Document:

exv10w78

Exhibit 10.78

MORTGAGE AND SECURITY AGREEMENT

TO ALL PEOPLE TO WHOM THESE PRESENTS SHALL COME, GREETINGS:

     KNOW YE, that COLE TS GLOUCESTER NJ, LLC, a Delaware limited liability company, having a
mailing address at 2555 E. Camelback Road, Suite 400, Phoenix, Arizona 85016 (hereinafter called
the “Borrower”), for the consideration of One Dollar ($1.00) and other valuable consideration
received to the Borrower’s full satisfaction of PEOPLE’S UNITED BANK, a federally chartered banking
corporation having a mailing address at 265 Church Street, New Haven, Connecticut 06510
(hereinafter called the “Lender”), DOES HEREBY MORTGAGE TO THE LENDER, ITS SUCCESSORS AND ASSIGNS
forever:

THE PROPERTY

     (A) LAND: a certain piece or parcel of real property located at 643 Berlin Cross Keys Road,
Gloucester, New Jersey, more particularly described in Schedule A attached hereto and made a part
hereof, and all rights, privileges and easements appurtenant thereto (the “Land”).

     (B) IMPROVEMENTS: All the buildings, structures and improvements now or hereafter placed on
the Land (the “Improvements”).

     (C) FIXTURES AND EQUIPMENT: All fixtures, furnishings, appliances, machinery and equipment
now or hereafter installed, attached to, used, or furnished in connection with the use, letting or
operation of the Land and the Improvements or in connection with the activities conducted thereon,
and all renewals or replacements thereof or additions thereto or articles of substitution thereof
(collectively, the “FF&E”), specifically excluding any FF&E owned or leased by tenants of space in
the Improvements.

     (D) CONDEMNATION PROCEEDS: All awards or payments, including interest thereon, which may be
made with respect to the Land and the Improvements as a result of the exercise of the right of
eminent domain in accordance with, and subject to, the terms and conditions of Section 1.4.

     (E) LEASES: All right, title and interest of the Borrower in and to any and all leases,
tenancies or rights of use and occupancy, as the same may be amended, modified, extended, renewed
or replaced, and all guarantees of any tenant’s obligations thereunder, now or hereafter on or
affecting the Land and/or the Improvements, whether or not recorded, with all security therefor
and all monies payable thereunder (hereinafter, individually, a “Lease” and, collectively, the
“Leases”) in accordance with, and subject to, the terms and conditions of Section 1.8.

     (F) PROPERTY INCOME: All rents, income, profits, security deposits and other benefits to
which the Borrower may now or hereafter be entitled from the Land and the

 

 

Improvements and/or the
business operations conducted thereat or therefrom (hereinafter the “Property Income”) in
accordance with, and subject to, the terms and conditions of Section 1.9.

     (G) INTANGIBLES: All present and future funds, accounts, instruments, accounts receivable,
documents, causes of action, claims, general intangibles (including, without
limitation, trademarks, trade names, service marks and symbols now or hereafter used in
connection with any part of the Land or the Improvements, all names by which the Land or the
Improvements may be operated or known, all rights to carry on business under such names, and all
rights, interest and privileges which Borrower has or may have as developer or declarant under any
covenants, restrictions or declarations now or hereafter relating to the Land or the Improvements)
and all notes or chattel paper now or hereafter arising from or by virtue of any transactions
related to the Land or the Improvements (all of the foregoing, together with the FF&E, being
referred to collectively as the “Service Equipment”).

     (H) PERMITS AND APPROVALS: All permits, licenses, consents and approvals relating to the
development, use and occupancy of the Land and the Improvements.

     TO HAVE AND TO HOLD the above granted and bargained premises, with the privileges and
appurtenances thereof (collectively referred to herein as the “Property”) but subject to those
encumbrances, listed in the Lender’s mortgagee policy of title insurance (the “Permitted
Encumbrances”), unto it, the said Lender, its successors and assigns forever, to its and their own
proper use and behoof.

     THE CONDITION OF THIS MORTGAGE IS SUCH THAT:

     WHEREAS, the Lender and the Borrower have entered into a Promissory Note (the “Note”) of even
date herewith, pursuant to which all or part of the Loan proceeds are permitted to be advanced from
time to time and shall be secured by this Mortgage. The Note provides for repayment of all or a
portion of the outstanding balance of the Loan proceeds, together with interest thereon, from time
to time as provided therein, a copy of which Note is on file with the Lender. Unless sooner paid
or sooner due and payable, however, the entire then outstanding principal balance of the Loan,
together with accrued interest, shall be due and payable on January 1, 2017.

     WHEREAS, the Lender and the Borrower have entered or will enter into an interest rate swap
transaction evidenced by an ISDA 2002 Master Agreement of even date herewith, together with the
Schedule and all Confirmations relating thereto (the “Swap Agreement”), pursuant to which the
variable rate interest risk under the Note has been or will be hedged and pursuant to which the
Borrower has or will have certain payment and performance obligations to the Lender in the event
the Swap Agreement is terminated (the “Swap Obligations”).

     NOW, THEREFORE, Borrower hereby agrees to comply with and be subject to, the following terms,
representations, covenants and conditions:

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ARTICLE 1.

COVENANTS AND REPRESENTATIONS OF THE BORROWER

     The Borrower covenants, represents and warrants to the Lender as follows:

          1.1 FUTURE ADVANCES; PROTECTION OF PROPERTY

          This Mortgage shall secure the principal sum of $17,500,000.00, together with: (a) interest,
late charges, fees and other amounts due under the Note or this Mortgage; (b) any and all
additional advances made by Lender to protect or preserve the Property or the lien or security
interest created hereby on the Property, or for taxes, assessments or insurance premiums as
hereinafter provided or for performance of any of Borrower’s obligations hereunder or under the
other Loan Documents or for any other purpose provided herein or in
the other Loan Documents (whether or not the original Borrower remains the owner of the
Property at the time of such advances); (c) all legal fees, costs and other expenses incurred by
the Lender by reason of any default or otherwise in connection with the Mortgage Debt (defined
below); and (d) the Swap Obligations. The Borrower agrees that if, at any time during the term of
this Mortgage or following a foreclosure hereof (whether before or after the entry of a judgment of
foreclosure), the Borrower fails to perform or observe any covenant or obligation under this
Mortgage including, without limitation, payment of any of the foregoing, the Lender may (but shall
not be obligated to) take such steps as are reasonably necessary to remedy any such nonperformance
or nonobservance and provide payment thereof. All amounts so advanced by the Lender shall be added
to the amount secured by this Mortgage and the other Loan Documents (and, if advanced after the
entry of a judgment of foreclosure, by such judgment of foreclosure), and shall be due and payable
on demand, together with interest at the Default Rate set forth in the Note, such interest to be
calculated from the date of such advance to the date of repayment thereof.

          1.2 PAYMENT AND PERFORMANCE

          The Borrower will pay the Loan and all other sums due hereunder and all other indebtedness
secured hereby, in lawful money of the United States and pay and perform all of its obligations
under the Note, this Mortgage, the Swap Agreement and every other instrument now or hereafter
securing, evidencing or relating to the Loan (collectively referred to herein as the “Loan
Documents”) at the times and in the manner set forth in such Loan Documents. All amounts due the
Lender under any of the aforesaid instruments, including, without limitation, the Swap Obligations,
shall be secured by the lien of this Mortgage and shall hereinafter be referred to as the “Mortgage
Debt”. All advances made under the Note, this Mortgage and any other Loan Documents shall be
referred to collectively, herein as “Loan Advances”.

          1.3 INSURANCE

     A. The Borrower shall keep the Property insured against loss by fire, flood and other hazards,
casualties, liability, contingencies and all other “extended coverage” risks, including builder’s
risk, loss of income and demolition coverage in such amounts, with such companies, and with such
deductibles as the Lender may reasonably require. All insurance carried on the Property must show
the Lender as an additional insured and be payable to the

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Lender under the standard
non-contributing mortgagee endorsement and such other endorsements as the Lender may reasonably
require. The Borrower shall claim no cancellation or return of any policy or premium except from
and after the redemption of this Mortgage by the Borrower or the satisfaction in full of the
Mortgage Debt. The obligation to provide any policy or coverage under this subsection may be
satisfied by the policy or coverage carried by any tenant under an approved Lease, provided such
policy or coverage is primary and noncontributing; and further provided that, in the case of such
tenant’s property policy, the Borrower is named as an additional named insured or is an additional
insured, and the Lender is named as first mortgagee, or, in the case of such tenant’s liability
insurance policy, the Borrower and the Lender are named as additional insureds. In other words,
for so long as both parties to any approved Lease maintain insurance coverage or self-insure in
accordance with the terms of such Lease agreement, the Borrower shall be deemed to be in compliance
with the terms of this subsection.

          B. In the event of any loss or damage to the Property, the Borrower shall give prompt notice
thereof to the Lender. The Borrower authorizes the Lender, at its option, to collect, adjust and
compromise any losses under any hazard insurance policy required to be maintained by Borrower
hereunder. In case of loss and payment by any insurance company of
proceeds of a policy required to be maintained by Borrower hereunder, the amount of insurance
proceeds received shall be applied either in whole or in part upon the payment of the Mortgage Debt
or to rebuilding or restoring the Property, as the Lender may elect in its sole discretion.
Notwithstanding the foregoing, the Lender agrees to make such proceeds available to repair or
restore the Property so long as (1) no Event of Default (as defined herein) has occurred and is
then continuing, (2) the proceeds are sufficient to cover the cost to repair or restore the
Property substantially to its condition immediately preceding the loss or damage, and (3) the
Borrower is either required or has the option, under any lease of the Property, to use such
insurance proceeds to effect such repair or restoration.

          Notwithstanding the foregoing provisions of this Section 1.3.B or anything to the contrary
contained herein, for so long as the lease agreement (the “Tractor Supply Lease”) with Tractor
Supply Company (“Tractor Supply”) is in effect the disposition of casualty and condemnation
proceeds shall be governed by such lease.

          1.4 TAXES

          A. The Borrower shall pay or cause to be paid within any applicable grace period and before
the same become delinquent, all taxes, water rates, sewer rents, utility charges, assessments, and
governmental or other charges and impositions of any kind whatsoever, including any assessment for
local improvements, whether payable in installments or otherwise, for which lien rights exist,
which may now or hereafter be assessed or levied upon any part of the Property, or in lieu of or in
addition to a tax on the Property (all such charges and payments collectively referred to herein as
the “Taxes”). The Borrower shall promptly notify the Lender of the delinquency in the payment of
any Taxes.

