Document:

Exhibit 10.16

 

	
   

  

 

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.

 

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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:

 

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(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

 

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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.

 

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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

 

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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

 

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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

 

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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-1Exhibit 4.14

 

SUBSCRIPTION
AGENT AGREEMENT

 

December     ,
2010

 

American
Stock Transfer & Trust Company, LLC

59
Maiden Lane

New
York, New York 10038

 

Ladies
and Gentlemen:

 

In
connection with your appointment as Subscription Agent in the transaction described
herein, HKN, Inc. (the Company), hereby confirms its arrangements with you
as follows:

 

1.             Rights Offering - The Company
is offering (the “Rights offering”) to the holders of shares of its Common
Stock, par value $.01 per share (“Common Stock”), on January 5, 2011 (the “Record
Date”), the right (“Rights”) to subscribe for Units (“Units”), each Unit
consisting of a basic and an oversubscription privilege.  Except as set forth under Paragraphs 8 and 9
below, Rights shall cease to be exercisable at 5:00 p.m., New York City
time, on January 27, 2011 or such later date of which the Company notifies
you orally and confirms in writing (the “Expiration Date”). 0.74805 of a Right(s) is/are
being issued for each Common Share(s) held on the Record Date. One whole  Right(s) and payment in full of the
subscription price of $2.00 (the “Subscription Price”)  is/are required to subscribe for one
Unit.  Rights are evidenced by
non-transferable subscription certificates in registered form (“Subscription
Certificates”). Each holder of Subscription Certificate(s) who exercises
the holder’s right to subscribe for all Units that can be subscribed for with
the Rights evidenced by such Subscription Certificate(s) (the “Basic
Subscription Right”) will have the right to subscribe for additional Units, if
any, available as a result of any unexercised Rights (such additional
subscription right being referred to hereafter as the “Additional Subscription
Privileged”).  The Rights Offering will
be conducted in the manner and upon the terms set forth in the Company’s
Prospectus dated December     ,  2010 (the “Prospectus”), which is
incorporated herein by reference and made a part hereof as if set forth in full
herein.

 

2.             Appointment of Subscription Agent - You are
hereby appointed as Subscription Agent to effect the Rights offering in
accordance with the Prospectus. Each reference to you in this letter is to you
in your capacity as Subscription Agent unless the context indicates otherwise.

 

3.             Delivery of Documents - Enclosed
herewith are the following, the receipt of which you acknowledge by your
execution hereof:

(a) a
copy of the Prospectus;

(b) the
form of Subscription Certificate (with instructions);

(c) resolutions
adopted by the Board of Directors of the Company in connection with the Rights
Offering, certified by the secretary of the Company; and

 

As
soon as is reasonably practical, you shall mail or cause to be mailed to each
holder of Common Shares at the close of business on the Record Date a
Subscription Certificate evidencing the Rights to which such holder is
entitled, a Notice of Guaranteed Delivery, a Prospectus and an envelope
addressed to you. Prior to mailing, the Company will provide you with blank
Subscription Certificates which you will prepare and issue in the names of
holders of Common Shares of record at the close of business on the Record Date
and for the number of Rights to which they are entitled.  The Company will also provide you with a
sufficient number of copies of each of the documents to be mailed with the
Subscription Certificates.

 

4.             Subscription Procedure -

 

(a) Upon
your receipt prior to 5:00 p.m., New York City time, on the Expiration
Date (by mail or delivery), as Subscription Agent, of (ii) any
Subscription Certificate completed and endorsed for exercise, as provided on
the reverse side of the Subscription Certificate (except as provided in
paragraph 8 hereof), and (ii) payment in full of the Subscription Price in
U.S. funds by check, bank draft or money order payable
at par (without deduction for bank service charges or otherwise) to the order
of American Stock Transfer &
Trust Company, you shall as soon as practicable after the Expiration Date, but
after performing the procedures described in subparagraphs (b) and (c) below,
mail to the subscriber’s registered address on the books of the Company
certificates representing the securities underlying each Unit duly subscribed
for (pursuant to the Basic Subscription Right and the Additional Subscription
Privilege) and furnish a list of all such information to the Company.

