein have the
meanings given to them in the Credit Agreement and the Security Agreement.

 

 

In
the Credit Agreement, (i) the Lenders have agreed to make revolving loans
(the “Revolving Loans”) to the
Borrower, (ii) the Swingline Lender has agreed to make swingline loans
(the “Swingline Loans”, together
with Revolving Loans, the “Loans”) to the Borrower and (iii) the Issuing
Bank has issued or agreed to issue from time to time Letters of Credit for the
account of the Borrower, in each case pursuant to, upon the terms, and subject
to the conditions specified in, the Credit Agreement.  Subject to the
terms of the Credit Agreement, Borrower may borrow, prepay and reborrow
Revolving Loans.

 

Mortgagor
will be the Borrower subsequent to the Merger and will derive substantial
benefit from the making of the Loans by the Lenders and the issuance of the
Letters of Credit by the Issuing Bank.  In order to induce the Lenders to
make Loans and the Issuing Bank to issue Letters of Credit, the Mortgagor has
agreed to grant this Mortgage to secure, among other things, the due and
punctual payment and performance of all of the obligations of the Borrower
under the Credit Agreement.

 

The
obligations of the Lenders to make Loans and of the Issuing Bank to issue
Letters of Credit are conditioned upon, among other things, the execution and
delivery by the Mortgagor of this Mortgage in the form hereof to secure the
Secured Obligations (as defined in the Credit Agreement).

 

As
used in this Mortgage, the term “Secured
Parties” shall mean (a) the Lenders, (b) the Collateral
Agent, (c) the Issuing Banks, (d) each counterparty to any Swap
Agreement with a Loan Party the obligations under which constitute Secured Swap
Obligations, (e) the beneficiaries of each indemnification obligations
undertaken by any Loan Party under any Loan Document and (f) the
successors and permitted assigns of each of the foregoing.

 

Pursuant
to the requirements of the Credit Agreement, the Mortgagor is granting this
Mortgage to create a lien on and a security interest in the Mortgaged Property
(as hereinafter defined) to secure the performance and payment by the Mortgagor
of the Secured Obligations.  The Credit Agreement also requires the granting
by the Mortgagor or the other Loan Parties, as applicable, of mortgages, deeds
of trust and/or deeds to secure debt (the “Other
Mortgages”) that create liens on and security interests in certain
real and personal property other than the Mortgaged Property to secure the
performance of the Secured Obligations.

 

Granting Clauses

 

NOW,
THEREFORE, IN CONSIDERATION OF the foregoing and in order to secure the
due and punctual payment and performance of the Secured Obligations for the
benefit of the Secured Parties, Mortgagor hereby grants, conveys, mortgages,
assigns and pledges to the Mortgagee, a mortgage lien on and a security
interest in, Mortgagor’s interest in all the following described property (the “Mortgaged Property”) whether now owned or
held or hereafter acquired:

 

(1) the land more particularly described on Exhibit A hereto
(the “Land”), together with all
rights appurtenant thereto, including the easements over certain other
adjoining land granted by any easement agreements, covenant or restrictive

 

3

 

agreements
and all air rights, mineral rights, water rights, oil and gas rights and
development rights, if any, relating thereto, and also together with all of the
other easements, rights, privileges, interests, hereditaments and appurtenances
thereunto belonging or in any way appertaining and all of the estate, right,
title, interest, claim or demand whatsoever of Mortgagor therein and in the
streets and ways adjacent thereto, either in law or in equity, in possession or
expectancy, now or hereafter acquired (the “Premises”);

 

(2) all buildings, improvements, structures, paving, parking
areas, walkways and landscaping now or hereafter erected or located upon the
Land, and all fixtures of every kind and type affixed to the Premises or
attached to or forming part of any structures, buildings or improvements and
replacements thereof now or hereafter erected or located upon the Land (the “Improvements”);

 

(3) all apparatus, movable appliances, building materials,
equipment, fittings, furnishings, furniture, machinery and other articles of
tangible personal property of every kind and nature, and replacements thereof,
now or at any time hereafter placed upon or used in any way in connection with
the use, enjoyment, occupancy or operation of the Improvements or the Premises,
including all of Mortgagor’s books and records relating thereto and including
all pumps, tanks, goods, machinery, tools, equipment, lifts (including fire
sprinklers and alarm systems, fire prevention or control systems, cleaning
rigs, air conditioning, heating, boilers, refrigerating, electronic monitoring,
water, loading, unloading, lighting, power, sanitation, waste removal,
entertainment, communications, computers, recreational, window or structural,
maintenance, truck or car repair and all other equipment of every kind),
restaurant, bar and all other indoor or outdoor furniture (including tables,
chairs, booths, serving stands, planters, desks, sofas, racks, shelves, lockers
and cabinets), bar equipment, glasses, cutlery, uniforms, linens, memorabilia
and other decorative items, furnishings, appliances, supplies, inventory, rugs,
carpets and other floor coverings, draperies, drapery rods and brackets,
awnings, venetian blinds, partitions, chandeliers and other lighting fixtures,
freezers, refrigerators, walk-in coolers, signs (indoor and outdoor), computer
systems, cash registers and inventory control systems, and all other apparatus,
equipment, furniture, furnishings, and articles used in connection with the use
or operation of the Improvements or the Premises, it being understood that the
enumeration of any specific articles of property shall in no way result in or
be held to exclude any items of property not specifically mentioned (the
property referred to in this subparagraph (3), the “Personal Property”);

 

(4) all general intangibles owned by Mortgagor and relating to
design, development, operation, management and use of the Premises or the
Improvements, all certificates of occupancy, zoning variances, building, use or
other permits, approvals, authorizations and consents obtained from and all
materials prepared for filing or filed with any governmental agency in
connection with the development, use, operation or management of the Premises
and Improvements, all construction, service, engineering, consulting, leasing,
architectural and other similar contracts concerning the design, construction,
management, operation, occupancy and/or use of the Premises and Improvements,
all architectural drawings, plans, specifications, soil

 

