Document:

Exhibit 10.2

Hudson Hotel

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”)
is made as of the 6th day of October, 2006, between HENRY HUDSON SENIOR MEZZ
LLC, a Delaware limited liability company, having an address at c/o Morgans Group LLC, 475 Tenth Avenue, New
York, New York 10018 (“Borrower”) and WACHOVIA BANK, NATIONAL
ASSOCIATION, having an address at Commercial Real Estate Services, 8739
Research Drive URP 4, NC 1075, Charlotte, North Carolina  28262 (“Lender”).

W  I  T  N  E
S  S  E  T  H:

WHEREAS, Henry Hudson Holdings LLC, a Delaware limited
liability company (“Owner”)
is the owner, respectively, of the fee and leasehold estates in the premises
described in Exhibit A attached hereto and all buildings, foundations,
structures, and improvements of any kind or nature now or hereafter located
thereon which premises are commonly known as the Hudson Hotel located in New
York, New York (the “Premises”);

WHEREAS, Borrower is the present owner and holder
directly or indirectly of one hundred percent (100%) of the equity in Owner;

WHEREAS, Owner delivered a promissory note (the “
Mortgage Note”) to Wachovia Bank, National Association (“Mortgage Lender”)
which evidences a loan (the “Mortgage Loan”) in the original principal
amount of $217,000,000 which is secured by certain mortgages which were amended and
consolidated pursuant to that certain Agreement of Consolidation and
Modification of Mortgage, Security Agreement, Assignment of Rents and Fixture
Filing dated as of the date hereof by and between Mortgage Lender, as lender,
and Owner, as borrower, encumbering the Premises (the “Mortgage”);

WHEREAS, Lender has agreed to make a loan (the “Loan”)
to Borrower, which Loan, together with interest thereon, shall be evidenced by
and payable in accordance with the provisions of the promissory note issued by
Borrower, as maker, to Lender, as holder (the “Note”, and together with
this Agreement and all other documents executed and delivered now or hereafter
in connection with the making of the Loan, collectively, the “Loan Documents”)
in the original principal amount of $32,500,000.00 (the “Loan Amount”
and together with interest and all other sums which may or shall become due
under the Note or this Agreement or the other Loan Documents being hereinafter
collectively referred to as the “Debt”); and

WHEREAS, Lender is willing to make the Loan to
Borrower only if Borrower grants and assigns to Lender, as security for the
payment of the Debt and the observance and performance by Borrower of all of
the terms, covenants and provisions of the Note and the other Loan Documents on
the part of Borrower to be observed and performed, a security interest in the
Collateral (hereinafter defined) in the manner hereinafter set forth;

NOW, THEREFORE, in consideration of the making of the
Loan and other good and valuable consideration, the receipt of which is hereby
acknowledged, Borrower hereby represents and warrants to and covenants and
agrees with Lender as follows:

 

ARTICLE I. 
DEFINITIONS

Section 1.01.  Defined Terms.  Capitalized terms used herein that are not
otherwise defined shall have the respective meanings ascribed thereto in the
definitions list on Exhibit C attached hereto and if not defined therein
shall have the meaning set forth in the Mortgage.  Any references to defined terms or provisions
of the Mortgage incorporated by reference in the Loan Documents shall survive
the repayment of the Mortgage Loan and termination of the Mortgage unless
expressly agreed to the contrary by the parties hereto.  All citations to the Mortgage in this
Agreement shall refer to the Mortgage as it exists as of the date of this
Agreement; provided, however, that in the event the cited
provision is amended and such amendment is approved in writing by Lender, then
such citation shall be to the amended provision.  All references to sections and schedules are
to sections and schedules in or to this Agreement unless otherwise specified.

ARTICLE II.  REPRESENTATIONS, COVENANTS AND

WARRANTIES OF BORROWER

Section 2.01.  Pledge of
Collateral.  (a)  As security for the due and punctual payment
and performance of all of the Debt (whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise, including, without
limitation, the payment of amounts that would become due but for the operation
of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. §362(a), whether allowed or allowable as claims), Borrower hereby
(i) pledges, transfers, hypothecates and assigns to Lender the Collateral
in which Borrower now or hereafter has rights, and (ii) grants to Lender a
continuing first priority lien on and security interest in and to all of the
Borrower’s rights, whether now owned or hereafter acquired, in the
Collateral.  The inclusion of Proceeds in
the definition of “Collateral” does not authorize Borrower to sell, dispose of
or otherwise use the Collateral in any manner not specifically authorized
hereby.  Lender is hereby
authorized:  (i) to transfer to the
account of Lender or its designee any Pledged Interests whether in the
possession of, or registered in the name of, The Depository Trust Company (the “DTC”)
or other clearing corporation or held otherwise; (ii) to transfer to the
account of Lender or its designee with any Federal Reserve Bank any Pledged
Interests held in book entry form with any such Federal Reserve Bank; and
(iii) to exchange certificates representing or evidencing the Pledged
Interests for certificates of smaller or larger denominations.  To the extent that the Pledged Interests have
not already been transferred to Lender or its designee in a manner sufficient
to perfect Lender’s security interest therein, Borrower shall promptly deliver
or cause to be delivered to Lender all certificates or instruments evidencing
the Pledged Interests, together with duly executed transfer powers or other
appropriate endorsements.  With respect
to any Collateral in the possession of or registered in the name of a custodian
bank or nominee therefor, or any Collateral represented by entries on the books
of any securities intermediary, Borrower agrees to cause such custodian bank or
nominee either to enter into an agreement with Lender satisfactory to Lender in
form and content confirming that the Collateral is held for the account of
Lender, or at the discretion of Lender and subject to the written instructions
of Lender, deliver any such Collateral to Lender and/or cause any such
Collateral to be put in bearer form, registered in the name of Lender or its
nominee, or transferred to the account of Lender with any Federal Reserve Bank,
DTC, or other clearing corporation.  With
respect to any Collateral held in an account maintained by Lender as securities
intermediary, Borrower hereby gives notice to Lender of Lender’s security
interest in

 2
 

 

such Collateral.  In addition,
Borrower agrees that in the event that any Collateral is held by Lender in a
fiduciary capacity for or on behalf of Borrower as the beneficial owner
thereof, any agreements executed by Borrower in connection therewith are hereby
amended to authorize and direct the pledge, hypothecation and/or transfer of
such Collateral to Lender, as lender, by Lender, as fiduciary, in accordance
with the terms, covenants and conditions of this Agreement.  The rights granted to Lender pursuant to this
Agreement are in addition to the rights granted to Lender pursuant to any such
agreements.  In case of conflict between
the provisions of this Agreement and those of any other such agreement, the
provisions hereof shall prevail.  In the
event that Borrower purchases or otherwise acquires or obtains any additional
Equity Interests in any Corporation, LLC or Partnership, or any rights, or
options, subscriptions or warrants to acquire such Equity Interests, all such
Equity Interests, rights, options, subscriptions or warrants shall
automatically be deemed to be a part of the Collateral pledged by
Borrower.  If any such Equity Interests
are to be evidenced by a certificate, such additional certificates shall be
promptly delivered to Lender, together with Powers related thereto, or other
instruments appropriate to a certificate representing an Equity Interest, duly
executed in blank.  Borrower shall
deliver to Lender all subscriptions, warrants, options and all such other rights,
and upon delivery to Lender, Lender shall hold such subscriptions, warrants,
options and other rights as additional collateral pledged to secure the Debt;
provided, however, that if Lender determines, in its sole discretion, that the
value of any such subscriptions, warrants, options or other rights shall
terminate, expire or be materially reduced in value by holding the same as
Collateral, Lender shall have the right (but not the obligation), in its sole
discretion, to sell or exercise the same, and if exercised, then the monies
disbursed by Lender in connection therewith shall become part of the Debt and
all of the stock, securities, evidences of indebtedness and other items so
acquired shall be titled in the name of Borrower and shall become part of the
Collateral.

(b)           Borrower
hereby authorizes Lender to file any financing statements, and amendments to
financing statements, in any jurisdictions and with any filing offices as
Lender may determine, in its sole discretion, are necessary or advisable to
perfect the security interest granted to Lender hereunder. Such financing
statements may describe the collateral in the same manner as described in this
Agreement or may contain an indication or description of collateral that
describes such property in any other manner Lender so chooses, including,
without limitation, describing such property as “all assets, whether now owned
or hereafter acquired” or “all personal property, whether now owned or
hereafter acquired”.

Section 2.02.  Representations
of Borrower.  Borrower represents and
warrants to Lender:

(a)           Organization and Authority. 
Borrower (i) is a limited liability company, general partnership,
limited partnership or corporation, as the case may be, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
formation, (ii) has all requisite power and authority and all necessary
licenses and permits to enter into the transactions contemplated by the
Note and this Agreement and to carry on its business as now conducted and as
presently proposed to be conducted and (iii)
is duly qualified, authorized to do business and in good standing in each
jurisdiction where the conduct of its business or the nature of its activities
makes such qualification necessary.  If
Borrower is a limited liability company, limited partnership or general
partnership, each general partner or managing member, as applicable, of
Borrower which is a corporation is duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation.

 3
 

 

(b)           Power.  Borrower and, if applicable,
each General Partner has full power and authority to execute, deliver and
perform, as applicable, the Loan Documents to which it is a party, to receive
the borrowings thereunder, to execute and deliver the Note and to grant to Lender
a first priority, perfected and continuing lien on and security interest in the
Collateral.

(c)           Authorization of Borrowing.  The
execution, delivery and performance of the Loan Documents to which Borrower is
a party, the making of the borrowings thereunder, the execution and delivery of
the Note, the grant of the lien and security interest on and in the Collateral
pursuant to the Loan Documents to which Borrower is a party and the
consummation of the Loan are within the powers of Borrower and have been duly
authorized by Borrower and, if applicable, the General Partners, by all
requisite action (and Borrower hereby represents that no approval or action of
any member, limited partner or shareholder, as applicable, of Borrower, which
has not been received or taken, is required to authorize any of the Loan
Documents to which Borrower is a party) and will constitute the legal, valid
and binding obligation of Borrower, enforceable against Borrower in accordance
with their terms, except as enforcement may be stayed or limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors’ rights
generally and by general principles of equity (whether considered in
proceedings at law or in equity) and will not (i) violate any provision of its
Organizational Documents, or, to its knowledge, any law, judgment, order, rule
or regulation of any court, arbitration panel or other Governmental Authority,
domestic or foreign, or other Person affecting or binding upon Borrower or the
Collateral, or (ii) violate any provision of any indenture, agreement,
mortgage, deed of trust, contract or other instrument to which Borrower or, if
applicable, any General Partner is a party or by which any of their respective
property, assets or revenues are bound, or be in conflict with, result in an
acceleration of any obligation or a breach of or constitute (with notice or
lapse of time or both) a default or require any payment or prepayment under,
any such indenture, agreement, mortgage, deed of trust, contract or other instrument,
or (iii) result in the creation or imposition of any lien, except those in
favor of Lender as provided in the Loan Documents to which it is a party.

(d)           Consent.  Neither Borrower nor, if
applicable, any General Partner, is required to obtain any consent, approval or
authorization from, or to file any declaration or statement with, any
Governmental Authority in connection with or as a condition to the execution,
delivery or performance of this Agreement, the Note or the other Loan Documents
which has not been so obtained or filed.

(e)           Interest Rate.  To
Borrower’s knowledge, the rate of interest paid under the Note and the method
and manner of the calculation thereof do not violate any usury or other law or
applicable Legal Requirement.

(f)            Other Agreements. 
Borrower is not a party to or otherwise bound by any agreements or
instruments which, individually or in the aggregate, are reasonably likely to
have a Material Adverse Effect.  Neither
Borrower nor, if applicable, any General Partner, is in violation of its
organizational documents or other restriction or any agreement or instrument by
which it is bound, or any judgment, decree, writ, injunction, order or award of
any arbitrator, court or Governmental Authority, or any Legal Requirement, in each
case, applicable to Borrower or the Collateral, except for such violations that
would not, individually or in the aggregate, have a Material Adverse Effect.

 4
 

 

(g)           Maintenance of
Existence. (i)  Borrower
is familiar with the criteria of the Rating Agency required to qualify as a
special-purpose bankruptcy-remote entity and Borrower and, if applicable, each
General Partner at all times since their formation have been duly formed and
existing at all times and at all times has preserved and shall preserve and has
kept and shall keep in full force and effect their existence as a Single
Purpose Entity.

(ii)           Borrower and, if
applicable, each General Partner, at all times since their organization have
complied, and will continue to comply, with the provisions of its certificate
of limited partnership and agreement of limited partnership or certificate of
incorporation and by-laws or articles of organization, certificate of formation
and operating agreement, as applicable, and the laws of its jurisdiction of
organization relating to partnerships, corporations or limited liability
companies, as applicable.

(iii)          Borrower and, if
applicable, each General Partner have done or caused to be done and will do all
things necessary to observe organizational formalities and preserve their
existence and Borrower and, if applicable, each General Partner will not amend,
modify or otherwise change the certificate of limited partnership and agreement
of limited partnership or certificate of incorporation and by-laws or articles
of organization, certificate of formation and operating agreement, as
applicable, or other organizational documents of Borrower and, if applicable,
each General Partner except for
immaterial amendments which do not modify the Single Purpose Entity provisions.

(iv)          Borrower and, if
applicable, each General Partner, have at all times accurately maintained, and
will continue to accurately maintain, their respective financial statements,
accounting records and other partnership, company or corporate documents separate
from those of any other Person and Borrower, have filed and will file its own
tax returns or, if Borrower and/or, if applicable, General Partner is part of a
consolidated group for purposes of filing tax returns, Borrower and, General
Partner, as applicable, has been shown and will be shown as separate members of
such group.  Borrower and, if applicable,
each General Partner have not at any time since their formation commingled, and
will not commingle, their respective assets with those of any other Person and
each has maintained and will maintain their assets in such a manner such that
it will not be costly or difficult to segregate, ascertain or identify their
individual assets from those of any other Person.  Borrower and, if applicable, each General Partner
has not permitted and will not permit any Affiliate independent access to their
bank accounts.  Borrower and, if
applicable, each General Partner have at all times since their formation
accurately maintained and utilized, and will continue to accurately maintain
and utilize, their own separate bank accounts, payroll and separate books of
account, stationery, invoices and checks.

(v)           Borrower and, if
applicable, each General Partner, have at all times paid, and will continue to
pay, their own liabilities from their own separate assets and each has
allocated and charged and shall each allocate and charge fairly and reasonably
any overhead which Borrower and, if applicable, any General Partner, shares
with any other Person, including, without limitation, for office space and
services performed by any employee of another Person.

 5
 

 

(vi)          Borrower and, if
applicable, each General Partner, have at all times identified themselves, and
will continue to identify themselves, in all dealings with the public, under their
own names and as separate and distinct entities and shall correct any known
misunderstanding regarding their status as separate and distinct entities.  Borrower and, if applicable, each General
Partner, have not at any time identified themselves, and will not identify
themselves, as being a division of any other Person.

(vii)         Borrower and, if
applicable, each General Partner, have been at all times, and will continue to
be, adequately capitalized in light of the nature of their respective
businesses.

(viii)        Borrower and, if applicable, each General Partner, (A) have not owned,
do not own and will not own any assets or property other than the Collateral,
and, with respect to General Partner, if applicable, its interest in Borrower,
(B) have not engaged and will not engage in any business other than the
ownership, management and operation of the Collateral, or with respect to
General Partner, if applicable, its interest in Borrower, (C) have not incurred
and will not incur any debt, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than in connection with the
Loan, (D) have not pledged (other than pledges in connection with loans which
have been paid in full prior to entering into the Loan) and will not pledge
their assets for the benefit of any other Person, and (E) have not made and
will not make any loans or advances to any Person (including any Affiliate).

(ix)           Neither Borrower nor, if applicable, any General Partner will change
its name or principal place of business unless thirty (30) days prior written
notice thereof is provided to Lender.

(x)            Neither Borrower nor, if applicable, any
General Partner has, and neither of such Persons will have, any subsidiaries other
than, with respect to Borrower, Owner.

(xi)           Borrower has preserved
and maintained and will preserve and maintain its existence as a Delaware limited liability company and all
material rights, privileges, trade names, if any, and franchises.

(xii)          Neither Borrower, nor,
if applicable, any General Partner, will merge or consolidate with, or sell all
or substantially all of its respective assets to any Person, or liquidate, wind
up or dissolve itself (or suffer any liquidation, winding up or
dissolution).  Neither Borrower, nor, if
applicable, any General Partner has acquired nor will acquire any business or
assets from, or capital stock or other ownership interest of, or be a party to
any acquisition of, any Person.

(xiii)         Borrower and, if applicable, each General Partner, have not at any time
since their formation assumed, guaranteed or held themselves out to be
responsible for, and will not assume, guarantee or hold themselves out to be
responsible for the liabilities or the decisions or actions respecting the
daily business affairs of their partners, shareholders or members or any
predecessor company, corporation or partnership, each as applicable, any
Affiliates, or any other Persons other than in connection with the Loan.

 6
 

 

Borrower and, if applicable, each General
Partner, have not at any time since their formation acquired, and will not
acquire, obligations or securities of its partners or shareholders, members or
any predecessor company, corporation or partnership, each as applicable, or any
Affiliates (other than, with respect to General Partner, its interest in
Borrower).  Borrower and, if applicable,
each General Partner, have not at any time since their formation made, and will
not make, loans to its partners, members or shareholders or any predecessor
company, corporation or partnership, each as applicable, or any Affiliates of
any of such Persons.  Borrower and, if
applicable, each General Partner, have no known contingent liabilities nor do
they have any material financial liabilities under any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which such
Person is a party or by which it is otherwise bound other than under the Loan
Documents.

(xiv)        Borrower and, if
applicable, each General Partner, have not at any time since their formation
entered into and was not a party to, and, will not enter into or be a party to,
any transaction with its Affiliates, members, partners or shareholders, as
applicable, or any Affiliates thereof except in the ordinary course of business
of such Person on terms which are no less favorable to such Person than would
be obtained in a comparable arm’s length transaction with an unrelated third
party.

(xv)         If Borrower is a limited partnership or a limited liability company,
the General Partner shall be a corporation or limited liability company whose
sole asset is its interest in Borrower and the General Partner will at all
times comply, and will cause Borrower to comply with each of the
representations, warranties, and covenants contained in this Section 2.02(g) as
if such representation, warranty or covenant was made directly by such General
Partner.

(xvi)        Borrower shall at all times cause there to be at least two (2) duly
appointed members of Borrower’s board of directors or board of managers or
other governing board or body, as applicable (each an “Independent Director”),
of, if Borrower is a corporation, Borrower, if Borrower is a limited
partnership, of the General Partner, and if Borrower is a limited liability
company, of the General Partner or of Borrower, reasonably satisfactory to
Lender who shall not have been at the time of such individual’s appointment,
and may not be or have been at any time (A) a shareholder, officer, director,
attorney, counsel, partner, member or employee of Borrower or any of the
foregoing Persons or Affiliates thereof, (B) a customer or creditor of, or
supplier or service provider to Borrower or any of its shareholders, partners,
members or their Affiliates, (C) a member of the immediate family of any Person
referred to in (A) or (B) above or (D) a Person Controlling, Controlled by or
under common Control with any Person referred to in (A) through (C) above.  A natural person who otherwise
satisfies the foregoing definition except for being the Independent Director of
a Single Purpose Entity Affiliated with Borrower or General Partner shall not
be disqualified from serving as an Independent Director if such individual is
at the time of initial appointment, or at any time while serving as the
Independent Director, an Independent Director of a Single Purpose Entity
Affiliated with Borrower or General Partner if such individual is an
Independent Director provided by a nationally-recognized company that provides
professional independent directors.

 7
 

 

(xvii)       Borrower and, if applicable, each General Partner, shall not cause or
permit the board of directors or board of managers or other governing board or
body, as applicable, of Borrower or, if applicable, each General Partner, to
take any action which, under the terms of any certificate of incorporation,
by-laws, certificate of formation, operating agreement or articles of
organization with respect to any common stock, requires a vote of the board of
directors of Borrower, or, if applicable, the General Partner, unless at the
time of such action there shall be at least two (2) members, with respect to
Borrower, who is or are Independent Directors.

(xviii)      Borrower and, if applicable, each General Partner has paid and shall
pay the salaries of their own employees and has maintained and shall maintain a
sufficient number of employees in light of their contemplated business
operations.

(xix)         Borrower shall, and shall cause its Affiliates to, conduct their
business so that the assumptions made with respect to Borrower and, if
applicable, each General Partner, in that certain opinion letter relating to
substantive non-consolidation dated the date hereof (the “Insolvency Opinion”)
delivered in connection with the Loan shall be true and correct in all
respects.

Notwithstanding anything
to the contrary contained in this Section 2.02(g), provided Borrower is a
Delaware limited liability company which satisfies the single purpose
bankruptcy remote entity requirements of each Rating Agency for a single member
limited liability company, the foregoing provisions of this Section 2.02(g)
shall not apply to the General Partner.

(h)           No Defaults.  No Default or Event of Default
has occurred and is continuing or would occur as a result of the consummation
of the transactions contemplated by the Loan Documents.  Borrower is not in default in the payment or
performance of any of its Contractual Obligations in any respect.

(i)            Consents and Approvals. 
Borrower and, if applicable, each General Partner, have obtained or made
all necessary (i) consents, approvals and authorizations, and registrations and
filings of or with all Governmental Authorities and (ii) consents,
approvals, waivers and notifications of partners, stockholders, members,
creditors, lessors and other nongovernmental Persons, in each case, which are
required to be obtained or made by Borrower or, if applicable, the General
Partner, in connection with the execution and delivery of, and the performance
by Borrower of its obligations under, the Loan Documents.

(j)            Investment Company Act Status, etc. 
Borrower is not (i) an “investment company,” or a company “controlled”
by an “investment company,” as such terms are defined in the Investment Company
Act of 1940, as amended, (ii) a “holding company” or a “subsidiary company” of
a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary
company” within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or (iii) subject to any other federal or state law or regulation
which purports to restrict or regulate its ability to borrow money.

 8
 

 

(k)           Compliance with Law. 
Borrower is and shall remain in compliance in all material respects with
all Legal Requirements to which it or the Collateral are subject, including,
without limitation, ERISA.

(l)            Transaction Brokerage Fees. 
Borrower has not dealt with any financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the
transactions contemplated by this Agreement. 
Borrower hereby agrees to indemnify and hold Lender harmless for, from
and against any and all claims, liabilities, costs and expenses of any kind in
any way relating to or arising from (i) a claim by any Person that such Person
acted on behalf of Borrower in connection with the transactions contemplated
herein or (ii) any breach of the foregoing representation.  The provisions of this subsection (l) shall
survive the repayment of the Debt.

(m)          Federal Reserve Regulations.  No
part of the proceeds of the Loan will be used for the purpose of “purchasing”
or “carrying” any “margin stock” within the meaning of Regulations T, U or X of
the Board of Governors of the Federal Reserve System or for any other purpose
which would be inconsistent with such Regulations T, U or X or any other
Regulations of such Board of Governors, or for any purposes prohibited by Legal
Requirements or by the terms and conditions of the Loan Documents.

(n)           Pending Litigation. 
There are no actions, suits or proceedings pending or, to the best
knowledge of Borrower, threatened against or affecting Borrower, the Premises
or the Collateral in any court or before any Governmental Authority which if
adversely determined either individually or collectively has or is reasonably
likely to have a Material Adverse Effect.

(o)           Solvency; No Bankruptcy. 
Borrower and, if applicable, the General Partner, (i) is and has at all
times been Solvent and will remain Solvent immediately upon the consummation of
the transactions contemplated by the Loan Documents and (ii) is free from
bankruptcy, reorganization or arrangement proceedings or a general assignment
for the benefit of creditors and is not contemplating the filing of a petition
under any state or federal bankruptcy or insolvency laws or the liquidation of
all or a major portion of such Person’s assets or property and Borrower has no
knowledge of any Person contemplating the filing of any such petition against
it or, if applicable, the General Partner. 
None of the transactions contemplated hereby will be or have been made
with an intent to hinder, delay or defraud any present or future creditors of
Borrower and Borrower has received reasonably equivalent value in exchange for
its obligations under the Loan Documents. 
Borrower’s assets do not, and immediately upon consummation of the
transaction contemplated in the Loan Documents will not, constitute unreasonably
small capital to carry out its business as presently conducted or as proposed
to be conducted.  Borrower does not
intend to, nor believes that it will, incur debts and liabilities beyond its
ability to pay such debts as they may mature.

(p)           Use of Proceeds.  The
proceeds of the Loan shall be applied by Borrower to, inter  alia,
(i) satisfy certain loans presently encumbering all or a part of the Collateral
and (ii) pay certain transaction costs incurred by Borrower in connection with
the Loan.  No portion of the proceeds of
the Loan will be used for family, personal, agricultural or household use.

 9
 

 

(q)           Tax Filings.  Borrower and, if applicable,
each General Partner, have filed all federal, state and local tax returns
required to be filed and have paid or made adequate provision for the payment
of all federal, state and local taxes, charges and assessments payable by
Borrower and, if applicable, the General Partners.  Borrower and, if applicable, the General Partners,
believe that their respective tax returns properly reflect the income and taxes
of Borrower and said General Partner, if any, for the periods covered thereby,
subject only to reasonable adjustments required by the Internal Revenue Service
or other applicable tax authority upon audit.