          Notwithstanding the foregoing provisions of this Section 1.4.A or anything to the contrary
contained herein, for so long as the Tractor Supply Lease is in effect the right to contest

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the
validity, applicability or amount of any asserted tax or assessment shall be governed by such
lease.

          B. Upon the request of the Lender, the Borrower shall deposit with the Lender in advance, and
without interest, such amounts, in such installments, to be held on such terms and conditions, as
the Lender may in its sole discretion require in order to pay the Taxes. All such payments shall
be held in a non-interest bearing account at the Lender and may be commingled with other assets of
the Lender. Upon the occurrence of an Event of Default and during the continuance thereof, the
Lender may, at its option, apply the accumulated escrow balance remaining as a credit against the
Mortgage Debt. The foregoing escrow requirement shall be waived by the Lender so long as (i) no
Event of Default (as defined herein) has occurred and is then continuing, and (ii) Borrower,
Tractor Supply or any other tenant of the Property is paying such Taxes directly to the taxing
authority in a timely manner.

          1.5 CONDEMNATION

          A. The Borrower will give the Lender prompt notice of any eminent domain proceedings affecting
any part of the Property. The Borrower hereby appoints the Lender as its attorney-in-fact,
coupled with an interest, and authorizes the Lender to collect, receive, and retain, subject to the
terms hereof, the proceeds of any such award or payment, to give proper receipts therefor and, if
an Event of Default has occurred, to adjust, compromise and settle the claim therefor. The Lender
shall have the right to intervene and participate in any eminent domain proceedings and the
Borrower shall consult with the Lender in all matters pertaining to
the adjustment, compromise or settlement of such proceedings and shall not enter into any
agreement with respect to such matters without the prior written consent of the Lender. The Lender
may, in its sole discretion, retain and apply any eminent domain award or payment toward payment of
the Mortgage Debt, or pay same over wholly or in part to the Borrower.

          Notwithstanding the foregoing provisions of this Section 1.5.A, for so long as the Tractor
Supply Lease is in effect the disposition of casualty and condemnation proceeds shall be governed
by such lease.

          1.6 COMPLIANCE WITH LAWS, ETC.

          A. The Borrower warrants that it presently does and covenants that it will continue to observe
and comply with (1) all laws, regulations, ordinances, rules and orders affecting the Property or
the business operations thereon; and (2) the terms of each insurance policy applicable to the
Property that Borrower is required by this Mortgage to maintain. If the Borrower receives notice
that it is not in compliance with any such law or condition, the Borrower will promptly provide the
Lender with a copy of such notice.

          Notwithstanding the foregoing, the Borrower may, upon providing Lender with security
satisfactory to Lender, proceed diligently and in good faith to contest the validity or
applicability of any such laws, regulations, ordinances, rules and orders affecting the Property or
the business operations thereon, so long as during such contest the Property shall not be subject

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to any lien, charge, fine or other liability and shall not be in danger of being forfeited, lost or
closed. The Borrower shall not use or occupy, or allow the use or occupancy of, the Property in
any manner which violates any Lease of or any other agreement applicable to the Property or any
applicable laws, regulations, ordinances, rules and orders, or which constitutes a public or
private nuisance or which makes void, voidable or cancelable, or increases the premium of, any
insurance then in force with respect thereto.

          B. The Borrower shall indemnify the Lender and hold the Lender harmless from and against all
loss, liability, damage and expense, including attorneys’ fees, suffered or incurred by the Lender,
whether as holder of this Mortgage, as mortgagee in possession or as a successor in interest to the
Borrower as owner of the Property by virtue of foreclosure or acceptance of a deed in lieu of
foreclosure (1) under or on account of any applicable state or federal laws or regulations,
including the assertion of any lien thereunder; (2) any fact or event giving rise to liability
under the Borrower’s and Guarantor’s Environmental Indemnification dated as of even date herewith
with respect to the Property; and (3) with respect to any other matter affecting the Property and
governed by the provisions of applicable state or federal laws or regulations.

          C. In the event of any discharge, spillage, uncontrolled loss, seepage or infiltration of oil
or petroleum or chemical liquids, solids or gaseous products or hazardous waste or hazardous or
toxic substance which would give rise to a lien under applicable law (a “Spill”) affecting the
Property, whether or not the same originates or emanates from the Property or any contiguous real
estate, the Borrower shall contain, remove or mitigate, or cause the containment, removal or
mitigation of, the same immediately and in accordance with any directives of the State of New
Jersey. If the Borrower shall fail to remedy such Spill or otherwise comply with any of the
requirements of any environmental law or regulation, the Lender may at its election, but without
the obligation to do so, give such notices and/or cause such work to be performed at the Property
and/or take any and all other actions as the Lender shall deem necessary or advisable in order to
remedy the Spill or cure such failure of compliance, and any amounts paid as a result thereof shall
be reimbursed by the Borrower
upon demand by the Lender, shall bear interest at the “Default Rate” provided for in the Note,
and shall be secured by the lien of this Mortgage.

          1.7 MAINTENANCE AND REPAIR; INSPECTION; SIGN

          A. The Borrower will (1) keep and maintain the Property in good condition, working order and
repair, or cause the same to be so kept and maintained; (2) not commit or suffer any waste of the
Property; (3) repair, replace, rebuild or restore any part of the Property which may be damaged or
destroyed, or cause the same to be so repaired, replaced, rebuilt or restored; and (4) make, or
cause to be made, all other repairs and replacements to the Property required by any applicable
Lease, or, with respect to any period during which there is no Lease applicable to the Property,
which the Lender may reasonably require. All such work shall be done promptly in a good and
workmanlike manner.

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          B. After the occurrence of and during the continuation of an Event of Default, the Lender and
any person duly authorized by the Lender shall, subject to the rights of tenants under the Leases,
have the right to enter and inspect the Property at all reasonable times.

          1.8 SALE, ENCUMBRANCE AND USE

          A. The Borrower shall not, without the Lender’s prior written consent, which may be withheld
in the Lender’s sole discretion for any reason whatsoever, (1) initiate or allow any transfer or
other disposition of, legal or equitable title to all or any part of the Property other than in
compliance with the provisions of Section 4.09 below; (2) if applicable, commence an action to
dissolve or otherwise effect the dissolution of an entity Borrower or guarantor; (3) if applicable,
cause the termination of or change the ownership, the articles of organization, the operating
agreement, or the manager of the Borrower or any guarantor; (4) voluntarily create any liens or
encumbrances against the Borrower’s title to the Property; (5) initiate or, allow any change in the
nature of the use and occupancy of the Property from that permitted by the terms of any Lease,
including any such change which materially increases the likelihood of a Spill; or (6) record any
declaration of condominium or other form of common interest ownership affecting any part of the
Property or otherwise subject the Property to the provisions of N.J.S.A. 46:8(b)-1 et seq.
Notwithstanding the foregoing, however, any of the following may occur without the consent of the
Lender: (i) transfers of limited partnership interests in any Restricted Party (as hereinafter
defined), (ii) transfers of shares in Cole Credit Property Trust II, Inc., Cole Credit Property
Trust III, Inc. or any other entity whose ownership interests are bought, sold and redeemed through
U.S. broker-dealers, (iii) any involuntary transfer caused by the death of any Restricted Party or
any general partner, shareholder, joint venturer, manager, member or beneficial owner of a trust so
long as the Borrower is reconstituted, if required, following such death and so long as those
persons responsible for the management of the Property and the Borrower remain unchanged as a
result of such death or any replacement management is approved by the Lender, (iv) gifts for estate
planning purposes of any individual’s interests in any Restricted Party to the spouse or any lineal
descendant of such individual, or to a trust for the benefit of any one or more of such individual,
spouse or lineal descendant so long as the Borrower is reconstituted, if required, following such
gift and so long as those persons responsible for the management of the Property and the Borrower
remain unchanged following such gift or any replacement management is approved by the Lender, and
(v) transfers of ownership interests in any Restricted Party and ownership interests in any member,
partner or shareholder of any Restricted Party to any affiliate or subsidiary of a Restricted
Party, provided that, at all times, Christopher H. Cole, Cole Holdings Corporation, Cole Credit
Property Trust II, Inc.,
and/or Cole Credit Property Trust III, Inc., continues to “control” the Restricted Party,
where the term “control” means the power to direct the management and policies of the Restricted
Party. As used herein, the term “Restricted Party” shall mean the Borrower and/or the guarantor.

          B. The Borrower will keep the Property free from the claim of all persons supplying labor or
materials in connection with the construction or repair of any Improvements constituting a part of
the Property; provided, however, that the Borrower shall have the right to contest in good faith
any such claim or demand, so long as it does so diligently, by appropriate proceedings and without
prejudice to the Lender and provided that neither the Property nor any

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interest therein would be in
any danger of sale, loss or forfeiture as a result of such proceeding or contest. In the event the
Borrower shall contest any such claim or demand, the Borrower shall promptly notify the Lender of
such contest and thereafter shall, upon the Lender’s written request therefor, promptly provide a
bond, cash deposit or other security reasonably satisfactory to the Lender to protect the Lender’s
interest and security should the contest be unsuccessful. If the Borrower shall fail to promptly
discharge or provide security against any such claim or demand as aforesaid, the Lender may do so
and any and all expenses incurred by the Lender, together with interest thereon at the Default Rate
under the Note from the date incurred by Lender until actually paid by the Borrower, shall be
immediately paid by the Borrower on demand and shall be secured by this Mortgage and by all of the
other Loan Documents securing all or any part of the Mortgage Debt.

          C. The Borrower will furnish, at the Lender’s request, all waivers and releases of liens or
claims upon or with respect to the Property.

          D. The term “transfer or other disposition” as used in Section 1.8.A above shall mean:

               (1) any sale, conveyance, transfer, gift or other disposition, whether voluntary, involuntary,
or by operation of law;

               (2) if the Borrower is a limited liability company, any transfer of a beneficial interest in
the ownership of the membership interest in the company, whether caused by a member’s death or
otherwise, or any change in the Articles of Organization or Operating Agreement of the company, or
any change in members or managers of the company that has not been approved by the Lender, or any
termination of the company;

               (3) if the Borrower is a partnership, any transfer of a partner’s interest, whether caused by
the partner’s death or otherwise, or any change in the partnership agreement, or any termination of
the partnership;

               (4) any dissolution or liquidation of, or the filing of a suit to dissolve or liquidate, the
Borrower;

               (5) except for the existing Lease of the Land and Improvements to Tractor Supply, a lease or
leases of more than twenty percent (20%) of the Land, Improvements and/or Service Equipment,
wherein the proposed tenant or tenants do not intend to occupy the Property but intend to sell,
sublease or assign their interest in a lease or leases of the Land, Improvements and/or Service
Equipment. It is the express intention of this provision to prohibit a long-term lease or sale and
leaseback for either financing purposes or to effectuate a transfer of the Property, but nothing
herein shall prohibit or affect the rights of Tractor Supply to sublease or assign its interests
in, to and under its Lease, as set forth in such
Lease; and

               (6) any management contract wherein management of the Property shall be the responsibility of
anyone other than the Cole Realty Advisors, Inc.