4

 

tests,
feasibility studies, appraisals, environmental studies, engineering reports and
similar materials relating to any portion of or all of the Premises and Improvements,
and all payment and performance bonds or warranties or guarantees relating to
the Premises or the Improvements, all to the extent assignable (the “Permits, Plans and Warranties”);

 

(5) all now or hereafter existing leases or licenses (under which
Mortgagor is landlord or licensor) and subleases (under which Mortgagor is
sublandlord), concession, management, mineral or other agreements of a similar
kind that permit the use or occupancy of the Premises or the Improvements for
any purpose in return for any payment, or the extraction or taking of any gas,
oil, water or other minerals from the Premises in return for payment of any
fee, rent or royalty (collectively, “Leases”),
and all agreements or contracts for the sale or other disposition of all or any
part of the Premises or the Improvements, now or hereafter entered into by
Mortgagor, together with all charges, fees, income, issues, profits, receipts,
rents, revenues or royalties payable thereunder (“Rents”);

 

(6) all real estate tax refunds and all proceeds of the
conversion, voluntary or involuntary, of any of the Mortgaged Property into
cash or liquidated claims (“Proceeds”),
including, subject to the rights of Mortgagor under the Credit Agreement or
other Collateral Documents, Proceeds of insurance maintained by the Mortgagor
and condemnation awards, any awards that may become due by reason of the taking
by eminent domain or any transfer in lieu thereof of the whole or any part of
the Premises or Improvements or any rights appurtenant thereto, and any awards
for change of grade of streets, together with any and all moneys now or
hereafter on deposit for the payment of real estate taxes, assessments or
common area charges levied against the Mortgaged Property, unearned premiums on
policies of fire and other insurance maintained by the Mortgagor covering any
interest in the Mortgaged Property or required by the Credit Agreement; and

 

(7) to the extent assignable, all extensions, improvements,
betterments, renewals, substitutes and replacements of and all additions and
appurtenances to, the Land, the Premises, the Improvements, the Personal
Property, the Permits, Plans and Warranties and the Leases, hereinafter
acquired by or released to the Mortgagor or constructed, assembled or placed by
the Mortgagor on the Land, the Premises or the Improvements, and all
conversions of the security constituted thereby, immediately upon such
acquisition, release, construction, assembling, placement or conversion, as the
case may be, and in each such case, without any further mortgage, deed of
trust, conveyance, assignment or other act by the Mortgagor, all of which shall
become subject to the lien of this Mortgage as fully and completely, and with
the same effect, as though now owned by the Mortgagor and specifically described
herein.

 

TO
HAVE AND TO HOLD the Mortgaged Property unto the Mortgagee, its successors and
assigns, for the ratable benefit of the Secured Parties, forever, subject only
to Liens (as defined in the Credit Agreement), expressly permitted under Section 6.02
of the Credit Agreement and to satisfaction and release as provided in
Section 3.04.

 

5

 

ARTICLE I

 

Representations,
Warranties and Covenants of Mortgagor

 

Mortgagor
agrees, covenants, represents and/or warrants as follows:

 

SECTION 1.01.  Title, Mortgage Lien.  Mortgagor
has good and marketable fee simple title to the Mortgaged Property, subject
only to Liens expressly permitted under Section 6.02 of the Credit
Agreement.  Mortgagor will forever warrant and defend its title to the
Mortgaged Property, the rights of Mortgagee therein under this Mortgage and the
validity and priority of the lien of this Mortgage thereon against the claims
of all persons and parties except those having rights under Liens expressly
permitted under Section 6.02 of the Credit Agreement (but to the extent of
those rights).

 

SECTION 1.02.  Credit Agreement.  This Mortgage
is given pursuant to the Credit Agreement.  Mortgagor expressly covenants
and agrees to pay when due, and to timely perform, and to cause the other Loan
Parties to pay when due, and to timely perform, the Secured Obligations in
accordance with the terms of the Loan Documents.

 

SECTION 1.03.  Maintenance of Mortgaged Property. 
Mortgagor will maintain the Improvements and the Personal Property in the
manner required by the Credit Agreement.

 

SECTION 1.04.  Insurance.  Mortgagor will keep
or cause to be kept the Improvements and Personal Property insured against such
risks, and in the manner, pursuant to the Credit Agreement or the Security
Agreement and shall purchase such additional insurance as may be required from
time to time pursuant to the Credit Agreement and the Security Agreement. 
Federal Emergency Management Agency Standard Flood Hazard Determination Forms
will be purchased by Mortgagor for each Mortgaged Property on which
Improvements are located.  If any portion of Improvements constituting
part of the Mortgaged Property is located in an area identified as a special
flood hazard area by Federal Emergency Management Agency or other applicable
agency, Mortgagor will purchase flood insurance in an amount reasonably
satisfactory to Mortgagee, but in no event less than the maximum limit of
coverage available under the National Flood Insurance Act of 1968, as amended.

 

SECTION 1.05.  Casualty Condemnation/Eminent Domain. 
Mortgagor shall give Mortgagee prompt written notice of any casualty or other
damage to the Mortgaged Property or any proceeding for the taking of the
Mortgaged Property or any portion thereof or interest therein under power of
eminent domain or by condemnation or any similar proceeding in accordance with,
and to the extent required by, the Credit Agreement.  Any net proceeds
received by or on behalf of the Mortgagor in respect of any such casualty,
damage or taking shall constitute trust funds held by the Mortgagor for the
benefit of the Secured Parties to be applied to repair, restore or replace the
Mortgaged Property or, if a prepayment event shall occur with respect to any
such net proceeds, to be applied in accordance with the Credit Agreement.

 

6

 

SECTION 1.06.  Assignment of Leases and Rents. 
(a)  Mortgagor hereby irrevocably and absolutely grants, transfers and
assigns all of its right title and interest in all Leases, together with any
and all extensions and renewals thereof for purposes of securing and
discharging the performance by Mortgagor of the Secured Obligations. 
Mortgagor has not assigned or executed any assignment of, and will not assign
or execute any assignment of, any Leases or the Rents payable thereunder to
anyone other than Mortgagee.