(r)            Not Foreign Person. 
Borrower is not a “foreign person” within the meaning of §1445(f)(3) of
the Code.

(s)           ERISA.  (i) The
assets of Borrower are not and will not become treated as “plan assets”,
whether by operation of law or under regulations promulgated under ERISA.  If any Person having a legal or
beneficial ownership interest in Borrower is using (or is deemed under ERISA to
be using) “plan assets”, Borrower will qualify as a “real estate operating
company” within the meaning of 29 C.F.R. §2510.3-101(e) at all times that the
Loan is outstanding.  Each Plan and Welfare Plan, and, to the
knowledge of Borrower, each Multiemployer Plan, is in compliance in all
material respects with, and has been administered in all material respects in
compliance with, its terms and the applicable provisions of ERISA, the Code and
any other applicable Legal Requirement, and no event or condition has occurred
and is continuing as to which Borrower would be under an obligation to furnish
a report to Lender under clause (ii)(A) of this Section.  Other than an application for a favorable
determination letter with respect to a Plan, there are no pending issues or
claims before the Internal Revenue Service, the United States Department of Labor
or any court of competent jurisdiction related to any Plan or Welfare Plan
under which Borrower or any ERISA Affiliate, directly or indirectly (through an
indemnification agreement or otherwise), could be subject to any material risk
of liability under Section 409 or 502(i) of ERISA or Section 4975 of the
Code.  No Welfare Plan, other than a
Multiemployer Plan, provides or will provide benefits, including, without
limitation, death or medical benefits (whether or not insured) with respect to
any current or former employee of Borrower or any ERISA Affiliate beyond his or
her retirement or other termination of service other than (A) coverage mandated
by applicable law, (B) death or disability benefits that have been fully
provided for by fully paid up insurance or (C) severance benefits.

(ii)           Borrower will furnish to Lender as soon as possible, and in any event
within ten (10) days after Borrower knows or has reason to believe that any of
the events or conditions specified below with respect to any Plan, Welfare Plan
or Multiemployer Plan has occurred or exists, an Officer’s Certificate setting
forth details respecting such event or condition and the action, if any, that
Borrower or its ERISA Affiliate proposes to take with respect thereto (and a
copy of any report or notice required to be filed with or given to the PBGC (or
any other relevant Governmental Authority)) by Borrower or an ERISA Affiliate
with respect to such event or condition, if such report or notice is required
to be filed with the PBGC or any other relevant Governmental Authority:

(A)          any reportable event, as defined in Section 4043 of ERISA and the
regulations issued thereunder, with respect to a Plan, as to which PBGC has not
by regulation waived the requirement of Section 4043(a) of ERISA that it be

 10
 

 

notified within thirty (30) days of the occurrence
of such event (provided that a failure to meet the minimum funding standard of
Section 412 of the Code and of Section 302 of ERISA, including, without
limitation, the failure to make on or before its due date a required installment
under Section 412(m) of the Code and of Section 302(e) of ERISA, shall be a
reportable event regardless of the issuance of any waivers in accordance with
Section 412(d) of the Code), and any request for a waiver under Section 412(d)
of the Code for any Plan;

(B)           the distribution under Section 4041 of ERISA of a notice of intent to
terminate any Plan or any action taken by Borrower or an ERISA Affiliate to
terminate any Plan;

(C)           the institution by PBGC of proceedings under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Plan, or
the receipt by Borrower or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by PBGC with respect to such Multiemployer
Plan;

(D)          the complete or partial withdrawal from a Multiemployer Plan (or other
employee benefit plan) by Borrower or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or the receipt
by Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it
is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or
that it intends to terminate or has terminated under Section 4041A of ERISA;

(E)           the institution of a proceeding by a fiduciary of any Multiemployer
Plan against Borrower or any ERISA Affiliate to enforce Section 515 of ERISA,
which proceeding is not dismissed within thirty (30) days;

(F)           the adoption of an
amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA, would result in the loss of tax-exempt status of the
trust of which such Plan is a part if Borrower or an ERISA Affiliate fails to
timely provide security to the Plan in accordance with the provisions of said
Sections; or

(G)           the imposition of a lien or a security interest in connection with a
Plan.

(iii)          No liability under Title
IV of ERISA has been incurred by Borrower
or any ERISA Affiliate that has not been satisfied in full, and no
condition exists that presents a material risk to Borrower or any ERISA Affiliate of incurring any liability under
such Title, other than liability for premiums due the PBGC, which
payments have been or will be made when due. 
To the extent this representation applies to Sections 4064, 4069 or 4204
of Title IV of ERISA, it is made not only with respect to the ERISA Plans but
also with respect to any employee benefit plan, program, agreement or

 11
 

 

arrangement subject to Title IV of ERISA to
which Borrower or
any ERISA Affiliate made, or was required to make, contributions during
the past six years.

(iv)          Borrower shall not knowingly engage in or permit any transaction in
connection with which Borrower or any ERISA Affiliate could be reasonably
subject to either a material civil penalty or material tax assessed pursuant to
Section 502(i) or 502(l) of ERISA or Section 4975 of the Code; Borrower shall
not permit any Welfare Plan, other than a Multiemployer Plan, to provide
benefits, including without limitation, medical benefits (whether or not
insured), with respect to any current or former employee of Borrower or any
ERISA Affiliate beyond his or her retirement or other termination of service
other than (A) coverage mandated by applicable law, (B) death or
disability benefits that have been fully provided for by paid up insurance or
otherwise or (C) severance benefits, permit the assets of Borrower to become “plan
assets”, whether by operation of law or under regulations promulgated under
ERISA; and Borrower shall not adopt, amend (except as may be required by
applicable law) or increase the amount of any benefit or amount payable under,
or permit any ERISA Affiliate to adopt, amend (except as may be required by
applicable law) or increase the amount of any benefit or amount payable under,
any employee benefit plan (including, without limitation, any employee welfare
benefit plan that is not a Multiemployer Plan) or other plan, policy or
arrangement, except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits expense to Borrower or any ERISA Affiliate.

(t)            Labor Matters. 
Borrower is not a party to any collective bargaining agreement and has
no employees.

(u)           Borrower’s Legal Status. 
Borrower’s exact legal name that is indicated on the signature page
hereto, organizational identification number and place of business or, if more
than one, its chief executive office, as well as Borrower’s mailing address, if
different, which were identified by Borrower to Lender and contained in this
Agreement, are true, accurate and complete. 
Borrower (i) will not change its name, its place of business or, if more
than one place of business, its chief executive office, or its mailing address
or organizational identification number if it has one without giving Lender at
least thirty (30) days prior written notice of such change, (ii) if Borrower
does not have an organizational identification number and later obtains one, Borrower
shall promptly notify Lender of such organizational identification number and
(iii) Borrower will not change its type of organization, jurisdiction of
organization or other legal structure.

(v)           Owner’s
Legal Status.  (i)  The fee owner of the Premises and the maker
of the Mortgage Note is and shall be Owner, (ii) there are no defaults existing
under the Mortgage Loan Documents, and, to the best of Borrower’s knowledge,
there is no event which, but for the passage of time or the giving of notice,
or both, would constitute an event of default under the Mortgage Loan
Documents, (iii) the Mortgage Loan Documents and the provisions thereof have
not been amended, modified or altered in any manner whatsoever, (iv) the
Mortgage constitutes a valid and enforceable first lien covering the Premises
subject only to items set forth as exceptions to or subordinate matters in the
title insurance policy insuring the lien of the Mortgage, none of which,
individually or in the aggregate, materially interfere with the benefits

 12
 

 

of the security intended to be provided by the Mortgage, materially and
adversely affect the value of the Premises, impair the use or operation of the
Premises for the use currently being made thereof or impair Owner’s or Borrower’s
ability to pay its obligations in a timely manner (such items being the “Permitted Encumbrances”), (v)
the Premises are improved and income-producing and the improvements located
thereon have not been damaged by fire or other casualty, (vi) no condemnation
or other eminent domain proceedings have been commenced with respect to the
Premises and Borrower has no knowledge that any such proceedings are
contemplated, (vii) Borrower knows of no fact or circumstance which would
affect the enforceability, validity or priority of the Mortgage Loan Documents,
or which would affect the ability or willingness of Owner and any other Person
liable under the Mortgage Loan Documents to continue to perform and observe the
terms, covenants and provisions of the Mortgage Loan Documents, (viii) the
unpaid principal balance of the Mortgage Note as of the date of this Agreement
is as set forth on Exhibit B attached hereto.

(w)          Title.  Borrower (i) is the record and beneficial
owner of, and has good and marketable title to, (x) the Equity Interests set
forth in Schedule 1 attached hereto and (y) all of the other Collateral
owned by Borrower as of the date hereof, and (ii) will have good and marketable
title to the Equity Interests and all other Collateral hereafter acquired, in
any case, free and clear of all claims, liens, options and encumbrances of any
kind, and Borrower has the right and authority to pledge and assign its portion
of the Equity Interests and grant a security interest therein as herein
provided.

(x)            Securities
Laws.  The transactions contemplated
by this Agreement do not violate and do not require that any filing,
registration or other act be taken with respect to any and all laws pertaining
to the registration or transfer of securities, including without limitation the
Securities Act of 1933, as amended, and the Securities and Exchange Act of
1934, as amended, and any and all rules and regulations promulgated thereunder
(collectively, the “Securities Laws”), as such laws are amended and in
effect from time to time, and none of the Equity Interests in the Partnerships
or LLCs are represented by any “certificated security” as that term is defined
in Section 8-102 of the UCC. 
Borrower shall at all times comply with the Securities Laws as the same
pertain to all or any portion of the Collateral or any of the transactions
contemplated by this Agreement.  Lender
agrees not take any action with respect to the Collateral that, without the
consent of Borrower, requires Borrower to file a registration statement with
the SEC or apply to qualify a sale of a security under the securities laws of
any state.

(y)           Ownership
Structure.  The ownership chart
attached hereto as Schedule 2 is true, correct and complete as of the
Closing Date. Except as set forth on Schedule 2, no other Person has any
direct or indirect interest in the Owner or Borrower.

(z)            Control
of Owner.  Borrower has the power and
authority and the requisite ownership interests to control the actions of the
Owner and at all times during the term of the Loan shall maintain the power and
authority to control the actions of Owner.

(aa)         Representations
and Warranties of Owner.  All of the
representations and warranties of Owner or any Affiliate of Owner under the
Mortgage Loan Documents are true, complete and correct in all material respects.

 13
 

 

(bb)         Management
Agreement.  The Management Agreement
is in full force and effect.  There is no
default, breach or violation existing under the Management Agreement, and no
event has occurred (other than payments due but not yet delinquent) that, with the
passage of time or the giving of notice, or both, would constitute a default,
breach or violation thereunder, by either party thereto.

(cc)         Operating
Company Status.  Borrower qualifies
as an “operating company,” as such term is defined in the regulation issued by
the U.S. Department of Labor known as the “plan assets regulation,” 29 C.F.R.
§2510.3-101 and, as long as the Loan is outstanding, Borrower will remain at
all times an operating company, as so defined.

(dd)         Affiliation.  Borrower is not an Affiliate of Lender.

(ee)         Insurance.  Borrower has obtained and delivered, or has
caused Owner to obtain and deliver, to Lender certified copies of all insurance
policies reflecting the insurance coverages, amounts and other requirements set
forth in this Agreement.  Borrower has
not, and to the best of Borrower’s knowledge no other Person has, done by act
or omission anything which would impair the coverage of any such policy.

(ff)           Absence
of UCC Financing Statements, Etc. 
Except with respect to the Mortgage Loan Documents and the Loan
Documents, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry, or other public office, that purports to cover, affect
or give notice of any present or possible future lien on, or security interest
or security title in the interest in the Premises or any of the Collateral.

(gg)         Compliance with
Anti-Terrorism, Embargo and Anti-Money Laundering Laws.   (i) Neither Borrower, General Partner, nor
any Person who owns any equity interest in or Controls Borrower or General
Partner currently is identified on the OFAC List or otherwise qualifies as a
Prohibited Person, and Borrower has implemented procedures, approved by General
Partner, to ensure that no Person who now or hereafter owns an equity interest
in Borrower or General Partner is a Prohibited Person or Controlled by a
Prohibited Person, (ii) no proceeds of the Loan will be used to fund any
operations in, finance any investments or activities in or make any payments
to, Prohibited Persons, and (iii) neither Borrower nor General Partner are in
violation of any Legal Requirements relating to anti-money laundering or
anti-terrorism, including, without limitation, Legal Requirements related to
transacting business with Prohibited Persons or the requirements of the Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001, U.S. Public Law 107-56, and the related regulations
issued thereunder, including temporary regulations, all as amended from time to
time.

(hh)         Collateral.  Borrower (i) represents and warrants to
Lender that the Collateral constitutes a “general intangible” (as defined in
Section 9-102(a)(42) of the UCC); and (ii) Borrower covenants and agrees that
(A) the Collateral is not and will not be dealt in or traded on securities
exchanges or securities markets, (B) the terms of the Collateral do not and
will not provide that they are securities governed by the UCC, (C) the
Collateral is not and will not be investment company securities within the
meaning of Section 8-103 of the UCC and (D)

 14
 

 

Borrower shall not cause or permit any interests in the Collateral to
be certificated and delivered to any Person other than Lender.

(ii)           Lockbox
Account.

(i)            Pursuant
to the irrevocable direction letter delivered by Borrower to Owner on the
Closing Date, Borrower shall direct Owner to cause all Remaining Rents to be
deposited into the Lockbox Account;

(ii)           neither
Borrower nor Owner nor any other Person shall have any right, title or interest
in or to any Remaining Rents from and after the time at which the Mortgage
Lender becomes obligated under the Mortgage Loan Documents to transfer such
Remaining Rents to the Lockbox Account (other than Borrower’s interest in any
Remaining Rents that remain in the Lockbox Account after all disbursements have
been made in accordance with the provisions of the Lockbox Agreement);

(iii)          there
are no other accounts maintained by Owner, Borrower or any other Person with
respect to the collection of rents, revenues, proceeds or other income from the
Premises or for the collection of Rents, except for the Rent Accounts and the
Central Account and the Lockbox Account; and

(iv)          so
long as any of the Debt shall be outstanding, neither Borrower, Owner nor any
other Person shall open any other accounts with respect to the collection of
rents, revenues, proceeds or other income from the Premises or for the
collection of Rents.

(jj)           Perfected
Security Interest.  Upon the filing
of the UCC-1 financing statements with the Delaware Secretary of State, Lender
will have a valid, and duly perfected first priority, security interest in the
Collateral enforceable as such against all creditors of Borrower and any
Persons purporting to purchase any Pledged Interests and Proceeds from
Borrower.

(kk)         Financial
Information.  All financial data that
has been delivered by Borrower to Lender (i) is true, complete and correct in
all material respects, (ii) accurately represents the financial condition and
results of operations of the Persons covered thereby as of the date on which
the same shall have been furnished, and (iii) has been prepared in accordance
with GAAP or the Uniform System of Accounts (or such other accounting basis as
is reasonably acceptable to Lender) throughout the periods covered
thereby.  As of the date hereof, neither
Borrower nor, if applicable, any General Partner, has any contingent liability,
liability for taxes or other unusual or forward commitment not reflected in
such financial statements delivered to Lender. 
Since the date of the last financial statements delivered by Borrower to
Lender, except as otherwise disclosed in such financial statements or notes
thereto, there has been no change in the assets, liabilities or financial
position of Borrower nor, if applicable, any General Partner, or in the results
of operations of Borrower which would have a Material Adverse Effect.  Neither Borrower nor, if applicable, any
General Partner, has incurred any obligation or liability, contingent or
otherwise not reflected in such financial statements which would have a
Material Adverse Effect.

Section 2.03.  Further Acts,
Etc.  Borrower will, at the cost of
Borrower, and without expense to Lender, do, execute, acknowledge and deliver
all and every such further acts, deeds,

 15
 

 

conveyances, assignments, notices of assignments, transfers and
assurances as Lender shall, from time to time, reasonably require for the
better assuring, conveying, assigning, transferring, and confirming unto Lender
the property, security interest and rights hereby given, granted, bargained,
sold, alienated, enfeoffed, conveyed, confirmed, pledged, assigned and
hypothecated, or which Borrower may be or may hereafter become bound to convey
or assign to Lender, or for carrying out or facilitating the performance of the
terms of this Agreement or for filing, registering or recording this Agreement
and, within five (5) Business Days of written demand, will execute and deliver
and hereby authorizes Lender to execute in the name of Borrower or without the
signature of Borrower to the extent Lender may lawfully do so, one or more
financing statements, chattel mortgages or comparable security instruments to
evidence more effectively the lien hereof upon the Collateral.  Without limiting the generality of the
foregoing, Borrower will:  (i) if any
Collateral shall be evidenced by a promissory note or other instrument or chattel
paper, deliver and pledge to Lender hereunder such note or instrument or
chattel paper duly indorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Lender; (ii)
execute or authenticate and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable and as Lender may request, in order to perfect and preserve the
security interest granted or purported to be granted by Borrower hereunder;
(iii) take all action necessary to ensure that Lender has control of any
Collateral consisting of deposit accounts, electronic chattel paper, investment
property and letter-of-credit rights as provided in Sections 9-104, 9-105,
9-106 and 9-107 of the UCC; and (iv) deliver to Lender evidence that all other
action that Lender may reasonably deem necessary or desirable in order to
perfect and protect the security interest granted or purported to be granted by
Borrower under this Agreement has been taken. 
Borrower grants to Lender an irrevocable power of attorney coupled with
an interest for the purpose of protecting, perfecting, preserving and realizing
upon the interests granted pursuant to this Agreement and to effect the intent
hereof, all as fully and effectually as Borrower might or could do; and Borrower
hereby ratifies all that Lender shall lawfully do or cause to be done by virtue
hereof.  Upon receipt of an affidavit of
an officer of Lender as to the loss, theft, destruction or mutilation of the
Note or any other Loan Document which is not of public record, and, in the case
of any such mutilation, upon surrender and cancellation of such Note or other
applicable Loan Document, Borrower will issue, in lieu thereof, a replacement
Note or other applicable Loan Document, dated the date of such lost, stolen,
destroyed or mutilated Note or other Loan Document in the same principal amount
thereof and otherwise of like tenor.

Section 2.04.  Recording of
Agreement, etc.  Borrower forthwith
upon the execution and delivery of this Agreement and thereafter, from time to
time, will, at the request of Lender, cause this Agreement, and any security
instrument creating a lien or security interest or evidencing the lien hereof
upon the Collateral and each instrument of further assurance to be filed,
registered or recorded 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 protect the
lien or security interest hereof upon, and the interest of Lender in, the
Collateral.  Borrower will pay all filing,
registration or recording fees, and all expenses incident to the preparation,
execution and acknowledgment of this Agreement, any additional security
instrument with respect to the Collateral and any instrument of further
assurance, and all federal, state, county and municipal, taxes, duties,
imposts, assessments and charges arising out of or in connection with the
execution and delivery of this Agreement, and any security agreement
supplemental hereto, or any instrument of further assurance, except where
prohibited by law to do so, in which event Lender may declare the Loan to be
immediately

 16
 

 

due and payable.  Borrower shall
hold harmless and indemnify Lender, and its successors and assigns, against any
liability incurred as a result of the imposition of any tax on the making and
recording of this Agreement.

Section 2.05.  Cost of
Defending and Upholding Lien.  If any
action or proceeding is commenced to which Lender is made a party relating to
the Loan Documents and/or the Collateral or Lender’s interest therein or in
which it becomes necessary to defend or uphold the lien of this Agreement or
any other Loan Document, Borrower shall, on demand, reimburse Lender for all
expenses (including, without limitation, reasonable attorneys’ fees and
disbursements) incurred by Lender in connection therewith, and such sum,
together with interest thereon at the Default Rate from and after such demand
until fully paid, shall constitute a part of the Loan.

Section 2.06.  Financial
Reports.  Borrower shall keep
accurate and complete books, records and accounts in accordance with generally
accepted accounting principles (“GAAP”) or the Uniform System of
Accounts (or such other accounting basis reasonably acceptable to Lender)
consistently applied with respect to the financial affairs of Borrower,
including, but not limited to, the financial affairs of Borrower which relate
to the Collateral and all sums due or which may become due thereunder.  Borrower shall, within ten (10) Business Days
after request and at its sole cost and expense, deliver to Lender any of such
books and records as may be requested by Lender.  Lender shall have the right from time to time
at all times during normal business hours to examine such books, records and accounts
at the office of Borrower or other Person maintaining such books, records and
accounts and to make copies or extracts thereof as Lender shall desire.  Borrower shall, from time to time, within
thirty (30) days after request and at its sole cost and expense, deliver to
Lender such information, reports and additional financial information with
respect to the financial affairs of Borrower as Lender shall reasonably
request.  Borrower will furnish Lender
annually, within one hundred twenty (120) days following the end of each Fiscal
Year of Borrower, with a complete copy of Borrower’s financial statement
audited by an Independent certified public accountant that is acceptable to
Lender in accordance with GAAP or the Uniform System of Accounts (or such other
accounting basis reasonably acceptable to Lender) consistently applied covering
(i) all of the financial affairs of Borrower for such Fiscal Year and
containing a statement of revenues and expenses, a statement of assets and
liabilities and a statement of Borrower’s equity.  Together with Borrower’s annual financial
statements, Borrower shall furnish to Lender an Officer’s Certificate
certifying as of the date thereof (i) that the annual financial statements
accurately represent the results of operations and financial condition of
Borrower all in accordance with GAAP or the Uniform System of Accounts (or such
other accounting basis reasonably acceptable to Lender) consistently applied,
and (ii) whether there exists an event or circumstance which constitutes, or
which upon notice or lapse of time or both would constitute, a Default under
the Note or any other Loan Document executed and delivered by Borrower, and if
such event or circumstance exists, the nature thereof, the period of time it
has existed and the action then being taken to remedy such event or
circumstance.  Borrower shall at all
times, whether or not the Mortgage Loan is outstanding, deliver or shall cause
Owner to deliver to Lender (x) a copy of all financial statements, reports,
books, records and accounts required to be delivered to Mortgage Lender
pursuant to the terms of the Mortgage Loan Documents within the time frames set
forth in the Mortgage Loan Documents for the delivery of such financial
statements, reports, books, records and accounts (and, with each monthly
statement of revenues and expenses delivered or required to be

 17
 

 

delivered under the Mortgage Loan Documents, a comparison of such
revenues and expenses to the Annual Budget) and (y) annually, within thirty
(30) days following the end of each calendar year, and within thirty (30) days
after Lender’s request therefor, a true, complete and correct rent roll for the
Premises, including a list of which tenants are in default under their
respective leases, dated as of the end of the preceding month, identifying each
tenant, the monthly rent and additional rent, if any, payable by such tenant,
the expiration date of such tenant’s Lease, the security deposit, if any, held
by Owner under the Lease, the space covered by the Lease, each tenant that has
filed a bankruptcy, insolvency, or reorganization proceeding since delivery of
the last such rent roll, and the
arrearages for such tenant, if any, and such rent roll shall be accompanied by
an Officer’s Certificate, dated as of the date of the delivery of such rent
roll, certifying that such rent roll is true, correct and complete in all
material respects as of its date. 
Borrower shall furnish to Lender, within thirty (30) days after Lender’s
request therefor, such further detailed information with respect to the
operation of the Premises and the financial affairs of Borrower as may be
reasonably requested by Lender.  Borrower
acknowledges that notwithstanding anything to the contrary contained herein or
in the Note, all extension fees and exit fees will be treated as additional interest.

Section 2.07.  Litigation.  Borrower will give prompt written notice to
Lender of any litigation or governmental proceedings pending or threatened (in
writing) against Borrower, Owner or Guarantor which are reasonably likely to
have a Material Adverse Effect and of any claim, option, lien or encumbrance
upon or against all or a portion of the Collateral.

Section 2.08.  Estoppel
Certificates.  Borrower shall, or
shall cause Owner to, from time to time, request from Mortgage Lender such
certificates of estoppel with respect to compliance by Owner with the terms of
the Mortgage Loan Documents as may be requested by Lender and required to be
given by Mortgage Lender pursuant to the Mortgage Loan Documents.

Section 2.09.  Budget.  Borrower shall submit to Lender for Lender’s
written approval an annual budget (the “Annual Budget”) not later than
fifteen (15) days prior to the commencement of such Fiscal Year, in form
reasonably satisfactory to Lender setting forth in reasonable detail budgeted
monthly operating income and monthly operating capital and other expenses for
the Premises.  Each Annual Budget shall
contain, among other things, management fees, third party service fees, and
other expenses as Borrower may reasonably determine.  Lender shall have the right to approve such
Annual Budget which approval shall not be unreasonably withheld, and in the
event that Lender objects to the proposed Annual Budget submitted by Borrower,
Lender shall advise Borrower of such objections within fifteen (15) days after receipt
thereof (and deliver to Borrower a reasonably detailed description of such
objections) and Borrower shall, within ten (10) days after receipt of notice of
any such objections, revise such Annual Budget and resubmit the same to Lender.  Lender shall advise Borrower of any
objections to such revised Annual Budget within ten (10) days after receipt
thereof (and deliver to Borrower a reasonably detailed description of such
objections) and Borrower shall revise the same in accordance with the process described
herein until Lender approves an Annual Budget, provided, however, that if
Lender shall not advise Borrower of its objections to any proposed Annual
Budget within the applicable time period set forth in this Section, then such
proposed Annual Budget shall be deemed approved by Lender.  Until such time that Lender approves a
proposed Annual Budget, the most recently Approved Annual Budget shall apply;
provided that, such Approved Annual Budget shall be adjusted to reflect actual
increases in Basic Carrying Costs

 18
 

 

and utilities expenses.  In the
event that Owner must incur an Extraordinary Expense of the type described in
clause (a) of the definition of Extraordinary Expense, then Borrower shall
promptly deliver to Lender a reasonably detailed explanation of such proposed
Extraordinary Expense for Lender’s approval, which approval may be granted or
denied in Lender’s reasonable discretion.