 

 

(b) As
soon as practicable after the Expiration Date you shall calculate the number of
Units to which each subscriber is entitled pursuant to the Additional
Subscription Privilege. The Additional Subscription Privilege may only be exercised
by holders who subscribe to all the Units that can be subscribed for under the
Basic Subscription Right.  The Units
available for additional subscriptions will be those that have not been
subscribed and paid for pursuant to the Basic Subscription Right (the “Remaining
Units”).  Where there are sufficient
Remaining Units to satisfy all additional subscriptions by holders exercising
their rights under the Additional Subscription Privilege, each holder shall be
allotted the number of Additional Units subscribed for. If the aggregate number
of Units subscribed for under the Additional Subscription Privilege exceeds the
number of Remaining Units, the number of Remaining Units allotted to each
participant in the Additional Subscription Privilege shall be the product
(disregarding fractions) obtained by multiplying the number of Remaining Units
by a fraction of which the numerator is the number of Units subscribed for by
that participant under the Basic Subscription Privilege and the denominator is
the aggregate number of Units subscribed for by all participants under the
Basic Subscription Privilege. Any fractional Unit to which persons exercising
their Additional Subscription Privilege would otherwise be entitled pursuant to
such allocation shall be rounded to the next whole Unit.

 

(c) Upon
calculating the number of Units to which each subscriber is entitled pursuant
to the Additional Subscription Privilege and the amount overpaid, if any, by
each subscriber, you shall, as soon as practicable, furnish a list of all such
information to the Company.

 

(d) Upon
calculating the number of Units to which each subscriber is entitled pursuant
to the Additional Subscription Privilege and assuming payment for the
additional Units subscribed for has been delivered, you shall mail, as
contemplated in subparagraph (a) above, the certificates representing the
additional securities which the subscriber has been allotted. If a lesser
number of Units is allotted to a subscriber under the Additional Subscription
Privilege than the subscriber has tendered payment for, you shall remit the
difference to the subscriber without interest or deduction at the same time as
certificates representing the securities allotted pursuant to the Additional
Subscription Privilege are mailed.

 

(e) Funds
received by you pursuant to the Basic Subscription Right and the Additional
Subscription Privilege shall be held by you in a segregated account. Upon
mailing certificates representing the securities and refunding subscribers for
additional Units subscribed for but not allocated, if any, you shall promptly
remit to the Company all funds received in payment of the Subscription Price
for Units sold in the Rights Offering.

 

5.             Subdivision or Transfer of Rights -  Until 5:00 p.m., New York City time, on
the third business day prior to the Expiration Date, you shall facilitate
subdivision or transfers of Subscription Certificates by issuing new
Subscription Certificates in accordance with the instructions set forth on the
reverse side of the Subscription Certificates.

 

6.             Defective Exercise of Rights Lost
Subscription Certificates - The Company shall have
the absolute right to reject any defective exercise of Rights or to waive any
defect in exercise. Unless requested to do so by the Company, you shall not be under
any duty to give notification to holders of Subscription Certificates of any
defects or irregularities in subscriptions. Subscriptions will not be deemed to
have been made until any such defects or irregularities have been cured or
waived within such time as the Company shall determine. You shall as soon as
practicable return Subscription Certificates with the defects or irregularities
which have not been cured or waived to the holder of the Rights. If any
Subscription Certificate is alleged to have been lost, stolen or destroyed, you
should follow the same procedures followed far lost stock certificates
representing Common Shares you use in your capacity as transfer agent for the
Company’s Common Shares.

 

7.             Delivery - You shall
deliver to the Company the exercised Subscription Certificates in accordance
with written directions received from the Company and shall deliver to the
subscribers who have duly exercised Rights at their registered addresses
certificates representing the securities subscribed for as instructed on the
reverse side of the Subscription Certificates.