 

(b)  All Leases entered into by Mortgagor at
the Mortgaged Property following the date hereof shall be subordinate to the
lien of this Mortgage unless otherwise contemplated under the Credit
Agreement.  Mortgagor will not enter into, any Lease if such Lease, as
entered into, will not be subordinate to the lien of this Mortgage unless
otherwise contemplated under the Credit Agreement.

 

(c)  Subject to Section 1.07(d), Mortgagor
has assigned and transferred to Mortgagee all of Mortgagor’s right, title and
interest in and to the Rents now or hereafter arising from each Lease
heretofore or hereafter made or agreed to by Mortgagor, it being intended that
this assignment establish, subject to Section 1.07(d), an absolute
transfer and assignment of all Rents and all Leases to Mortgagee and not merely
to grant a security interest therein.  Subject to Section 1.07(d),
Mortgagee may in Mortgagor’s name and stead (with or without first taking
possession of any of the Mortgaged Property personally or by receiver as
provided herein) operate the Mortgaged Property and rent, lease or let all or
any portion of any of the Mortgaged Property to any party or parties at such
rental and upon such terms as Mortgagee shall, in its sole discretion,
determine, and may collect and have the benefit of all of said Rents arising
from or accruing at any time thereafter or that may thereafter become due under
any Lease.

 

(d)  So long as an Event of Default shall not
have occurred and be continuing, Mortgagee will not exercise any of its rights
under Section 1.07(c), and Mortgagor shall receive and collect the Rents
accruing under any Lease; but after the occurrence and during the continuance
of any Event of Default, Mortgagee may, at its option, receive and collect all
Rents and enter upon the Premises and Improvements through its officers,
agents, employees or attorneys for such purpose and for the operation and
maintenance thereof.  Mortgagor hereby irrevocably authorizes and directs
each tenant, if any, and each successor, if any, to the interest of any tenant
under any Lease, respectively, to rely upon any notice of a claimed Event of
Default sent by Mortgagee to any such tenant or any of such tenant’s successors
in interest, and thereafter to pay Rents to Mortgagee without any obligation or
right to inquire as to whether an Event of Default actually exists and even if
some notice to the contrary is received from the Mortgagor, who shall have no
right or claim against any such tenant or successor in interest for any such
Rents so paid to Mortgagee.  Each tenant or any of such tenant’s
successors in interest from whom Mortgagee or any officer, agent, attorney or
employee of Mortgagee shall have collected any Rents, shall be authorized to
pay Rents to Mortgagor only after such tenant or any of their successors in
interest shall have received written notice from Mortgagee that the Event of
Default is no longer continuing, unless and until a further notice of an Event
of Default is given by Mortgagee to such tenant or any of its successors in
interest.

 

7

 

(e)  Mortgagee will not become a mortgagee in
possession so long as it does not enter or take actual possession of the
Mortgaged Property.  In addition, Mortgagee shall not be responsible or
liable for performing any of the obligations of the landlord under any Lease,
for any waste by any tenant, or others, for any dangerous or defective
conditions of any of the Mortgaged Property, for negligence in the management,
upkeep, repair or control of any of the Mortgaged Property or any other act or
omission by any other person unless and until it enters or takes actual
possession of the Mortgaged Property.

 

(f)  Mortgagor shall furnish to Mortgagee,
within 30 days after a request by Mortgagee to do so, a written statement
containing the names of all tenants, subtenants and concessionaires of the
Premises or Improvements, and a copy of any Lease.

 

SECTION 1.07.  Security Agreement.  This
Mortgage is both a mortgage of real property and a grant of a security interest
in personal property, and shall constitute and serve as a “Security Agreement”
within the meaning of the uniform commercial code as adopted in the state
wherein the Premises are located (“UCC”). 
Mortgagor has hereby granted unto Mortgagee a security interest in and to all
the Mortgaged Property described in this Mortgage that is not real property,
and simultaneously with the recording of this Mortgage, Mortgagor has filed or
will file UCC financing statements, and will file continuation statements prior
to the lapse thereof, at the appropriate offices in the jurisdiction of
formation of the Mortgagor to perfect the security interest granted by this
Mortgage in all the Mortgaged Property that is not real property. 
Mortgagor hereby appoints Mortgagee as its true and lawful attorney-in-fact and
agent, for Mortgagor and in its name, place and stead, in any and all
capacities, to execute any document and to file the same in the appropriate
offices (to the extent it may lawfully do so), and to perform each and every
act and thing reasonably requisite and necessary to be done to perfect the
security interest contemplated by the preceding sentence.  Mortgagee shall
have all rights with respect to the part of the Mortgaged Property that is the
subject of a security interest afforded by the UCC in addition to, but not in
limitation of, the other rights afforded Mortgagee hereunder and under the Security
Agreement.  In the case of any conflict between this Mortgage and the
Security Agreement, the Security Agreement shall govern.

 

SECTION 1.08.  Filing and Recording.  Mortgagor
will cause this Mortgage, the UCC financing statements referred to in Section 1.09,
any other security instrument creating a security interest in or evidencing the
lien hereof upon the Mortgaged Property and each UCC continuation statement and
instrument of further assurance to be filed, registered or recorded and, if necessary,
refiled, rerecorded and reregistered, in such manner and in such places as may
be required by any present or future law in order to publish notice of and
fully to perfect the lien hereof upon, and the security interest of Mortgagee
in, the Mortgaged Property until this Mortgage is terminated and released in
full in accordance with Section 3.04 hereof.  Mortgagor will pay all
filing, registration and recording fees, all Federal, state, county and
municipal recording, documentary or intangible taxes and other taxes, duties,
imposts, assessments and charges, and all reasonable expenses incidental to or
arising out of or in connection with the execution, delivery and recording of
this Mortgage, UCC continuation statements any mortgage supplemental hereto,
any security instrument with respect to the Personal Property, Permits, Plans
and Warranties and Proceeds or any instrument of further assurance.