Section 2.10.  Intentionally
Omitted.

Section 2.11.  Transfers, Etc.  (a) Borrower shall not, without the prior
consent of Lender, in any manner allow a Transfer to occur or enter into any
agreement which in either case expressly restricts Borrower from making
amendments, modifications or waivers to the Loan Documents.  Without the express prior written consent of
Lender, Borrower shall not, and shall not cause or permit Owner to, enter into
any consensual sale or other similar transaction with respect to the Premises
or impair or otherwise adversely affect the interests of Lender in the
Collateral or any portion thereof or any interest therein.

(b)  Notwithstanding the
foregoing provisions of this Section 2.11, solely in connection with a Sale (as
defined in the Mortgage) permitted pursuant to Section 9.04 of the Mortgage a
new borrower (“New Borrower”), owning 100% of the unencumbered equity
interests in the proposed new owner of the Premises (the “New Owner”)
may assume Borrower’s obligations hereunder (hereinafter, a  “Proposed Loan Assumption”) or a
Transfer otherwise prohibited hereunder shall be permitted without Lender
consent or approval provided that each of the following terms and conditions
are satisfied:

(i)            No
Event of Default is then continuing hereunder or under any of the other Loan
Documents;

(ii)           Lender
shall have, in its reasonable discretion, consented to the Proposed Loan
Assumption;

(iii)          Borrower
gives Lender written notice of the terms of the Proposed Loan Assumption not
less than sixty (60) days before the date on which such Proposed Loan
Assumption is scheduled to close and, concurrently therewith, gives Lender all
such information concerning the New Borrower and the New Owner as Lender would
require in evaluating an initial extension of credit to a borrower and Lender
determines, in its reasonable discretion that the New Borrower and the New
Owner are acceptable to Lender in all respects (it being acknowledged that any Permitted Transferee shall be
deemed acceptable to Lender provided that not more than 75% in the aggregate of
the direct or indirect interests in Borrower (but without including more than once one or more transfers of the same
interest) has been transferred subsequent to the Closing Date in one or
more transactions and Borrower continues to be Controlled by the same Persons
which Controlled Borrower prior to such transfer (it being acknowledged that
(x) any holder of more than forty percent of the direct or indirect interest in
Borrower may have veto rights over major decisions which are customary in joint
venture agreements between two fifty percent owners of a Person and the same
shall not constitute a change in Control) and (y) it further being acknowledged
that any Transfer of a direct or indirect interest in Morgans Group LLC
otherwise requiring approval hereunder shall not be subject to the approval of
Lender if Morgans Group LLC continues to own and manage hotel rooms located in
full service luxury or full service upscale properties numbering not less than
eighty

 19
 

 

percent (80%)
of the number of hotel rooms which it owns and eighty percent (80%) of the
number of hotel rooms it manages as of the Closing Date (and such numbers shall
be calculated on a pro rata basis, so that, for example, if Morgans Group LLC
has a fifty percent (50%) interest in a Person that owns two hundred (200)
hotel rooms, Morgans Group LLC shall be deemed to own one hundred (100) hotel
rooms) and the conditions set forth in clauses (A) and (B) of the definition of
Permitted Transferee are met);

(iv)          In
the event the applicable Transfer will result in a New Borrower owning the
Collateral, Borrower pays Lender, concurrently with the closing of such
Proposed Loan Assumption, a non-refundable assumption fee in an amount equal to
one percent (1%) of the then outstanding Loan Amount (which fee shall be waived
in the event of a Transfer of the type set forth in clause (y) of Section
2.11((b)(iii)) for each Proposed Loan Assumption, together with all
out-of-pocket costs and expenses, including, without limitation, reasonable
attorneys’ fees, incurred by Lender in connection with the Proposed Loan
Assumption;

(v)           In
the event the applicable Transfer will result in a New Borrower owning the
Collateral, New Borrower assumes all of the obligations under the Loan
Documents and, prior to or concurrently with the closing of such Proposed Loan
Assumption, New Borrower executes, without any cost or expense to Lender, such
documents and agreements as Lender shall reasonably require to evidence and
effectuate said assumption and delivers such legal opinions as Lender may
require similar to those delivered at the closing of the Loan;

(vi)          In
the event the applicable Transfer will result in a New Borrower owning the
Collateral, Borrower and New Borrower execute, without any cost or expense to
Lender, new financing statements or financing statement amendments and any
additional documents reasonably requested by Lender and New Borrower grants to
Lender a perfected first priority interest in 100% of the equity ownership
interests in New Owner (such interests, along with any other collateral
securing the Loan, the “New Collateral”) and grants Lender a perfected
first priority lien in such New Collateral;

(vii)         In
the event the applicable Transfer will result in a New Borrower owning the
Collateral, New Borrower delivers to Lender, without any cost or expense to
Lender, such endorsements to Lender’s “Eagle 9” (or equivalent) insurance
policy which insures Lender’s lien in the New Collateral, hazard insurance
policy endorsements or certificates and other similar materials as Lender may
deem necessary at the time of the Proposed Loan Assumption, all in form and
substance reasonably satisfactory to Lender;

(viii)        In
the event the applicable Transfer will result in a New Borrower owning the
Collateral, Borrower executes and delivers to Lender, without any cost or
expense to Lender, a release of Lender, its officers, directors, employees and
agents, from all claims and liability relating to the transactions evidenced by
the Loan Documents, through and including the date of the closing of the
Proposed Loan Assumption, which agreement shall be in form and substance
satisfactory to Lender and shall be binding upon New Borrower;

(ix)           In
the event the applicable Transfer will result in a New Borrower owning the
Collateral, subject to the provisions of Article
VIII hereof, such Proposed Loan Assumption does not relieve Borrower of any
personal liability under the Note or any of the other Loan

 20
 

 

Documents for
any acts or events occurring or obligations arising prior to or simultaneously
with the closing of such Proposed Loan Assumption, and Borrower executes, without
any cost or expense to Lender, such documents and agreements as Lender shall
reasonably require to evidence and effectuate the ratification of said personal
liability;

(x)            In
the event the applicable Transfer will result in a New Borrower owning the Collateral,
such Proposed Loan Assumption does not relieve any Guarantor of its obligations
under any guaranty or indemnity agreement executed in connection with the Loan
and each such Guarantor executes, without any cost or expense to Lender, such
documents and agreements as Lender shall reasonably require to evidence and
effectuate the ratification of each such guaranty agreement, provided that if
New Borrower or a party associated with New Borrower approved by Lender in its
reasonable discretion assumes the obligations of the current Guarantor under
its guaranty and New Borrower or such party associated with New Borrower, as
applicable, executes, without any cost or expense to Lender, a new guaranty in
similar form and substance to the existing guaranty and otherwise satisfactory
to Lender, then Lender shall release the current Guarantor from all obligations
arising under its guaranty after the closing of such Proposed Loan Assumption;
and

(xi)           In
the event the applicable Transfer will result in a New Borrower owning the
Collateral, New Borrower is a Single Purpose Entity and Lender receives a
non-consolidation opinion relating to New Borrower from New Borrower’s counsel,
which opinion is in form and substance reasonably acceptable to Lender.

Section 2.12.  Sums Held In
Trust.  To the extent Borrower
receives any sums it is not otherwise entitled to receive pursuant to the terms
of this Agreement, Borrower shall hold all such sums sufficient to discharge
all sums due or to become due on the Debt, in trust for use in payment of the
Debt.

Section 2.13.  Notification of Defaults. 
Borrower shall promptly (and in all events within one (1)
Business Day of obtaining knowledge thereof) notify Lender of the occurrence of
any default under the Mortgage Loan or of the occurrence of any event, which
but for the passage of time or the giving of notice or both, would constitute a
default under the Mortgage Loan.

Section 2.14.  Compliance With
Mortgage Loan Documents.  Borrower
shall cause Owner to comply with all of the terms, covenants and conditions set
forth in the Mortgage Loan Documents, notwithstanding any waiver or future
amendment of such covenants by Mortgage Lender. 
Borrower acknowledges that the obligation to comply with such covenants
is separate from, and may be enforced independently from, the obligations of
Owner under the Mortgage Loan Documents, and, to the extent such term,
covenants and conditions require any consents, approvals or waivers by Mortgage
Lender, Lender shall have the same rights to consent, approve or waive.  The provisions of Sections 3.01, 4.01,
7.02(a) through (c) and 8.01 of the Mortgage are hereby incorporated by
reference as if fully restated herein and shall constitute the direct
obligation of Borrower to either perform or to cause Owner to perform such
covenants on behalf of Lender.

Section 2.15. 
No Change of Accounts.  Borrower shall not permit Owner to change the
Rent Accounts or the Central Account (as such terms are defined in the
Mortgage), without the

 21
 

 

prior written consent of Lender and Mortgage Lender.

Section 2.16.  Confirmation of
Loan Documents, Etc.  (a)  After request by Lender, Borrower, within
fifteen (15) days and at its expense, will furnish or will cause Owner to
furnish to Lender a statement, duly acknowledged and certified, setting forth
with respect to this Agreement, the Note and the Mortgage Note, as applicable,
(i) the amount of the original principal amount, and the unpaid principal
amount, (ii) the rate of interest, (iii) the date payments of interest and/or
principal were last paid, (iv) any offsets or defenses to payment, and if any
are alleged, the nature thereof, (v) that no modifications have taken place, or
if modified, giving particulars of such modification and (vi) that there has
occurred and is then continuing no Default or if such Default exists, the
nature thereof, the period of time it has existed, and the action being taken
to remedy such Default.

(b)           Within
fifteen (15) days after written request by Borrower, Lender shall furnish to
Borrower a written statement confirming the Principal Amount of the Loan, the
maturity date of the Note and the date to which interest has been paid.

Section 2.17.  Corporate
Actions.  Without the prior written
consent of Lender, Borrower will not and will not cause or allow the
Corporations, LLCs or Partnerships at any time, to (and, without limiting the
foregoing, will not vote to enable, or take any other action to permit, the
Corporations, LLCs or Partnerships to):

(a)           purchase
or redeem or obligate itself to purchase or redeem any Equity Interests in
violation of this Agreement or any of the other Loan Documents; or

(b)           redeem
or cancel any Equity Interests or authorize to be issued any additional Equity
Interests; or

(c)           merge
into or merge or consolidate with any corporation, partnership or limited
liability company or entity or cause itself to dissolve or liquidate its
assets; or

(d)           enter
into, or cause or permit any affiliate of any of the Corporations, LLCs or
Partnerships to enter into, (x) any transaction with a Person or entity
affiliated with or related to itself, except upon arms-length terms and
conditions, or (y) any transaction which is motivated by an intent to
evade this Agreement; or

(e)           breach
any of the covenants or obligations of the Corporations, LLCs or Partnerships
pursuant to this Agreement.

Section 2.18.  Conduct of
Operations.  To the extent that such
matters are within the control of Borrower pursuant to the terms of the
Organizational Documents and applicable laws, Borrower shall cause the Corporations,
LLCs and Partnerships to conduct their operations and to manage, protect and
preserve their assets and to act in a commercially reasonable manner to
preserve the value of the Collateral.

Section 2.19.  Voting Rights;
Etc.  (a) So long as an Event of
Default shall not have occurred and be continuing, Borrower shall be permitted
(i) to receive any and all regular Distributions and dividends paid in cash and
in the ordinary course of business of the

 22
 

 

Partnerships, the LLCs and the Corporations with respect to the Equity
Interests and (ii) to exercise all voting and other rights with respect to the
Equity Interests as long as no vote shall be cast, or right exercised or other
action taken which would, directly or indirectly, materially impair the value of
any Collateral or which would be inconsistent with or result in a default under
this Agreement or any of the other Loan Documents.  Upon the receipt of a written request from
Borrower, Lender shall execute and deliver (or cause to be executed and delivered)
to Borrower all such proxies and other instruments as Borrower may reasonably
request for the purpose of enabling Borrower to exercise the voting and other
rights which it is entitled to exercise and to receive the dividends or
interest payments which it is authorized to receive and retain pursuant to this
Agreement.  Upon the occurrence and
during the continuance of an Event of Default, the aforesaid rights shall
immediately and automatically vest in Lender.

(b)           If
Borrower shall receive, by virtue of Borrower’s being or having been an owner
of any Equity Interest, (i) any Distributions or dividends payable in cash
(except such Distributions and dividends permitted to be retained by Borrower
pursuant to sub-section (a) above) or in securities or other property, or (ii)
any Distributions or dividends in connection with a partial or total
liquidation or dissolution or a reclassification, increase or reduction of
capital, capital surplus or paid-in capital, Borrower shall receive the same in
trust for Lender, segregate the same from its other assets and promptly deliver
the same to Lender in the exact form received, with any necessary endorsement
and/or appropriate powers or other instruments of assignment or conveyance, to
be held by Lender as Collateral pursuant to this Agreement.

Section 2.20.  Admission of
New Equity.  Borrower will not agree
to admit any new or substitute shareholders, members or partners into the
Corporations, LLCs or Partnerships or transfer its interests in the
Corporations, LLCs or Partnerships unless such new shareholder, member or
partner executes and delivers, and agrees to be bound by, an agreement, in form
and content substantially identical to this Agreement, pursuant to which such
new shareholder, member or partner pledges its interests in the Corporations,
LLCs or Partnerships to Lender and such admission is otherwise in accordance
with the terms of the applicable Organizational Documents and the Loan
Documents.

Section 2.21.  Proceeds of
Collateral.  Upon the occurrence and
during the continuance of an Event of Default, all Proceeds of the Collateral
received by Borrower shall be promptly delivered to Lender, in the same form as
received, with the addition only of such endorsements and assignments as may be
necessary to transfer title to Lender, and pending such delivery, such Proceeds
shall be held in trust for Lender; and such Proceeds shall be applied to the
Debt in such order and manner as Lender shall direct in its sole discretion.

Section 2.22.  Admission of
Lender As Shareholder, Member, Partner. 
In the event that Lender forecloses on the Collateral, notwithstanding
anything to the contrary in the Organizational Documents, the Person that
acquires the Collateral in connection with such foreclosure (whether Lender, a
designee or Affiliate of Lender or any other Person) shall automatically be
admitted as a shareholder, member or partner of the Corporations, LLCs or
Partnerships, respectively, and shall be entitled to receive all benefits and
exercise all rights in connection therewith pursuant to the Organizational
Documents; provided, however, that such Person (whether Lender, a designee or
Affiliate of Lender or any other Person) shall have no liability for matters in
connection with the Equity Interests arising or occurring, directly or

 23
 

 

indirectly, prior to such Person’s becoming a shareholder, member or
partner of the Corporations, LLCs or Partnerships.

Section 2.23.  Purchase of
Mortgage Loan, Etc.  Neither Borrower
nor any Affiliate thereof or any other Person acting upon their direction or
request shall, directly or indirectly, acquire or agree to acquire, obtain,
purchase or control the Mortgage Loan, or any portion thereof or any interest
therein, or any direct or indirect ownership interest in the holder of, or participant
in, the Mortgage Loan in any manner whatsoever. 
If, solely by operation of applicable subrogation law, Borrower or any
Affiliate thereof shall be in breach of or fail to comply with the foregoing,
then such breach or failure shall not be an Event of Default provided
that Borrower (a) shall immediately upon obtaining knowledge thereof notify
Lender of such failure or breach, and (b) shall cause Borrower and Affiliates
thereof acquiring any interest in the Mortgage Loan Documents (i) not to
enforce the Mortgage Loan Documents, and (ii) upon the request of Lender, to
the extent any Borrower or such Affiliate has the power or authority to do so,
to promptly (A) cancel, reconvey and release its interest in the Mortgage Loan
Documents, (B) discontinue and terminate any enforcement proceeding(s) under
the Mortgage Loan Documents and (C) assign and transfer its interest in the
Mortgage Loan Documents to Lender.

Section 2.24.  Deed-In-Lieu,
etc.  Without the prior written
consent of Lender, Borrower shall not, and shall not cause or permit Owner to,
enter into any deed-in-lieu or consensual foreclosure or transfer or assignment
with or for the benefit of Mortgage Lender or any of Mortgage Lender’s
Affiliates or designees.  Without the
express prior written consent of Lender, Borrower shall not, and shall not
cause or permit Owner to, enter into any consensual sale or transfer or
assignment or other similar transaction, impair or otherwise adversely affect
the interests of Lender in the Collateral or any portion thereof or any
interest therein.

Section 2.25.  Intercreditor
Agreement.  Borrower acknowledges and
agrees that Lender and Mortgage Lender have entered into an intercreditor
agreement regarding their respective rights under the Mortgage Loan and Loan
(the “Intercreditor Agreement”). 
Borrower acknowledges and agrees that: 
(a) no Person other than Lender and Mortgage Lender has any rights
whatsoever, direct or indirect, beneficial or otherwise, under the Intercreditor
Agreement and Borrower is not a third party beneficiary thereof; (b) Lender and
Mortgage Lender may amend, modify, cancel, terminate, supplement or waive the
Intercreditor Agreement at any time without notice to, or the consent of
Borrower, Owner or any other Person, and (c) except as expressly set forth in
this Agreement, any restriction or other agreement between Lender and Mortgage
Lender set forth in the Intercreditor Agreement is personal between Lender, and
Mortgage Lender and, as between Lender, on the one hand, and Borrower, on the
other hand, no such agreement or restriction will be deemed to benefit or
otherwise modify any of the rights of Lender under the Loan Documents.

Section 2.26.  Payment of
Impositions.  Borrower shall pay and
discharge all taxes now or hereafter imposed on it, or its income or profits,
on any of its property or upon the liens provided for herein prior to the date
on which penalties attach thereto; provided that Borrower shall have the right
to contest the validity or amount of any such tax in good faith and by proper
proceedings.  Borrower shall promptly pay
any valid, final judgment enforcing any such tax and cause the same to be
satisfied of record.

 24

 

Section 2.27.  Central
Cash Management.  (a)  All amounts paid by the issuer of the Rate
Cap Agreement (the “Counterparty”) to Borrower or Lender, together with
all rents, issues, profits, insurance proceeds, condemnation proceeds,
refinancing proceeds and all other sums received with respect to the Premises
or distributed with respect to the Equity Interests after all sums which are
then due and payable have been paid to Mortgage Lender pursuant to the terms of
the Mortgage Loan Documents (collectively, “Remaining Rents”), shall be
paid by federal wire transfer or automatic clearing house funds (“ACH”)
to Lender and shall be deposited immediately into an Eligible Account located
at a bank satisfactory to Lender (the “Lockbox Account”).  Lender has established the Lockbox Account in
the name of Lender as secured party.  The
Lockbox Account shall be under the sole dominion and control of Lender.  The Lockbox Account shall have a sub-account
on a ledger basis entitled the “Debt Service Payment Account” (the “Debt
Service Sub-Account” and together with the other accounts now or hereafter
required to be established pursuant to this Section 2.27, collectively, the “Accounts”)
to which certain funds shall be allocated and from which disbursements shall be
made pursuant to the terms of the Lockbox Agreement.  Borrower hereby irrevocably directs and
authorizes Lender to withdraw funds from the Lockbox Account, all in accordance
with the terms and conditions of the Lockbox Agreement.  Borrower shall have no right of withdrawal in
respect of the Lockbox Account.  Each
transfer of funds to be made hereunder shall be made only to the extent that
funds are on deposit in the Lockbox Account, and Lender shall have no
responsibility to make additional funds available in the event that funds on
deposit are insufficient.  Borrower shall
enter into or shall cause Owner to enter into a substitute cash management
agreement and related lockbox agreement (collectively, the “Substitute CMA
Agreements”) with substantially the same terms as the agreements entered
into as of the date hereof  in connection
with the Mortgage Loan as a condition to the satisfaction of the Mortgage Loan
or if Mortgage Lender is not requiring that sums be deposited into any
Sub-Accounts or Escrow Accounts.  Such
substitute agreements shall provide that all Remaining Rents shall be deposited
into the Lockbox Account for disbursement in accordance with the terms of the
Substitute CMA Agreements, the Lockbox Agreement (as amended to conform with
the Substitute CMA Agreements) and this Agreement.  Additionally, on or before the Closing Date,
Borrower shall establish or cause Owner to establish such escrow and reserve
accounts and deposit such amounts into such accounts as required pursuant to
the terms of the Mortgage Loan Documents. 
After the occurrence and during the continuance of an Event of Default,
the funds on deposit in the Lockbox Account, and all other funds received by
Lender in respect of the Loan, shall be disbursed and applied in such order and
such manner as Lender shall elect in its sole discretion.  If Borrower shall receive any Remaining Rents
other than in accordance with this Agreement, Borrower shall hold all such
payments in trust for Lender, will not co-mingle such payments with other funds
of Borrower, and will immediately pay and deliver in kind, all such payments
directly to Lender for application by Lender in accordance with this Agreement.

(b)           Borrower
shall maintain the Rate Cap Agreement at all times during the term of the Loan
and pay all fees, charges and expenses incurred in connection therewith.  Borrower shall comply with all of its
obligations under the terms of the Rate Cap Agreement.  All amounts paid by the Counterparty to
Borrower or Lender shall be deposited immediately into the Lockbox
Account.  Borrower shall take all actions
reasonably requested by Lender to enforce Lender’s rights under the Rate Cap
Agreement in the event of a default by the Counterparty.  In the event that (a) the long-term
unsecured debt obligations of the Counterparty are downgraded by the Rating
Agency below “A+” or its equivalent or (b) the Counterparty shall default
in any of its

 25
 

 

obligations under the Rate Cap Agreement, Borrower shall, at the
request of Lender, promptly but in all events within five (5) Business Days,
replace the Rate Cap Agreement with an agreement having identical payment terms
and maturity as the Rate Cap Agreement and which is otherwise in form and
substance substantially similar to the Rate Cap Agreement and otherwise
acceptable to Lender with a cap provider, the long-term unsecured debt of which
is rated at least “AA-” (or its equivalent) by each Rating Agency, or which
will allow each Rating Agency to reaffirm their then current ratings of all
rated certificates issued in connection with the Securitization.  In the event that Borrower fails to maintain
the Rate Cap Agreement as provided in this Section, Lender may purchase the
Rate Cap Agreement and the cost incurred by Lender in connection therewith
shall be paid by Borrower to Lender with interest thereon at the Default Rate
from the date such cost is incurred until such cost is paid by Borrower to
Lender.

(c)           At
any time that sums are not being deposited into the Sub-Accounts or Escrow
Accounts pursuant to the terms of the Mortgage,   Borrower shall establish and maintain one or
more sub-accounts of the Lockbox Account into which Remaining Rents shall be
deposited for the purposes of paying Basic Carrying Costs, Recurring
Replacement Expenditures and Operating Expenses (each as defined in the
Mortgage).  In connection therewith,
Borrower and Lender shall modify the Lockbox Agreement to provide that, if sums
are required to be deposited into the Lockbox Account pursuant to this Section
2.27(c), such funds shall be allocated in the order of priority set forth in
Section 5.05 of the Mortgage and Borrower hereby irrevocably appoints Lender as
its attorney-in-fact, coupled with an interest, to execute any such amendment
to the Lockbox Agreement.  The amounts to
be deposited in such sub-accounts shall equal the amounts required to be
deposited in the Sub-Accounts and Escrow Accounts pursuant to the terms of the
Mortgage (as in effect on the Closing Date or as amended with Lender’s
approval) and sums deposited into such sub-accounts may be released on the same
terms and conditions as set forth in the Mortgage (as in effect on the Closing
Date or as amended with Lender’s approval).

(d)           Borrower
hereby agrees for the benefit of itself and Owner that all payments actually
received by Lender shall be deemed payments to Borrower by Owner.  Lender shall apply any and all such payments
actually received by Lender for application in accordance with this
Agreement.  After payment of all sums due
and payable with respect to the Loan or which may be retained by Lender
pursuant to the other provisions hereof, Lender shall return to Borrower that
portion of any payments actually received by Lender from Borrower or Owner.

