Document:

Exhibit 10.9

 

 

FORM OF FIRST PRIORITY

 

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 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 Term Loan Credit
Agreement.

 

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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) 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 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”);

 

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(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 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,

 

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“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 Term Loan Credit
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. 
Title, Mortgage Lien.  Mortgagor has good and marketable fee simple
title to the Mortgaged Property, subject only to Permitted Liens.  Mortgagor will forever warrant and defend its
title to the Mortgaged Property, the rights of Mortgagee

 

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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).

 

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 Term 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 and 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 and the Security 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

 

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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.

 

(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 (as defined in the Security Agreement) 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.

 

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(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.

 

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

 

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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.

 

(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

 

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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. 
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 Security Agreement, the Security Agreement
shall govern.

 

SECTION 1.14. 
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 1.15. 
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 1.16. 
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.

 

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ARTICLE II

 

Defaults and
Remedies

 

SECTION 2.01. 
Events of Default.  Any Event of Default shall constitute an
Event of Default under this Mortgage.

 

SECTION 2.02. 
Demand for Payment.  Subject to the terms of the Security
Agreement, 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, the Existing Indenture 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,
(iv) manage and operate the Mortgaged Property and exercise all the rights
and powers of

 

11

 

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 Property and to collect and apply
the Rents.  The receiver shall have all
of the rights and

 

12

 

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 Term 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 Term 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
Security Agreement at

 

16

 

the address set forth on the first page of this Mortgage and to the
Mortgagee as provided in the Security 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 first-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 Second 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 Second 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 Term
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.

 

19

 

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:

  

 

20

 

[ADD LOCAL FORM OF ACKNOWLEDGMENT]

 

21

 

Exhibit A

to Mortgage

 

Description of the Land

 

22

 

Exhibit B

to Mortgage

 

Security Agreement

 

23

 

Exhibit A

to Mortgage

 

Local Law Provisions

 

None

 

24Exhibit 10.10

 

 

 

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

 

3

 

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

 

4

 

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).

 

5

 

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.

 

6

 

(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.

 

7

 

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

 

8

 

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

 

29

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