 

8

 

SECTION 1.09.  Further Assurances.  Upon demand
by Mortgagee, Mortgagor will, at the cost of Mortgagor and without expense to
Mortgagee, do, execute, acknowledge and deliver all such further acts, deeds,
conveyances, mortgages, assignments, notices of assignment, transfers and
assurances as Mortgagee shall from time to time reasonably require for the
better assuring, conveying, assigning, transferring and confirming unto
Mortgagee the property and rights hereby conveyed or assigned or intended now
or hereafter so to be, or which Mortgagor may be or may hereafter become bound
to convey or assign to Mortgagee, or for carrying out the intention or
facilitating the performance of the terms of this Mortgage, or for filing,
registering or recording this Mortgage, and on demand, Mortgagor will also
execute and deliver and hereby appoints Mortgagee, following the occurrence and
during the continuance of an Event of Default, as its true and lawful
attorney-in-fact and agent, for Mortgagor and in its name, place and stead, in
any and all capacities, to execute and file to the extent it may lawfully do
so, one or more financing statements, chattel mortgages or comparable security
instruments reasonably requested by Mortgagee to evidence more effectively the
lien hereof upon the Personal Property and to perform each and every act and
thing requisite and necessary to be done to accomplish the same.

 

SECTION 1.10.  Additions to Mortgaged Property. 
All right, title and interest of Mortgagor in and to all extensions,
improvements, betterments, renewals, substitutes and replacements of, and all
additions and appurtenances to, the Mortgaged Property hereafter acquired by or
released to Mortgagor or constructed, assembled or placed by Mortgagor upon the
Premises or the Improvements, and all conversions of the security constituted
thereby, immediately upon such acquisition, release, construction, assembling,
placement or conversion, as the case may be, and in each such case without any
further mortgage, conveyance, assignment or other act by Mortgagor, shall
become subject to the lien and security interest of this Mortgage as fully and
completely and with the same effect as though now owned by Mortgagor and
specifically described in the grant of the Mortgaged Property above, but at any
and all times Mortgagor will execute and deliver to Mortgagee any and all such
further assurances, mortgages, conveyances or assignments thereof as Mortgagee
may reasonably require for the purpose of expressly and specifically subjecting
the same to the lien and security interest of this Mortgage.

 

SECTION 1.11.  No Claims Against Mortgagee. 
Nothing contained in this Mortgage shall constitute any consent or request by
Mortgagee, express or implied, for the performance of any labor or services or
the furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof, nor as giving Mortgagor any right, power or
authority to contract for or permit the performance of any labor or services or
the furnishing of any materials or other property in such fashion as would
permit the making of any claim against Mortgagee in respect thereof.

 

SECTION 1.12.  Fixture Filing.  (a) 
Certain portions of the Mortgaged Property are or will become “fixtures” (as
that term is defined in the UCC) on the Land, and this Mortgage, upon being
filed for record in the real estate records of the county wherein such fixtures
are situated, shall operate also as a financing statement filed as a fixture
filing in accordance with the applicable provisions of said UCC upon such
portions of the Mortgaged Property that are or become fixtures.

 

9

 

(b)  The real property to which the fixtures
relate is described in Exhibit A attached hereto.  The record owner
of the real property described in Exhibit A attached hereto is Mortgagor. 
The name, type of organization and jurisdiction of organization of the debtor
for purposes of this financing statement are the name, type of organization and
jurisdiction of organization of the Mortgagor set forth in the first paragraph
of this Mortgage, and the name of the secured party for purposes of this
financing statement is the name of the Mortgagee set forth in the first
paragraph of this Mortgage.  The mailing address of the Mortgagor/debtor
is the address of the Mortgagor set forth in the first paragraph of this
Mortgage.  The mailing address of the Mortgagee/secured party from which
information concerning the security interest hereunder may be obtained is the
address of the Mortgagee set forth in the first paragraph of this Mortgage. 
Mortgagor’s organizational identification number is 95-4119509.

 

SECTION 1.13.  Second Mortgage.  The terms and
conditions set forth herein and the security interest granted hereby shall be
subject, in all respects, to the terms of the Intercreditor Agreement.

 

SECTION 1.14.  Conflicts.  In the event of a
conflict between any provision of this Second Priority Mortgage and any
provision of the Intercreditor Agreement, the Intercreditor Agreement shall
govern.  In the event of a conflict between any provision of this Second
Priority Mortgage and any provision of the Credit Agreement, the Credit
Agreement shall govern.

 

SECTION 1.15.  Performance Under First Mortgage.  The
Mortgagor shall perform or observe all covenants and conditions to be performed
or observed by the Mortgagor under the First Mortgage and shall not permit an
Event of Default under the First Mortgage to occur and continue.

 

SECTION 1.16.  Copies of Communication.  If at
any time the Mortgagor provides the First Mortgagee with any written communication,
information, documentation, notice or demand of any kind (including regular
monthly loan payments) relevant to the First Mortgage, including any appraisal
or other similar material, then the Mortgagor shall at the same time and by the
same means provide the Mortgagee with a copy of the same.  If at any time
the Mortgagor receives any written communication, information, documentation,
notice or demand of any kind from the First Mortgagee relevant to the First
Mortgage or the loan or other obligation secured thereby, then the Mortgagor
shall immediately provide the Mortgagee with a copy of the same.

 

SECTION 1.17.  Savings Clause.  Any
provision herein to the contrary notwithstanding, Mortgagor makes no assignment
or grant of rights with respect to any (i) personal property or
(ii) any general intangibles or any other rights to any Leases, Management
Agreements, contracts, insurance proceeds, instruments, licenses or other
documents (collectively, “Contract Rights”),
as to which the grant of a security interest therein would constitute a
violation of applicable law or of any valid and enforceable obligation in favor
of a third party relating to such personal property or under such Contract
Rights.

 

10

 

ARTICLE II

 

Defaults
and Remedies

 

SECTION 2.01.  Events of Default.  Any Event of
Default under the Credit Agreement (as such term is defined therein) shall
constitute an Event of Default under this Mortgage.