Section 2.28.  Certain
Additional Rights of Lender. 
Notwithstanding anything to the contrary which may be contained in this
Agreement, Lender shall have:

(a)           the right to routinely consult on a regular
basis (no less frequently than quarterly) with and advise Borrower’s management
regarding the significant business activities and business and financial
developments of Borrower, provided, however, that such
consultations shall not include discussions of environmental compliance
programs or disposal of hazardous substances, and, provided, further,
that Lender shall have the right to call special meetings at any reasonable
times;

(b)           the right, without restricting any other
rights of Lender under this Agreement (including any similar right), to
restrict financing to be obtained in connection with future

 26
 

 

property transactions, refinancing of any acquisition financings, and
unsecured debt unless the Loan has been paid in full or as otherwise permitted
hereunder;

(c)           the right, without restricting any other
right of Lender under this Agreement (including any similar right), to
restrict, upon the occurrence of an Event of Default, Borrower’s payments of
management consulting, director or similar fees to Affiliates of Borrower (or
their personnel) other than management fees due pursuant to the Management
Agreement which will continue to be paid as long as Manager is managing the
Premises and is not in default pursuant to its Management Agreement;

(d)           the right, without restricting any other
rights of Lender under this Agreement (including any similar right), to approve
any acquisition by Borrower of any other significant property (other than
personal property required for the day to day operation of the Premises);

(e)           the right, without restricting any other
rights of Lender under this Agreement (including any similar right), in the
event of an Event of Default, to vote the owners’ interests in Borrower
pursuant to irrevocable proxies granted, at the request of Borrower in advance
for this purpose; and

(f)            the right, without restricting any other
rights of Lender under this Agreement (including any similar right), to
restrict the transfer of voting interests in Borrower held by its members, and
the right to restrict the transfer of interests in such member, except for any
transfer that is a permitted Transfer.

The rights contained in
this Section 2.28 may be exercised by any Person which owns or Controls,
directly or indirectly, substantially all of the interests in Lender or the
Loan.

Section 2.29.  Refinancing,
Liens, etc.  Borrower shall not and
shall not permit Owner to, without the prior written consent of Lender, which
consent may be withheld, delayed or conditioned in the sole discretion of
Lender, give its consent or approval or agree to any of the following:

(a)           (i)
any refinancing of the Mortgage Loan, (ii) any prepayment in full of the
Mortgage Loan, (iii) any Transfer (for purposes of this Section 2.29(a) only,
as defined in the Mortgage (as in effect on the Closing Date or as amended with
Lender’s approval)) of the Premises except pursuant to Section 2.11 hereof, or
(iv) any action in connection with or in furtherance of the foregoing;

(b)           placing
or permitting to attach any additional liens or encumbrances on the Premises
(except for liens and encumbrances permitted 
under the Mortgage Loan Documents (as in effect on the Closing Date or
as amended with Lender’s approval) not requiring the consent of Mortgage
Lender); or

(c)           any
modification, amendment, consolidation, spread, restatement or waiver of any
provision of the Mortgage Loan Documents.

Section 2.30.  Insurance.  (a) The insurance described in Section 3.01
of the Mortgage and Section 2.30(c) hereof (except policies for worker’s
compensation) shall be in the form

 27
 

 

(other than with respect to Sections 3.01(a)(vi) and (vii) of the
Mortgage when insurance in those two sub-sections is placed with a governmental
agency or instrumentality on such agency’s forms) and amount and with
deductibles as, from time to time, shall be reasonably acceptable to Lender,
under valid and enforceable policies issued by financially responsible insurers
authorized to do business in the State where the Premises is located, which
shall have a claims paying ability rating and/or financial strength rating, as
applicable, of not less than “A-” (or its equivalent), or such lower claims
paying ability rating and/or financial strength rating, as applicable, as
Lender shall, in its reasonable discretion (taking into account then current
Rating Agency guidelines), consent to, from a Rating Agency (one of which after
a Securitization in which Standard & Poor’s rates any securities issued in
connection with such Securitization, shall be Standard & Poor’s) and
Borrower shall cause Owner to carry all such insurance (whether or not the
Mortgage Loan is outstanding) for so long as any portion of the Debt remains
outstanding.  All such policies (except
policies for worker’s compensation) shall name Lender as an additional named
insured (subject to the rights of Mortgage Lender), with respect to the
insurance required pursuant to Section 3.01(a)(iii) of the Mortgage, shall
provide, subsequent to the satisfaction of the Mortgage Loan, for loss payable
to Lender and shall contain (or have attached): 
(i) standard “non-contributory mortgagee” endorsement or its equivalent
relating, inter  alia, to recovery by Lender notwithstanding the
negligent or willful acts or omissions of Borrower; (ii) a waiver of
subrogation endorsement as to Lender; (iii) an endorsement indicating that
neither Lender nor Borrower shall be or be deemed to be a co-insurer with
respect to any casualty risk insured by such policies and shall provide for a
deductible per loss of an amount not more than that which is customarily
maintained by owners of similar properties similarly situated, and (iv) a
provision that such policies shall not be canceled, terminated, denied renewal
or amended, including, without limitation, any amendment reducing the scope or
limits of coverage, without at least thirty (30) days’ prior written notice to
Lender in each instance.  Not less than
thirty (30) days prior to the expiration dates of the insurance policies
obtained pursuant to this Agreement, originals or certified copies of renewals
of such policies (or certificates evidencing such renewals) bearing notations
evidencing the payment of premiums or accompanied by other reasonable evidence
of such payment (which premiums shall not be paid by Borrower or Owner through
or by any financing arrangement which would entitle an insurer to terminate a
policy) provided,
however, premiums for the insurance required pursuant to this Section may be
paid quarterly in advance or as otherwise reasonably acceptable to Lender, it
being acknowledged that paying the premium for such policies by financing the
same, paying twenty percent (20%) of the total annual premium (inclusive of
finance charges) at the time of the applicable policy renewal and paying the
remaining eighty percent (80%) of the total annual premium (inclusive of
finance charges) in nine (9) equal monthly installments is acceptable to
Lender) shall be delivered by Borrower to Lender.  Borrower shall not carry separate insurance,
concurrent in kind or form or contributing in the event of loss, with any
insurance required under Section 3.01 of the Mortgage or Section 2.30(c)
hereof.

(b)           If
Borrower fails to maintain and deliver to Lender the original policies or
certificates of insurance required by this Agreement, Lender may, at its
option, procure such insurance, and Borrower shall pay, or as the case may be,
reimburse Lender for, all premiums thereon promptly, upon demand by Lender,
with interest thereon at the Default Rate from the date paid by Lender to the
date of repayment and such sum shall constitute a part of the Debt.

(c)           Borrower
shall deliver, or shall cause Owner to deliver, to Lender such other

 28
 

 

insurance as may from time to time be required by Lender and which is
then customarily required by Institutional Lenders for similar properties
similarly situated, against other insurable hazards, including, but not limited
to, malicious mischief, vandalism, acts of terrorism, windstorm and/or earthquake,
due regard to be given to the size and type of the Premises, Improvements,
Fixtures and Equipment and their location, construction and use.

Section 2.31.  Casualty.  Borrower shall give Lender prompt notice of
any loss or damage to the Premises and, subject to the rights of the Mortgage
Lender under the Mortgage Loan Documents (which shall in all respects supersede
the rights of Lender under this Section 2.31);

(a)           After
the Mortgage Loan has been paid in full, in the event of any loss or damage covered
by any insurance, Lender is hereby authorized (i) if an Event of Default shall
have occurred or, if no Event of Default shall have occurred but Borrower or
Owner fails to settle and adjust any claim within ninety (90) Business Days
after such casualty has occurred, to settle and adjust any claim under such
insurance without the consent of Borrower or Owner, or (ii) if no Event of
Default has occurred, to allow Borrower or Owner within ninety (90) Business
Days after such casualty to settle and adjust such claim with, if any
settlement may reasonably be anticipated to result in proceeds in excess of
$250,000.00, the consent of Lender, not to be unreasonably withheld; provided,
however, that in either case Lender shall, and is hereby authorized to, collect
and receive any such insurance proceeds, subject, however, to the rights of
Mortgage Lender under the Mortgage Loan Documents.  The expenses incurred by Lender in the
adjustment and collection of such proceeds of insurance shall be additional
Debt of Borrower, and shall be reimbursed to Lender upon demand or, at Lender’s
option, in the event and to the extent sufficient proceeds are available,
deducted by Lender from such proceeds of insurance prior to any other
application thereof.  If the Mortgage Loan
has been paid in full, each insurance company which has issued insurance is
hereby authorized and directed to make payment for all losses covered by such
insurance to Lender alone, and not to Lender and Borrower or Owner jointly.  Borrower agrees to execute and cause Owner to
execute all documents and make all deliveries required in order to permit
adjustment and payment of insurance proceeds as provided above.

(b)           Borrower
hereby assigns to Lender the proceeds of all insurance (other than worker’s
compensation and liability insurance) obtained pursuant to this Agreement, all
of which proceeds shall be payable to Lender as collateral and further security
for the payment of the Debt and the performance of Borrower’s obligations
hereunder and under the other Loan Documents, and Borrower hereby authorizes
and directs the issuer of any such insurance to, subject to the rights of
Mortgage Lender under the Mortgage Loan Documents, make payment of such
proceeds directly to Lender.  Lender may,
in its sole discretion, apply the proceeds of insurance received upon any
casualty either (i) to reduce the Debt, in such order or manner as Lender may
elect; or (ii) at Lender’s election, to reimburse Borrower or Owner for or to
pay the costs of restoring, repairing, replacing or rebuilding (collectively, a
“Restoration”) the loss or damage caused by such casualty, in accordance
with and subject to such conditions as Lender may determine in its sole
discretion.

Section 2.32.  Management of
Premises.  Borrower shall cause Owner
to operate and manage the Premises or cause the Premises to be operated and
managed in a manner which is consistent with the Approved Manager
Standard.  Borrower covenants and agrees
with Lender

 29
 

 

that (a) the Premises will be managed at all times by Manager pursuant
to the management agreement approved by Lender (the “Management Agreement”),
(b) after Borrower has knowledge of a fifty percent (50%) or more change in
control of the ownership of Manager, Borrower will promptly give Lender notice
thereof (a “Manager Control Notice”) and (c) the Management Agreement
may be terminated by Lender at any time for cause (including, but not limited
to, Manager’s gross negligence, misappropriation of funds, willful misconduct
or fraud) or at any time following (A) the occurrence of an Event of Default,
or (B) the receipt of a Manager Control Notice, and a substitute managing agent
shall be appointed by Borrower, subject to Lender’s prior written approval,
which, in the case of clause (A) above, may be given or withheld in Lender’s
sole discretion and in the case of clause (B) above, shall not be unreasonably
withheld or delayed, and which may be conditioned on, inter alia, a letter from
the Rating Agency confirming that any rating issued by the Rating Agency in
connection with a Securitization or Mortgage Securitization will not, as a
result of the proposed change of Manager, be downgraded from the then current
ratings thereof, qualified or withdrawn. 
Borrower may from time to time cause Owner to appoint a successor manager
to manage the Premises with Lender’s prior written consent which consent shall
not be unreasonably withheld or delayed, provided that any such successor
manager shall be a reputable management company which meets the Approved
Manager Standard and each Rating Agency shall have confirmed in writing that
any rating issued by the Rating Agency in connection with a Securitization or
in connection with a Mortgage Securitization will not, as a result of the
proposed change of Manager, be downgraded from the then current ratings
thereof, qualified or withdrawn. 
Borrower further covenants and agrees that Borrower shall cause Owner to
require the Manager (or any successor managers) to maintain at all times during
the term of the Loan worker’s compensation insurance as required by
Governmental Authorities.

Section 2.33.  Power of
Attorney.  Borrower hereby
irrevocably appoints and instructs Lender as its attorney-in-fact, with full
authority in the place and stead of Borrower and in the name of Borrower,
Lender or otherwise, from time to time in Lender’s discretion to take any and
all actions necessary and proper, to carry out the intent of this Agreement and
(a) to perfect and protect the lien, pledge, assignment and security interest
of Lender created hereunder, (b) from and during the continuance of an Event of
Default, (i) to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
respect of any of the Collateral, (ii) to file any claims or take any action or
institute any proceedings for the collection of any of the Collateral or
otherwise to enforce the rights of Lender with respect to any of the
Collateral, and (iii) in connection with the exercise of any power, right,
privilege or remedy pursuant to this Agreement, to make all necessary
assignments, transfers and deliveries of the Collateral and rights and to
execute all applications, certificates, instruments, assignments and other
documents and papers, (c) to collect and receive any insurance proceeds paid
with respect to any portion of the insurance policies required to be maintained
hereunder, and to endorse any checks, drafts or other instruments representing
any insurance proceeds whether payable by reason of loss thereunder or
otherwise, (d) to exercise any option to extend or renew the term of the Ground
Lease in the name of and on behalf of Borrower or Owner and (e) from and during
the continuance of an Event of Default, to file and prosecute, to the exclusion
of Borrower and Owner, any proofs of claim, complaints, motions, applications,
notices and other documents, in any case in respect of the Ground Lessor under
the Bankruptcy Code.  Borrower hereby
ratifies, approves and confirms all actions taken by Lender and its attorneys-in-fact
pursuant to this Section 2.33. 
Neither Lender nor any said Lender or

 30
 

 

attorney-in-fact will be liable for any acts of commission or omission
nor for any error of judgment or mistake of fact or law with respect to its
dealings with the Collateral.  This power
of attorney, being coupled with an interest, is irrevocable until the date upon
which the Debt has been indefeasibly satisfied in full.  Without limiting the foregoing, if Borrower
fails to perform any agreement or obligation contained herein, Lender may
itself perform, or cause performance of, where necessary or advisable in the
name or on behalf of Borrower, and at the expense of Borrower, as applicable.

Section 2.34.  Leases.  (a) 
Borrower covenants and agrees that, from the date hereof and until
payment in full of the Debt, Borrower shall, or shall cause Owner to, comply
with the terms and provisions of Section 7.02(a) through (c) of the Mortgage as
provided in Section 2.14 hereof, and, to the extent such term, covenants and
conditions require any consents, approvals or waivers by Mortgage Lender,
Lender shall have the same rights to consent, approve or waive.

(b)           Subject
to the rights of Mortgage Lender in respect of the Rents under the Mortgage
Loan Documents at any time that (i) payments are not being made to the Central
Account, (ii) following repayment of the Mortgage Loan or (iii) following the
occurrence of an Event of Default, then Lender shall have the immediate right
to notify all tenants and other third parties to make payments directly to the
Lockbox Account.  Borrower hereby
authorizes and directs the tenants and other third parties to make such
payments directly to the Lockbox Account upon notice by Lender.  Subject to the rights of Mortgage Lender
under the Mortgage Loan Documents, security and other refundable deposits of
tenants, whether held in cash or any other form, shall, after and during the
continuance of an Event of Default, be turned over to Lender (together with any
undisbursed interest earned thereon) upon Lender’s request therefor to be held
by Lender subject to the terms of the Leases. 
Any letter of credit or other instrument which Borrower or Owner holds
in lieu of cash security deposit shall be maintained in full force and effect
in the full amount of such deposits unless replaced by cash deposits as
herein-above described and shall in all respects comply with any applicable
Legal Requirements and otherwise be satisfactory to Lender.  Borrower shall, upon request, provide Lender
with evidence satisfactory to Lender of Borrower’s and Owner’s compliance with
the foregoing.

(c)           Borrower
(i) shall cause Owner to observe and perform all of its material obligations
under the Leases pursuant to applicable Legal Requirements and shall not do or
permit to be done anything to impair the value of the Leases; (ii) shall cause
Owner to promptly send copies to Lender of all notices of material default
which Owner shall receive under the Leases; (iii) shall, consistent with the
Approved Manager Standard, enforce all of the terms, covenants and conditions
contained in the Leases to be observed or performed; (iv) shall not permit
Owner to collect any of the Rents under the Leases more than one (1) month in
advance (except that Owner may collect in advance such security deposits as are
permitted pursuant to applicable Legal Requirements and are commercially
reasonable in the prevailing market); (v) shall not permit Owner to cancel or
terminate any of the Leases or accept a surrender thereof in any manner
inconsistent with the Approved Manager Standard; (vi) shall not permit Owner to
alter, modify or change the terms of any guaranty of any Major Space Lease or
cancel or terminate any such guaranty; (vii) shall cause Owner, in accordance
with the Approved Manager Standard, to make all reasonable efforts to seek
lessees for space as it becomes vacant and enter into Leases in accordance with
the terms hereof; and (viii) shall not permit Owner to materially modify, alter
or amend any Major Space Lease or Premises Agreement without Lender’s

 31
 

 

consent, which consent
will not be unreasonably withheld or delayed. 
In all instances that Owner is required to obtain the consent of
Mortgage Lender prior to entering into any Lease, Lease amendment, modification
or termination, Borrower shall cause Owner to obtain Lender’s consent to such
proposed Lease, Lease amendment, modification or termination prior to
permitting or causing Owner to submit the proposed Lease, Lease amendment,
modification or termination to Mortgage Lender. 
Borrower shall, and shall cause Owner to, promptly send copies to Lender
of all notices of material default which Owner shall receive under the Leases.

Section 2.35.  Condemnation.  In the event that all or any portion of the
Premises shall be damaged or taken through condemnation (which term shall
include any damage or taking by any governmental authority, quasi-governmental
authority, any party having the power of condemnation, or any transfer by
private sale in lieu thereof), or any such condemnation shall be threatened, Borrower
shall give prompt written notice to Lender. 
Lender acknowledges that Owner’s rights to any condemnation award is
subject to the terms of the Mortgage. 
Notwithstanding the foregoing, Borrower may not and shall not permit
Owner to settle or compromise any claim, action or proceeding relating to such
damage or condemnation without the prior written consent of Lender, which shall
not be unreasonably withheld, delayed or denied; provided, further, that Owner
may settle, adjust and compromise any such claim, action or proceeding which is
of an amount less than $250,000 provided no Event of Default has occurred.  Any proceeds remaining after the application
of any award to reconstruct or repair the Premises or to the payment of the
Mortgage Loan shall be paid to Lender and applied to the payment of the Debt
whether or not then due.  In the event
that Owner is permitted pursuant to the terms of the Mortgage to reconstruct,
restore or repair the Premises following a condemnation of any portion of the
Premises, Borrower shall cause Owner to promptly and diligently repair and
restore the Premises in the manner and within the time periods required by the
Mortgage, the Leases and any other agreements affecting the Premises.  In the event that Owner is permitted pursuant
to the terms of the Mortgage to elect not to reconstruct, restore or repair the
Premises following a condemnation of any portion of the Premises, Borrower
shall not permit Owner to elect not to reconstruct, restore or repair the
Premises without the prior written consent of Lender.

Section 2.36.  Ground Lease.

(a)           Borrower
will, and will cause Owner to, comply in all material respects with the terms
and conditions of the Ground Lease. 
Borrower will not, and will not permit Owner to, do or permit anything
to be done, the doing of which, or refrain from doing anything, the omission of
which, will impair or tend to impair the security of the Premises under the
Ground Lease or will be grounds for declaring a forfeiture of the Ground Lease.  Borrower shall, and shall cause Owner to,
promptly send copies of all notices of default which Owner may receive under
the Ground Lease to Lender.

(b)           Borrower
shall, and shall cause Owner to, enforce the Ground Lease and not terminate,
modify, cancel, change, supplement, alter or amend the Ground Lease, or waive,
excuse, condone or in any way release or discharge Ground Lessor of or from any
of the material covenants and conditions to be performed or observed by Ground
Lessor.

(c)           Lender
shall have the right, but not the obligation, to perform any obligations of

 32
 

 

Borrower or Owner under the terms of the Ground Lease during the
continuance of an Event of Default.  All
costs and expenses (including, without limitation, reasonable attorneys’ fees
and expenses) so incurred, shall be treated as an advance secured by this
Agreement, shall bear interest thereon at the Default Rate from the date of
payment by Lender until paid in full and shall be paid by Borrower to Lender
during the continuance of an Event of Default on demand.  No performance by Lender of any obligations
of Borrower or Owner shall constitute a waiver of any Event of Default arising
by reason of Borrower’s or Owner’s failure to perform the same.  If Lender shall make any payment or perform
any act or take action in accordance with this Section 2.36(c), Lender will
notify Borrower of the making of any such payment, the performance of any such
act, or the taking of any such action.

(d)           Borrower
shall cause Owner to exercise each individual option, if any, to extend or
renew the term of the Ground Lease not less than thirty (30) days prior to the
last day upon which any such option may be exercised (and in all events within
five (5) days after demand by Lender made at any time within one (1) year of
the last day upon which any such option may be exercised), and Borrower hereby
expressly authorizes and appoints Lender its attorney-in-fact to exercise any
such option on behalf of Owner to so exercise such option if Borrower fails to
cause Owner to exercise as herein required, which power of attorney shall be
irrevocable and shall be deemed to be coupled with an interest.  Borrower shall give Lender notice of Owner’s
exercise of any such option to extend or renew the term of the Ground Lease
within five (5) days of the exercise of any such option.

(e)           Subject
to Mortgage Lender’s rights under the Mortgage Loan, Borrower shall cause Owner
to assign, transfer and set over to Lender all of Borrower’s claims and rights
to the payment of damages arising from any rejection by the Ground Lessor of
the Ground Lease under the Bankruptcy Code. 
Borrower shall notify Lender promptly (and in any event within ten (10)
days) of any claim, suit, action or proceeding relating to the rejection of the
Ground Lease.  Lender is hereby irrevocably
appointed as Borrower’s attorney-in-fact, coupled with an interest, with
exclusive power to file and prosecute, to the exclusion of Borrower, any proofs
of claim, complaints, motions, applications, notices and other documents, in
any case in respect of the Ground Lessor under the Bankruptcy Code during the
continuance of an Event of Default. 
Borrower may make any compromise or settlement in connection with such
proceedings (subject to Lender’s reasonable approval); provided, however, that
Lender shall be authorized and entitled to compromise or settle any such
proceeding if such compromise or settlement is made after the occurrence and
during the continuance of an Event of Default. 
Borrower shall promptly execute and deliver to Lender any and all instruments
reasonably required in connection with any such proceeding after request
therefor by Lender.  Except as set forth
above, Borrower shall not, nor permit Owner to, adjust, compromise, settle or
enter into any agreement with respect to such proceedings without the prior
written consent of Lender, which consent shall not be unreasonably withheld or
delayed.

(f)            Borrower
shall not permit Owner to, without Lender’s prior written consent, elect to
treat the Ground Lease as terminated under Section 365(h)(1) of the Bankruptcy
Code.  Any such election made without
Lender’s prior written consent shall be void.

(g)           If
pursuant to Section 365(h)(2) of the Bankruptcy Code, Owner seeks to offset
against the rent reserved in the Ground Lease the amount of any damages caused
by the non-

 33
 

 

performance by the Ground Lessor of any of the Ground Lessor’s
obligations under the Ground Lease after the rejection by the Ground Lessor of
the Ground Lease under the Bankruptcy Code, Borrower shall, prior to Owner
effecting such offset, notify Lender of its intention to do so, setting forth
the amounts proposed to be so offset and the basis therefor.  If Lender has failed to object as aforesaid
within ten (10) days after notice from Borrower in accordance with the first
sentence of this Section 2.35(g), Borrower may permit Owner to proceed to
effect such offset in the amounts set forth in Borrower’s notice.  Neither Lender’s failure to object as
aforesaid nor any objection or other communication between Lender and Borrower
relating to such offset shall constitute an approval of any such offset by
Lender.  Borrower shall indemnify and
save Lender harmless from and against any and all claims, demands, actions,
suits, proceedings, damages, losses, costs and expenses of every nature whatsoever
(including, without limitation, reasonable attorneys’ fees and disbursements)
arising from or relating to any such offset by Owner against the rent reserved
in the Ground Lease.

(h)           Borrower
shall immediately, after obtaining knowledge thereof, notify Lender of any
filing by or against the Ground Lessor of a petition under the Bankruptcy
Code.  Borrower shall thereafter
forthwith give written notice of such filing to Lender, setting forth any
information available to Borrower or Owner as to the date of such filing, the
court in which such petition was filed, and the relief sought therein.  Borrower shall promptly deliver to Lender
following receipt any and all notices, summonses, pleadings, applications and
other documents received by Borrower or Owner in connection with any such
petition and any proceedings relating thereto.

(i)            Borrower
shall, and shall cause Owner to, perform all other covenants with respect to
the Ground Lease as set forth in the Mortgage for so long as any portion of the
Debt remains outstanding (regardless of whether the Mortgage Loan remains
outstanding).

