Document:

Exhibit 10.11

 

 

 

FORM OF

 

SECOND
PRIORITY MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY

AGREEMENT AND FINANCING STATEMENT

 

From

 

THE NEIMAN MARCUS
GROUP, INC.

 

To

 

DEUTSCHE BANK
TRUST COMPANY AMERICAS

 

 

Dated: October ____, 2005

Premises: [City], [State]
   _______________ County

 

 

 

 

 

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

 

WITNESSETH THAT:

 

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

 

 

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

 

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

 

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

 

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

 

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

 

Granting Clauses

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

5

 

ARTICLE I

Representations, Warranties and Covenants of Mortgagor

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

10

 

ARTICLE II

Defaults and Remedies

 

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

 

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

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

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

 

14

 

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

 

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

 

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

 

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

 

15

 

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

 

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

 

ARTICLE III

Miscellaneous

 

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

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

17

 

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

 

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

 

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

 

ARTICLE IV

Particular Provisions

 

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

 

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

 

18

 

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

 

	
   

  	
  THE NEIMAN
  MARCUS GROUP, INC., a

  Delaware corporation,

  
	
   

  	
   

  
	
   

  	
  by:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

19

 

[ADD
LOCAL FORM OF ACKNOWLEDGMENT]

 

20

 

Exhibit A

to Mortgage

 

Description of
the Land

 

 

 

Exhibit B

to Mortgage

 

Intercreditor
Agreement

 

 

Appendix A

to Deed of Trust

 

Local Law
Provisions

 

None

 

23Exhibit
10.12

 

 

FORM OF

 

SECOND
PRIORITY LEASEHOLD MORTGAGE, ASSIGNMENT OF LEASES AND

RENTS, SECURITY AGREEMENT AND FINANCING STATEMENT

 

From

 

THE NEIMAN MARCUS
GROUP, INC.

 

To

 

DEUTSCHE BANK
TRUST COMPANY AMERICAS

 

 

Dated: October____, 2005

Premises: [City], [State]

______________ County

 

 

 

1

 

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

 

WITNESSETH THAT:

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

Granting Clauses

 

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

 

3

 

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

 

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

 

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

 

(4) all
of Mortgagor’s right, title and interest in and to all general intangibles
owned by Mortgagor and relating to design, development, operation, management
and use of the Premises or the Improvements, all certificates of occupancy,
zoning variances, building, use or other permits, approvals, authorizations and
consents obtained from and all materials prepared for filing or filed with any
governmental agency in connection with the development, use, operation or
management of the

 

4

 

Premises and Improvements, all construction, service, engineering,
consulting, leasing, architectural and other similar contracts concerning the
design, construction, management, operation, occupancy and/or use of the
Premises and Improvements, all architectural drawings, plans, specifications,
soil tests, feasibility studies, appraisals, environmental studies, engineering
reports and similar materials relating to any portion of or all of the Premises
and Improvements, and all payment and performance bonds or warranties or
guarantees relating to the Premises or the Improvements, all to the extent
assignable (the “Permits, Plans and
Warranties”);

 

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

 

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

 

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

 

5

 

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

 

ARTICLE I

 

Representations, Warranties and Covenants of Mortgagor

 

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

 

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

 

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

 

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

 

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

 

SECTION 1.05.  Casualty
Condemnation/Eminent Domain. 
Mortgagor shall give Mortgagee prompt written notice of any casualty or
other damage to the Mortgaged Property or any proceeding for the taking of the
Mortgaged Property or any portion thereof or interest

 

6

 

therein under power of eminent
domain or by condemnation or any similar proceeding in accordance with, and to
the extent required by, the Revolving Facility Credit Agreement.  Any net proceeds received by or on behalf of
the Mortgagor in respect of any such casualty, damage or taking shall constitute
trust funds held by the Mortgagor for the benefit of the Secured Parties to be
applied to repair, restore or replace the Mortgaged Property or, if a
prepayment event shall occur with respect to any such net proceeds, to be
applied in accordance with the Revolving Facility Credit Agreement.