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          E. The Borrower shall promptly notify the Lender if any lien, attachment or encumbrance is
recorded against the Property without the Borrower’s consent and shall cause the lien to be
cancelled or bonded over and discharged of record within thirty (30) days after its recording.

          1.9 LEASES

          The Borrower will not take any action, the effect of which would be to cause any Lease to
cease to be in full force and effect, and will not, except with the prior written consent of the
Lender and except as may otherwise be expressly permitted by the terms of this Mortgage, (1) cancel
or terminate any Lease, or consent to any cancellation, termination or surrender thereof, or any
assignment thereof; (2) amend, modify or subordinate any Lease; (3) enter into any new Lease; (4)
waive any event of default under any Lease; (5) consent to any prepayment or discount of rent or
advance rent under any Lease; or (6) take any other action in connection with any Lease which may
materially impair or jeopardize the validity of such Lease or the Lender’s interest therein. The
Lender shall have the right to review and reasonably refuse written consent to any of the above
proposed actions of the Borrower based upon the substance of the proposed transaction, the
creditworthiness of the Borrower or the tenant, the financial condition of the Property or
otherwise.

          1.10 PROPERTY INCOME

          As additional and collateral security for the payment of the Mortgage Debt and cumulative of
any and all rights and remedies herein provided for, the Borrower hereby absolutely and presently
assigns to the Lender all existing and future Property Income. The Borrower hereby grants to the
Lender the sole, exclusive and immediate right, without taking possession of the Property, to
demand, collect (by suit or otherwise), receive and give valid and sufficient receipts for any and
all of said Property Income, for which purpose the Borrower does hereby irrevocably make,
constitute and appoint the Lender its attorney-in-fact with full power to appoint substitutes or a
trustee to accomplish such purpose (which power of attorney shall be irrevocable so long as any
portion of the Mortgage Debt is outstanding, shall be deemed to be coupled with an interest, shall
survive the voluntary or involuntary dissolution of the Borrower and shall not be affected by any
disability or incapacity suffered by the Borrower subsequent to the date hereof); provided,
however, that until the occurrence of an Event of Default under this Mortgage or under any other of
the Loan Documents, the Borrower shall have a license to collect, receive, use and enjoy the
Property Income when due and prepayments thereof for not more than one (1) month prior to due date
thereof. Upon the occurrence of an Event of Default, the Borrower’s license shall automatically
terminate without notice to the Borrower and the Lender may thereafter, without taking possession
of the Property, collect the Property Income itself or by an agent or receiver. From and after the
termination of such license, the Borrower shall be the agent of the Lender in collection of the
Property Income, and all of the Property Income so collected by the Borrower shall be held in trust
by the Borrower for the sole and exclusive benefit of the Lender, and the Borrower shall, within
three (3) business days after receipt of any Property Income, pay the same to the Lender to be
applied by the Lender as hereinafter set forth. Neither the demand for or collection of Property
Income by the Lender shall constitute any assumption by the Lender of any obligations under any
agreement relating

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thereto. The Lender is obligated to account only for
such Property Income as is actually collected or received by the Lender. The Borrower
irrevocably agrees and consents that the respective payors of the Property Income shall, upon
demand and notice from the Lender of an Event of Default, pay said Property Income to the Lender
without liability to determine the actual existence of any Event of Default claimed by the Lender.
The Borrower hereby waives any right, claim or demand which the Borrower may now or hereafter have
against any such payor by reason of such payment of Property Income to the Lender, and any such
payment shall discharge such payor’s obligation to make such payment to the Borrower. All Property
Income collected or received by the Lender may be applied against all expenses of collection,
including, without limitation, reasonable and actual attorneys’ fees, against costs of operation
and management of the Property and against the Mortgage Debt, in whatever order or priority as to
any of the items so mentioned as the Lender directs in its sole discretion and without regard to
the adequacy of its security. Neither the exercise by the Lender of any rights under this Section
1.10 nor the application of any Property Income to the Mortgage Debt shall cure or be deemed a
waiver of any Event of Default. The assignment of Property Income hereinabove granted shall
continue in full force and effect during any period of foreclosure or redemption with respect to
the Property. The Borrower has executed a Collateral Assignment of Leases, Rentals and Property
Income dated of even date herewith (the “Assignment”) in favor of the Lender covering all of the
right, title and interest of the Borrower, as landlord, lessor or licensor, in and to any Leases.
All rights and remedies granted to the Lender under the Assignment shall be in addition to and
cumulative of all rights and remedies granted to Lender hereunder. Unless the Lender shall have
taken possession of the Property pursuant to this Mortgage, the Lender shall be without liability
for any loss which may arise from a failure to collect any Property Income, proceeds or other
payments.

          1.11 REMOVALS, ALTERATIONS AND DEMOLITION

          No part of the Improvements may be removed, demolished or materially altered, except as
otherwise provided under any Lease of the Property, without the prior written consent of the Lender
(not to be unreasonably withheld). Without the prior written consent of the Lender (not to be
unreasonably withheld), the Borrower shall not commence construction of any improvements on the
Land other than improvements required for the maintenance or repair of the Property. All such
changes, additions and alterations shall become part of the Property immediately upon installation,
except as otherwise provided in any Lease of all or any part of the Property. Except as permitted
under any Lease, no Service Equipment shall be removed from the Property without the prior written
consent of the Lender (not to be unreasonably withheld), unless it is replaced with an item of
similar or greater function and value. Any replacement equipment shall constitute Service
Equipment and be subject to the lien of this Mortgage.

          1.12 PROTECTION OF LIEN AND OTHER EXPENSES

          The Borrower shall pay, indemnify, defend and hold the Lender harmless from all costs,
disbursements, expenses and reasonable and actual attorneys’ fees incurred by the Lender in
connection with protecting or sustaining the lien of this Mortgage or collection of the Mortgage
Debt, either before or after obtaining judgment of foreclosure of the Mortgage or judgment on or
with respect to the Mortgage Debt.

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          1.13 BOOKS, RECORDS AND ACCOUNTS; FINANCIAL STATEMENTS

          A. The Borrower will keep and maintain proper and accurate books, records and accounts
reflecting all items of income and expense received or paid by or on behalf of the
Borrower in connection with the Property and all business operations conducted at or from the
Property. The Lender shall have the right, upon not less than seventy-two (72) hours advance
written notice to the Borrower, during normal business hours, to examine any such books, records
and accounts. The Borrower shall provide the Lender with (i) annual financial statements and
operating reports for the Property within one hundred twenty (120) days after each fiscal year-end
of the Borrower; and (ii) annual federal tax returns within thirty (30) days after filing. If the
Borrower is a disregarded entity for federal tax purposes, then the sole member of the Borrower (or
such other affiliated entity whose consolidated tax return includes the Borrower or such member),
will provide its federal tax return to the Lender for purposes of complying with the provisions
hereof.

          B. At all times during the Loan term, the aggregate Loan to value ratio (“LTVR”) for the Loan,
as determined by the Lender taking into account the value of the Property and the value of that
certain property located at 480 Park Center Drive, Winchester, Virginia (the “Winchester Property”)
that has been mortgaged by Cole HD Winchester VA, LLC to the Lender as security for the Loan, shall
not exceed fifty-five percent (55%), and the aggregate debt service coverage ratio (“DSCR”) for the
Loan, as determined annually by the Lender, shall not fall below 1.50 to 1.00. The DSCR will be
calculated based on the actual income received by the Borrower in the aggregate from both the
Property and the Winchester Property (the “DSCR Income”) less Borrower’s Operating Expenses of such
properties. “Operating Expenses”, as used herein, shall be (i) a replacement reserve of $0.15 per
square foot, and (ii) a 2% management fee. The DSCR Income less the Operating Expenses shall be
considered to be the net operating income (“NOI”). The NOI must support the proposed debt service
on the Loan based upon the interest rate under the Loan at the time of the Loan closing and a
25-year amortization schedule at not less than 1.50x.

          1.14 SECURITY AGREEMENT AND FINANCING STATEMENT

          This Mortgage is a security agreement and is intended to be effective as a fixture financing
statement pursuant to the Uniform Commercial Code as adopted in the State of New Jersey with
respect to the Service Equipment. The Lender is the secured party and the Borrower is the debtor
with respect to this financing statement and the mailing addresses of the secured party and the
debtor for the purpose of this financing statement are set forth hereinabove.

          1.15 REQUIRED NOTICES

          In addition to any other notices required under this Mortgage, the Borrower shall promptly
notify the Lender of the (1) receipt of notice from any governmental authority relating to the
Property; (2) receipt of any notice from any person (natural or otherwise, but specifically
excluding the Lender) claiming to hold any lien or security interest in the Property; or (3)

11

 

commencement of any judicial or administrative proceedings by or against or otherwise affecting the
Borrower or the Property.

          1.16 OTHER DOCUMENTS

          The Borrower, upon its receipt of a written request from the Lender, shall promptly deliver to
the Lender all copies of all reports, licenses, permits, approvals, orders, agreements, options,
and applications in the Borrower’s possession or control relating to or affecting the Property.

          1.17 GENERAL REPRESENTATIONS AND WARRANTIES

          The Borrower represents and warrants that as of the date of this Mortgage:

          A. The Borrower is generally paying its debts as such debts become due, the fair market value
of its assets exceeds its liabilities and no bankruptcy or insolvency proceedings are pending
against or contemplated by the Borrower, and the Borrower has received no written notice that any
such bankruptcy or insolvency proceedings are contemplated against it.

          B. All reports, statements and other data furnished by the Borrower to the Lender in
connection with the Loan are true, correct and complete in all material respects and do not omit
any fact or circumstance which would make the statements contained therein materially misleading;
present fairly the financial position of the Borrower as of the date stated therein, and the
results of the Borrower’s operation and changes in financial position for the years then ended and
the statements are prepared in conformity with generally accepted accounting principles applied on
a consistent basis; and that no material adverse change has occurred in the financial condition of
the Borrower or the Property since the date of said financial statement.