ARTICLE
III.  EVENTS OF DEFAULT/REMEDIES

Section 3.01.  Events of
Default.  The Loan shall become
immediately due at the option of Lender upon any one or more of the following events
(“Event of Default”):

(a)           if
the final payment or prepayment premium, if any, due under the Note or
hereunder shall not be paid on Maturity;

(b)           if
any monthly payment of interest and/or principal due under the Note (other than
the sums described in (a) above) shall not be fully paid on the date upon which
the same is due and payable thereunder;

(c)           if
payment of any sum (other than the sums described in (a) above or (b) above)
required to be paid pursuant to the Note, this Agreement or any other Loan
Document shall not be paid within five (5) days after Lender delivers written
notice to Borrower that same is due and payable thereunder or hereunder;

(d)           if
Borrower, Owner, Guarantor or, if Borrower, Owner or Guarantor is a
partnership, any general partner of Borrower, Owner or Guarantor, or, if
Borrower, Owner or Guarantor is a limited liability company, any member of
Borrower, Owner or Guarantor, shall institute or cause to be instituted any
proceeding for the termination or dissolution of Borrower,

 34
 

 

Owner, Guarantor or any such general partner or member;

(e)           if
a default beyond applicable notice and grace periods shall occur under any of
the Mortgage Loan Documents or any other event or condition shall exist, if the
effect of such event or condition is to accelerate or permit Mortgage Lender to
accelerate the maturity of any portion of the Mortgage Loan;

(f)            if
Borrower, Owner or Guarantor attempts to assign its rights under this Agreement
or any other Loan Document or any interest herein or therein, or if any
Transfer occurs other than in each case as permitted hereunder;

(g)           if
any representation or warranty of Borrower, Owner or Guarantor made herein or
in any other Loan Document or in any certificate, report, financial statement
or other instrument or agreement furnished to Lender shall prove false or
misleading in any material respect as of the date made or furnished;

(h)           if
Borrower, Owner, Guarantor or, if Borrower, Owner or Guarantor is a
partnership, any general partner of Borrower, Owner or Guarantor, or, if
Borrower, Owner or Guarantor is a limited liability company, any member of
Borrower or Owner or managing member of Guarantor, shall make an assignment for
the benefit of creditors or shall admit in writing its inability to pay its
debts generally as they become due;

(i)            if
a receiver, liquidator or trustee of Borrower, Owner or Guarantor or any
general partner of Borrower, Owner or Guarantor shall be appointed or if
Borrower, Owner or Guarantor or their respective general partners shall be adjudicated
a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar federal or state
law, shall be filed by or against, consented to, or acquiesced in by, Borrower,
Owner, Guarantor or their respective general partners or if any proceeding for
the dissolution or liquidation of Borrower, Owner, Guarantor or their
respective general partners shall be instituted; however, if such appointment,
adjudication, petition or proceeding was involuntary and not consented to by
Borrower, Owner, Guarantor or their respective general partners, as applicable,
upon the same not being discharged, stayed or dismissed within ninety (90) days
or if Borrower, Owner, Guarantor or their respective general partners shall
generally not be paying its debts as they become due;

(j)            if
Borrower consummates a transaction which would cause this Agreement or Lender’s
rights under this Agreement, the Note or any other Loan Document to constitute
a non-exempt prohibited transaction under ERISA or result in a violation of a
state statute regulating government plans subjecting Lender to liability for a
violation of ERISA or a state statute;

(k)           if
a default beyond applicable notice and grace periods shall occur under any loan
and security agreement executed by Borrower or any Affiliate of Borrower which
secures, in whole or in part, the Debt;

(l)            if
any pledge or security interest made or granted or purported to be made or
granted pursuant to this Agreement or any of the other Loan Documents shall
cease to be in full force and effect or shall not be enforceable or shall not
be of the effect or have the priority stated herein or therein for such pledge
or security interest;

 35
 

 

(m)          if
a sale of the Premises occurs pursuant to Section 9.04 of the Mortgage and
concurrently therewith a Proposed Loan Assumption does not occur for any
reason; or

(n)           if
a default shall occur under any of the other terms, covenants or conditions of
the Note, this Agreement or any other Loan Document, other than as set forth in
(a) through (m) above, for ten (10) days after notice from Lender in the case
of any default which can be cured by the payment of a sum of money, or for
thirty (30) days after notice from Lender in the case of any other default or
an additional ninety (90) days if Borrower is diligently and continuously
effectuating a cure of a curable non-monetary default, other than as set forth
in (a) through (m) above.

Section 3.02.  Remedies.  (a) 
Upon the occurrence and during the continuance of any Event of Default,
Lender may, in addition to any other rights or remedies available to it
hereunder or under any other Loan Document, at law or in equity, take such
action, without notice or demand, as it reasonably deems advisable to protect
and enforce its rights against Borrower and in and to the Collateral,
including, but not limited to, the following actions, each of which may be
pursued singly, concurrently or otherwise, at such time and in such order as
Lender may determine, in its sole discretion, without impairing or otherwise
affecting any other rights and remedies of Lender hereunder, at law or in
equity:  (i) declare all or any portion
of the unpaid Loan to be immediately due and payable; provided, however, that
upon the occurrence of any of the events specified in Section 3.01(i), the
entire Loan will be immediately due and payable without notice or demand or any
other declaration of the amounts due and payable; or (ii) bring an action to
foreclose this Agreement and thereupon Lender may (A) exercise all rights and
powers of Borrower with respect to the Collateral or any part thereof, whether
in the name of Borrower or otherwise and (B) apply the receipts from the
Collateral to the payment of the Debt, after deducting therefrom all expenses
(including, without limitation, reasonable attorneys’ fees and disbursements
and all applicable transfer taxes) reasonably incurred in connection therewith,
as well as just and reasonable compensation for the services of Lender’s
third-party agents; or (iii) sell the Collateral or institute proceedings for
the complete foreclosure of this Agreement, or take such other action as may be
allowed pursuant to Legal Requirements, at law or in equity, for the
enforcement of this Agreement; or (iv) pursue any or all such other rights or
remedies as Lender may have under applicable law or in equity (including,
without limitation, all rights and remedies to a secured party under the UCC);
provided, however, that the provisions of this Section shall not be construed
to extend or modify any of the notice requirements or grace periods provided
for hereunder or under any of the other Loan Documents.

(b)           In
addition to the remedies described in subsection (a) above, if any Event
of Default shall occur, so long as such Event of Default shall be continuing,
(i) Lender and/or its nominees or designees shall have the right to
receive any and all dividends, payments or Distributions paid with respect to
the Equity Interests and the other Collateral, as applicable, and make
application thereof in accordance with this Agreement (and any dividends and
other payments received in trust by Borrower for the benefit of Lender shall be
segregated from the other funds of Borrower) and (ii) at Lender’s
election, all Equity Interests shall be transferred to Lender and/or one (1) or
more nominee(s) or designee(s) thereof, and Lender and/or such nominee(s) or
designee(s) may in the name of Borrower or in Lender’s and/or such nominee’s(s’)
or designee’s(s’) own name, collect all payments and assets due Borrower
pursuant to the Equity Interests and/or the applicable Organizational
Documents, and Lender

 36
 

 

and/or such nominee(s) or designee(s) may thereafter exercise
(A) all voting and other rights pertaining to the Equity Interests and/or
the other Collateral under the Organizational Documents, and (ii) any and
all rights of conversion, exchange, subscription and any other rights,
privileges or options pertaining to the Equity Interests as if they were the
absolute owners thereof (including the right to exchange at their discretion
any and all of the Equity Interests upon the merger, consolidation,
reorganization, recapitalization or other change in the structure of any
Corporation, LLC or Partnership), or upon the exercise by Borrower or Lender
and/or such nominee(s) or designee(s) of any right, privilege or option
pertaining to such Equity Interests, and, in connection therewith, the right to
deposit and deliver evidences of the Equity Interests with any committee,
depository, transfer agent, registrar or other designated agency (upon such
terms and conditions as they may determine), all without liability except to
account for property actually received by them, but neither Lender nor any such
nominee or designee shall have any duty to exercise any such right, privilege
or option and shall not be responsible for any failure to do so or delay in so
doing.  Further, unless and until Lender
and/or such nominee(s) or designee(s) succeeds to actual ownership thereof,
pursuant to the exercise of Lender’s remedies described in subsection (a)
above, neither Lender nor any such nominee or designee shall be obligated to
perform or discharge any obligation, duty or liability in connection with the
Equity Interests or the other Collateral. 
The rights of Lender hereunder shall not be conditioned or contingent
upon the pursuit by Lender of any other right or remedy against  Borrower or any guarantor of any of the Debt,
or against any other Person which may be or become liable in respect of all or
any part of the Debt or against any other collateral security therefor,
guarantee thereof or right of offset with respect thereto.  Neither Lender nor any of its nominees or
designees shall be liable for any failure to demand, collect or realize upon
all or any part of the Collateral or for any delay in doing so, nor shall they
be under any obligation to sell or otherwise dispose of any Collateral upon the
request of Borrower or any other Person or to take any other action whatsoever
with regard to the Collateral or any part thereof.

(c)           Following
the occurrence and during the continuance of an Event of Default, Lender may,
at its election, and in addition to any other remedies available hereunder, in
its sole and absolute discretion, no such duty being imposed hereby, pay,
purchase, contest or compromise any encumbrance, charge or lien which is prior
or superior to its security interest in the Collateral and pay all expenses
incurred therewith (any payment or expense so incurred shall be deemed a part
of the Debt and shall be immediately due and payable and secured hereby), all
of which shall be deemed authorized by Borrower.  All such expenses not paid when due shall
accrue interest at the Default Rate.

(d)           Without
limiting the generality of the other provisions of this Agreement, Lender is
hereby authorized by Borrower, but not obligated, in the event of any Event of
Default hereunder giving rise to Lender’s rights to sell or otherwise dispose
of the Collateral, and after the giving of any notices required herein, to sell
all or any part of the Collateral at private sale, subject to an investment
letter or in any other manner which will not require the Collateral, or any
part thereof, to be registered in accordance with the Securities Act of 1933,
as amended (the “Securities Act”), or other applicable rules and
regulations promulgated thereunder, or any other law or regulation, at the best
price reasonably obtainable by Lender at any such private sale or other
disposition in the manner mentioned above, and Borrower specifically
acknowledges that any such disposition shall be commercially reasonable under
the UCC even though any such private sales may be at prices and on terms less
favorable than those obtainable through a public

 37
 

 

sale without such restrictions, and agrees that Lender shall have no
obligation to engage in public sales and no obligation to delay the sale of any
Collateral for the period of time necessary to permit the issuer thereof to
register it for a form of public sale required by registration under the Securities
Act or under applicable state securities laws, even if such issuer would, or
should agree to, so register it.  Lender
is also hereby authorized by Borrower, but not obligated, to take such actions,
give such notices, obtain such consents, and do such other things as Lender may
deem required or appropriate in the event of a sale or disposition of any of
the Collateral.  If Lender determines to
exercise its right to sell any or all of the Collateral, upon written request,
Borrower shall and shall cause each issuer of any Pledged Interests or other
Equity Interests owned by Borrower to be sold hereunder from time to time to
furnish to Lender all such information as Lender may request in order to
determine the number of shares and other instruments included in the Collateral
which may be sold by Lender in exempt transactions under the Securities Act and
the rules and regulations of the Securities and Exchange Commission thereunder,
as the same are from time to time in effect. 
Borrower clearly understands that Lender may at its discretion approach
a restricted number of potential purchasers and that a sale under such
circumstances may yield a lower price for the Collateral, or any part or parts
thereof, than would otherwise be obtainable if same were registered and sold in
the open market.  Borrower agrees:  (i) in the event Lender shall, upon an
Event of Default hereunder, sell the Collateral, or any portion thereof, at such
private sale or sales, Lender shall have the right to rely upon the advice and
opinion of any member firm of the National Security Exchange as to the best
price reasonably obtainable upon such private sale thereof; and (ii) that
such reliance shall be conclusive evidence that Lender handled such matter in a
commercially reasonable manner under the UCC.

(e)           In
order to permit Lender to exercise the voting and other consensual rights which
it may be entitled to exercise pursuant to this Agreement and to receive all
dividends and other Distributions which it may be entitled to receive under
this Agreement, (i) Borrower shall promptly execute and deliver (or cause
to be executed and delivered) to Lender all such proxies, dividend payment
orders and other instruments as Lender may from time to time reasonably request
and (ii) WITHOUT
LIMITING THE EFFECT OF THE IMMEDIATELY PRECEDING CLAUSE (i), BORROWER
HEREBY GRANTS TO LENDER AN IRREVOCABLE PROXY TO VOTE THE PLEDGED INTERESTS AND
OTHER EQUITY INTERESTS PLEDGED BY BORROWER AND TO EXERCISE ALL OTHER RIGHTS,
POWERS, PRIVILEGES AND REMEDIES TO WHICH A HOLDER OF THE PLEDGED INTERESTS OR
OTHER EQUITY INTERESTS WOULD BE ENTITLED (INCLUDING WITHOUT LIMITATION GIVING
OR WITHHOLDING WRITTEN CONSENTS OF SHAREHOLDERS, MEMBERS OR PARTNERS, AS
APPLICABLE, CALLING SPECIAL MEETINGS OF SHAREHOLDERS, MEMBERS OR PARTNERS, AS
APPLICABLE, AND VOTING AT SUCH MEETINGS), WHICH PROXY SHALL BE EFFECTIVE,
AUTOMATICALLY AND WITHOUT THE NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER
OF ANY PLEDGED INTERESTS ON THE RECORD BOOKS OF THE ISSUER THEREOF) BY ANY
OTHER PERSON (INCLUDING THE ISSUER OF THE PLEDGED INTERESTS OR ANY OFFICER OR
AGENT THEREOF), UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF
DEFAULT AND WHICH PROXY SHALL ONLY TERMINATE UPON THE PAYMENT IN FULL OF THE
DEBT OTHER THAN THE SURVIVING OBLIGATIONS (WHICH, HOWEVER, SHALL REMAIN SUBJECT
TO

 38
 

 

THE PREFERENTIAL PAYMENT PROVISIONS).

(f)            Any
time after an Event of Default Lender shall have the power to sell the
Collateral or any part thereof at public auction, in such manner, at such time
and place, upon such terms and conditions, and upon such public notice as
Lender may deem best for the interest of Lender, or as may be required or
permitted by applicable law, consisting of advertisement in a newspaper of
general circulation in the jurisdiction and for such period as applicable law
may require and at such other times and by such other methods, if any, as may
be required by law to convey the Collateral to and at the cost of the
purchaser, who shall not be liable to see to the application of the purchase money.  Notwithstanding anything contained in this
Agreement or in any other Loan Document, the proceeds or avails of any sale
made under or by virtue of this Section, together with any other sums which
then may be held by Lender under this Agreement, whether under the provisions
of this Section or otherwise, shall be applied as follows:

First:  To the payment of the
third-party costs and expenses reasonably incurred in connection with any such
sale (including, without limitation, any transfer taxes) and to advances, fees
and expenses, including, without limitation, reasonable fees and expenses of
Lender’s legal counsel as applicable, and of any judicial proceedings wherein
the same may be made, and of all expenses, liabilities and advances reasonably
made or incurred by Lender under this Agreement, together with interest as
provided herein on all such advances made by Lender;

Second:  To the payment of the
whole amount then due, owing and unpaid under the Note for principal and
interest thereon, with interest on such unpaid principal at the Default Rate
from the date of the occurrence of the earliest Event of Default that formed a
basis for such sale until the same is paid;

Third:  To the payment of any
other portion of the Loan required to be paid by Borrower pursuant to any
provision of this Agreement, the Note, or any of the other Loan Documents; and

Fourth:  The surplus, if any, to
Borrower unless otherwise required by Legal Requirements.

Lender and any receiver
or custodian of the Collateral or any part thereof shall be liable to account
for only those rents, issues, proceeds and profits, as applicable, actually
received by it.

(g)           Lender
may adjourn from time to time any sale by it to be made under or by virtue of
this Agreement by announcement at the time and place appointed for such sale or
for such adjourned sale or sales and, except as otherwise provided by any
applicable provision of Legal Requirements, Lender, without further notice or
publication, may make such sale at the time and place to which the same shall
be so adjourned.

(h)           Upon
the completion of any sale or sales made by Lender under or by virtue of this
Section, Lender, or any officer of any court empowered to do so, shall execute
and deliver to the accepted purchaser or purchasers a good and sufficient
instrument, or good and sufficient instruments, granting, conveying, assigning
and transferring all estate, right, title and interest in and to the
Collateral.  Lender is hereby irrevocably
appointed the true and lawful attorney-in-fact

 39
 

 

of Borrower (coupled with an interest), in its name and stead, to make
all necessary conveyances, assignments, transfers and deliveries and for that
purpose Lender may execute all necessary instruments of conveyance, assignment,
transfer and delivery, and may substitute one or more Persons with like power,
Borrower hereby ratifying and confirming all that its said attorney-in-fact or
such substitute or substitutes shall lawfully do by virtue hereof.  Nevertheless, Borrower, if so requested by
Lender, shall ratify and confirm any such sale or sales by executing and
delivering to Lender, or to such purchaser or purchasers all such instruments
as may be advisable, in the sole judgment of Lender, for such purpose, and as
may be designated in such request.  Any
such sale or sales made under or by virtue of this Section shall operate to
divest all the estate, right, title, interest, claim and demand whatsoever,
whether at law or in equity, of Borrower in and to the Collateral, and shall,
to the fullest extent permitted under Legal Requirements, be a perpetual bar,
both at law and in equity against Borrower and against any and all Persons
claiming or who may claim the same, or any part thereof, from, through or under
Borrower.

(i)            In
the event of any sale made under or by virtue of this Section, the entire Loan
immediately thereupon shall, anything in the Loan Documents to the contrary
notwithstanding, become due and payable.

(j)            Upon
any sale made under or by virtue of this Section (whether made under the power
of sale herein granted or under or by virtue of judicial proceedings or a
judgment or decree of foreclosure and sale), Lender may bid for and acquire the
Collateral or any part thereof and in lieu of paying cash therefor may make
settlement for the purchase price by crediting upon the Loan the net sales
price after deducting therefrom the expenses of the sale (including, without
limitation, transfer taxes) and the costs of the action.

(k)           No
recovery of any judgment by Lender and no levy of an execution under any judgment
upon the Collateral or upon any other property of Borrower shall release the
lien of this Agreement upon the Collateral or any part thereof, or any liens,
rights, powers or remedies of Lender hereunder, but such liens, rights, powers
and remedies of Lender shall continue unimpaired until all amounts due under
the Note, this Agreement and the other Loan Documents are paid in full.

(l)            Upon
the exercise by Lender of any power, right, privilege, or remedy pursuant to
this Agreement which requires any consent, approval, registration,
qualification, or authorization of any Governmental Authority, Borrower agrees
to execute and deliver, or will cause the execution and delivery of, all
applications, certificates, instruments, assignments and other documents and
papers that Lender or any purchaser of the Collateral may be required to obtain
for such governmental consent, approval, registration, qualification, or
authorization and Lender is hereby irrevocably appointed the true and lawful
attorney-in-fact of Borrower (coupled with an interest), in its name and stead,
to execute all such applications, certificates, instruments, assignments and
other documents and papers.

(m)          Lender
may comply with any applicable Legal Requirements in connection with the
disposition of the Collateral, and Lender’s compliance therewith will not be
considered to adversely affect the commercial reasonableness of any sale of the
Collateral.

 40
 

 

(n)           Lender
may sell the Collateral without giving any warranties as to the Collateral.
Lender may specifically disclaim any warranties of title, possession, quiet
enjoyment or the like.  This procedure
will not be considered to adversely affect the commercial reasonableness of any
sale of the Collateral.

(o)           If
Lender sells any of the Collateral upon credit, Borrower will be credited only
with payments actually made by the purchaser, received by Lender and applied to
the indebtedness of the purchaser.  In
the event the purchaser of the Collateral fails to fully pay for the
Collateral, Lender may resell the Collateral and Borrower will be credited with
the proceeds of such sale.

Section 3.03.  No Conditions
Precedent to Exercise of Lender’s Remedies. 
Borrower waives any and all legal requirements that Lender institute any
action or proceeding at law or in equity against Borrower or any other party or
exhaust its remedies against Borrower or any other party in respect of any
other security held by Lender for the Debt or any portion thereof as a
condition precedent to exercising its right and remedies pursuant to this
Agreement.

Section 3.04.  Additional
Security.  Borrower authorizes Lender
without notice or demand and without affecting its liability under this
Agreement or under the Note (i) to take and hold security in addition to the
security interest in the Collateral granted by Borrower to Lender pursuant to
this Agreement, for the payment of the Debt or any part thereof, and to
exchange, waive or release any such other security and (ii) to release or
substitute Borrower.

Section 3.05.  Rights and Remedies
Continue.  Until the Debt shall have
been paid in full, all rights, powers and remedies granted to Lender under this
Agreement shall continue to exist and may be exercised by Lender at any time
and from time to time irrespective of the fact that the Debt or any part
thereof may have become barred by any statute of limitations or that the
liability of Borrower therefor may have ceased.

Section 3.06.  Right to
Terminate Proceedings.  Lender may
terminate or rescind any proceeding or other action brought in connection with
its exercise of the remedies provided in Section 3.02 at any time before the
conclusion thereof, as determined in Lender’s sole discretion and without
prejudice to Lender.

Section 3.07.  No Waiver or
Release.  The failure of Lender to exercise
any right, remedy or option provided in the Loan Documents shall not be deemed
a waiver of such right, remedy or option or of any covenant or obligation
contained in the Loan Documents.  No
acceptance by Lender of any payment after the occurrence of an Event of Default
and no payment by Lender of any payment or obligation for which Borrower is
liable hereunder shall be deemed to waive or cure any Event of Default.  No sale of all or any portion of the Collateral,
no forbearance on the part of Lender, and no extension of time for the payment
of the whole or any portion of the Loan or any other indulgence given by Lender
to Borrower or any other Person, shall operate to release or in any manner
affect the interest of Lender in the Collateral or the liability of Borrower to
pay the Loan.  No waiver by Lender shall
be effective unless it is in writing and then only to the extent specifically
stated.

Section 3.08.  Payment of Debt
After Default.  If following the
occurrence of any Event

 41
 

 

of Default, Borrower shall tender payment of an amount sufficient to
satisfy the Debt in whole or in part at any time prior to a UCC sale of the
Collateral, and if at the time of such tender prepayment of the principal
balance of the Note is not permitted by the Note and this Agreement, Borrower
shall, in addition to the entire Debt, also pay to Lender a sum equal to
interest which would have accrued on the principal balance of the Note at an
interest rate equal to the LIBOR Margin for the Note plus the greater of (x)
the then current LIBOR Rate and (y) the then current average yield for “This
Week” as published by the Federal Reserve Board during the most recent full
week preceding the date on which Borrower tenders such payment in Federal
Reserve Statistical Release H.15 (519) for instruments having a ten (10) year
maturity, from the date of such tender to the earlier of (a) the Maturity Date
or (b) the first day of the period during which prepayment of the principal
balance of the Note would have been permitted together with a prepayment
consideration equal to the prepayment consideration which would have been
payable as of the first day of the period during which prepayment would have
been permitted.  If at the time of such
tender, prepayment of the principal balance of the Note is permitted, such
tender by Borrower shall be deemed to be a voluntary prepayment of the
principal balance of the Note and Borrower shall, in addition to the entire
Debt, also pay to Lender the applicable prepayment consideration specified in
the Note and this Agreement.

Section 3.09.  No Impairment;
No Releases.  The interests and
rights of Lender under the Loan Documents shall not be impaired by any
indulgence, including (a) any renewal, extension or modification which Lender
may grant with respect to any of the Loan; (b) any surrender, compromise,
release, renewal, extension, exchange or substitution which Lender may grant
with respect to the Loan Documents or any portion thereof; or (c) any release
or indulgence granted to any maker, endorser, or surety of any of the Loan.

Section 3.10.  Interest After
Default.  If any amount due under the
Note, this Agreement or any of the other Loan Documents is not paid within any
applicable notice and grace period after same is due, whether such date is the
stated due date, any accelerated due date or any other date or at any other
time specified under any of the terms hereof or thereof, then, in  such event, Borrower shall pay interest on
the amount not so paid from and after the date on which such amount first
becomes due at the Default Rate; and such interest shall be due and payable at
such rate until the earlier of the cure of all Events of Default or the payment
of the entire amount due to Lender, whether or not any action shall have been
taken or proceeding commenced to recover the same or to foreclose this
Agreement.  All unpaid and accrued
interest shall be secured by this Agreement as part of the Debt.  Nothing in this Section or in any other
provision of this Agreement shall constitute an extension of the time for
payment of the Debt.

Section 3.11.  Late Payment
Charge.  If any portion of the Debt
is not paid in full on or before the date on which it is due and payable
hereunder (other than the principal portion of the Debt due on the Maturity
Date), Borrower shall pay to Lender an amount equal to five percent (5%) of
such unpaid portion of the Debt (“Late Charge”) to defray the expense
incurred by Lender in handling and processing such delinquent payment, and such
amount shall constitute a part of the Debt.

Section 3.12.  Recovery of
Sums Required To Be Paid.  Lender
shall have the right from time to time to take action to recover any sum or
sums which constitute a part of the Debt as the same become due and payable
hereunder (after the expiration of any grace period or the giving

 42
 

 

of any notice herein provided, if any), without regard to whether or
not the balance of the Debt shall be due, and without prejudice to the right of
Lender thereafter to bring an action of foreclosure, or any other action, for a
default or defaults by Borrower existing at the time such earlier action was
commenced.

Section 3.13.  Control By
Lender After Default. 
Notwithstanding the appointment of any custodian, receiver, liquidator
or trustee of Borrower, or of any of its property, or of the Collateral or any
part thereof, to the extent permitted by Legal Requirements, Lender shall be
entitled to obtain possession and control of all Collateral.