 

SECTION 2.02.  Demand for Payment.  If an Event
of Default shall occur and be continuing, then, upon written demand of
Mortgagee, Mortgagor will pay to Mortgagee all amounts due hereunder and under
the Credit Agreement and the Security Agreement and such further amount as
shall be sufficient to cover the costs and expenses of collection, including
attorneys’ fees, disbursements and expenses incurred by Mortgagee, and
Mortgagee shall be entitled and empowered to institute an action or proceedings
at law or in equity for the collection of the sums so due and unpaid, to
prosecute any such action or proceedings to judgment or final decree, to
enforce any such judgment or final decree against Mortgagor and to collect, in
any manner provided by law, all moneys adjudged or decreed to be payable.

 

SECTION 2.03.  Rights To Take Possession, Operate and Apply
Revenues.  (a)  If an Event of Default shall occur and
be continuing, Mortgagor shall, upon demand of Mortgagee, forthwith surrender
to Mortgagee actual possession of the Mortgaged Property and, if and to the
extent not prohibited by applicable law, Mortgagee itself, or by such officers
or agents as it may appoint, may then enter and take possession of all the
Mortgaged Property without the appointment of a receiver or an application
therefor, exclude Mortgagor and its agents and employees wholly therefrom, and
have access to the books, papers and accounts of Mortgagor.

 

(b)  If Mortgagor shall for any reason fail to
surrender or deliver the Mortgaged Property or any part thereof after such
demand by Mortgagee, Mortgagee may to the extent not prohibited by applicable
law, obtain a judgment or decree conferring upon Mortgagee the right to
immediate possession or requiring Mortgagor to deliver immediate possession of
the Mortgaged Property to Mortgagee, to the entry of which judgment or decree
Mortgagor hereby specifically consents.  Mortgagor will pay to Mortgagee,
upon demand, all reasonable expenses of obtaining such judgment or decree,
including reasonable compensation to Mortgagee’s attorneys and agents with interest
thereon at the rate per annum applicable to overdue amounts under the Credit
Agreement as provided in Section 2.13(c) of the Credit Agreement (the
“Interest Rate”); and all such
expenses and compensation shall, until paid, be secured by this Mortgage.

 

(c)  Upon every such entry or taking of
possession, Mortgagee may, to the extent not prohibited by applicable law,
hold, store, use, operate, manage and control the Mortgaged Property, conduct
the business thereof and, from time to time, (i) make all necessary and
proper maintenance, repairs, renewals, replacements, additions, betterments and
improvements thereto and thereon, (ii) purchase or otherwise acquire
additional fixtures, personalty and other property, (iii) insure or keep
the Mortgaged Property insured, (iv) manage and operate the Mortgaged
Property and exercise all the rights and powers of Mortgagor to the same extent
as Mortgagor could in its own name or otherwise with respect

 

11

 

to
the same, or (v) enter into any and all agreements with respect to the
exercise by others of any of the powers herein granted Mortgagee, all as may
from time to time be directed or determined by Mortgagee to be in its best
interest and Mortgagor hereby appoints Mortgagee as its true and lawful
attorney-in-fact and agent, following the occurrence and during the continuance
of an Event of Default for Mortgagor and in its name, place and stead, in any
and all capacities, to perform any of the foregoing acts. Mortgagee may collect
and receive all the Rents, issues, profits and revenues from the Mortgaged
Property, including those past due as well as those accruing thereafter, and,
after deducting (i) all expenses of taking, holding, managing and
operating the Mortgaged Property (including compensation for the services of
all persons employed for such purposes), (ii) the costs of all such
maintenance, repairs, renewals, replacements, additions, betterments,
improvements, purchases and acquisitions, (iii) the costs of insurance,
(iv) such taxes, assessments and other similar charges as Mortgagee may at
its option pay, (v) other proper charges upon the Mortgaged Property or
any part thereof and (vi) the compensation, expenses and disbursements of
the attorneys and agents of Mortgagee, Mortgagee shall apply the remainder of
the moneys and proceeds so received first to the payment of the Mortgagee for
the satisfaction of the Secured Obligations, and, if there is any surplus, to
Mortgagor, subject to the entitlement of others thereto under applicable law.

 

(d)  Whenever, before any sale of the Mortgaged
Property under Section 2.06, all Secured Obligations that are then due
shall have been paid and all Events of Default fully cured, Mortgagee will
surrender possession of the Mortgaged Property back to Mortgagor, its
successors or assigns.  The same right of taking possession shall,
however, arise again if any subsequent Event of Default shall occur and be
continuing.

 

SECTION 2.04.  Right To Cure Mortgagor’s Failure to Perform. 
Should Mortgagor fail in the payment, performance or observance of any term,
covenant or condition required by this Mortgage or the Credit Agreement (with
respect to the Mortgaged Property), Mortgagee may pay, perform or observe the
same, and all payments made or costs or expenses incurred by Mortgagee in
connection therewith shall be secured hereby and shall be, without demand,
immediately repaid by Mortgagor to Mortgagee with interest thereon at the
Interest Rate.  Mortgagee shall be the judge using reasonable discretion
of the necessity for any such actions and of the amounts to be paid. 
Mortgagee is hereby empowered to enter and to authorize others to enter upon
the Premises or the Improvements or any part thereof for the purpose of
performing or observing any such defaulted term, covenant or condition without
having any obligation to so perform or observe and without thereby becoming
liable to Mortgagor, to any person in possession holding under Mortgagor or to
any other person.

 

SECTION 2.05.  Right to a Receiver.  If an Event
of Default shall occur and be continuing, Mortgagee, shall be entitled to make
application to a court of competent jurisdiction for, and (to the extent
permitted by law) obtain from such a court, as a matter of right to the appointment
of a receiver to take possession of and to operate the Mortgaged Property and
to collect and apply the Rents.  The receiver shall have all of the rights
and powers permitted under the laws of the state wherein the Mortgaged Property
is located.  Mortgagor shall pay to Mortgagee upon demand all reasonable
expenses, including receiver’s fees, reasonable attorney’s fees and
disbursements, costs and agent’s compensation incurred pursuant to the
provisions of this Section 2.05; and all such expenses shall be secured by
this

 

12

 

Mortgage
and shall be, without demand, immediately repaid by Mortgagor to Mortgagee with
interest thereon at the Interest Rate.