 

8.             Reports - You shall
notify the Company by telephone on or before the close of business an each
business day during the period commencing 5 business days after the mailing of
the Rights and ending at the Expiration Date (and in the case of guaranteed
deliveries ending three NNM trading days after the Expiration Date) (a “daily
notice”), which notice shall thereafter be confirmed in writing, of (i) the
number of Rights exercised an the day covered by such daily notice, (ii) the
number of Rights subject to guaranteed exercises on the day covered by such
daily notice, (iii) the number of Rights for which defective exercises
have been received on the day covered by such daily notice, and (iv) the
cumulative total of the information set forth in clauses (i) through (iii) above.  At or before 5:00 p.m., New York City
time, on the first NNM trading day following the Expiration Date you shall
certify in writing to the Company the cumulative total through the Expiration
Date of all the information set forth in clauses (i) through (iii) above.
At or 

 

2

 

before
10:00 a.m., New York City time, on the fifth NNM trading day following the
Expiration Date you will execute and deliver to the Company a certificate
setting forth the number of Rights exercised pursuant to a Notice of Guaranteed
Delivery and as to which Subscription Certificates have been timely received.
You shall also maintain and update a listing of holders who have fully or
partially exercised their Rights, holders who have transferred their Rights and
their transferees, and holders who have not exercised their Rights.  You shall provide the Company or its
designees with such information compiled by you pursuant to this paragraph 9 as
any of them shall request.

 

9.             Future Instructions — With respect
to notices or instructions to be  provided by
the Company hereunder, you may rely and act on any written instruction signed
by any one or more of the following authorized officers or employees of the
Company:

 

10.           Payment  of Expenses - The Company
will pay you compensation for acting in your capacity as Subscription Agent
hereunder in the amount of a one-time fee of $20,000 and a per subscription
instruction (Registered and Cede Co) received fee of $8.00 plus your reasonable
out-of-pocket expenses. The Company will pay an additional fee equal to
one-third of the Subscription Agent fee for each extension of the Offering,
plus any out-of-pocket expenses associated with such extension.

 

Fees
will be paid by:

 

Name:     HKN, Inc.

Attention:              Sarah Gasch

Address:  180 State
Street, Suite 200

Address:  Southlake,
TX  76092

Address:

Facsimile:               817-410-1884

Phone:    817-424-2424, ext 103

Email:                      sgasch@hkninc.com

 

11.           Counsel - You may
consult with counsel satisfactory to you, which may be counsel to the Company,
and the advice or opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted by you hereunder in good faith and in accordance
with such advice an opinion of such counsel.

 

12.           Indemnification - The Company
covenants and agrees to indemnify and hold you harmless against any costs,
expenses (including reasonable fees of legal counsel), losses or damages, which
may be paid, incurred or suffered by or to which you may become subject arising
from or out of, directly or indirectly, any claim or liability resulting from
your actions as Subscription Agent pursuant hereto; provided that such covenant
and agreement does not extend to such costs, expenses, losses and damages
incurred or suffered by you as a result of, or arising out of, your own gross
negligence, misconduct or bad faith or that of any employees, agents or
independent contractors used by you in connection with performance of your
duties as Subscription Agent hereunder.

 

13.           Notices  -  Unless otherwise provided herein, all
reports, notices and other communications required or permitted to be given
hereunder shall be in writing and delivered by hand or confirmed telecopy or by
first class U.S. mail, postage prepaid, shall be deemed given if by hand or
telecopy, upon receipt or if by U.S. mail, three business days after deposit in
the U.S. mail and shall be addressed as follows

 

(a)    If to the Company, to:

 

HKN, Inc.

Attn:  Sarah Gasch

180
State Street, Suite 200

Southlake,
TX  76092

Telephone:  817-424-2424, ext. 103

Telecopy:
817-410-1884

 

3

 

(b)    If to you, to:

 

American
Stock Transfer & Trust Company, LLC

59
Maiden Lane

New
York, N.Y. 10038

Attention:
Isaac Freilich

Telephone:
(718) 921-8200

Telecopy:
(718) 236-4588

 

 

Yours
truly,

 

	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Agreed &
  Accepted:

  	
   

  
	
  AMERICAN
  STOCK TRANSFER & TRUST COMPANY, LLC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  

 

4

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