ARTICLE
IV.  INDEMNIFICATION

Section 4.01.  Indemnification
Covering Property.  In addition, and without limitation, to any
other provision of this Agreement or any other Loan Document, Borrower shall
protect, indemnify and save harmless Lender and its successors and assigns, and
each of their agents, employees, officers, directors, stockholders, partners
and members (collectively, “Indemnified Parties”) for, from and against
any claims, demands, penalties, fines, liabilities, settlements, damages, costs
and expenses of whatever kind or nature, known or unknown, contingent or
otherwise, whether incurred or imposed within or outside the judicial process,
including, without limitation, reasonable attorneys’ fees and disbursements
imposed upon or incurred by or asserted against any of the Indemnified Parties
by reason of (a) ownership of this Agreement or the Collateral; (b) any
accident, injury to or death of any person or loss of or damage to property
occurring in, on or about the Premises or the Collateral or any part thereof or
on the adjoining sidewalks, curbs, parking areas, streets or ways; (c) any use,
nonuse or condition in, on or about, or possession, alteration, repair,
operation, maintenance or management of, the Premises or any part thereof or on
the adjoining sidewalks, curbs, parking areas, streets or ways; (d) any failure
on the part of Borrower to perform or comply with any of the terms of this
Agreement; (e) performance of any labor or services or the furnishing of any
materials or other property in respect of the Premises or any part thereof; (f)
any claim by brokers, finders or similar Persons claiming to be entitled to a
commission in connection with any Lease or other transaction involving the
Premises or any part thereof; (g) any Imposition including, without limitation,
any Imposition attributable to the execution, delivery, filing, or recording of
any Loan Document, Lease or memorandum thereof; (h) any lien or claim arising
on or against the Premises or any part thereof under any Legal Requirement or
any liability asserted against any of the Indemnified Parties with respect thereto;
(i) any claim arising out of or in any way relating to any tax or other
imposition on the making and/or recording of this Agreement, the Note or any of
the other Loan Documents; (j) a Default under Sections 2.02(f), 2.02(g),
2.02(k) or 2.02(s) hereof, (k) the failure of any Person to file timely with
the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients
of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which
may be required in connection with the Loan, or to supply a copy thereof in a
timely fashion to the recipient of the proceeds of the Loan; (l) the claims of
any lessee or any Person acting through or under any lessee or otherwise
arising under or as a consequence of any Lease; or (m) the actual or alleged
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release or threat of release of any Hazardous Materials in, on, over, under,
from or affecting the Premises or (n) the failure to pay any insurance
premiums.  Notwithstanding the foregoing
provisions of this Section to the contrary, Borrower shall have no obligation
to indemnify the Indemnified Parties pursuant to this Section for liabilities,

 43
 

 

obligations,
claims, damages, penalties, causes of action, costs and expenses relative to
the foregoing which result from Lender’s, and its successors’ or assigns’,
willful misconduct or gross negligence. 
Any amounts payable to Lender by reason of the application of this
Section shall constitute a part of the Debt secured by this Agreement and the
other Loan Documents and shall become immediately due and payable and shall
bear interest at the Default Rate from the date the liability, obligation,
claim, cost or expense is sustained by Lender, as applicable, until paid.  The provisions of this Section shall survive
the termination of this Agreement whether by repayment of the Debt, foreclosure
of this Agreement, assignment or otherwise. 
In case any action, suit or proceeding is brought against any of the
Indemnified Parties by reason of any occurrence of the type set forth in (a)
through (m) above, Borrower shall, at Borrower’s expense, resist and defend
such action, suit or proceeding or will cause the same to be resisted and
defended by counsel at Borrower’s expense for the insurer of the liability or
by counsel designated by Borrower (unless reasonably disapproved by Lender
promptly after Lender has been notified of such counsel); provided, however,
that nothing herein shall compromise the right of Lender (or any other
Indemnified Party) to appoint its own counsel at Borrower’s expense for its
defense with respect to any action which, in the reasonable opinion of Lender
or such other Indemnified Party, as applicable, presents a conflict or
potential conflict between Lender or such other Indemnified Party that would
make such separate representation advisable. 
Any Indemnified Party will give Borrower prompt notice after such
Indemnified Party obtains actual knowledge of any potential claim by such Indemnified
Party for indemnification hereunder.  The
Indemnified Parties shall not settle or compromise any action, proceeding or
claim as to which it is indemnified hereunder without notice to Borrower.  Notwithstanding the foregoing, so long
as no Default has occurred and is continuing and Borrower is resisting and
defending such action, suit or proceeding as provided above in a prudent and
commercially reasonable manner, in order to obtain the benefit of this Section
with respect to such action, suit or proceeding, Lender and the Indemnified Parties
agree that they shall not settle such action, suit or proceeding without
obtaining Borrower’s consent which Borrower agrees not to unreasonably
withhold, condition or delay; provided, however, (x) if  Borrower is not diligently defending such
action, suit or proceeding in a prudent and commercially reasonable manner as
provided above and Lender has provided Borrower with thirty (30) days’ prior
written notice, or shorter period if mandated by the requirements of the
applicable law, and Borrower has failed to correct such failure, or (y) failure
to settle could, in Lender’s reasonable judgment, expose Lender to criminal
liability, Lender may settle such action, suit or proceeding without the
consent of but upon notice to Borrower and be entitled to the benefits of this
Section with respect to the settlement of such action, suit or proceeding.

ARTICLE
V.  SECURITY AGREEMENT

Section 5.01.  Security
Agreement.  (a)  This Agreement is a “security agreement”
within the meaning of the UCC.  If an
Event of Default shall occur, Lender, in addition to any other rights and
remedies which it may have, shall have and may exercise immediately and without
demand, any and all rights and remedies granted to a secured party upon default
under the UCC, including, without limiting the generality of the foregoing, the
right to take possession of the Collateral or any part thereof, and to take
such other measures as Lender may deem necessary for the care, protection and
preservation of the Collateral.  Upon
request or demand of Lender following an Event of Default, Borrower shall, at
its expense, assemble the Collateral and make it available to Lender at a
convenient place acceptable to Lender. 
Borrower shall pay to Lender

 44
 

 

on demand any and all expenses, including reasonable legal expenses and
attorneys’ fees and all transfer taxes, incurred or paid by Lender in
protecting its interest in the Collateral and in enforcing its rights hereunder
with respect to the Collateral.  Any
notice of sale, disposition or other intended action by Lender with respect to
the Collateral given to Borrower in accordance with the provisions hereof at
least ten (10) days prior to such action shall constitute reasonable notice to
Borrower.

(b)           Borrower
hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an
interest, to file with the appropriate public office on its behalf any
financing or other statements signed only by Lender, as secured party, or, to
the extent permitted under the UCC, unsigned, in connection with the Collateral
covered by this Agreement.  Such
financing statements may, at the option of Lender, describe the Collateral as “all
assets” or “all personal property” of Borrower.

(c)           Borrower will furnish to Lender from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as Lender may
reasonably request, all in reasonable detail.

(d)           The powers conferred on Lender hereunder are
solely to protect Lender’s interest in the Collateral and shall not impose any
duty upon it to exercise any such powers. 
Except for the safe custody of any Collateral in its possession and the
accounting for moneys actually received by it hereunder, Lender shall have no
duty (and neither Lender nor any of its partners, members, officers, directors,
employees or agents shall be responsible to Borrower for any act or failure to
act) as to any Collateral, as to ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relating to
any Collateral, whether or not Lender has or is deemed to have knowledge of
such matters, or as to the taking of any necessary steps to preserve rights
against any parties or any other rights pertaining to any Collateral.  Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which it accords its own property.

ARTICLE VI. 
PREPAYMENT

Section 6.01.  Prepayment.  (a) Except
as set forth in Section 6.01(b) hereof, no prepayment of the Debt may be made
in whole or in part.

(b)           Borrower may voluntarily prepay the Loan, in whole or in part, on any
Business Day, in accordance with the following provisions:

(i)            Lender shall have received from Borrower not
less than thirty (30) days , nor more than ninety (90) days, prior written
notice specifying the date proposed for such prepayment and the amount which is
to be prepaid (which notice shall be revocable by Borrower up to three (3)
times during the term of the Loan by giving Lender not less than one (1)
Business Day prior written notice of such revocation, provided that Borrower
shall remain obligated to pay Lender’s costs and expenses including, without limitation,
breakage costs incurred by Lender in connection with such revocation).

 45
 

 

(ii)           Borrower shall also pay to Lender all interest due through and
including the last day of the Interest Accrual Period in which such prepayment
is being made, together with any and all other amounts due and owing pursuant
to the terms of the Note, this Agreement or the other Loan Documents, provided
that the amount prepaid shall be deposited in an interest-bearing account until
the Final Payment Date, and all interest accruing thereon through  the date immediately preceding the Final
Payment Date shall be remitted to Borrower, provided that Borrower acknowledges
that Lender makes no representation or warranty as to the rate of return.  For the sake of clarity, if Borrower shall
have paid interest on the Payment Date in the month in which the repayment
occurs through the then current Interest Accrual Period and repays the Debt in
full on or before the Final Payment Date, no additional interest shall be due
or payable by Borrower with respect to the period subsequent to the Payment
Date.

(iii)          Any partial prepayment shall be in a minimum amount of not less than
$25,000 and shall be in whole multiples of $1,000 in excess thereof.

(iv)          Intentionally omitted.

(v)           Intentionally omitted.

(vi)          In the event that the
Loan is prepaid in whole or in part prior to the first (1st) anniversary of the
date hereof, Borrower shall pay to Lender, together with such prepayment and
all other amounts due in connection therewith, a non-refundable amount which
shall be deemed earned by Lender upon the funding of the Loan and shall not
count to or be credited to payment of the Principal Amount, any interest
thereon or any other amounts payable under the Note, this Agreement or any of
the Loan Documents, equal to the Spread Maintenance Premium.  Thereafter, all prepayments of the Loan shall
be without any prepayment fee or charge of any kind.

(vii)         No prepayments shall be
made on the Mortgage Loan until the Loan shall have been paid in full.

ARTICLE VII. 
MISCELLANEOUS

Section 7.01.  Notices.  Any notice, demand, statement, request or
consent made hereunder shall be in writing and delivered personally or sent to
the party to whom the notice, demand or request is being made by overnight
delivery by Federal Express or other nationally recognized overnight delivery
service, as follows and shall be deemed given when delivered personally or one
(1) Business Day after being deposited with Federal Express or such other
nationally recognized delivery service:

If to Lender:                          Wachovia Bank, National Association

Commercial Real Estate Services

8739 Research Drive URP-4

NC 1075

Charlotte, NC 28262

Loan Number:  509850398

Attention:  Portfolio Management

Fax No.: (704) 715-0036

 46
 

 

with a copy to:                      Proskauer
Rose LLP

1585 Broadway

New York, New York 10036

Attn:  David J. Weinberger, Esq.

Facsimile No.: 
(212) 969-2900

If to Borrower:                      To Borrower,
at the address first written above, to
the attention of Chief Financial Officer, Facsimile No. (212) 277-4268,

with a copy to:                      Sullivan
& Cromwell LLP

125 Broad Street

New York, New York  10004

Attn:  Arthur Adler, Esq.

Facsimile No.:  (212) 558-3588,

or such other address as Borrower or Lender shall hereafter specify by
not less than ten (10) days prior written notice as provided herein; provided,
however, that notwithstanding any provision of this Section to the contrary,
such notice of change of address shall be deemed given only upon actual receipt
thereof.  Rejection or other refusal to
accept or the inability to deliver because of changed addresses of which no
notice was given as herein required shall be deemed to be receipt of the
notice, demand, statement, request or consent.

Section 7.02.  Exhibits
Incorporated.  The information set
forth on the cover hereof, and the Exhibits annexed hereto, are hereby
incorporated herein as a part of this Agreement with the same effect as if set
forth in the body hereof.

Section 7.03.  Severable
Provisions.  If any term, covenant or
condition of the Loan Documents including, without limitation, the Note or this
Agreement, is held to be invalid, illegal or unenforceable in any respect, such
Loan Document shall be construed without such provision.

Section 7.04.  Cumulative
Rights.  The rights, powers and
remedies of Lender under this Agreement shall be separate, distinct and
cumulative and none shall be given effect to the exclusion of the others.  No act of Lender shall be construed as an
election to proceed under any one provision herein to the exclusion of any
other provision.  Lender shall not be
limited exclusively to the rights and remedies herein stated but shall be
entitled, subject to the terms of this Agreement, to every right and remedy now
or hereafter afforded by law.

Section 7.05.  Duplicate
Originals.  This Agreement may be
executed in any number of duplicate originals and each such duplicate original
shall be deemed to constitute but one and the same instrument.

 47

 

Section 7.06.  Waiver of
Notice.  Borrower shall not be
entitled to any notices of any nature whatsoever from Lender except with
respect to matters for which this Agreement specifically and expressly provides
for the giving of notice by Lender to Borrower and except with respect to
matters for which Borrower is not, pursuant to applicable legal requirements
permitted to waive the giving of notice.

Section 7.07.  Joint and
Several Liability.  If Borrower
consists of more than one Person, the obligations and liabilities of each such
Person hereunder shall be joint and several.

Section 7.08.  No Oral Change.  The terms of this Agreement, together with
the terms of the Note and the other Loan Documents constitute the entire
understanding and agreement of the parties hereto and supersede all prior
agreements, understandings and negotiations between Borrower and Lender with
respect to the Loan.  This Agreement, and
any provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act on the part of Borrower or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change,
discharge or termination is sought.

Section 7.09.  WAIVER OF
COUNTERCLAIMS, ETC.  BORROWER HEREBY
WAIVES THE RIGHT TO ASSERT A COUNTERCLAIM, OTHER THAN A COMPULSORY
COUNTERCLAIM, IN ANY ACTION OR PROCEEDING BROUGHT AGAINST IT BY LENDER OR ITS
AGENTS, AND WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY EITHER
PARTY HERETO AGAINST THE OTHER OR IN ANY COUNTERCLAIM BORROWER MAY BE PERMITTED
TO ASSERT HEREUNDER OR WHICH MAY BE ASSERTED BY LENDER OR ITS AGENTS, AGAINST
BORROWER, OR IN ANY MATTERS WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED
WITH THIS AGREEMENT OR THE DEBT.

Section 7.10.  Headings;
Construction of Documents, etc.  The
headings and captions of various paragraphs of this Agreement are for
convenience of reference only and are not to be construed as defining or
limiting, in any way, the scope or intent of the provisions hereof.  Borrower acknowledges that it was represented
by competent counsel in connection with the negotiation and drafting of this
Agreement and the other Loan Documents and that neither this Agreement nor the
other Loan Documents shall be subject to the principle of construing the
meaning against the Person who drafted same.

Section 7.11.  Sole Discretion
of Lender.  Whenever Lender exercises
any right given to it to approve or disapprove, or any arrangement or term is
to be satisfactory to Lender, the decision of Lender to approve or disapprove
or to decide that arrangements or terms are satisfactory or not satisfactory
shall be in the sole discretion of Lender and shall be final and conclusive,
except as may be otherwise specifically provided herein.

Section 7.12.  APPLICABLE LAW.  THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF
NEW YORK AND MADE BY BORROWER AND ACCEPTED BY LENDER IN THE STATE OF NEW YORK
AND THE PROCEEDS OF THE NOTE WERE DISBURSED FROM THE STATE OF NEW YORK WHICH
STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO
THE UNDERLYING

 48
 

 

TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.  THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA.

Section 7.13.  Actions and
Proceedings.  Lender has the right to
appear in and defend any action or proceeding brought with respect to the
Collateral in its own name or, if required by Legal Requirements or, if in
Lender’s reasonable judgment, it is necessary, in the name and on behalf of
Borrower, which Lender believes will adversely affect the Collateral or this
Agreement and to bring any action or proceedings, in its name or in the name
and on behalf of Borrower, which Lender, in its discretion, decides should be
brought to protect its interest in the Note, this Agreement and the other Loan
Documents.

Section 7.14.  Usury Laws.  This Agreement and the Note are subject to
the express condition, and it is the expressed intent of the parties, that at no
time shall Borrower be obligated or required to pay interest on the principal
balance due under the Note at a rate which could subject the holder of the Note
to either civil or criminal liability as a result of being in excess of the
maximum interest rate which Borrower is permitted by law to contract or agree
to pay.  If by the terms of this
Agreement or the Note, Borrower is at any time required or obligated to pay
interest on the principal balance due under the Note at a rate in excess of
such maximum rate, such rate of interest shall be deemed to be immediately
reduced to such  maximum rate and the
interest payable shall be computed at such maximum rate and all prior interest
payments in excess of such maximum rate shall be applied and shall be deemed to
have been payments in reduction of the principal balance of the Note.  No application to the principal balance of
the Note pursuant to this Section shall give rise to any requirement to pay any
prepayment fee or charge of any kind due hereunder, if any.

Section 7.15.  Remedies of
Borrower.  In the event that a claim
or adjudication is made that Lender has acted unreasonably or unreasonably
delayed acting in any case where by law or under the Note, this Agreement or
the Loan Documents, it has an obligation to act reasonably or promptly, Lender
shall not be liable for any monetary damages, and Borrower’s remedies shall be
limited to injunctive relief or declaratory judgment.

Section 7.16.  Offsets,
Counterclaims and Defenses.  Any
assignee of this Agreement and the Note shall take the same free and clear of
all offsets, counterclaims or defenses which are unrelated to the Note or this
Agreement which Borrower may otherwise have against any assignor of this
Agreement and the Note and no such unrelated counterclaim or defense shall be
interposed or asserted by Borrower in any action or proceeding brought by any
such assignee upon this Agreement or the Note and any such right to interpose
or assert any such unrelated offset, counterclaim or defense in any such action
or proceeding is hereby expressly waived by Borrower.

Section 7.17.  Restoration of
Rights.  In case Lender shall have
proceeded to enforce any right under this Agreement and such proceedings shall
have been discontinued or abandoned for

 49
 

 

any reason or shall have been determined adversely, then, in every such
case, Borrower and Lender shall be restored to their former positions and
rights hereunder with respect to the Collateral subject to the lien hereof.

Section 7.18.  Waiver of
Statute of Limitations.  The
pleadings of any statute of limitations as a defense to any and all obligations
secured by this Agreement are hereby waived to the full extent permitted by
Legal Requirements.

Section 7.19.  Advances.  This Agreement shall cover any and all advances
made pursuant to the Loan Documents, rearrangements and renewals of the Loan
and all extensions in the time of payment thereof, even though such advances,
extensions or renewals be evidenced by new promissory notes or other
instruments hereafter executed and irrespective of whether filed or
recorded.  Likewise, the execution of
this Agreement shall not impair or affect any other security which may be given
to secure the payment of the Loan, and all such additional security shall be
considered as cumulative.  The taking of
additional security, execution of partial releases of the security, or any
extension of time of payment of the Loan shall not diminish the force, effect
or lien of this Agreement and shall not affect or impair the liability of
Borrower and shall not affect or impair the liability of any maker, surety, or
endorser for the payment of the Loan.

Section 7.20.  Application of
Default Rate Not a Waiver. 
Application of the Default Rate shall not be deemed to constitute a
waiver of any Default or Event of Default or any rights or remedies of Lender
under this Agreement, any other Loan Document or applicable Legal Requirements,
or a consent to any extension of time for the payment or performance of any
obligation with respect to which the Default Rate may be invoked.

Section 7.21.  Intervening
Lien.  To the fullest extent
permitted by law, any agreement hereafter made pursuant to this Agreement shall
be superior to the rights of the holder of any intervening lien.

Section 7.22.  No Joint
Venture or Partnership.  Borrower and
Lender intend that the relationship created hereunder be solely that of pledgor
and pledgee or borrower and lender, as the case may be.  Nothing herein is intended to create a joint
venture or partnership relationship between Borrower and Lender nor to grant
Lender any interest in the Collateral other than that of pledgee or lender.

Section 7.23.  Time of the
Essence.  Time shall be of the
essence in the performance of all obligations of Borrower hereunder.

Section 7.24.  Borrower’s
Obligations Absolute.  Borrower
acknowledges that Lender and/or certain Affiliates of Lender are engaged in the
business of financing, owning, operating, leasing, managing, and brokering real
estate and in other business ventures which may be viewed as adverse to or
competitive with the business, prospect, profits, operations or condition
(financial or otherwise) of Borrower. 
Except as set forth to the contrary in the Loan Documents, all sums
payable by Borrower hereunder shall be paid without notice or demand,
counterclaim, set-off, deduction or defense and without abatement, suspension,
deferment, diminution or reduction, and the obligations and liabilities of
Borrower hereunder shall in no way be released, discharged, or otherwise
affected (except as expressly provided herein) by reason of:  (a) any

 50
 

 

bankruptcy proceeding relating to Owner, Borrower, any General Partner,
or any guarantor or indemnitor, or any action taken with respect to this
Agreement or any other Loan Document by any trustee or receiver of Owner,
Borrower or any such General Partner, guarantor or indemnitor, or by any court,
in any such proceeding; (b) any claim which Borrower has or might have against
Lender; (c) any default or failure on the part of Lender to perform or comply
with any of the terms hereof or of any other agreement with Borrower; or (d)
any other occurrence whatsoever, whether similar or dissimilar to the
foregoing, whether or not Borrower shall have notice or knowledge of any of the
foregoing.

Section 7.25.  Publicity.  All promotional news releases, publicity or
advertising by Borrower or its Affiliates through any media intended to reach
the general public shall not refer to the Loan Documents or the financing
evidenced by the Loan Documents, or to Lender or to any of its Affiliates
without the prior written approval of Lender or such Affiliate, as applicable,
in each instance, such approval not to be unreasonably withheld or
delayed.  Notwithstanding anything herein to the
contrary, Borrower shall be authorized to provide information relating to the
Loan Documents or the financing evidenced by the Loan Documents, or to Lender
or to any of its Affiliates, to rating agencies, underwriters, potential
securities investors, auditors, regulatory authorities and to any Persons which
may be entitled to such information by operation of law and without limiting
the foregoing to issue press releases and make Form 8-K and other securities
filings containing the above-described information as it or its counsel
reasonably deems required by law.  Lender
shall be authorized to provide information relating to the Collateral, the Loan
and matters relating thereto to rating agencies, underwriters, potential
securities investors, auditors, regulatory authorities and to any Persons which
may be entitled to such information by operation of law and may use basic
transaction information (including, without limitation, the name of Borrower,
the name and address of the Premises and the Loan Amount) in press releases or
other marketing materials.

Section 7.26.  Securitization
Opinions.  In the event the Loan is
included as an asset of a Securitization by Lender or any of its Affiliates,
Borrower shall, within fifteen (15) Business Days after Lender’s written
request therefor, at Lender’s sole cost and expense, deliver opinions in form
and substance and delivered by counsel reasonably acceptable to Lender and the
Rating Agency, as may be reasonably required by Lender and/or the Rating Agency
in connection with such securitization. 
Borrower’s failure to deliver the opinions required hereby within such
fifteen (15) Business Day period shall constitute an “Event of Default”
hereunder.  Notwithstanding the foregoing, in no event
shall Borrower be required to deliver a “10b-5 opinion” in connection with any
Securitization.

Section 7.27.  Sale of Loan,
Participations, Securitization.  (a)
Nothing contained in this Agreement shall be construed as preventing Lender, at
any time after the date hereof, from selling, pledging, assigning or
transferring the Note and in connection with any such sale, pledge, assignment
or transfer from assigning this Agreement and transferring possession of the
Collateral, if any, in Lender’s possession, to the purchaser of the Note.  Upon any sale, pledge, assignment or transfer
of the Note and upon assignment of this Agreement and a transfer in connection
therewith of possession of the Collateral, if any, in Lender’s possession to
the purchaser of the Note, Lender shall be released and discharged from any
liability or responsibility with respect to the Loan Documents and references
to “Lender” in this Agreement shall, with respect to any matters
thereafter occurring, be deemed to be references to the

 51
 

 

purchaser of the Note.  Borrower
or any agent of Borrower acting on its behalf shall maintain at its offices a
copy of each notice of a sale, pledge, assignment or other transfer of the Loan
or a portion thereof as a whole loan delivered to it and a register (the “Register”) for the recordation of the names and addresses of each Lender
and the principal amount of the Loan or portion thereof owing to each Lender
from time to time.  The entries in the
Register shall be conclusive, in the absence of manifest error, and Borrower
may treat each Person whose name is recorded in the Register as the owner of
the Loan or portion thereof recorded therein, hereunder for all purposes of
this Agreement.  A sale, pledge,
assignment or other transfer of the Loan or a portion thereof as a whole loan,
whether or not evidenced by a Note, shall be effective only upon appropriate
entries with respect thereto being made in the Register (and, if applicable,
each Note shall expressly so provide). 
The Register shall be available for inspection by each Lender at any
reasonable time and from time to time upon reasonable prior notice.  Borrower hereby appoints Lender as its agent
to maintain the Register and Lender hereby accepts such appointment.  Lender shall indemnify and hold harmless
Borrower for any losses resulting from Lender’s failure to maintain the Register
and no failure by Lender, as Borrower’s agent (solely for the purposes of
maintaining the Register), shall result in a default hereunder or under any
other Loan Document or otherwise subject Borrower to any liability.