 

SECTION 2.06.  Foreclosure and Sale.  (a) 
If an Event of Default shall occur and be continuing, Mortgagee may elect to
sell the Mortgaged Property or any part of the Mortgaged Property by exercise
of the power of foreclosure or of sale granted to Mortgagee by applicable law
or this Mortgage.  In such case, Mortgagee may commence a civil action to
foreclose this Mortgage, or it may proceed and sell the Mortgaged Property to
satisfy any Obligation.  Mortgagee or an officer appointed by a judgment
of foreclosure to sell the Mortgaged Property, may sell all or such parts of
the Mortgaged Property as may be chosen by Mortgagee at the time and place of
sale fixed by it in a notice of sale, either as a whole or in separate lots,
parcels or items as Mortgagee shall deem expedient, and in such order as it may
determine, at public auction to the highest bidder.  Mortgagee or an
officer appointed by a judgment of foreclosure to sell the Mortgaged Property
may postpone any foreclosure or other sale of all or any portion of the
Mortgaged Property by public announcement at such time and place of sale, and
from time to time thereafter may postpone such sale by public announcement or
subsequently noticed sale.  Without further notice, Mortgagee or an
officer appointed to sell the Mortgaged Property may make such sale at the time
fixed by the last postponement, or may, in its discretion, give a new notice of
sale.  Any person, including Mortgagor or Mortgagee or any designee or
affiliate thereof, may purchase at such sale.

 

(b)  The Mortgaged Property may be sold subject
to unpaid taxes and Liens expressly permitted under Section 6.02 of the
Credit Agreement, and, after deducting all costs, fees and expenses of
Mortgagee (including costs of evidence of title in connection with the sale),
Mortgagee or an officer that makes any sale shall apply the proceeds of sale in
the manner set forth in Section 2.08.

 

(c)  Any foreclosure or other sale of less than
the whole of the Mortgaged Property or any defective or irregular sale made
hereunder shall not exhaust the power of foreclosure or of sale provided for
herein; and subsequent sales may be made hereunder until the Secured
Obligations have been satisfied, or the entirety of the Mortgaged Property has
been sold.

 

(d)  If an Event of Default shall occur and be
continuing, Mortgagee may instead of, or in addition to, exercising the rights
described in Section 2.06(a) above and either with or without entry
or taking possession as herein permitted, proceed by a suit or suits in law or
in equity or by any other appropriate proceeding or remedy (i) to
specifically enforce payment of some or all of the Secured Obligations, or the
performance of any term, covenant, condition or agreement of this Mortgage or
any other Loan Document or any other right, or (ii) to pursue any other
remedy available to Mortgagee, all as Mortgagee shall determine most effectual
for such purposes.

 

SECTION 2.07.  Other Remedies.  (a)  In
case an Event of Default shall occur and be continuing, Mortgagee may also
exercise, to the extent not prohibited by law, any or all of the remedies
available to a secured party under the UCC.

 

(b)  In connection with a sale of the Mortgaged
Property or any Personal Property and the application of the proceeds of sale
as provided in Section 2.08, Mortgagee shall be

 

13

 

entitled
to enforce payment of and to receive up to the principal amount of the Secured
Obligations, plus all other charges, payments and costs due under this
Mortgage, and to recover a deficiency judgment for any portion of the aggregate
principal amount of the Secured Obligations remaining unpaid, with interest.

 

SECTION 2.08.  Application of Sale Proceeds and Rents. 
After any foreclosure sale of all or any of the Mortgaged Property, Mortgagee
shall receive and apply the proceeds of the sale together with any Rents that
may have been collected and any other sums that then may be held by Mortgagee
under this Mortgage as pursuant to Section 2.18(b) of the Credit
Agreement, subject to the terms of the Intercreditor Agreement.

 

SECTION 2.09.  Mortgagor as Tenant Holding Over. 
If Mortgagor remains in possession of any of the Mortgaged Property after any
foreclosure sale by Mortgagee, at Mortgagee’s election Mortgagor shall be
deemed a tenant holding over and shall forthwith surrender possession to the
purchaser or purchasers at such sale or be summarily dispossessed or evicted
according to provisions of law applicable to tenants holding over.

 

SECTION 2.10.  Waiver of Appraisement, Valuation, Stay, Extension
and Redemption Laws.  Mortgagor waives, to the extent not
prohibited by law, (i) the benefit of all laws now existing or that
hereafter may be enacted (x) providing for any appraisement or valuation
of any portion of the Mortgaged Property and/or (y) in any way extending
the time for the enforcement or the collection of amounts due under any of the
Secured Obligations or creating or extending a period of redemption from any
sale made in collecting said debt or any other amounts due Mortgagee,
(ii) any right to at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
homestead exemption, stay, statute of limitations, extension or redemption, or
sale of the Mortgaged Property as separate tracts, units or estates or as a
single parcel in the event of foreclosure or notice of deficiency, and
(iii) all rights of redemption, valuation, appraisement, stay of
execution, notice of election to mature or declare due the whole of or each of
the Secured Obligations and marshaling in the event of foreclosure of this
Mortgage.

 

SECTION 2.11.  Discontinuance of Proceedings. 
In case Mortgagee shall proceed to enforce any right, power or remedy under
this Mortgage by foreclosure, entry or otherwise, and such proceedings shall be
discontinued or abandoned for any reason, or shall be determined adversely to
Mortgagee, then and in every such case Mortgagor and Mortgagee shall be
restored to their former positions and rights hereunder, and all rights, powers
and remedies of Mortgagee shall continue as if no such proceeding had been
taken.

 

SECTION 2.12.  Suits To Protect the Mortgaged Property. 
Mortgagee shall have power (a) to institute and maintain suits and
proceedings to prevent any impairment of the Mortgaged Property by any acts that
may be unlawful or in violation of this Mortgage, (b) to preserve or
protect its interest in the Mortgaged Property and in the Rents arising
therefrom and (c) to restrain the enforcement of or compliance with any
legislation or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of or compliance with
such enactment, rule or order would impair the security or be prejudicial
to the interest of Mortgagee hereunder.