 

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

 

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

 

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

 

(d)  So
long as an Event of Default shall not have occurred and be continuing,
Mortgagee will not exercise any of its rights under Section 1.06(c), and
Mortgagor shall receive and collect the Rents accruing under any Lease; but
after the occurrence and during the continuance of any Event of Default,
Mortgagee may, at its option, receive and collect all Rents and enter upon the
Premises and Improvements through its officers, agents, employees or attorneys
for such purpose and for the operation and maintenance thereof.  Mortgagor hereby irrevocably authorizes and
directs each tenant, if any, and each successor, if any, to the interest of any
tenant under any Lease, respectively, to rely upon any notice of a claimed
Event of Default sent by Mortgagee to any such tenant or any of such tenant’s
successors in interest, and thereafter to pay Rents to Mortgagee without any
obligation or right to inquire as to whether an Event of Default actually
exists and even if some notice to the contrary is

 

7

 

received from the Mortgagor,
who shall have no right or claim against any such tenant or successor in
interest for any such Rents so paid to Mortgagee.  Each tenant or any of such tenant’s
successors in interest from whom Mortgagee or any officer, agent, attorney or
employee of Mortgagee shall have collected any Rents, shall be authorized to
pay Rents to Mortgagor only after such tenant or any of their successors in
interest shall have received written notice from Mortgagee that the Event of
Default is no longer continuing, unless and until a further notice of an Event
of Default is given by Mortgagee to such tenant or any of its successors in
interest.

 

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

 

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

 

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

 

SECTION 1.08.  Filing
and Recording.  Mortgagor
will cause this Mortgage, the UCC financing statements referred to in Section 1.09,
any other security instrument creating a security interest in or evidencing the
lien hereof upon the Mortgaged Property and each UCC continuation statement and
instrument of further assurance to be filed, registered or

 

8

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

SECTION 1.16.  Copies
of Communication.  If at
any time the Mortgagor provides the First Mortgagee with any written
communication, information, documentation, notice or demand of any kind
(including regular monthly loan payments) relevant to the First

 

10

 

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

 

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

 

ARTICLE II

 

Defaults and Remedies

 

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

 

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

 

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

 

11

 

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

 

(c)  Upon
every such entry or taking of possession, Mortgagee may, to the extent not
prohibited by applicable law, hold, store, use, operate, manage and control the
Mortgaged Property, conduct the business thereof and, from time to time, (i) make
all necessary and proper maintenance, repairs, renewals, replacements,
additions, betterments and improvements thereto and thereon, (ii) purchase
or otherwise acquire additional fixtures, personalty and other property, (iii) insure
or keep the Mortgaged Property insured, (iv) manage and operate the
Mortgaged Property and exercise all the rights and powers of Mortgagor to the
same extent as Mortgagor could in its own name or otherwise with respect to the
same, or (v) enter into any and all agreements with respect to the
exercise by others of any of the powers herein granted Mortgagee, all as may
from time to time be directed or determined by Mortgagee to be in its best
interest and Mortgagor hereby appoints Mortgagee as its true and lawful
attorney-in-fact and agent, following the occurrence and during the continuance
of an Event of Default for Mortgagor and in its name, place and stead, in any
and all capacities, to perform any of the foregoing acts. Mortgagee may collect
and receive all the Rents, issues, profits and revenues from the Mortgaged
Property, including those past due as well as those accruing thereafter, and,
after deducting (i) all expenses of taking, holding, managing and
operating the Mortgaged Property (including compensation for the services of
all persons employed for such purposes), (ii) the costs of all such
maintenance, repairs, renewals, replacements, additions, betterments,
improvements, purchases and acquisitions, (iii) the costs of insurance, (iv) such
taxes, assessments and other similar charges as Mortgagee may at its option
pay, (v) other proper charges upon the Mortgaged Property or any part
thereof and (vi) the compensation, expenses and disbursements of the
attorneys and agents of Mortgagee, Mortgagee shall apply the remainder of the
moneys and proceeds so received first to the payment of the Mortgagee for the
satisfaction of the Secured Obligations, and, if there is any surplus, to Mortgagor,
subject to the entitlement of others thereto under applicable law.

 

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

 

12

 

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

 

SECTION 2.05.  Right
to a Receiver.  If an
Event of Default shall occur and be continuing, Mortgagee, shall be entitled to
make application to a court of competent jurisdiction for, and (to the extent
permitted by law) obtain from such a court, as a matter of right to the
appointment of a receiver to take possession of and to operate the Mortgaged
Property and to collect and apply the Rents. 
The receiver shall have all of the rights and powers permitted under the
laws of the state wherein the Mortgaged Property is located.  Mortgagor shall pay to Mortgagee upon demand
all reasonable expenses, including receiver’s fees, reasonable attorney’s fees
and disbursements, costs and agent’s compensation incurred pursuant to the
provisions of this Section 2.05; and all such expenses shall be secured by
this Mortgage and shall be, without demand, immediately repaid by Mortgagor to
Mortgagee with interest thereon at the Interest Rate.

 

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

 

(b)  The
Mortgaged Property may be sold subject to unpaid taxes and Liens expressly
permitted under Section 6.02 of the Revolving Facility Credit Agreement,
and, after

 

13

 

deducting all costs, fees and expenses
of Mortgagee (including costs of evidence of title in connection with the
sale), Mortgagee or an officer that makes any sale shall apply the proceeds of
sale in the manner set forth in Section 2.08.