          C. The Property and all Improvements thereon have not suffered any damage from fire or other
casualty, no part of the Property has been condemned or taken by eminent domain and no condemnation
action or other taking of the Property or any part thereof is pending, nor has written notice of
any threat of eminent domain or condemnation or other taking of the Property been received by the
Borrower.

          D. To the actual knowledge of the Borrower and except as set forth in any Phase I
Environmental Site Assessment or other environmental report delivered by the Borrower to the
Lender, there does not now exist on, under or within the Property any Spill. To the actual
knowledge of the Borrower and except as set forth in any Phase I Environmental Site Assessment or
other environmental report delivered by the Borrower to the Lender, there does not now exist any
condition, nor, to the actual knowledge of the Borrower, will the current or proposed operations
cause there to exist any condition upon the Property or land contiguous thereto which would
materially increase the likelihood of the occurrence of (1) a Spill, or (2) a material violation of
any applicable state or federal laws or regulations.

          E. The Borrower is a validly existing limited liability company organized under the laws of
the State of Delaware, is qualified to do business in the State of New Jersey,

12

 

has the legal
capacity and is authorized to execute and deliver all Loan Documents, and the Loan Documents are
valid and binding obligations enforceable in accordance with their respective terms.

          F. There is no action, suit or proceeding pending against or materially affecting the Borrower
or the Property or the business operations conducted at or from the Property or which involve the
possibility of any judgment or liability not fully covered by insurance or which, in the Borrower’s
opinion, might result in any adverse change in the business, assets or operations of the Borrower
which would, in any way, materially and adversely affect the Property or the validity or
enforceability of the Loan Documents, and the Borrower has received no written notice threatening
any such action, suit or proceeding.

          G. The Borrower is not a party to or bound by any contract, agreement or other instrument, or,
to the actual knowledge of the Borrower, subject to any charter or other
restriction or any judgment, order, writ, injunction, decree, rule or regulation which now or
in the future may materially and adversely affect the business, operations, properties, assets or
condition, financial or otherwise, of the Borrower.

          H. The Borrower has filed all required federal, state and local tax returns, if any, and the
Borrower has received not written notice of claims asserted with respect to such taxes.

          I. The Property has frontage on, and direct access for ingress and egress to, the public
street(s) appurtenant thereto.

          J. Electric facilities and any other necessary utilities are and at all times hereafter shall
be, available in sufficient capacity to service the Property satisfactorily, and any easements
necessary to the furnishing of such utility service by the Borrower have been or will be obtained
and duly recorded.

          K. To its actual knowledge, the Borrower is not in default under the terms of any instrument
evidencing or securing any indebtedness of the Borrower, and the Borrower has received no written
notice of any fact or condition which would, if uncured or uncorrected after the receipt of notice
or passage of time, or both, constitute a default under any such instrument.

          1.18 COMMERCIAL TRANSACTION

          The Borrower represents, warrants and acknowledges that the transaction of which this Mortgage
is a part is a “commercial transaction” as defined by the Statutes of the State of New Jersey.
Monies now or in the future to be advanced to or on behalf of Borrower are not and will not be used
for personal, family or household purposes.

13

 

ARTICLE 2.

DEFAULT

          2.1 EVENTS OF DEFAULT

          Any one or more of the following shall constitute an “Event of Default” hereunder:

          A. The failure to pay the Mortgage Debt in full by the “Maturity Date” as defined in the Note,
or the failure to pay any other installment of principal and/or interest due under the Note within
fifteen (15) days from the date when such installment is otherwise due and payable, or the failure
to pay any other sums due under any other Loan Document prior to the expiration of any applicable
notice and/or cure periods or, if there is no such applicable notice or cure period, after the
Lender has given written notice to the Borrower of such failure and a period of ten (10) days shall
have passed with no cure by the Borrower.

          B. The occurrence of an Event of Default (as defined therein) under any Loan Documents beyond
any grace or cure periods set forth in said Loan Documents, if any.

          C. The failure to pay the premiums on or keep in force any insurance which Borrower is
required to maintain under Section 1.3.

          D. With respect to any period during which there is no applicable Lease or the obligation to
pay Taxes under an applicable Lease is the landlord’s, the failure to pay any Taxes which the
Borrower is required to pay within the applicable time periods set forth under Section 1.4, or as
to any other period, the failure to cause the payment of any Taxes which a tenant is required to
pay pursuant to any applicable Lease within the applicable time periods set forth under Section
1.4.

          E. The transfer, encumbrance or change in use of, or other action or non-action with respect
to, the Property or the composition of the Borrower in contravention of the provisions of Section
1.8.

          F. The failure of the Borrower to promptly contain, remove or mitigate any Spill, or to cause
the containment, removal or mitigation thereof, or the Borrower’s failure to promptly, upon the
Borrower’s receipt of the Lender’s written request therefor, reimburse the State of New Jersey or
the Lender, as applicable, for any amounts expended by them with respect to any Spill.

          G. The actual waste, removal or demolition of, or material alteration to, any part of the
Property in contravention of Sections 1.7 or 1.11 hereof, without the Lender’s prior written
consent.

          H. The failure to observe or perform any other covenant, agreement, obligation, term or
condition set forth herein, other than those otherwise described in this Section 2.1, and, to the
extent such failure or default is susceptible of being cured, the continuance of

14

 

such failure or
default for thirty (30) days after Borrower’s receipt of written notice thereof from Lender;
provided, however, that if such default is susceptible of cure but such cure cannot
be accomplished with reasonable diligence within said period of time, and if Borrower commences to
cure such default promptly after receipt of notice thereof from Lender, and thereafter prosecutes
the curing of such default with reasonable diligence, such period of time shall be extended for
such period of time as may be necessary to cure such default with reasonable diligence, but not to
exceed an additional sixty (60) days.

          I. The LTVR for the Loan exceeds 55% at any time during the Loan term; provided, however, that
a breach of this provision shall not be an Event of Default if the Borrower pays down the Loan to a
level that cures such breach within thirty (30) days after Borrower’s receipt of written notice of
such breach from the Lender. For purposes hereof, the “value” portion of the LTVR will be
calculated using the aggregate fair market value, as reasonably determined by the Lender, of both
the Property and the Winchester Property.

          J. The DSCR falls below 1.50 to 1.0 at any time during the Loan term, provided, however, that
a breach of this provision shall not be an Event of Default if the Borrower pays down the Loan to a
level that cures such breach within thirty (30) days after Borrower’s receipt of written notice of
such breach from the Lender or by posting cash or other collateral acceptable to the Lender
sufficient to cover any debt service shortfall for the remaining Loan term. The DSCR will be
calculated as set forth in Paragraph 1.13(B) above.

ARTICLE 3.

REMEDIES

     Whenever an Event of Default shall have occurred, the Lender shall not be required to advance
any part of the remainder of the Loan herein described and the Lender may take any one or more of
the following remedial steps:

          3.1 ACCELERATION

          The Lender may declare, without demand or notice to the Borrower, any or all of the Mortgage
Debt to be due and payable immediately and, upon such declaration, the same shall immediately
become, and be, due and payable, and the Lender may exercise any and all remedies, as may be
available under applicable law.

          3.2 FORECLOSURE

          The Lender may foreclose this Mortgage and exercise its rights as a secured party for all or
any portion of the Mortgage Debt which is then due and payable, subject to the continuing lien of
this Mortgage for the balance not then due and payable.

          3.3 POSSESSION OF PROPERTY; APPOINTMENT OF RECEIVER

          A. The Lender may, at its option (a) enter upon and take possession and control of the
Property and the Property Income with those rights and powers more particularly

15

 

set forth in
subsection 3.3 C.; (b) make application to a court of competent jurisdiction for and obtain the
immediate ex parte appointment of a receiver authorized to immediately enter upon and take
possession and control of the Property and the Property Income with those rights and powers more
particularly set forth in subsection 3.3 C.; and (c) without taking possession and control of the
Property, immediately commence action to collect directly all Property Income in the place and
stead of the Borrower with full rights and powers to notify all parties liable to make payments of
Property Income to make said payments directly to the Lender or its agents, and the Lender or its
agents shall have the further power and authority to sue for or otherwise collect and receive all
Property Income.

          B. The Borrower hereby waives to the fullest extent permitted by law all rights to prior
notice or court hearing in connection with any action by the Lender of the types set forth in
subsection 3.3 A., and the Borrower further waives any requirement that Lender provide any bond,
surety, or other security in connection with any said action.

          C. In the event the Lender or a receiver enters upon and takes possession and control of the
Property and/or the Property Income pursuant to subsection 3.3 A., said person or entity shall, in
addition to such other rights and powers as may subsequently be authorized, have the right and
power to (1) operate, manage and control the Property and exercise all the rights and powers of the
Borrower in its name or otherwise with respect to the same; (2) make all necessary and proper
maintenance, repairs, replacements, and improvements to the Property required of the landlord under
any applicable Lease or, with respect to any period during which there is no applicable Lease, as
reasonably determined by the Lender; (3) collect and receive all Property Income; and (4) enforce
all terms of existing contracts pertaining to the Property and enter into such new contracts as
required of the landlord under any applicable Lease or, with respect to any period during which
there is no applicable Lease, as reasonably determined by Lender.

          D. All Property Income collected by the Lender, the Lender’s agent or a receiver pursuant to
this subsection 3.3 shall be applied in such order of priority as the Lender may determine in its
sole discretion to (1) interest and principal due on the Mortgage Debt; (2) with respect to any
period during which there is no applicable Lease, taxes, assessments and insurance premiums due
with respect to the Property and/or the business operations conducted from the Property and, as to
any other period taxes, assessments and insurance premiums due with respect to the Property which
are the obligation of the landlord under the Lease(s); (3)
with respect to any period during which there is no applicable Lease, all reasonable costs and
expenses of operating, maintaining, repairing and improving the Property and conducting the
business operations which are or may be conducted at the Property and, as to any other period, the
reasonable costs and expenses of operating, maintaining, repairing and improving the Property and
conducting the business operations which have or may be conducted at the Property which are the
obligation of the landlord under the Lease(s); and (4) the compensation, salaries, expenses and
disbursements of any agents, employees, attorneys or other representatives of the Lender, the
Lender’s agent or the receiver in connection with the possession, control and/or operation of the
Property and the business operations conducted therefrom.