 

14

 

SECTION 2.13.  Filing Proofs of Claim.  In case
of any receivership, insolvency, bankruptcy, reorganization, arrangement,
adjustment, composition or other proceedings affecting Mortgagor, Mortgagee
shall, to the extent permitted by law, be entitled to file such proofs of claim
and other documents as may be necessary or advisable in order to have the
claims of Mortgagee allowed in such proceedings for the Secured Obligations
secured by this Mortgage at the date of the institution of such proceedings and
for any interest accrued, late charges and additional interest or other amounts
due or that may become due and payable hereunder after such date.

 

SECTION 2.14.  Possession by Mortgagee. 
Notwithstanding the appointment of any receiver, liquidator or trustee of
Mortgagor, any of its property or the Mortgaged Property, Mortgagee shall be
entitled, to the extent not prohibited by law, to remain in possession and
control of all parts of the Mortgaged Property now or hereafter granted under this
Mortgage to Mortgagee in accordance with the terms hereof and applicable law.

 

SECTION 2.15.  Waiver.  (a)  No delay or
failure by Mortgagee to exercise any right, power or remedy accruing upon any
breach or Event of Default shall exhaust or impair any such right, power or
remedy or be construed to be a waiver of any such breach or Event of Default or
acquiescence therein; and every right, power and remedy given by this Mortgage
to Mortgagee may be exercised from time to time and as often as may be deemed
expedient by Mortgagee.  No consent or waiver by Mortgagee to or of any
breach or Event of Default by Mortgagor in the performance of the Secured
Obligations shall be deemed or construed to be a consent or waiver to or of any
other breach or Event of Default in the performance of the same or of any other
Secured Obligations by Mortgagor hereunder.  No failure on the part of
Mortgagee to complain of any act or failure to act or to declare an Event of
Default, irrespective of how long such failure continues, shall constitute a
waiver by Mortgagee of its rights hereunder or impair any rights, powers or
remedies consequent on any future Event of Default by Mortgagor.

 

(b)  Even if Mortgagee (i) grants some
forbearance or an extension of time for the payment of any sums secured hereby,
(ii) takes other or additional security for the payment of any sums
secured hereby, (iii) waives or does not exercise some right granted
herein or under the Loan Documents, (iv) releases a part of the Mortgaged
Property from this Mortgage, (v) agrees to change some of the terms,
covenants, conditions or agreements of any of the Loan Documents,
(vi) consents to the filing of a map, plat or replat affecting the
Premises, (vii) consents to the granting of an easement or other right affecting
the Premises or (viii) makes or consents to an agreement subordinating
Mortgagee’s lien on the Mortgaged Property hereunder; no such act or omission
shall preclude Mortgagee from exercising any other right, power or privilege
herein granted or intended to be granted in the event of any breach or Event of
Default then made or of any subsequent default; nor, except as otherwise
expressly provided in an instrument executed by Mortgagee, shall this Mortgage
be altered thereby.  In the event of the sale or transfer by operation of
law or otherwise of all or part of the Mortgaged Property, Mortgagee is hereby
authorized and empowered to deal with any vendee or transferee with reference
to the Mortgaged Property secured hereby, or with reference to any of the
terms, covenants, conditions or agreements hereof, as fully and to the same
extent as it might deal with the original parties hereto and without in any way
releasing or discharging any liabilities, obligations or undertakings.

 

15

 

SECTION 2.16.  Waiver of Trial by Jury.  To the
fullest extent permitted by applicable law, Mortgagor and Mortgagee each hereby
irrevocably and unconditionally waive trial by jury in any action, claim, suit
or proceeding relating to this Mortgage and for any counterclaim brought
therein.  Mortgagor hereby waives all rights to interpose any counterclaim
in any suit brought by Mortgagee hereunder and all rights to have any such suit
consolidated with any separate suit, action or proceeding.

 

SECTION 2.17.  Remedies Cumulative.  No right,
power or remedy conferred upon or reserved to Mortgagee by this Mortgage is
intended to be exclusive of any other right, power or remedy, and each and
every such right, power and remedy shall be cumulative and concurrent and in
addition to any other right, power and remedy given hereunder or now or
hereafter existing at law or in equity or by statute.

 

ARTICLE III

 

Miscellaneous

 

SECTION 3.01.  Partial Invalidity.  In the event
any one or more of the provisions contained in this Mortgage shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
validity, illegality or unenforceability shall, at the option of Mortgagee, not
affect any other provision of this Mortgage, and this Mortgage shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein or therein.

 

SECTION 3.02.  Notices.  All notices and
communications hereunder shall be in writing and given to Mortgagor in
accordance with the terms of the Credit Agreement at the address set forth on
the first page of this Mortgage and to the Mortgagee as provided in the
Credit Agreement.

 

SECTION 3.03.  Successors and Assigns.  All of
the grants, covenants, terms, provisions and conditions herein shall run with
the Premises and the Improvements and shall apply to, bind and inure to, the
benefit of the permitted successors and assigns of Mortgagor and the successors
and assigns of Mortgagee.

 

SECTION 3.04.  Satisfaction and Cancelation. 
(a)  This Mortgage shall continue in effect (notwithstanding the fact that
from time to time there may be no Secured Obligations outstanding) until
(i) the Credit Agreement has terminated pursuant to its express terms and
(ii) all of the Secured Obligations have been indefeasibly paid and
performed in full (or with respect to any outstanding Letters of Credit, have
been cash collateralized as required by the Credit Agreement) and no
commitments of the Agent or the Lenders which would give rise to any Secured
Obligations are outstanding.

 

(b)  Upon any sale or other transfer by
Mortgagor of the Mortgaged Property that is permitted under
Section 4.1(d) of the Security Agreement to any Person that is not
another Grantor or, upon the effectiveness of any written consent to the
release of the security interest granted hereby in the Mortgaged Property
pursuant to Section 9.02 of the Credit Agreement, the security interest in
the Mortgaged Property shall be automatically released.

 

16

 

(c)  In connection with any termination or
release pursuant to paragraph (a) or (b), the Mortgage shall be
marked “satisfied” by the Mortgagee, and this Mortgage shall be canceled of
record at the request and at the expense of the Mortgagor.  Mortgagee
shall execute any documents reasonably requested by Mortgagor to accomplish the
foregoing or to accomplish any release contemplated by this Section 3.04
and Mortgagor will pay all costs and expenses, including reasonable attorneys’
fees, disbursements and other charges, incurred by Mortgagee in connection with
the preparation and execution of such documents.