(b)           Borrower
acknowledges that Lender may on or after the Closing Date sell and assign
participation interests in and to the Loan, or pledge, hypothecate or encumber,
or sell and assign all or any portion of the Loan, to or with such domestic or
foreign banks, insurance companies, pension funds, trusts or other
institutional lenders or other Persons, parties or investors (including,
without limitation, grantor trusts, owner trusts, special purpose corporations,
real estate investment trusts or other similar or comparable investment vehicles)
as may be selected by Lender in its sole and absolute discretion and on terms
and conditions satisfactory to Lender in its sole and absolute discretion.  Borrower and all Affiliates of Borrower shall
cooperate in all respects with Lender in connection with the sale of
participation interests in, or the pledge, hypothecation or encumbrance or sale
of all or any portion of, the Loan, and shall, in connection therewith, at Lender’s sole cost and expense, execute
and deliver such estoppels, certificates, instruments and documents as may be
reasonably requested by Lender.  Borrower
grants to Lender the right to distribute financial and other information
concerning Borrower, Owner, the Premises, the Collateral, and all other
pertinent information with respect to the Loan to any Person who has purchased
a participation interest in the Loan, or who has purchased the Loan, or who has
made a loan to Lender secured by the Loan or who has expressed an interest in
purchasing a participation interest in the Loan, or expressed an interest in
purchasing the Loan or the making of a loan to Lender secured by the Loan.  If requested by Lender, Borrower shall
execute and deliver, and shall cause each Affiliate of Borrower to execute and
deliver, at no cost or expense to Borrower, such documents and instruments as
may be necessary to split the Loan into two or more loans evidenced by separate
sets of notes and secured by separate sets of other related Loan Documents to
the full extent required by Lender to facilitate the sale of participation
interests in the Loan or the sale of the Loan or the making of a loan to Lender
secured by the Loan, it being agreed that (a) any such splitting of the Loan
will not adversely affect or diminish the rights of Borrower as presently set
forth herein and in the other Loan Documents and will not increase the
respective obligations and liabilities of Borrower or any other Person
associated or connected with the Loan or the Collateral, (b) the Loan Documents
securing the Loan as so split will have such priority of lien as may be
specified by Lender, and (c) the retained interest of Lender in the Loan as so
split shall be allocated to or

 52
 

 

among one or more of such separate loans in a manner specified by
Lender in its sole and absolute discretion. 
From and after the effective date of any assignment of all or any
portion of the Loan to any Person (an “Assignee”) (a) such Assignee
shall be a party hereto and to each of the other Loan Documents to the extent
of the applicable percentage or percentages assigned to such Assignee and,
except as otherwise specified herein, shall succeed to the rights and
obligations of Lender hereunder in respect of such applicable percentage or
percentages and (b) Lender shall relinquish its rights and be released from its
obligations hereunder and under the Loan Documents to the extent of such
applicable percentage or percentages. 
The liabilities of Lender and each of the other Assignees shall be
separate and not joint and several. 
Neither Lender nor any Assignee shall be responsible for the obligations
of any other Assignee.  Borrower
acknowledges that the information provided by Borrower to Lender may be
incorporated into the offering documents for a Securitization and to the fullest
extent permitted, Borrower irrevocably waives all rights, if any, to prohibit
such disclosures including, without limitation, any right of privacy.  Lender and each Rating Agency shall be
entitled to rely on the information supplied by, or on behalf of, Borrower and
Borrower indemnifies Lender as to any liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses, (including, without
limitation, reasonable attorney’s fees and expenses, whether incurred within or
outside the judicial process) that arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in such
information or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated in such information or
necessary in order to make the statements in such information, or in light of
the circumstances under which they were made, not misleading.

(c)           Lender,
at its option, may elect to effect a Securitization by means of the issuance of
certificates of interest therein or notes secured thereby (the “Securities”)
rated by one or more Rating Agencies.  In
such event and upon request by Lender to seek to effect such a Securitization,
Borrower, at no cost and expense to Borrower shall promptly thereafter cooperate
in all reasonable respects with Lender in the Securitization including, without
limitation, providing such information as may be requested in connection with
the preparation of a private placement memorandum or registration statement
required to privately place or publicly distribute the Securities in a manner
which does not conflict with federal or state securities laws.

Section 7.28.  Expenses.  Borrower shall reimburse Lender upon receipt
of notice for all reasonable costs and expenses (including reasonable attorneys’
fees and disbursements) incurred by Lender in connection with (i) the
preparation, negotiation, execution and delivery of the Loan Documents and the
consummation of the transactions contemplated thereby (other than, except as
specifically set
forth herein, participations, assignments
by Lender or a Securitization); (ii) Borrower’s, its Affiliates’ and Lender’s
ongoing performance under and compliance with the Loan Documents, including
confirming compliance with environmental and insurance requirements; (iii)
unless otherwise set forth herein, the negotiation, preparation, execution,
delivery and administration of any consents, amendments, waivers or other
modifications of or under any Loan Document and any other documents or matters
requested by Lender; (iv) filing and recording of any Loan Documents; (v)
surveys, inspections and appraisals; (vi) enforcing or preserving any rights,
in response to third party claims or the prosecuting or defending of any action
or proceeding or other litigation, in each case against, under or affecting
Borrower, Owner, the Loan Documents, the Collateral, the Premises, or any other
security given for the Loan; and (vii) enforcing any obligations of or
collecting any payments due from Borrower, or

 53
 

 

Owner under any Loan Document or with respect to the Collateral, the
Premises or in connection with any refinancing or restructuring of the Loan in
the nature of a “work-out”, or any insolvency or bankruptcy proceedings.  Any costs and expenses due and payable to
Lender hereunder which are not paid by Borrower within ten (10) days after
demand may be paid from any amounts in the Lockbox Account.  The obligations and liabilities of Borrower
under this Section shall survive the Maturity Date and the exercise by Lender
of any of its rights or remedies under the Loan Documents.

Section 7.29. 
Mortgage
Loan Defaults.

(a)           Without limiting the generality of the other
provisions of this Agreement, and without waiving or releasing Borrower from
any of its obligations hereunder, if there shall occur any Event of Default
under the Mortgage Loan Documents (without regard to any other defenses or
offset rights Owner may have against Mortgage Lender), Borrower hereby
expressly agrees that Lender shall have the immediate right, without notice to
or demand on Borrower or Owner, but shall be under no obligation:  (i) to pay all or any part of the Mortgage
Loan, and any other sums, that are then due and payable and to perform any act
or take any action on behalf of Owner, as may be appropriate, to cause all of
the terms, covenants and conditions of the Mortgage Loan Documents on the part
of Owner to be performed or observed thereunder to be promptly performed or
observed; and (ii) to pay any other amounts and take any other action as Lender,
in its sole and absolute discretion, shall deem advisable to protect or
preserve the rights and interests of Lender in the Loan and/or the
Collateral.  Lender shall have no
obligation to complete any cure or attempted cure undertaken or commenced by
Lender.  All sums so paid and the third
party costs and expenses actually incurred by Lender in exercising rights under
this Section (including, without limitation, reasonable attorneys’ and other
professional fees), with interest at the Default Rate, for the period from the
date of demand by Lender to Borrower for such payments to the date of payment
to Lender, shall constitute a portion of the Debt, shall be secured by this
Agreement and shall be due and payable to Lender within two (2) Business Days
following demand therefor.  In the event
that Lender makes any payment in respect of the Mortgage Loan, Lender shall be
subrogated to all of the rights of Mortgage Lender under the Mortgage Loan
Documents against the Premises and Owner in addition to all other rights Lender
may have under the Loan Documents or applicable law.

(b)           Subject to the rights of tenants, Borrower
hereby grants, and shall cause Owner to grant, Lender and any Person designated
by Lender the right to enter upon the Premises at any time for the purpose of
carrying out the rights granted to Lender under this Section 7.29.  Borrower shall not, and shall not cause or
permit Owner or any other Person to impede, interfere with, hinder or delay,
any effort or action on the part of Lender to cure any Event of Default under
the Mortgage Loan as permitted by this Section 7.29, or to otherwise protect or
preserve Lender’s interests in the Loan and the Collateral, including the
Premises in accordance with the provisions of this Agreement and the other Loan
Documents.

(c)           Borrower hereby indemnifies Lender from and
against all out-of-pocket liabilities, obligations, losses, damages, penalties,
assessments, actions, or causes of action, judgments, suits, claims, demands,
costs, expenses (including, without limitation, reasonable attorneys’ and other
professional fees, whether or not suit is brought, and settlement costs), and
disbursements of any kind or nature whatsoever which may be imposed on, incurred
by or asserted against

 54
 

 

Lender as a result of the foregoing actions described in Section
7.29(a) or (b) other than as a result of gross negligence or willful misconduct
of Lender.  Lender shall have no
obligation to Borrower, Owner or any other party to make any such payment or
performance.

(d)           If Lender shall receive a copy of any notice
of default under the Mortgage Loan Documents sent by Mortgage Lender to Owner,
such notice shall constitute full protection to Lender for any action taken or
omitted to be taken by Lender, in good faith, in reliance thereon.  As a material inducement to Lender’s making
the Loan, Borrower hereby absolutely and unconditionally releases and waives
all claims against Lender arising out of Lender’s exercise of its rights and
remedies provided in this Section other than claims arising out of the fraud,
illegal acts, gross negligence or willful misconduct of Lender.

Section 7.30. 
Discussions
With Mortgage Lender; Etc.  In
connection with the exercise of its rights set forth in the Loan Documents,
Lender shall have the right at any time to discuss the Premises, the Mortgage
Loan, the Loan or any other matter directly with Mortgage Lender or Mortgage
Lender’s consultants, agents or representatives without notice to or permission
from Borrower, nor shall Lender have any obligation to disclose such
discussions or the contents thereof with Borrower.

Section 7.31. 
Independent
Approval Rights.  If any
action, proposed action or other decision is consented to or approved by
Mortgage Lender, such consent or approval shall not be binding or controlling
on Lender.  Borrower hereby acknowledges
and agrees that (a) the risks of Mortgage Lender in making the Mortgage Loan
are different from the risks of Lender in making the Loan, (b) in determining
whether to grant, deny, withhold or condition any requested consent or approval
Mortgage Lender and Lender may reasonably reach different conclusions, and
(c) Lender has an absolute independent right to grant, deny, withhold or
condition any requested consent or approval based on its own point of view in
accordance with  the terms hereof.  Further, the denial by Lender of a requested
consent or approval in accordance with the Loan Documents shall not create any
liability or other obligation of Lender if the denial of such consent or
approval results directly or indirectly in a default under the Mortgage Loan,
and Borrower hereby waives any claim of liability against Lender arising from
any such denial.

Section 7.32. 
Reinstatement.  This Agreement and each other Loan Document
shall continue to be effective or be reinstated, as the case may be, if at any
time payment and performance of the Debt or any part thereof, is, pursuant to
applicable law, rescinded or reduced in amount, or must otherwise be restored
or returned by Borrower, whether as a “voidable preference”, “fraudulent
conveyance”, or otherwise, all as though such payment or performance had not
been made.  In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Debt shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.

Section 7.33.  Reallocation of
Loan Amounts.  Lender, without in any
way limiting its other rights hereunder, in its sole and absolute discretion,
shall have the right to reallocate the amount of the Loan and the Mortgage Loan
and/or adjust the interest rate rates thereon provided that (i) the aggregate
principal amount of the Loan and the Mortgage Loan immediately following such
reallocation shall equal the outstanding principal balance of the Loan and the
Mortgage Loan immediately prior to such reallocation, and (ii) the initial
weighted average

 55
 

 

interest rate of the Note and the note evidencing the Mortgage Loan
immediately following such reallocation shall equal the weighted average
interest rate which was applicable to the Note and the note evidencing the
Mortgage Loan immediately prior to such reallocation.  Borrower shall cooperate with all reasonable
requests of Lender in order to reallocate the amount of the Loan and the
Mortgage Loan and shall execute and deliver such documents as shall reasonably
be required by Lender in connection therewith, including, without limitation,
amendments to the Loan Documents and the documents evidencing or securing the
Mortgage Loan, and endorsements to the Title Policy and the UCC title insurance
policy, all in form and substance reasonably satisfactory to Lender, and Lender
shall pay all costs and expenses in connection with such reallocation pursuant
to this Section, including, without limitation, any additional title insurance
and UCC insurance premiums and any additional mortgage, mortgage recording,
stamp, intangible or other similar tax required to be paid by any Person under
applicable Legal Requirements currently in effect in connection with the
execution, delivery, recordation, filing, registration, perfection or
enforcement of any amendments of the Loan Documents or the documents evidencing
or securing the Mortgage Loan in connection with the reallocation.

ARTICLE
VIII.  EXCULPATION

Section 8.01.  Exculpation.  Notwithstanding anything herein or in any
other Loan Document to the contrary, except as otherwise set forth in this
Section 8.01 to the contrary, Lender shall not enforce the liability and
obligation of Borrower and (a) if Borrower is a partnership, its constituent
partners or any of their respective partners, (b) if Borrower is a trust, its
beneficiaries or any of their respective Partners (as hereinafter defined), (c)
if Borrower is a corporation, any of its shareholders, directors, principals,
officers or employees, or (d) if Borrower is a limited liability company, any
of its members and their respective legal, equitable and beneficial owner (the
Persons described in the foregoing clauses (a) - (d), as the case may be, are
hereinafter referred to as the “Partners”) to perform and observe the
obligations contained in this Agreement or any of the other Loan Documents by
any action or proceeding wherein a money judgment shall be sought against
Borrower or the Partners, except that Lender may bring a UCC sale, action for
specific performance, or other appropriate action or proceeding (including,
without limitation, an action to obtain a deficiency judgment) solely for the
purpose of enabling Lender to realize upon (i) Borrower’s interest in the
Collateral and (ii) any other collateral given to Lender under the Loan
Documents (the “Default Collateral”); provided, however,
that any judgment in any such action or proceeding shall be enforceable against
Borrower and the Partners only to the extent of any such Default
Collateral.  The provisions of this
Section shall not, however, (a) impair the validity of the Debt evidenced by
the Note or in any way affect or impair the lien of this Agreement or any of
the other Loan Documents or the right of Lender to enforce this Agreement
following the occurrence of an Event of Default; (b) impair the right of Lender
to name Borrower as a party defendant in any action or suit for judicial
foreclosure and sale under this Agreement; (c) affect the validity or
enforceability of the Note, this Agreement, or any of the other Loan Documents,
or impair the right of Lender to seek a personal judgment against the
Guarantor; (d) impair the right of Lender to obtain the appointment of a
receiver; (e) impair the right of Lender to bring suit for a

 56
 

 

monetary judgment with respect to damages incurred by Lender resulting
from fraud or intentional misrepresentation by Borrower, or any other Person in
connection with this Agreement, the Note or the other Loan Documents, and the
foregoing provisions shall not modify, diminish or discharge the liability of
Borrower or the Partners with respect to same; (f) impair the right of Lender
to bring suit for a monetary judgment with respect to Borrower’s
misappropriation of tenant security deposits or Rent, and the foregoing
provisions shall not modify, diminish or discharge the liability of Borrower or
the Partners with respect to same; (g) impair the right of Lender to obtain
insurance proceeds due to Lender pursuant to this Agreement; (h) impair the
right of Lender to enforce the provisions of Section 2.02(g) of this Agreement,
even after repayment in full by Borrower of the Debt; (i) prevent or in any way
hinder Lender from exercising, or constitute a defense, or counterclaim, or other
basis for relief in respect of the exercise of, any other remedy against any or
all of the collateral securing the Note as provided in the Loan Documents; (j)
impair the right of Lender to bring suit for a monetary judgment with respect
to damages incurred by Lender resulting from any misapplication or conversion
of Loss Proceeds (as defined in the Mortgage), and the foregoing provisions
shall not modify, diminish or discharge the liability of Borrower or the
Partners with respect to same; (k) impair the right of Lender to sue for, seek
or demand a deficiency judgment against Borrower solely for the purpose of
foreclosing the Premises or any part thereof, or realizing upon the Default
Collateral; provided, however, that any such deficiency judgment
referred to in this clause (k) shall be enforceable against Borrower and the
Partners only to the extent of any of the Default Collateral; (l) impair the
ability of Lender to bring suit for monetary judgment with respect to damages
incurred by Lender resulting from arson or waste to or of the Premises and/or
the Collateral or damage to the Premises committed by Borrower or its
Affiliates; (m) impair the right of Lender to bring a suit for a monetary
judgment in the event of the exercise of any right or remedy under any federal,
state or local forfeiture laws resulting in the loss of the lien of this
Agreement, or the priority thereof, against the Collateral; (n) be deemed a
waiver of any right which Lender may have under Sections 506(a), 506(b),
1111(b) or any other provision of the Bankruptcy Code to file a claim for the
full amount of the Debt or to require that all collateral shall continue to
secure all of the Debt; (o) impair the right of Lender to bring suit for
monetary judgment with respect to damages incurred by Lender resulting from any
losses resulting from any claims, actions or proceedings initiated by Borrower
(or any Affiliate of Borrower) alleging that the relationship of Borrower and
Lender is that of joint venturers, partners, tenants in common, joint tenants
or any relationship other than that of debtor and creditor; (p) impair the right of Lender to bring suit for
a monetary judgment for damages incurred by Lender in the event of a Transfer
in violation of the provisions of Section 2.11 hereof, including, without
limitation, the failure to obtain Lender’s consent to a Transfer as, when and
to the extent required thereunder; (q) impair the right of Lender to
bring suit for a monetary judgment in the event that Borrower moves its
principal place of business or its books and records relating to the Collateral
which are governed by the UCC, or changes its name, its jurisdiction of
organization, type of organization or other legal structure or, if it has one,
organizational identification number, without first giving Lender thirty (30)
days prior written notice or (r) impair the right of Lender to bring suit for a
monetary judgment in the event that Borrower changes its name of otherwise does
anything which would make the information set forth in any UCC Financing
Statements relating to the Collateral materially misleading without giving
Lender thirty (30) days prior written notice thereof.  The provisions of this
Section shall be inapplicable to Borrower if (a) any proceeding, action,
petition or filing under the Bankruptcy Code, or any similar state or federal
law now or hereafter in effect relating to bankruptcy, reorganization or
insolvency, or the arrangement or adjustment of debts, shall be filed by,
consented to or acquiesced in by or with respect to Borrower, or if Borrower
shall institute any proceeding for its dissolution or liquidation, or shall
make an assignment for the benefit of creditors or (b) Lender obtains a
judgment that Borrower or any Affiliate of Borrower

 57
 

 

has, other than in good faith, contested or in any material way
interfered with, directly or indirectly (collectively, a “Contest”) any
UCC sale or other material remedy exercised by Lender upon the occurrence of
any Event of Default whether by making any motion, bringing any counterclaim,
claiming any defense, seeking any injunction or other restraint, commencing any
action, or otherwise or (c) Borrower (i) fails to cause Owner to deliver notice
of default under the Ground Lease to Lender or any other Person designated in
writing by Lender or (ii) fails to prevent Owner from amending or modifying the
Ground Lease without the prior written consent of Lender, in which event Lender
shall have recourse against all of the assets of Borrower including, without
limitation, any right, title and interest of Borrower in and to the Premises,
and any partnership interests in Borrower (but excluding the other assets of
such Partners to the extent Lender would not have had recourse thereto other
than in accordance with the provisions of this Section).

*  *  * 
*  *

 58

 

IN WITNESS WHEREOF,
Borrower has duly executed this Agreement the day and year first above written.

 

	
  Borrower’s Organizational Identification

  	
   

  	
  HENRY HUDSON SENIOR
  MEZZ LLC,

  
	
  Number: 4218604

  	
   

  	
  Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Marc S. Gordon

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Marc S. Gordon

  
	
   

  	
   

  	
   

  	
  Title: Authorized
  Signatory

  

 

 

EXHIBIT C

CERTAIN DEFINED TERMS

“Accounts” shall have the meaning set forth in
Section 2.27.

“ACH” shall have the meaning set forth in
Section 2.27.

“Affiliate” of any specified Person shall mean
any other Person directly or indirectly Controlling or Controlled by or under
direct or indirect common Control with such specified Person.

“Agreement” shall have the meaning set forth
in  the recitals hereto.

“Bankruptcy Code” shall mean 11 U.S.C. §101 et
seq., as amended from time to time.

“Borrower” shall mean Borrower named herein and
its successors and assigns.

“Business Day” shall mean any day other than
(a) a Saturday or Sunday, or (b) a day on which banking and savings and loan
institutions in the State of New York or the State of North Carolina are
authorized or obligated by law or executive order to be closed, or at any time
during which the Loan is an asset of a Securitization, the cities, states
and/or commonwealths used in the comparable definition of “Business Day”
in the Securitization documents.

“Closing Date” shall mean the date of the Note.

“Code” shall mean the Internal Revenue Code of
1986, as amended and as it may be further amended from time to time, any
successor statutes thereto, and applicable U.S. Department of Treasury
regulations issued pursuant thereto.

“Collateral” shall mean (a) all Equity
Interests, (b) all additional Equity Interests acquired by Borrower,
including all rights, options, subscriptions and/or warrants acquired by Borrower
with respect to additional Equity Interests in any Pledged Entity, (c) all
rights to payment of all monetary obligations owed to Borrower, if any, by a
Pledged Entity, (d) the Lockbox Account, including any and all funds from time
to time credited to the Lockbox Account; (e) the Accounts and all cash, checks,
drafts, securities entitlements, securities, securities accounts, funds or
deposit accounts maintained or deposited with Lender and other investment
property, certificates, instruments and other property, including, without
limitation, all deposits and/or wire transfers from time to time deposited or
held in, credited to or made to any of the foregoing; (f) all interest,
dividends, cash, instruments, securities, securities entitlements and other investment
property, and other property from time to time received, receivable or
otherwise payable in respect of, or in exchange for, any or all of the
foregoing or purchased with funds from the Accounts; (g) all of Borrower’s
rights in the Rate Cap Agreement; (h) all
rights of Borrower in, to and under Owner’s certificate of formation, limited
liability company agreement and all other organizational documents of Owner
(collectively, the “Owner Organizational Documents”), or any other
agreement or instrument relating to the Pledged Interests, including, without
limitation, (i) all rights of Borrower to receive moneys due and to become due
under or pursuant to Owner Organizational Documents, (ii) all rights of Borrower
to receive proceeds of

 

any
insurance, indemnity, warranty or guaranty with respect to Owner Organizational
Documents, (iii) all claims of Borrower for damages arising out of or for
breach of or default under Owner Organizational Documents, and (iv) any right
of Borrower to perform thereunder and to compel performance and otherwise
exercise all rights and remedies thereunder; and (i) all Proceeds.

“Condemnation Proceeds” shall mean all of the
proceeds in respect of any Taking or purchase in lieu thereof.

“Contractual Obligation” shall mean, as to any
Person, any provision of any security issued by such Person or of any
agreement, instrument or undertaking to which such Person is a party or by
which it or any of the property owned by it is bound.

“Control” means, when used with respect to any specific
Person, the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person whether through
ownership of voting securities, beneficial interests, by contract or otherwise.  The definition is to be construed to apply
equally to variations of the word “Control” including “Controlled,” “Controlling”
or “Controlled by.”

“Corporations” shall mean the corporations
identified on Schedule 1 hereto, and each being a “Corporation”.

“Counterparty” shall have the meaning set forth
in Section 2.27.

“Debt” shall have the meaning set forth in the
recitals hereto.

“Default” shall mean any Event of Default or
event which would constitute an Event of Default if all requirements in
connection therewith for the giving of notice, the lapse of time, and the
happening of any further condition, event or act, had been satisfied.

“Default Rate” shall mean the lesser of (a) the
highest rate allowable at law and (b) five percent (5%) above the interest rate
set forth in the Note.

“Default Rate Interest” shall mean, to the
extent the Default Rate becomes applicable, interest in excess of the interest
which would have accrued on (a) the principal amount of the Loan which is
outstanding from time to time and (b) any accrued but unpaid interest, if the
Default Rate was not applicable.

“Distributions” shall mean all dividends,
distributions, liquidation proceeds, cash, profits, instruments and other
property and economic benefits to which Borrower is entitled with respect to any
one or more Equity Interests, whether or not received by or otherwise
distributed to Borrower, in each case whether cash or non-cash and whether such
dividends, distributions, liquidation proceeds, cash, profits, instruments and
other property and economic benefits are paid or distributed by the Pledged
Entities in respect of operating profits, sales, exchanges, refinancings,
condemnations or insured losses of the relevant Pledged Entity’s assets, the
liquidation of such Pledge Entity’s assets and affairs, management fees,
guaranteed payments,

 

repayment of loans, or
reimbursement of expenses or otherwise in respect of or in exchange for any or
all of the Equity Interests.

“DTC” shall have the meaning set forth in
Section 2.01.

“Eligible Account” shall mean a segregated
account which is either (a) an account or accounts maintained with a depository
institution or trust company the long term unsecured debt obligations of which
are rated by each of the Rating Agencies (or, if not rated by Fitch, Inc. (“Fitch”),
otherwise acceptable to Fitch, as confirmed in writing that such account would
not, in and of itself, result in a downgrade, qualification or withdrawal of
the then current ratings assigned to any certificates issued in connection with
a Securitization) in its highest rating category at all times by each of the
Rating Agencies (or, if not rated by Fitch, otherwise acceptable to Fitch, as
confirmed in writing that such account would not, in and of itself, result in a
downgrade, qualification or withdrawal of the then current ratings assigned to
any certificates issued in connection with a Securitization) or, if the funds
in such account are to be held in such account for less than thirty (30) days,
the short term obligations of which are rated by each of the Rating Agencies
(or, if not rated by Fitch, otherwise acceptable to Fitch, as confirmed in
writing that such account would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any
certificates issued in connection with a Securitization) in its highest rating
category at all times or (b) a segregated trust account or accounts maintained
with a federal or state chartered depository institution or trust company
acting in its fiduciary capacity which, in the case of a state chartered
depository institution is subject to regulations substantially similar to 12
C.F.R. § 9.10(b), having in either case a combined capital and surplus of at
least $100,000,000 and subject to supervision or examination by federal and
state authority, or otherwise acceptable (as evidenced by a written
confirmation from each Rating Agency that such account would not, in and of
itself, cause a downgrade, qualification or withdrawal of the then current
ratings assigned to any certificates issued in connection with a
Securitization) to each Rating Agency, which may be an account maintained by
Lender or its agents.  Eligible Accounts
may bear interest.  The title of each
Eligible Account shall indicate that the funds held therein are held in trust
for the uses and purposes set forth herein.