16

 

          E. The Lender, its agents, or any receiver acting pursuant to this subsection 3.3 shall in no
event be liable or accountable for more moneys than actually are received or collected during the
period during which the Lender, its agent or any receiver actually is in possession and control of
the Property. Unless Lender shall have taken possession of the Property pursuant to this Mortgage,
neither the Lender, its agents or any receiver shall be liable or accountable in any manner for the
failure to collect Property Income for any reason whatsoever.

          F. All costs, expenses and liabilities of every character incurred by the Lender in managing,
operating and maintaining the Property, not paid from Property Income as hereinabove provided,
shall constitute Lender advances pursuant to Section 3.4.

          G. In the event of foreclosure, the Lender, its agent or any receiver acting pursuant to this
subsection 3.3 may remain in possession of the Property until (1) the foreclosure sale; (2) the
redemption of the Property; or (3) if a deficiency exists, the expiration of any redemption period
of the United States of America extending subsequent to the foreclosure sale. The Borrower shall
and does hereby indemnify and hold the Lender harmless from and against any and all liability,
loss, claim, demand or damage which may or might be incurred by reason of this Mortgage, including,
without limitation, claims or demands for security deposits from tenants of the Property deposited
with the Borrower, and from and against any and all claims and demands whatsoever which may be
asserted against the Lender by reason of any alleged obligations or undertakings on its part to
perform or discharge any of the terms, covenants or agreements contained in any of the Leases,
unless occurring after the Lender has taken possession of the Property pursuant to this Mortgage or
unless resulting from the Lender’s negligence or willful misconduct. Should the Lender incur any
liability by reason of this Mortgage or in defense of any claim or demand for loss or damage as
provided above, the amount thereof, including, without limitation, costs, expenses and reasonable
and actual attorneys’ fees, together with interest thereon at the Default Rate under the Note from
the date paid or incurred by the Lender until repaid by the Borrower, shall be immediately due and
payable to the Lender by the Borrower upon demand and shall be secured by this Mortgage and by all
of the other Loan Documents securing all or any part of the indebtedness evidenced by the Note.

          3.4 LENDER ADVANCES

          The Lender may, without notice or demand, pay any amount which the Borrower has failed to pay,
or perform any act which the Borrower has failed to perform hereunder. In such event such Lender
advances, together with interest thereon from the date made, at the highest interest rate allowed
under the Note, shall be (1) added to the Mortgage Debt, (2) payable on demand to the Lender and
(3) secured by the lien of this Mortgage.

          3.5 NO MARSHALLING

          The Lender shall not be (1) compelled to release, or be prevented from foreclosing or
enforcing this Mortgage upon all or any part of the Property, unless the entire Mortgage Debt shall
have been paid; (2) required to accept any part or parts of the Property, as

17

 

distinguished from the
entire whole thereof, as payment of or upon the Mortgage Debt to the extent of the value of such
part or parts; (3) compelled to accept or allow any apportionment of the Mortgage Debt to or among
any separate parts of the Property; or (4) prevented from selling the Property in one or more
parcels or as an entirety and in such manner and order as the Lender in its sole discretion may
elect.

          3.6 REMEDIES CUMULATIVE; LENDER’S DISCRETION

          No remedy conferred upon or reserved to the Lender hereunder is or shall be deemed to be
exclusive but shall be cumulative, and may be exercised in the sole discretion of the Lender at any
time, in any manner, and in any order, and shall be in addition to and separate and distinct from
every other remedy given the Lender under this Mortgage, the Note, or any other Loan Documents, or
now or hereafter existing in favor of the Lender at law or in equity. The Lender, in exercising
any remedy provided herein under which it may make payments or perform actions which the Borrower
has failed to do or make, may do so in its sole discretion whenever in its opinion such payment or
performance is necessary or desirable to protect the full security intended by this Mortgage. The
Lender shall be entitled to collect all reasonable costs and expenses incurred in pursuing any of
its remedies hereunder, including without limitation, reasonable attorney’s fees permitted by Rules
of Court, costs of documentary evidence, abstracts and title reports.

          3.7 NO WAIVER

          Time and punctuality shall be of the essence in this Mortgage, but any delay or failure by the
Lender to exercise any right or remedy available to it upon the occurrence of an Event of Default
hereunder shall not constitute a waiver of such Event of Default or relinquishment of the right in
the future to enforce strict compliance by the Borrower with all of the covenants, conditions and
agreements herein, or of the right to exercise any such rights or remedies if such Event of Default
by the Borrower be continued or repeated. No modification, amendment, change, or discharge of any
term or provision of this Mortgage shall be valid or binding unless the same is in writing and
signed by both the Lender and the Borrower. The Lender may however, without notice to or the
consent of the Borrower, any other person primarily or contingently liable for the payment of the
Mortgage Debt or the holders of any subordinate lien on the Property, (1) release any part of the
security described herein, (2) release the obligation of any person primarily or contingently
liable for the Mortgage Debt secured hereby, (3) extend the time for payment or otherwise modify
the terms of the Mortgage Debt or this Mortgage, and (4) take any additional security for the
Mortgage Debt. No such release, extension, modification or additional security shall impair or
affect the lien of this Mortgage or its priority over any subordinate lien and no such party shall
be relieved of any liability by reason thereof.

          3.8 NO MERGER

          In the event the Lender shall acquire title to the Property by conveyance from the Borrower or
as a result of the foreclosure of any other mortgage which the Lender at any time holds with
respect to the Property, this Mortgage shall not merge in the fee of the Property but

18

 

shall remain
and continue as an existing and enforceable lien for the Mortgage Debt secured hereby until the
same shall be released of record by the Lender in writing.

ARTICLE 4.

MISCELLANEOUS PROVISIONS

          4.1 PERSONAL LIABILITY

          Notwithstanding anything to the contrary contained in this Mortgage, the liability of the
Borrower and its officers, directors, general partners, managers, members and principals for the
Mortgage Debt and for the performance of the other agreements, covenants and obligations contained
herein and in the Loan Documents shall be limited as set forth in Section 12 of the Note.

          4.2 MODIFICATION OF MORTGAGE

          This Mortgage is subject to “modification” as such term is defined in P.L. 1985 c. 353
(N.J.S.A. 46:9-8.1 et seq.) and shall be subject to the priority provisions thereof.

          4.3 GOVERNING LAW; BINDING EFFECT

          This Mortgage shall be governed by and construed, interpreted, regulated and enforced in
accordance with the applicable laws of the State of New Jersey. All covenants, conditions and
agreements herein shall run with the land, and shall be binding upon and inure to the benefit of
the respective heirs, successors and assigns of the Lender and the Borrower.

          4.4 NOTICE

          All notices, demands, requests or other communications to be sent by one party to the other
hereunder or required by law shall be in writing and shall be deemed to have been validly given or
served by delivery of the same in person to the intended addressee, or by depositing the same with
Federal Express or another reputable private courier service for next business day delivery, or by
depositing the same in the United States mail, postage prepaid, registered or certified mail,
return receipt requested, in any event addressed to the intended addressee: to the Borrower at its
address set forth on the first page of this Mortgage, and to the Lender at its address set forth on
the first page of this Mortgage, or at such other address as may be designated by such party as
herein provided. All notices, demands and requests shall be effective upon such personal delivery,
or one (1) business day after being deposited with the private courier service, or two (2) business
days after being deposited in the United States mail as required above. Rejection or other refusal
to accept or the inability to deliver because of changed address of which no notice was given as
herein required shall be deemed to be receipt of the notice, demand or request sent. By giving to
the other party hereto at least fifteen (15) days’ prior written notice thereof in accordance with
the provisions hereof, the parties hereto shall have the right from time to time to change their
respective addresses and each shall have the right to specify as its address any other address
within the United States of America.

19

 

          4.5 NO AGENCY OR JOINT VENTURE

          Nothing contained in this Mortgage shall be construed to cause the Borrower to become the
agent for, or joint venturer with, the Lender for any purpose whatsoever, nor shall the Lender be
responsible for any shortage, discrepancy, damage, loss or destruction of any
part of the Property for whatever cause unless same is the direct result of the gross
negligence or willful misconduct of the Lender.

          4.6 INVALID PROVISIONS

          If any term or provision herein is judicially determined invalid or unenforceable then the
same shall either be severed from this Mortgage or if possible reduced in scope to the extent
necessary to be valid or enforceable.

          4.7 INTERPRETATION

          In this Mortgage, unless the context otherwise requires:

          A. Words of the masculine gender shall mean and include correlative words of the feminine and
neuter genders and words importing the singular number shall mean and include the plural number and
vice versa.

          B. Any headings or captions preceding the texts of the several sections of this Mortgage shall
be solely for convenience of reference and shall not constitute a part of this Mortgage, nor shall
they affect its meaning, construction or effect.

          C. As used herein the term “actual knowledge” means the conscious awareness of facts or other
information after inquiry reasonable for an institutional owner of properties similar to the
Property.

          4.8 RELEASE OF MORTGAGE

          If the Borrower desires to sell the Property, the Borrower will so notify the Lender and
provide the Lender with the terms of the proposed sale. The Lender will release the lien of this
Mortgage from the Property so long as no Event of Default has occurred and is then continuing and
in connection with such sale the Loan is paid down so that after such paydown (1) the LTVR (as
determined by an appraisal ordered by the Lender and paid for by the Borrower) for the Winchester
Property is not more than it was immediately prior to such paydown (and in no event more than
fifty-five percent (55%), and (2) the DSCR is not less than 1.50 to 1.00 based on the income from
the Winchester Property and a reamortization of the principal balance of the Loan following such
prepayment as provided in the Note. The applicable prepayment penalty under the Note and any
applicable breakage or termination fee due under the Swap Agreement will be due in connection with
any such partial paydown of the Loan.

20

 

     NOW, THEREFORE, if all agreements and provisions contained herein are fully kept and performed
by the Borrower, and all the Mortgage Debt shall be fully paid in all respects, then this deed
shall be void; otherwise to remain in full force and effect.

[The Remainder of this Page Intentionally Left Blank]

21

 

     IN WITNESS WHEREOF, the Borrower has caused this instrument to be executed and delivered this
18th day of December, 2009.