 

SECTION 3.05.  Definitions.  As used in this
Mortgage, the singular shall include the plural as the context requires and the
following words and phrases shall have the following meanings: (a) “including” shall mean “including but not
limited to”; (b) “provisions”
shall mean “provisions, terms, covenants and/or conditions”; (c) “lien” shall mean “lien, charge,
encumbrance, security interest, mortgage or deed of trust”; (d) “obligation” shall mean “obligation, duty,
covenant and/or condition”; and (e) “any of the Mortgaged Property” shall
mean “the Mortgaged Property or any part thereof or interest therein”. 
Any act that Mortgagee is permitted to perform hereunder may be performed at
any time and from time to time by Mortgagee or any person or entity designated
by Mortgagee.  Any act that is prohibited to Mortgagor hereunder is also
prohibited to all lessees of any of the Mortgaged Property.  Each
appointment of Mortgagee as attorney-in-fact for Mortgagor under the Mortgage
is irrevocable, with power of substitution and coupled with an interest. 
Subject to the applicable provisions hereof, Mortgagee has the right to refuse
to grant its consent, approval or acceptance or to indicate its satisfaction,
in its sole discretion, whenever such consent, approval, acceptance or
satisfaction is required hereunder.

 

SECTION 3.06.  Multisite Real Estate Transaction. 
Mortgagor acknowledges that this Mortgage is one of a number of Other Mortgages
and Collateral Documents that secure the Secured Obligations.  Mortgagor
agrees that the lien of this Mortgage shall be absolute and unconditional and
shall not in any manner be affected or impaired by any acts or omissions
whatsoever of Mortgagee, and without limiting the generality of the foregoing,
the lien hereof shall not be impaired by any acceptance by the Mortgagee of any
security for or guarantees of any of the Secured Obligations hereby secured, or
by any failure, neglect or omission on the part of Mortgagee to realize upon or
protect any Secured Obligation or indebtedness hereby secured or any collateral
security therefor including the Other Mortgages and other Collateral
Documents.  The lien hereof shall not in any manner be impaired or
affected by any release (except as to the property released), sale, pledge,
surrender, compromise, settlement, renewal, extension, indulgence, alteration,
changing, modification or disposition of any of the Secured Obligations secured
(unless all Secured Obligations are satisfied pursuant to the Credit Agreement)
or of any of the collateral security therefor, including the Other Mortgages
and other Collateral Documents or of any guarantee thereof, and Mortgagee may
at its discretion foreclose, exercise any power of sale, or exercise any other
remedy available to it under any or all of the Other Mortgages and other
Collateral Documents without first exercising or enforcing any of its rights
and remedies hereunder.  Such exercise of Mortgagee’s rights and remedies
under any or all of the Other Mortgages and other Collateral Documents shall
not in any manner impair the indebtedness hereby secured or the lien of this
Mortgage and any exercise of the rights or remedies of Mortgagee hereunder
shall not impair the lien of any of the Other Mortgages and other Collateral
Documents or any of Mortgagee’s rights and remedies thereunder.  Mortgagor

 

17

 

specifically
consents and agrees that Mortgagee may exercise its rights and remedies
hereunder and under the Other Mortgages and other Collateral Documents
separately or concurrently and in any order that it may deem appropriate and
waives any rights of subrogation.

 

SECTION 3.07.  No Oral Modification.  This
Mortgage may not be changed or terminated orally.

 

SECTION 3.08.  Subject to Intercreditor Agreement. 
Notwithstanding anything herein to the contrary, the second-priority lien and
security interest granted to the Collateral Agent pursuant to this Second
Priority Mortgage and the exercise of any right or remedy by the Collateral
Agent hereunder are subject to the provisions of the Intercreditor
Agreement.  In the event of any conflict between the terms of the
Intercreditor Agreement and this Second Priority Mortgage, the terms of the
Intercreditor Agreement shall govern.  So long as the First Mortgage, or
other senior mortgages are, outstanding, Mortgagor shall not be in default
hereunder for the failure to comply with any term or provision contained in
this Second Priority Mortgage if such compliance would result in a default
under the terms and provisions of the First Mortgage or other senior mortgages.

 

ARTICLE IV

 

Particular
Provisions

 

This
Mortgage is subject to the following provisions relating to the particular laws
of the state wherein the Premises are located:

 

SECTION 4.01.  Applicable Law; Certain Particular Provisions. 
This Mortgage shall be governed by and construed in accordance with the
internal law of the state where the Mortgaged Property is located, except that
Mortgagor expressly acknowledges that by their terms, the Credit Agreement and
other Loan Documents (aside from those Other Mortgages to be recorded outside
New York) shall be governed by the internal law of the State of
New York, without regard to principles of conflict of law.  Mortgagor
and Mortgagee agree to submit to jurisdiction and the laying of venue for any
suit on this Mortgage in the state where the Mortgaged Property is
located.  The terms and provisions set forth in Appendix A attached
hereto are hereby incorporated by reference as though fully set forth
herein.  In the event of any conflict between the terms and provisions
contained in the body of this Mortgage and the terms and provisions set forth
in Appendix A, the terms and provisions set forth in Appendix A shall
govern and control.

 

18

 

IN
WITNESS WHEREOF, this Mortgage has been duly executed and delivered to
Mortgagee by Mortgagor on the date of the acknowledgment attached hereto.

 

	
   

  	
  THE
  NEIMAN MARCUS GROUP, INC., a

  Delaware corporation,

  
	
   

  	
   

  
	
   

  	
   

  	
  by:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  

 

19

 

[ADD LOCAL FORM OF ACKNOWLEDGMENT]

 

20

 

Exhibit A

to Mortgage

 

Description of the Land

 

 

Exhibit B

to Mortgage

 

Intercreditor Agreement

 

 

Appendix A

to Deed of Trust

 

Local Law Provisions

 

None

 

23

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