 

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

 

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

 

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

 

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

 

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

 

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

 

SECTION 2.10.  Waiver
of Appraisement, Valuation, Stay, Extension and Redemption Laws.  Mortgagor waives, to the extent not
prohibited by law, (i) the benefit of all laws now existing or that
hereafter may be enacted (x) providing for any appraisement or valuation
of any portion of the Mortgaged Property and/or (y) in any way extending
the time for the enforcement or the collection of amounts due under any of the
Secured Obligations or

 

14

 

creating or extending a period
of redemption from any sale made in collecting said debt or any other amounts
due Mortgagee, (ii) any right to at any time insist upon, plead, claim or
take the benefit or advantage of any law now or hereafter in force providing
for any homestead exemption, stay, statute of limitations, extension or
redemption, or sale of the Mortgaged Property as separate tracts, units or
estates or as a single parcel in the event of foreclosure or notice of
deficiency, and (iii) all rights of redemption, valuation, appraisement,
stay of execution, notice of election to mature or declare due the whole of or
each of the Secured Obligations and marshaling in the event of foreclosure of
this Mortgage.

 

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

 

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

 

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

 

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

 

SECTION 2.15.  Waiver.  (a)  No delay or failure by Mortgagee to
exercise any right, power or remedy accruing upon any breach or Event of
Default shall exhaust or impair any such right, power or remedy or be construed
to be a waiver of any such breach or Event of Default or acquiescence therein;
and every right, power and remedy given by this Mortgage to Mortgagee may be
exercised from time to time and as often as may be deemed expedient

 

15

 

by Mortgagee.  No consent or waiver by Mortgagee to or of
any breach or Event of Default by Mortgagor in the performance of the Secured
Obligations shall be deemed or construed to be a consent or waiver to or of any
other breach or Event of Default in the performance of the same or of any other
Secured Obligations by Mortgagor hereunder. 
No failure on the part of Mortgagee to complain of any act or failure to
act or to declare an Event of Default, irrespective of how long such failure
continues, shall constitute a waiver by Mortgagee of its rights hereunder or
impair any rights, powers or remedies consequent on any future Event of Default
by Mortgagor.

 

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

 

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

 

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

 

16

 

ARTICLE III

 

Miscellaneous

 

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

 

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

 

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

 

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

 

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

 

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

 

SECTION 3.05.  Definitions.  As used in this Mortgage, the singular shall
include the plural as the context requires and the following words and phrases
shall have the following

 

17

 

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

 

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

 

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

 

18

 

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

 

ARTICLE IV

 

Particular Provisions

 

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

 

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

 

ARTICLE V

 

Subject Lease

 

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

 

19

 

(b)  Without
the prior written consent of Mortgagee, Mortgagor will not modify, amend, or in
any way alter the terms of the Subject Lease if such modification, amendment or
alteration would increase the monetary obligations of the Mortgagor under the
Subject Lease in any material respect or otherwise be adverse in any material
respect to the interests of Mortgagee or the value of the Mortgaged
Property.  Except to the extent permitted
under the Revolving Facility Credit Agreement, without the prior written
consent of Mortgagee, Mortgagor will not (i) in any way cancel, release,
terminate, surrender or reduce the term of the Subject Lease, (ii) fail to
exercise any option to renew or extend the term of the Subject Lease, (iii) waive,
excuse, condone or in any way release or discharge the lessor under the Subject
Lease of or from any material obligations, covenants, conditions and agreements
by said lessor to be done and performed and (iv) consent to the
subordination of the Subject Lease to any mortgage unless such subordination is
conditioned upon the non-disturbance of Mortgagor, as tenant, by the applicable
mortgagee.  Any attempt on the part of
Mortgagor to do any of the foregoing without such written consent of Mortgagee
shall be null and void and of no effect and shall constitute a default
hereunder.

 

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

 

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

 

(e)  To
the extent that Mortgagee is not given the right by the lessor to cure any
defaults of Mortgagor under the Subject Lease pursuant to the terms thereof,
then notwithstanding any other provision of this Mortgage, following written
notice of default sent by the lessor to Mortgagor and the completion of
one-half of Mortgagor’s cure period with respect to such default, Mortgagee may
(but shall not be obligated to) take any such action Mortgagee deems reasonably
necessary or desirable to cure, in whole or in part, any failure of compliance
by Mortgagor under the Subject Lease; and upon the receipt by Mortgagee from
Mortgagor or the lessor under the Subject Lease of any written notice of
default by Mortgagor as the lessee thereunder, Mortgagor may rely thereon, and
such notice and conclusion of one-half of Mortgagor’s cure period shall
constitute full authority and protection to Mortgagee for any action taken or
omitted to be taken in good faith reliance thereon.  All sums, including reasonable attorneys’
fees, so reasonably expended by the Mortgagee to cure or prevent any such
default, or expended to sustain the lien of this