	 	 	 	 	 	 	 
	Signed, sealed and delivered
in the presence of:

	 	 	
	COLE TS GLOUCESTER NJ, LLC
	 
	 

	 	 	 	By: 
	Cole REIT Advisors III, LLC

Its Manager	
	 
	 	 	 	 	 	 
	/s/ Mary Bates

	 	 	 		By:  	/s/ Todd J. Weiss
	 

	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Name: Todd J. Weiss
	 

	 	 	 	 	 	Its Senior Vice President
	/s/ Carol Beck

	 	 	 	 	 	Duly Authorized
	 

Name:

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	STATE OF ARIZONA
	 	) 	 	 	 	 
	 
	 	)  	 	 	 	 
	COUNTY OF MARICOPA
	 	)  	 	 	 	 
	 

     I CERTIFY as follows:

     1. On
December 17th, 2009, Todd J. Weiss personally appeared before me;

     2. I was satisfied that this person is the person who executed the attached instrument as
Senior Vice President of Cole TS Gloucester NJ, LLC, a Delaware limited liability company, the
Borrower named in the attached instrument; and

     3. This person states that he was authorized to execute the instrument on behalf of said
limited liability company and that he executed the instrument as the act of such limited liability
company.

	 	 	 
	 

	 	/s/ Taryn M. Hernandez
	 

	 	 
	 

	 	Notary Public 
	 

	 	My Commission Expires: April 23, 2012
	[NOTARIAL
SEAL]

My commission expires: April 23, 2012
	 	 

Signature
Page to Mortgage Deed

 

 

SCHEDULE A

Description of Land

 

 

MORTGAGE AND SECURITY AGREEMENT

COLE TS GLOUCESTER NJ, LLC

-to-

PEOPLE’S UNITED BANK

Dated: December ___, 2009

	 	 	 	 	 	 	 	 
	 

	 	BLOCK:
	 	18612	 	 	 
	 
	 	 	 	 	 	 	 
	 

	 	LOT:
	 	4.01	 	 	 
	 
	 	 	 	 	 	 	 
	 

	 	COUNTY:
	Camden
	 	 

RECORD AND RETURN TO:

Thomas B. Mitchell, Esq.

Pepe & Hazard LLP

Goodwin Square

225 Asylum Street

Hartford, CT 06103exv10w79

Exhibit 10.79

PROMISSORY NOTE

	 	 	 	 	 
	$17,500,000.00

	 	 	 	Scottsdale, Arizona
	 

	 	 	 	As of December 18th, 2009

     FOR VALUE RECEIVED, the undersigned COLE TS GLOUCESTER NJ, LLC, and COLE HD WINCHESTER VA,
LLC, each a Delaware limited liability company, each having a mailing address at 2555 E. Camelback
Road, Suite 400, Phoenix, Arizona 85016 (collectively, “Borrower”), hereby jointly and severally
promise to pay to the order of PEOPLE’S UNITED BANK, a federally chartered banking corporation
having an office at 265 Church Street, New Haven, Connecticut 06510 (“Lender”), the principal sum
of SEVENTEEN MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($17,500,000.00) (the “Loan”), with
interest on the unpaid balance as hereinafter provided, and hereby agree as follows:

     1. DEFINITIONS. Except as otherwise expressly provided herein, all undefined capitalized
terms used herein shall have the meanings assigned to such terms in the Mortgage. The following
terms shall have the respective meanings set forth below:

          1.1
“Business Day” means any day other than a Saturday, Sunday or legal holiday on which
commercial banks are either authorized or required to be closed in New York City and, when used to
describe a day on which an interest rate determination is to be made in respect of LIBOR, any day
that is a London Banking Day.

          1.2 “Default Rate” has the meaning set forth in Section 4 hereof.

          1.3 “Events of Default” has the meaning set forth in Section 8 hereof.

          1.4 “LIBOR” means, with respect to any LIBOR Period, the rate (rounded to the next higher
1/100 of 1%) fixed by the British Bankers’ Association for U.S. dollar deposits for one-month
periods as reported on Reuters Screen LIBOR Page 01 as of 11:00 a.m., London time, on the second
London Banking Day before such LIBOR Period begins (or if not so reported, then as determined by
Lender from another recognized source or interbank quotation). If for any reason the Lender cannot
determine such offered rate by the British Bankers’ Association, the Lender may, in its discretion,
select a replacement index based on the arithmetic mean of the quotations, if any, of the interbank
offered rate by first class banks in London or New York for deposits in comparable amounts and
maturities.

          1.5 “LIBOR Period” means: (i) initially, the period beginning on (and including) the date
hereof and ending on December 31, 2009; and (ii) thereafter, each period beginning on (and
including) the first day after the end of the immediately preceding LIBOR Period and ending on (and
including) the last day of the one calendar-month period. If any LIBOR Period would begin on a day
that is not a Business Day, such LIBOR Period will begin on the next following Business Day and the
preceding LIBOR Period will be extended to include the day prior to such following Business Day.

          1.6 “LIBOR Lending Rate” means, relative to any LIBOR Period, a rate per annum determined
pursuant to the following formula:

 

 

	 	 	 	 	 	 	 
	 	LIBOR Lending Rate
	 	=
	 	LIBOR	 
	 	 
	 	 	 	   (1.00- LIBOR Reserve Percentage)	 

          1.7 “LIBOR Reserve Percentage” means, with respect to any day of any LIBOR Period, the maximum
aggregate (without duplication) of the rates (expressed as a decimal fraction) of reserve
requirements (including all basic, emergency, supplemental, marginal and other reserves and taking
into account any transitional adjustments or other scheduled changes in reserve requirements)
applicable to Lender under any regulations of the Board of Governors of the Federal Reserve System
of the United States or other governmental authority having jurisdiction with respect thereto as
issued from time to time and then applicable to assets or liabilities consisting of “Eurocurrency
Liabilities”, as currently defined in Regulation D of the Board of Governors of the Federal Reserve
System, having a term approximately equal or comparable to such LIBOR Period.

          1.8 “Loan Documents” means this Note, the Mortgage and all other documents evidencing,
securing, guarantying, modifying, supplementing or otherwise relating to the Loan, as any of the
foregoing may be amended and in effect from time to time.

          1.9 “London Banking Day” means a day on which dealings in U.S. dollar deposits are transacted
in the London interbank market.

          1.10 “Maturity Date” means January 1, 2017.

          1.11 “Maximum Rate” has the meaning set forth in Section 9 hereof.

          1.12 “Mortgage” means that certain Mortgage and Security Agreement dated the date hereof from
Borrower to Lender, as amended and in effect from time to time.

          1.13 “Prepayment Fee” has the meaning set forth in Section 6 hereof.

          1.14 “Prime Rate” means the rate of interest established by Lender from time to time as its
reference rate in making commercial loans, but does not reflect the rate of interest charged to any
particular borrower or class of borrowers. The rate of interest shall change automatically and
immediately as of the date of any change in the Prime Rate, without notice to Borrower or any
endorser, surety or guarantor. Borrower acknowledges that the Prime Rate is not tied to any
external rate of interest or index. Any such change shall not affect or alter any of the other
terms and conditions of this Note.

          1.15 “Swap Agreement” means that certain ISDA Master Agreement of even date herewith between
the Borrower and the Lender, together with all Schedules, Confirmations and amendments relating
thereto.

     2. INTEREST RATE. The outstanding principal balance of the Loan shall bear interest for the
duration of each LIBOR Period applicable thereto at a floating rate of interest (the “Applicable
Interest Rate”) equal to the sum of (i) the LIBOR Lending Rate for such LIBOR Period plus
(ii) two and one-half percent (2.50%). Notwithstanding the foregoing, from and after any time that
the Swap Agreement is unwound or terminated, the Applicable Interest Rate will in no event be less
than five and three-quarters percent (5.75%) per annum (the “Interest Rate

2

 

Floor”). Interest shall be computed on a monthly basis and calculated on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed during the applicable period.

     3. PAYMENT OF PRINCIPAL AND INTEREST.

          3.1 Interest for the first LIBOR Period shall be due and payable on the date hereof.
Thereafter, interest only on the outstanding principal balance of the Loan shall be due and payable
monthly in arrears commencing on February 1, 2010 and continuing on the first (1st) day of each
month thereafter until and including January 1, 2013. Commencing on February 1, 2013 and
continuing on the first (1st) day of each month thereafter, payments of interest on the
outstanding principal balance of the Loan, plus principal in the amount set forth on Schedule
A attached hereto and made a part hereof, shall be due and payable monthly in arrears. If not
sooner paid, the entire unpaid balance of principal of the Loan, together with accrued interest
thereon and any and all other amounts due under this Note or the other Loan Documents, shall be due
and payable on the Maturity Date.

          3.2 If the Loan is paid down in part as a result of (a) a sale of the Gloucester Property
(defined below) pursuant to Section 4.9 of the Mortgage, or (b) any other prepayment Borrower is
required to make pursuant to the terms of this Note or the Mortgage, including, without limitation,
a partial prepayment to cure a breach of a financial covenant or resulting from the application of
casualty or condemnation proceeds, the principal portion of the monthly payment due hereunder will
be re-calculated based on (i) the outstanding principal balance of the Loan after the prepayment is
made, (ii) an amortization period equal to 25 years minus the number of months that have elapsed
from the date hereof to the date of such prepayment, and (iii) the fixed interest rate in effect
under the Swap Agreement. In such event, the principal repayment schedule attached hereto as
Schedule A will be replaced by a new repayment schedule calculated in accordance with the
foregoing.

     4. LATE PAYMENT AND DEFAULT INTEREST PROVISIONS.

          4.1 Late Charge. Borrower shall pay to Lender a late charge equal to five percent (5%) of the
aggregate unpaid balance of any monthly payment of principal, interest, taxes, assessments,
insurance premiums and other charges required to be deposited under the terms of the Mortgage (but
not the payment due at maturity) not paid within ten (10) days of the due date thereof to cover the
expenses to Lender resulting from such delinquent payment.

          4.2 Default Rate. At the option of Lender in its sole discretion following the occurrence of
an Event of Default, the interest rate on the Loan shall be converted to an interest rate equal to
the lesser of (i) the Applicable Interest Rate plus five percent (5.0%) per annum or (ii)
the maximum rate permitted by law. The rate of interest on the Loan, as adjusted in accordance with
this Section 4.2, shall be referred to as the “Default Rate.” The charging of interest at the
Default Rate shall be in addition to all other rights and remedies available to the holder of this
Note upon the occurrence of an Event of Default. The Default Rate shall remain in effect until any
Event of Default is cured (whether before or after judgment).

     5. APPLICATION OF PAYMENTS. Prior to the occurrence of any Event of Default, the order of
application of all payments received from Borrower shall be as follows: (a) to unpaid late charges,
costs of collection and other unpaid amounts due under the Loan Documents (other than principal or
interest); (b) to interest on the unpaid balance of the Loan; and (c) to the unpaid principal of
the Loan. After the occurrence of an Event of Default, Lender

3

 

shall apply any payments received from Borrower in such order as Lender may elect in its sole
discretion.

     6. PREPAYMENT. Borrower may prepay the Loan in whole or in part at any time (the date of any
such payment a “Prepayment Date”) in multiples of $1,000, without penalty or premium, except as
described below. The foregoing shall not impair Borrower’s obligation to pay any early termination
or breakage fee that may be due under the Swap Agreement. In addition, upon any prepayment of the
Loan on any day that is not the last day of the relevant LIBOR Period (regardless of the source of
such prepayment and whether voluntary, by acceleration or otherwise), the Borrower shall pay an
amount (the “Prepayment Fee”), as calculated by the Lender, equal to the “Net Loss” of Lender. As
used herein, the term “Net Loss” means the economic loss the Lender sustains or incurs a result of
such prepayment, and Borrower and Lender agree that said economic loss shall be calculated as
follows:

          (a) The Lender shall first determine the Index Rate. The “Index Rate” shall mean the LIBOR
Lending Rate used to calculate the Applicable Interest Rate in effect on the Prepayment Date;

          (b) Utilizing the Index Rate, the Lender shall then calculate the monthly interest amount
payable on the principal amount being prepaid from the Prepayment Date to the end of the then
applicable LIBOR Period or the Maturity Date, whichever is next to occur. The result is the
“Monthly Index Payment”.

          (c) Utilizing the Reinvestment Rate (defined below), the Lender shall then calculate the
monthly interest that would be earned by reinvesting the principal amount being prepaid until the
end of the LIBOR Period or the Maturity Date, as applicable. The result is the “Monthly
Reinvestment Payment”. The “Reinvestment Rate” shall mean the LIBOR Lending Rate (calculated as of
the date the Lender receives the prepayment) for a period closest to, or coterminous with the
period from the Prepayment Date to the end of the LIBOR Period or the Maturity Date, as applicable.

          (d) The Monthly Reinvestment Payment shall then be subtracted from the corresponding Monthly
Index Payment. The result, if positive, is the Net Loss. The Net Loss shall in no event be less
than zero.

If the Loan shall be accelerated for any reason whatsoever, the applicable Prepayment Fee in effect
as of the date of such acceleration shall be paid and such prepayment fee shall also be added to
the Loan in determining the debt for the purposes of any judgment of foreclosure of the mortgage or
such other Loan Documents given to secure the Note.

All partial prepayments of principal shall be accompanied by and applied first to the payment of
unpaid late charges, if any, then to accrued and unpaid interest and the balance on account of the
unpaid principal of this Note in the inverse order of maturity. Such partial prepayments shall not
affect the Borrower’s obligation to make the regular monthly installments required hereunder until
the Loan is fully paid.

4

 

     7. LIBOR PROVISIONS. In the event that at any time (i) Lender shall determine that adequate
and reasonable methods do not exist for ascertaining the LIBOR rate or (ii) any present or future
law, regulation, treaty or directive or any interpretation or application thereof shall make it
unlawful for Lender to make or maintain the LIBOR rate, Lender shall give notice of such
circumstances to Borrower. Upon the giving of such notice described in the preceding sentence or,
at the option of Lender in its sole discretion upon the occurrence of any Event of Default, the
commitment of Lender to continue the Loan at the LIBOR rate shall forthwith be suspended and the
interest rate on the Loan shall be converted to an interest rate equal to Lender’s Prime Rate per
annum, subject to the Interest Rate Floor, such conversion to be effective as of the first day
after the end of the LIBOR Period in effect at the time or such earlier date as may be required by
law.

     8. EVENTS OF DEFAULT. If any of the following events (“Events of Default”) shall occur: (a)
Borrower shall fail to pay within fifteen (15) days after when due and payable any principal of or
interest owing under this Note or shall fail to pay any other sum due under any of the Loan
Documents prior to the expiration of any applicable notice and/or cure periods (or, if there is no
such applicable notice or cure period, after Lender shall have given written notice to Borrower of
such failure and a period of ten (10) days shall have passed with no cure by Borrower); (b)
Borrower shall fail to perform any term, covenant or agreement contained in this Note for a period
of thirty (30) days following written notice; (c) Borrower or any guarantor or obligor of the Loan
shall fail to perform any other term, covenant or agreement contained in any of the Loan Documents
within thirty (30) days following written notice or after any other applicable grace period
specifically contained therein, provided, however, that if such default is
susceptible of cure, but such cure cannot be accomplished with reasonable diligence within said
period of time, and if Borrower commences to cure such default promptly after receipt of notice
thereof from Lender, and thereafter prosecutes the curing of such default with reasonable
diligence, such period of time shall be extended for such period of time as may be necessary to
cure such default with reasonable diligence, but not to exceed an additional sixty (60) days; (d)
any representation or warranty of Borrower or any guarantor or obligor of the Loan in any of the
Loan Documents or in any certificate, notice or document given in connection therewith shall have
been false or misleading in any material respect at the time made or deemed to have been made; (e)
Borrower shall be in default under any agreement or agreements (other than the Loan Documents)
evidencing any other indebtedness or obligations owing to Lender or any affiliates of Lender or
shall fail to pay or perform any such indebtedness or obligations prior to such failure
constituting an event of default thereunder; (f) Borrower or any guarantor or obligor of the Loan
(i) shall make an assignment for the benefit of creditors, (ii) shall be adjudicated bankrupt or
insolvent, (iii) shall be the subject of an order appointing, a trustee, liquidator or receiver as
to all or part of its assets, which order is not vacated within sixty (60) days following the entry
thereof, (iv) shall commence, approve, consent to, or have filed against it involuntarily, any case
or proceeding under any bankruptcy, reorganization or similar law and, in the case of an
involuntary case or proceeding, such case or proceeding is not dismissed within ninety (90) days
following the commencement thereof, or (v) shall be the subject of an order for relief in an
involuntary case under federal bankruptcy law, which order is not vacated within sixty (60) days
following the entry thereof; (g) Borrower or any guarantor or obligor of the Loan shall file an
answer or other pleading in any proceeding admitting it is unable to pay its respective debts as
they mature; (h) there shall remain undischarged for more than sixty (60) days any final judgment
or execution action against Borrower that individually or in the aggregate exceeds
$250,000; (i) the dissolution, liquidation, termination of existence, death or incapacity of

5

 

Borrower or any guarantor of the Loan shall occur; or (j) the termination of the Swap Agreement,
unless such termination occurs in connection with the amendment or replacement of the Swap
Agreement as part of a partial prepayment of the Loan.

     THEN, or at any time thereafter:

     (1) In the case of any Event of Default under clauses (f) or (g), the entire unpaid principal
amount of the Loan, all interest accrued and unpaid thereof, and all other amounts payable
hereunder and under the other Loan Documents shall automatically become forthwith due and payable,
without presentment, demand, protest or notice of any kind, all of which are hereby expressly
waived by Borrower; and

     (2) In the case of any Event of Default other than under clauses (f) or (g), Lender may, by
written notice to Borrower, declare the unpaid principal amount of the Loan, all interest accrued
and unpaid thereof, and all other amounts payable hereunder and under the other Loan Documents to
be forthwith due and payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by Borrower.

     No remedy herein conferred upon Lender is intended to be exclusive of any other remedy
conferred in this Note or any of the other Loan Documents and each and every remedy shall be
cumulative and in addition to every other remedy hereunder, under any of the other Loan Documents,
now or hereafter existing at law or in equity or otherwise.

     9. NO USURY. Under no circumstances shall the aggregate amount paid or agreed to be paid as
interest hereunder exceed the highest lawful rate permitted under applicable usury law (the
“Maximum Rate”) and the payment obligations of Borrower under this Note are hereby limited
accordingly. If under any circumstances, whether by reason of advancement or acceleration of the
unpaid principal balance hereof or otherwise, the aggregate amounts paid on this Note shall include
amounts which by law are deemed interest and which would exceed the Maximum Rate, Borrower
stipulates that payment and collection of such excess amounts shall have been and will be deemed to
have been the result of a mistake on the part of both Borrower and Lender, and Lender shall, at its
option, either return such excess to Borrower or, to the extent such excess does not exceed the
principal balance then outstanding under the Note, credit such excess against the principal balance
of this Note then outstanding, in which event any and all penalties of any kind under applicable
law as a result of such excess interest shall be inapplicable.

     10. SECURITY AND SET-OFF. This Note is the Note referred to in the Mortgage, and is secured
by the Mortgage and entitled to the benefits and security thereof. Reference is made to the
Mortgage for descriptions of the properties subject thereto and the respective rights and
obligations of Borrower and Lender thereunder. Borrower further grants to Lender, as security for
the full and punctual payment and performance of all amounts payable hereunder and under the other
Loan Documents, a continuing lien on and security interest in all securities or other property
belonging to Borrower now or hereafter held by Lender and in all deposits (general or special, time
or demand, provisional or final) and other sums credited by or due from Lender to Borrower or
subject to withdrawal by Borrower; and regardless of the adequacy of any collateral or other means
of obtaining repayment of such amounts, Lender is hereby authorized at
any time and from time to time when an Event of Default has occurred and is continuing,
without

6

 

notice to Borrower (any such notice being expressly waived by Borrower) and to the fullest
extent permitted by law, to set off and apply such deposits and other sums against such amounts
payable hereunder and under the other Loan Documents, whether or not Lender shall have made any
demand under this Note and although payment of such amounts may be contingent or unmatured.

     11. MAKING OF PAYMENTS. All payments and prepayments of principal and all payments of
interest, fees, and other amounts payable hereunder or the other Loan Documents shall be made by
Borrower to Lender at its head office or such other place as Lender may from time to time specify
in writing in immediately available U.S. dollars, on or before 2:00 p.m. (Bridgeport, Connecticut
time) on the due date thereof, without set-off or counterclaim and free and clear of, and without
any withholding or deduction whatsoever. Payments in federal funds immediately available in the
place designated for payment received by Lender prior to 2:00 p.m. local time on a Business Day at
said place of payment shall be credited prior to close of business, while other payments, at the
option of Lender, may not be credited until immediately available to Lender in federal funds in the
place designated for payment prior to 2:00 p.m. local time at said place of payment on a Business
Day. Lender shall be entitled to charge any account of Borrower with Lender for any sum due and
payable by Borrower to Lender hereunder or under any of the other Loan Documents if not otherwise
received by Lender when due. If any payment hereunder or under any of the other Loan Documents
becomes due on a day that is not a Business Day, the due date for such payment shall be extended to
the next Business Day.