 

20

 

Mortgage or its priority, shall be deemed secured by this Mortgage and
shall be paid by the Mortgagor on demand, with interest accruing thereon at the
Interest Rate.  Upon the vesting of
Mortgagee’s right to cure defaults under the Subject Lease as set forth
pursuant to this paragraph, Mortgagor hereby expressly grants to Mortgagee
(subject to the terms of the Subject Lease), and agrees that Mortgagee shall,
upon prior notice to Mortgagor, have, the absolute and immediate right to enter
in and upon the Land and the Improvements or any part thereof to such extent
and as often as Mortgagee, deems reasonably necessary or desirable in order to
cure any such default or alleged default by Mortgagor, provided, that,
Mortgagee agrees that it shall not interfere with Mortgagor’s business
conducted on the Land and Improvements and shall comply with Mortgagor’s reasonable
security requirements.

 

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

 

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

 

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

 

21

 

deliver to Mortgagee an endorsement to Mortgagee’s loan title insurance
policy insuring that such fee title or other estate is subject to the lien of
this Mortgage.

 

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

 

(j)  The lien of this Mortgage shall attach to all
of Mortgagor’s rights and remedies at any time arising under or pursuant to Subsection 365(h) of
the Bankruptcy Code, 11 U.S.C. 365(h), as the same may hereafter be
amended (the “Bankruptcy Code”), including, without limitation, all of
Mortgagor’s rights to remain in possession of each leasehold parcel.

 

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

 

(l)  If pursuant to Subsection 365(h)(1) of
the Bankruptcy Code, 11 U.S.C. § 365(h)(1), Mortgagor shall seek to
offset against the rent reserved in the Subject Lease the amount of any damages
caused by the nonperformance by the lessor or any fee owner of any of their
respective obligations under such Subject Lease after the rejection by the
lessor or any fee owner of such Subject Lease under the Bankruptcy Code, then
Mortgagor shall, prior to effecting such offset, notify Mortgagee of its intent
to do so, setting forth the amount

 

22

 

proposed to be so offset and the basis therefor.  Mortgagee shall have the right to object to
all or any part of such offset that, in the reasonable judgment of Mortgagee,
would constitute a breach of such Subject Lease, and in the event of such
objection, Mortgagor shall not effect any offset of the amounts to the extent
objected to by Mortgagee.  Neither
Mortgagee’s failure to object as aforesaid nor any objection relating to such
offset shall constitute an approval of any such offset by Mortgagee.

 

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

 

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

 

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

 

(p)  Effective upon the entry of an order for
relief with respect to Mortgagor under the Bankruptcy Code, Mortgagor hereby
assigns and transfers to Mortgagee a non-exclusive

 

23

 

right to apply to the Bankruptcy Court under subsection 365(d)(4) of
the Bankruptcy Code for an order extending the period during which the Subject
Lease may be rejected or assumed.

 

24

 

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

 

	
   

  	
  THE NEIMAN
  MARCUS GROUP, INC., a 

  	
   

  	
   

  
	
   

  	
  Delaware
  corporation,

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  by:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
   

  	
   

  

 

25

 

[ADD
LOCAL FORM OF ACKNOWLEDGMENT]

 

26

 

Exhibit A

to Mortgage

 

Description of
the Land

 

27

 

Exhibit B

to Mortgage

 

Description of
the Subject Lease

 

28

 

Exhibit C

to Mortgage

 

Intercreditor
Agreement

 

29

 

Appendix A

to Mortgage

 

Local Law
Provisions

 

None

 

30

 

Acceptance
of Offer to Acquire Shares of Newco (the “Acceptance Form”)

 

Pursuant to the terms and conditions set forth in letter to me dated September 30,
2005, I,                                            ,
hereby elect make an investment in Newco and purchase Shares in the amount and
manner below:

 

1.  $                          ,
which will be satisfied through a contribution of                           
NMG shares (at $100 per share).

 

2.  $                          ,
which will be satisfied through a reduction in my after-tax proceeds from any
cash payment of the Merger Consideration I will receive in exchange equity or
equity-based interests other than those being rolled over pursuant to this
Agreement.

 

3.  $                          ,
which will be satisfied by wire transfer (wire instructions to be supplied).

 

Aggregate Investment =
$                          
(sum of 1, 2 and 3 above cannot be less than $50,000)

 

	
   

  	
   

  
	
  Signature

  
	
   

  
	
   

  	
   

  
	
  Date

  
			

 

F-1

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