     12. EXCULPATION. Notwithstanding anything in this Note or the Loan Documents to the contrary,
but subject to the qualifications hereinbelow set forth, Lender agrees that:

     (a) Borrower shall be liable upon the indebtedness evidenced hereby and for the other
obligations arising under the Loan Documents to the full extent (but only to the extent) of
the security therefor, the same being all properties (whether real or personal), rights,
estates and interests now or at any time hereafter securing the payment of this Note and/or
the other obligations of Borrower under the Loan Documents (collectively, as used in this
Section 12, the “Security Property”);

     (b) if a default occurs in the timely and proper payment of all or any part of such
indebtedness evidenced hereby or in the timely and proper performance of the other
obligations of Borrower under the Loan Documents, any judicial proceedings brought by Lender
against Borrower shall be limited to the preservation, enforcement and foreclosure, or any
thereof, of the liens, security titles, estates, assignments, rights and security interests
now or at any time hereafter securing the payment of this Note and/or the other obligations
of Borrower under the Loan Documents, and no attachment, execution or other writ of process
shall be sought, issued or levied upon any assets, properties or funds of Borrower other
than the Security Property, except with respect to the liability described below in this
Section 12; and

     (c) in the event of a foreclosure of such liens, security titles, estates, assignments,
rights or security interests securing the payment of this Note and/or the other obligations
of Borrower under the Loan Documents, no judgment for any
deficiency upon the indebtedness evidenced hereby shall be sought or obtained by Lender

7

 

against Borrower; provided, however, that, notwithstanding the foregoing provisions of this
section, Borrower shall be fully and personally liable and subject to legal action (i) for
proceeds paid under any insurance policies (or paid as a result of any other claim or cause
of action against any person or entity) by reason of damage, loss or destruction to all or
any portion of the Security Property, to the full extent of such proceeds not previously
delivered to Lender, but which, under the terms of the Loan Documents, should have been
delivered to Lender, (ii) for proceeds or awards resulting from the condemnation or other
taking in lieu of condemnation of all or any portion of the Security Property, to the full
extent of such proceeds or awards not previously delivered to Lender, but which, under the
terms of the Loan Documents, should have been delivered to Lender, (iii) for all tenant
security deposits or other refundable deposits paid to or held by Borrower or any other
person or entity in connection with leases of all or any portion of the Security Property
which are not applied in accordance with the terms of the applicable lease or other
agreement, (iv) for rent and other payments received from tenants under leases of all or any
portion of the Security Property paid more than one (1) month in advance as of the date
hereof, (v) for rents, issues, profits and revenues of all or any portion of the Security
Property received or applicable to a period after the occurrence of any Event of Default
hereunder or under the Loan Documents, which are not either applied to the ordinary and
necessary expenses of owning and operating the Security Property or paid to Lender, (vi) for
waste committed by Borrower on the Security Property, damage to the Security Property as a
result of the intentional misconduct or gross negligence of Borrower or any of its
principals, officers, general partners or members, any guarantor, any indemnitor, or any
agent or employee of any such person, or any removal by Borrower of all or any portion of
the Security Property in violation of the terms of the Loan Documents, to the full extent of
the losses or damages incurred by Lender on account of such occurrence, (vii) for failure to
pay any valid taxes, assessments, mechanic’s liens, materialmen’s liens or other liens which
could create liens on any portion of the Security Property which would be superior to the
lien or security title of the Mortgage or the other Loan Documents, to the full extent of
the amount claimed by any such lien claimant except, with respect to any such taxes or
assessments, to the extent that funds have been deposited with Lender pursuant to the terms
of the Mortgage specifically for the applicable taxes or assessments and not applied by
Lender to pay such taxes and assessments, (viii) for all obligations and indemnities of
Borrower under the Loan Documents relating to hazardous or toxic substances or radon or
compliance with environmental laws and regulations to the full extent of any losses or
damages (including, but not limited to, those resulting from diminution in value of any
Security Property) incurred by Lender as a result of the existence of such hazardous or
toxic substances or radon or failure to comply with environmental laws or regulations, and
(ix) for fraud, material misrepresentation or failure to disclose a material fact by
Borrower or any of its principals, officers, general partners or members, any guarantor, any
indemnitor or any agent, employee or other person authorized or apparently authorized to
make statements, representations or disclosures on behalf of Borrower, any principal,
officer, general partner or member of Borrower, any guarantor or any indemnitor, to the full
extent of any losses, damages and expenses of Lender on account thereof.

8

 

     13. MISCELLANEOUS.

          13.1 Sales and Participations. Lender may from time to time sell or assign, in whole or in
part, or grant participations in this Note and/or the obligations evidenced hereby. The holder of
any such sale, assignment or participation, if the applicable agreement between Lender and such
holder so provides, shall be entitled to all of the rights, obligations and benefits of Lender and
deemed to hold and may exercise the rights of setoff or banker’s lien with respect to any and all
obligations of such holder to the undersigned, in each case as fully as though the undersigned were
directly indebted to such holder. Lender may in its discretion give notice to the undersigned of
such sale, assignment or participation; however, the failure to give such notice shall not affect
any of Lender’s or such holder’s rights hereunder.

          13.2 Disclosure of Financial Information. If Lender determines at any time to sell, transfer
or assign this Note, the Mortgage and the other Loan Documents, and any or all servicing rights
with respect thereto, or to grant participations therein (the “Participations”) or issue mortgage
pass-through certificates or other securities evidencing a beneficial interest in a rated or
unrated public offering or private placement (the “Securities”), Lender may forward to each
purchaser, transferee, assignee, servicer, participant, investor, or their respective successors in
such Participations and/or Securities (collectively, the “Investor”) or any rating agency rating
such Securities, each prospective Investor and each of the foregoing’s respective counsel, all
documents and information which Lender now has or may hereafter acquire relating to the debt
evidenced by this Note and to Borrower, any guarantor, any indemnitor and the Property (as defined
in the Mortgage), which shall have been furnished by Borrower, any guarantor or any indemnitor as
Lender determines reasonably necessary. Lender is hereby authorized to disclose any financial or
other information about the Borrower or any guarantor required to be disclosed by any regulatory
body or agency having jurisdiction over the Lender. The information provided may include only that
information specifically demanded in writing by such regulatory body or authority.

          13.3 Waivers. Borrower and all other parties liable hereunder, whether as principal, endorser
or otherwise, hereby severally waive presentment, demand for payment, protest and notice of
dishonor and also agree to pay all costs of collection, including reasonable attorneys’ fees
incurred by Lender in connection with enforcement of any of Lender’s rights hereunder or under the
Mortgage.

          13.4 No Waiver. Any forbearance by Lender in exercising any right or remedy hereunder or any
other Loan Document, or otherwise afforded by applicable law, shall not be a waiver or preclude the
exercise of any right or remedy by Lender. The acceptance by Lender of payment of any sum payable
hereunder after the due date of such payment shall not be a waiver of the right of Lender to
require prompt payment when due of all other sums payable hereunder or to declare a default for
failure to make prompt payment.

          13.5 Amendments. This Note may not be changed, modified or terminated except in writing
signed by the party to be charged.

          13.6 Governing Law. This Note shall be governed by and construed in accordance with the laws
of the State of Connecticut.

9

 

          13.7 Severability. If any term of this Note, or the applications hereof to any person or set
of circumstances, shall to any extent be invalid, illegal, or unenforceable, the remainder of this
Note, or the application of such provision or part thereof to persons or circumstances other than
those as to which it is invalid, illegal, or unenforceable, shall not be affected thereby, and each
term of this Note shall be valid and enforceable to the fullest extent consistent with applicable
law and this Note shall be interpreted and construed as though such invalid, illegal, or
unenforceable term or provision (or any portion thereof) were not contained in this Note.

          13.8 Bind and Inure. The terms and provisions hereof shall be binding upon and inure to the
benefit of Borrower and Lender and their respective heirs, executors, legal representatives,
successors, successors-in-title and assigns, whether by voluntary action of the parties or by
operation of law. As used herein, the terms “Borrower” and “Lender” shall be deemed to include
their respective heirs, executors, legal representatives, successors, successors-in-title and
assigns, whether by voluntary action of the parties or by operation of law. If Borrower consists
of more than one person or entity, each shall be jointly and severally liable to perform the
obligations of Borrower under this Note. All personal pronouns used herein, whether used in the
masculine, feminine or neuter gender, shall include all other genders; the singular shall include
the plural and vice versa. Titles of articles and sections are for convenience only and in no way
define, limit, amplify or describe the scope or intent of any provisions hereof. Time is of the
essence with respect to all provisions of this Note. This Note and the other Loan Documents
contain the entire agreements between the parties hereto relating to the subject matter hereof and
thereof and all prior agreements relative hereto and thereto which are not contained herein or
therein are terminated. The term “Lender” shall mean the holder of this Note at the time in
question.

          13.9 Notices. All notices under this Note shall be given as provided in the Mortgage.

          13.10 Time of Essence. It is expressly agreed that time is of the essence with respect to
this Note.

     14. WAIVER OF TRIAL BY JURY. BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM FILED BY EITHER PARTY,
WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY
THIS NOTE, THE OTHER LOAN DOCUMENTS, OR ANY ACTS OR OMISSIONS OF LENDER IN CONNECTION THEREWITH.

[The Remainder of this Page Intentionally Left Blank]

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     Time is of the essence of each and every term, condition and provision of this Note.

	 	 	 	 	 
	 	COLE HD WINCHESTER VA, LLC

 	 
	 	By:  	Cole REIT Advisors III, LLC
 	 
	 	 	Its Manager 	 
	 

	 	 	 	 	 	 
	 	 	 	 
	 	 	By:  	                           /s/ Todd J. Weiss
 	 
	 	 	 	Name:  	Todd J. Weiss 	 
	 	 	 	Its Senior Vice President

Duly Authorized 	 

	 	 	 	 	 
	 	COLE TS GLOUCESTER NJ, LLC

 	 
	 
	 	By:  	Cole REIT Advisors III, LLC
 	 
	 	 	Its Manager 	 
	 

	 	 	 	 	 	 
	 	 	By:  	                           /s/ Todd J. Weiss
 	 
	 	 	 	Name:  	Todd J. Weiss 	 
	 	 	 	Its Senior Vice President

Duly Authorized 	 
	 	 

This Note is secured by a mortgage on

certain real property located at:

480 Park Center Drive, Winchester, Virginia (the “Winchester Property”)

and

643 Berlin Cross Keys Road, Gloucester, New Jersey (the “Gloucester Property”)

Signature Page to Promissory Note

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