“Equity Interests” shall mean the LLC
Interests, the Partnership Interests and the Pledged Interests.

“ERISA” shall mean the Employee Retirement
Income Security Act of 1974, as amended from time to time, and the regulations
promulgated thereunder.  Section
references to ERISA are to ERISA, as in effect at the date of this Agreement
and, as of the relevant date, an subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.

“ERISA Affiliate” shall mean any corporation or
trade or business that is a member of any group of organizations (a) described
in Section 414(b) or (c) of the Code of which Borrower is a member and (b)
solely for purposes of potential liability under Section 302(c)(11) of ERISA
and Section 412(c)(11) of the Code and the lien created under Section 302(f) of
ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the
Code of which Borrower is a member.

“Event of Default” shall have the meaning set
forth in Section 3.01.

 

“Fiscal Year” shall mean the twelve (12) month
period commencing on January 1 and ending on December 31 during each year of
the term of this Agreement, or such other fiscal year of Borrower as Borrower
may select from time to time with the prior written consent of Lender, which
consent shall not be unreasonably withheld.

“General Partner” shall mean, if Borrower is a
partnership, each general partner of Borrower and, if Borrower is a limited
liability company, each managing member of Borrower and in each case, if
applicable, each general partner or managing member of such general partner or
managing member.  In the event that
Borrower or any General Partner is a single member limited liability company,
the term “General Partner” shall include such single member.

“Governmental Authority” shall mean, with
respect to any Person, any federal or State government or other political
subdivision thereof and any entity, including any regulatory or administrative
authority or court, exercising executive, legislative, judicial, regulatory or
administrative or quasi-administrative functions of or pertaining to
government, and any arbitration board or tribunal, in each case having
jurisdiction over such applicable Person or such Person’s property and any
stock exchange on which shares of capital stock of such Person are listed or
admitted for trading.

“Guarantor” shall mean Morgans Group LLC, a
Delaware limited liability company.

“Independent” shall mean, when used with respect
to any Person, a Person who (a) is in fact independent, (b) does not have any
direct financial interest or any material indirect financial interest in
Borrower, or in any Affiliate of Borrower or any constituent partner,
shareholder, member or beneficiary of Borrower, (c) is not connected with
Borrower or any Affiliate of Borrower or any constituent partner, shareholder,
member or beneficiary of Borrower as an officer, employee, promoter,
underwriter, trustee, partner, director or Person performing similar functions
and (d) is not a member of the immediate family of a Person defined in (b) or
(c) above.  Whenever it is herein
provided that any Independent Person’s opinion or certificate shall be
provided, such opinion or certificate shall state that the Person executing the
same has read this definition and is Independent within the meaning hereof.

“Insurance Proceeds” shall mean all of the
proceeds received under the insurance policies required to be maintained by
Owner pursuant to Article III of the Mortgage.

“Interest Shortfall” shall mean any shortfall
in the amount of interest required to be paid with respect to the Loan on any
Payment Date.

“Late Charge” shall have the meaning set forth
in Section 3.11 hereof.

“Lease” means all leases and other agreements
or arrangements affecting the use, enjoyment or occupancy of all or any portion
of the Premises now in effect or hereafter entered into (including, without
limitation, all lettings, subleases, licenses, concessions, tenancies and other
occupancy agreements covering or encumbering all or any portion of the
Premises), whether before or after the filing by or against Owner of any
petition for relief under the Bankruptcy Code, together with any guarantees,
supplements, amendments, modifications, extensions and renewals of the same,
and all additional remainders, reversions, and other rights and estates
appurtenant thereto.

 

“Legal Requirement” shall mean as to any
Person, the certificate of incorporation, by-laws, certificate of limited
partnership, agreement of limited partnership or other organizational or
governing documents of such Person, and any law, statute, order, ordinance,
judgment, decree, injunction, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority and all covenants,
agreements, restrictions and encumbrances contained in any instruments, in each
case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.

“Lender” shall mean Lender named herein and its
successors and assigns.

“LIBOR Rate” shall have the meaning set forth
in the Note.

“LLC Interests” shall mean, with respect to
Borrower, all membership, equity or ownership and/or other interests now or
hereafter owned by Borrower in the LLCs, and including all of Borrower’s right,
title and interest in and to: (a) any and all now existing and hereafter
acquired membership, equity or ownership interest of Borrower in the LLCs,
whether in capital, profits or otherwise; (b) any and all now existing and
hereafter arising rights of Borrower to receive Distributions or payments from
the LLCs, whether in cash or in kind and whether such Distributions or payments
are on account of Borrower’s interest as owner of a membership, equity or ownership
interest of the LLCs or as a creditor in the LLCs or otherwise, and all other
economic rights and interests of any nature of Borrower in the LLCs; (c) any
and all now existing and hereafter acquired management and voting rights of
Borrower of, in, or with respect to the LLCs, whether as an owner of a
membership, equity or ownership interest in the LLCs or otherwise, and whether
provided for under the Operating Agreements and/or applicable law, and all
other rights of and benefits to Borrower of any nature arising or accruing
under the Operating Agreements; (d) any and all now existing and hereafter
acquired rights of Borrower to any specific property owned by the LLCs; (e) if
the LLC Interests are evidenced in certificate form, the LLC Interests shall
include all such certificates, delivered to Lender accompanied by Powers duly
executed in blank; and (f) all Proceeds of the foregoing Collateral.

“LLCs” shall mean the limited liability
companies identified on Schedule 1 hereto, and each being a “LLC”.

“Loan” shall have the meaning set forth in the
recitals hereto.

“Loan Documents” shall have the meaning set
forth in the recitals hereto.

“Loan Year” shall mean each 365 day period (or
366 day period if the month of February in a leap year is included) commencing
on the first day of the month following the Closing Date (provided, however,
that the first Loan Year shall also include the period from the Closing Date to
the end of the month in which the Closing Date occurs).

“Lockbox Account” shall mean account number 5000000145012 established with
Wachovia Bank, National Association in the name “Wachovia Bank, National
Association, as secured party of Henry Hudson Senior Mezz”.

“Lockbox Agreement” shall mean that certain
mezzanine lockbox agreement dated as of the date hereof between Borrower,
Lender and Wachovia Bank, National Association.

 

“Material Adverse Effect” shall mean any event
or condition that has a material adverse effect on (a) the Collateral or the
Premises, (b) the business, prospects, profits, management, operations or
condition (financial or otherwise) of Borrower or Owner, (c) the
enforceability, validity, perfection or priority of the lien of any Loan
Document or (d) the ability of Borrower to perform any obligations under any
Loan Document.

“Maturity” shall mean the Maturity Date set
forth in the Note or such other date pursuant to the Loan Documents on which
the final payment of principal, and premium, if any, on the Note becomes due
and payable as therein or herein provided, whether at stated maturity or by
declaration of acceleration, or otherwise.

“Maturity Date” shall have the meaning set
forth in the Note.

“Mortgage” shall have the meaning set forth in
the recitals hereto.

“Mortgage Lender” shall have the meaning set
forth in the recitals hereto.

“Mortgage Loan” shall have the meaning set
forth in the recitals hereto.

“Mortgage Note” shall have the meaning set
forth in the recitals hereto.

“Mortgage Securitization” shall mean a public
or private offering of securities by Mortgage Lender or any of its Affiliates
or their respective successors and assigns which are collateralized, in whole
or in part, by the Mortgage Loan.

“Multiemployer Plan” shall mean a multiemployer
plan defined as such in Section 3(37) of ERISA to which contributions have
been, or were required to have been, made by Borrower, Guarantor or any ERISA
Affiliate and which is covered by Title IV of ERISA.

“Net Proceeds” shall mean the excess of (a)(i)
the purchase price actually received by Lender with respect to the Collateral
as a result of the exercise by Lender of its rights, powers, privileges and
other remedies after the occurrence of an Event of Default, or (ii) in the
event that Lender (or Lender’s nominee) is the purchaser of the Collateral by
credit bid, then the amount of such credit bid, in either case, over (b) all
costs and expenses, including, without limitation, all attorneys’ fees and  disbursements and any brokerage fees, if
applicable, incurred by Lender in connection with the exercise of such
remedies, including the sale of the Collateral after the acquiring by Lender of
the Collateral.

“Note” shall have the meaning set forth in the
recitals hereto.

“OFAC List” shall mean the list of specially
designated nationals and blocked persons subject to financial sanctions that is
maintained by the U.S. Treasury Department, Office of Foreign Assets Control
and accessible through the internet website www.treas.gov/ofac/t11sdn.pdf.

“Officer’s Certificate” shall mean a
certificate delivered to Lender by Borrower which is signed on behalf of
Borrower by an authorized representative of Borrower which states that the
items set forth in such certificate are true, accurate and complete in all
respects.

 

“Operating Agreements” shall mean all operating
agreements and articles of organization, certificates of formation or other
formation documents and all other agreements, certificates and other documents
which govern the existence, operation and ownership of any LLC, as the same are
in effect as of the date hereof and as the same hereafter may be modified from
time to time.

“Organizational Documents” shall mean (i) all
articles or certificate of incorporation (including any amendments thereto or
restatements thereof), bylaws and any certificate or statement of designation
of any Corporation, (ii) the Operating Agreements and (iii) the Partnership
Agreements.

“Owner” shall have the meaning set for in the
recitals hereto.

“Partnership Agreements” shall mean any and all
partnership agreements, together with all agreements, certificates and other
documents which govern the existence, operation and ownership of any
Partnership.

“Partnership Interests” shall mean all
partnership, equity or ownership and/or other interests now or hereafter owned
by Borrower in the Partnerships, and including all of Borrower’s right, title
and interest in and to: (a) any and all now existing and hereafter acquired
membership, equity or ownership interest of Borrower in the Partnerships
whether in capital, profits or otherwise; (b) any and all now existing and hereafter
arising rights of Borrower to receive Distributions or payments from the
Partnerships, whether in cash or in kind and whether such Distributions or
payments are on account of Borrower’s interest as an owner of a partnership,
equity or ownership interest in the Partnerships or as a creditor of the
Partnerships or otherwise, and all other economic rights and interests of any
nature of Borrower in the Partnerships; (c) any and all now existing and
hereafter acquired management and voting rights of Borrower of, in, or with
respect to the Partnerships, whether as an owner of a partnership, equity or
ownership interest in the Partnerships or otherwise, and whether provided for
under the Partnership Agreements and/or applicable law, and all other rights of
and benefits to Borrower of any nature arising or accruing under the
Partnership Agreements; (d) any and all now existing and hereafter acquired
rights of Borrower to any specific property owned by the Partnerships; (e) if
the Partnership Interests are evidenced in certificate form, the Partnership
Interests shall include all such certificates, delivered to Lender accompanied
by Powers duly executed in blank; and (f) all Proceeds of the foregoing.

“Partnerships” shall mean the partnerships
identified on Schedule 1 attached hereto, and each being a “Partnership”.

“PBGC” shall mean the Pension Benefit Guaranty
Corporation established under ERISA, or any successor thereto.

“Person” shall mean any individual,
corporation, limited liability company, partnership, joint venture, estate,
trust, unincorporated association, any federal, state, county or municipal
government or any bureau, department or agency thereof and any fiduciary acting
in such capacity on behalf of any of the foregoing.

 

“Plan” shall mean an employee benefit or other
plan established or maintained by Borrower or any ERISA Affiliate during the
five-year period ended prior to the date of this Agreement or to which Borrower
or any ERISA Affiliate makes, is obligated to make or has, within the five year
period ended prior to the date of this Agreement, been required to make
contributions (whether or not covered by Title IV of ERISA or Section 302 of
ERISA or Section 401(a) or 412 of the Code), other than a Multiemployer Plan.

“Pledged Entities” shall mean the Corporations,
the LLCs and the Partnerships.

“Pledged Interests” shall mean with respect to
Borrower, (a) all shares of capital stock of the Corporations, now owned or
hereafter acquired by Borrower, and the certificates representing the shares of
such capital stock and any interest of Borrower in the entries on the books of
any securities intermediary pertaining to such shares (such now-owned shares
being identified on Schedule 1 attached hereto), and all options and
warrants for the purchase of shares of the stock of the Corporations now or
hereafter held in the name of Borrower, (b) all certificated LLC Interests or
Partnership Interests, now owned or hereafter acquired by Borrower, and the
certificates representing such interests and any interest of Borrower in the
entries on the books of any securities intermediary pertaining to such
certificated interests (such now-owned certificated interests being identified
on Schedule 1 attached hereto), and all options and warrants for the
purchase of certificated interests in such LLCs or Partnership now or hereafter
held in the name of Borrower, (c) all additional shares of stock or
certificated interests of the Corporations, LLCs, or Partnerships from time to
time acquired by Borrower in any manner, and the certificates representing such
additional shares and any interest of Borrower in the entries on the books of
any securities intermediary pertaining to such shares and interests, and all
securities convertible into and options, warrants, dividends, cash, instruments
and other rights and options from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
shares, (including all rights to request or cause the issuer thereof to
register any or all of the Collateral under federal and state securities laws
to the maximum extent possible under any agreement for such registration
rights, and all put rights, tag-along rights or other rights pertaining to the
sale or other transfer of such Collateral, together in each case with all
rights under any agreements, articles or certificates of incorporation or
otherwise pertaining to such rights; and (d) all voting rights and rights to
cash and non-cash dividends, securities, securities entitlements and other investment
property, instruments and other property from time to time received, receivable
or otherwise distributed in respect of, or in exchange for, any or all of the
foregoing Collateral, and (e) all Proceeds of the foregoing Collateral.

“Powers” shall mean transfer powers in the form
of Schedule 4 attached hereto.

“Premises” shall have the meaning set forth in
the recitals hereto.

“Principal Amount”
shall mean the Loan Amount as such amount may be reduced from time to time
pursuant to the terms of this Agreement, the Note or the other Loan Documents.

“Proceeds” shall mean (a) all “proceeds”
(as such term is defined in the UCC) and “products” (as such term is defined in
the UCC) with respect to the Collateral and (b) includes, without
limitation:  whatever is receivable or
received when Collateral is sold, collected,

 

exchanged or otherwise
disposed of, whether such disposition is voluntary or involuntary; all rights
to payment, including return premiums, with respect to any insurance relating
thereto; all interest, dividends and other property receivable or received on
account of the Collateral or proceeds thereof, (including all Distributions or
other income from the Equity Interests, all collections thereon or all
Distributions with respect thereto); and proceeds of any indemnity or guaranty
payable to Borrower or Lender from time to time with respect to any Collateral.

“Prohibited Person” shall mean any Person
identified on the OFAC List or any other Person with whom a U.S. Person may not
conduct business or transactions by prohibition of Federal law or Executive
Order of the President of the United States of America.

“Rate Cap Agreement” shall mean that certain
interest rate protection agreement (together with the confirmation and
schedules relating thereto) with a notional amount which shall not at any time
be less than the Principal Amount and a LIBOR strike price equal to seven percent (7%) entered into by
Borrower in accordance with the terms hereof or of the other Loan Documents and
any similar interest rate cap or collar agreements subsequently entered into in
replacement or substitution therefor by Borrower with respect to the Loan.

“Rating Agency” shall mean each of Standard
& Poor’s Ratings Services, Inc., a division of The McGraw-Hill Company,
Inc. (“Standard & Poor’s”), Fitch, Inc. and Moody’s Investors
Service, Inc. (“Moody’s”) and any successor to any of them; provided,
however, that at any time after a Securitization, “Rating Agency” shall
mean those of the foregoing rating agencies that from time to time rate the
securities issued in connection with such Securitization.

“Register” shall have the meaning set forth in
Section 7.27(a).

“Remaining Rents” shall have the meaning set
forth in Section 2.27.

“Securities Act” shall have the meaning set
forth in Section 3.02(d).

“Securitization” shall mean a public or private
offering of securities by Lender or any of its Affiliates or their respective
successors and assigns which are collateralized, in whole or in part, by this
Agreement.

“Single Purpose Entity” shall mean a
corporation, partnership, joint venture, limited liability company, trust or
unincorporated association, which is formed or organized solely for the purpose
of holding, directly, an ownership interest in the Collateral, does not engage
in any business unrelated to the Collateral, does not have any assets other
than those related to its interest in the Collateral or any indebtedness other
than as permitted by this Agreement or the other Loan Documents, has its own
separate books and records and has its own accounts, in each case which are
separate and apart from the books and records and accounts of any other Person,
holds itself out as being a Person separate and apart from any other Person and
which otherwise satisfies the criteria of the Rating Agency for a
special-purpose bankruptcy-remote entity.

“Solvent” shall mean, as to any Person, that
(a) the sum of the assets of such Person, at a fair valuation, exceeds its
liabilities, including contingent liabilities, (b) such Person has sufficient
capital with which to conduct its business as presently conducted and as
proposed to be conducted and (c) such Person has not incurred debts, and does
not intend to incur debts, beyond

 

its ability to pay such
debts as they mature.  For purposes of
this definition, “debt” means any liability on a claim, and “claim”
means (a) a right to payment, whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured, or (b) a right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured,
or unsecured.  With respect to any such
contingent liabilities, such liabilities shall be computed in accordance with
GAAP at the amount which, in light of all the facts and circumstances existing
at the time, represents the amount which can reasonably be expected to become
an actual or matured liability.

“Spread Maintenance
Premium” shall mean (a) the amount of the prepayment, multiplied by
(b) the LIBOR Margin (as defined in the Note) multiplied by (c) a fraction, the
numerator of which is the number of full and partial months from such
prepayment date through the end of the first (1st) Loan Year and the
denominator of which is 12.

“Substitute CMA Agreement” shall have the
meaning set forth in Section 2.27.

“Transfer” shall mean any conveying, assigning,
selling, mortgaging, encumbering, pledging, hypothecating, granting of a
security interest in, granting of options with respect to or other disposition
(directly or indirectly, voluntarily or involuntarily, by operation of law or
otherwise and whether or not for consideration or of record) of all or any
portion of any legal or beneficial interest in the Collateral, Borrower, Owner,
the Premises or any other portion of the Property (as defined in the Mortgage),
provided that transfers of direct or indirect interests in Borrower that, together with all other direct or
indirect interests in Borrower previously transferred (but without counting
more than once one or more transfers of such interests), aggregate 49% or less
of the membership interest in Borrower (such that any Person who, as of the
Closing Date, did not own, directly or indirectly, 49% or more of the
membership interest in Borrower, will not subsequent to such transfer own,
directly or indirectly, 49% or more of the membership interest in Borrower)
will not constitute a Transfer; provided, further, however,
notwithstanding the foregoing or anything to the contrary contained in any
other Loan Document, “Transfer” shall
not include (a) transfers of publicly traded stock on a national stock exchange
or on the NASDAQ Stock Market in the normal course of business and not in
connection with a tender offer or a sale of Morgans Hotel Group Co. or
substantially all of the assets of such Person or (b) pledges (but not
the transfer of any direct or indirect interest in Borrower in connection with
the realization of such pledged interests) of direct or indirect interests in
Borrower to Qualified Transferees in connection with a financing secured by
pledges of direct or indirect interests in all or substantially all of the
assets of Morgans Group LLC, provided that the Net Operating Income at the time
of the origination of the financing constitutes ten percent (10%) or less of
the net operating income of the assets with respect to which the pledged
interests which secure such debt relate or
(c) any Transfer which does not result in (i) a change of Control of
Borrower (it being acknowledged that any holder of more than forty percent of
the direct or indirect interest in Borrower may have veto rights over major decisions
which are customary in joint venture agreements between two fifty percent
owners of a Person and the same shall not constitute a change of Control) or
(ii) a Transfer of more than 49% of any direct or indirect interest in
Borrower.

 

“UCC” shall mean the Uniform Commercial Code as
in effect from time to time in the State of New York; provided that, if
perfection or the effect of perfection or non-perfection or the priority of any
security interest in any Collateral is governed by the Uniform Commercial Code
as in effect in a jurisdiction other than the State of New York, “UCC” means
the Uniform Commercial Code as in effect from time to time in such other
jurisdiction for purposes of the provisions hereof relating to such perfection,
effect of perfection or non-perfection or priority.

“Unscheduled Payments” shall mean insurance
proceeds that have been applied to the repayment of the Debt, any funds
representing a voluntary or involuntary principal prepayment and proceeds of
any foreclosure action or UCC sale.

“Welfare Plan” shall mean an employee welfare
benefit plan as defined in Section 3(1) of ERISA established or maintained by
Borrower, Guarantor or any ERISA Affiliate or that covers any current or former
employee of Borrower, Guarantor or any ERISA Affiliate.Exhibit 10.3

Mondrian
Hotel

DOCUMENT PREPARED BY AND

UPON RECORDATION, RETURN TO:

Proskauer Rose LLP

1585 Broadway

New York, New York  10036

Attention:  David J. Weinberger, Esq.

SPACE
ABOVE LINE FOR RECORDER’S USE ONLY

A.P.N. 5555-002-147

 

MONDRIAN HOLDINGS LLC,

as Borrower

to

FIRST AMERICAN TITLE INSURANCE COMPANY,

as Trustee for the benefit of

WACHOVIA BANK, NATIONAL ASSOCIATION,

as Lender

DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS

AND FIXTURE FILING

Dated:  October 6, 2006

Property Location:              The Mondrian Hotel

8440 Sunset Boulevard

Los Angeles, California  90069

(Los Angeles
County)

 

THIS DOCUMENT SECURES A NOTE
WHICH MAY CONTAIN PROVISIONS FOR ADJUSTMENTS IN THE INTEREST RATE AND PAYMENT
AMOUNTS AND/OR A BALLOON PAYMENT.

THE PERSONAL PROPERTY IN
WHICH BENEFICIARY HAS A SECURITY INTEREST INCLUDES GOODS WHICH ARE OR SHALL
BECOME FIXTURES ON THE PREMISES. THIS DEED OF TRUST SHALL CONSTITUTE A “FIXTURE
FILING” FOR THE PURPOSES OF THE UNIFORM COMMERCIAL CODE. THIS FILING IS TO BE
RECORDED IN THE REAL ESTATE RECORDS OF THE APPROPRIATE COUNTY IN WHICH THE
PREMISES ARE LOCATED.

 

THIS DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF
RENTS AND FIXTURE FILING (the “Security Instrument”) is made as of the
6th day of October, 2006, by MONDRIAN HOLDINGS LLC, having its chief executive office c/o
Morgans Group LLC, 475 Tenth Avenue, New York, New York  10018 (hereinafter referred to as “Borrower”),
to FIRST AMERICAN TITLE INSURANCE
COMPANY, a corporation organized and existing under the laws of the
state of California, having an address at 520
North Central Avenue, Glendale, California 
91203 (hereinafter
referred to as “Trustee” for the benefit of WACHOVIA BANK, NATIONAL
ASSOCIATION, having an address at Wachovia Bank, National Association,
Commercial Real Estate Services, 8739 Research Drive URP 4, NC 1075, Charlotte,
North Carolina 28262 (hereinafter
referred to as “Lender”).

W I T N E S S E T H:

WHEREAS, Lender has
authorized a loan (hereinafter referred to as the “Loan”) to Borrower in
the maximum principal sum of ONE HUNDRED TWENTY MILLION FIVE HUNDRED THOUSAND
AND NO/100 DOLLARS ($120,500,000.00) (hereinafter referred to as the “Loan
Amount”), which Loan is evidenced by that certain promissory note, dated
the date hereof, in the amount of $60,250,000 (“Note A-1”) and that
certain promissory note, dated the date hereof, in the amount of $60,250,000 (“Note
A-2”; and together with any supplements, amendments, modifications or
extensions thereof, hereinafter collectively referred to as the “Note”)
made by Borrower, as maker, to Lender, as payee;

WHEREAS, in consideration of
the Loan, Borrower has agreed to make payments in amounts sufficient to pay and
redeem, and provide for the payment and redemption of the principal of,
premium, if any, and interest on the Note when due;

WHEREAS, Borrower desires by
this Security Instrument to provide for, among other things, the issuance of
the Note and for the deposit, deed and pledge by Borrower with, and the
creation of a security interest in favor of, Lender, as security for Borrower’s
obligations to Lender from time to time pursuant to the Note and the other Loan
Documents;

WHEREAS, Borrower and Lender
intend these recitals to be a material part of this Security Instrument; and

WHEREAS, all things
necessary to make this Security Instrument the valid and legally binding
obligation of Borrower in accordance with its terms, for the uses and purposes
herein set forth, have been done and performed.

NOW THEREFORE, in consideration of the foregoing
recitals and to secure the payment of the principal of, prepayment premium (if
any) and interest on the Note and all other obligations, liabilities or sums
due or to become due under this Security Instrument, the Payment Guaranty, the
Note or any other Loan Document, including, without limitation, interest on
said obligations, liabilities or sums (said principal, premium, interest and
other sums being hereinafter referred to as the “Debt”), Borrower has
executed and delivered this Security Instrument; and Borrower has irrevocably
granted, and by these presents and by the execution and delivery hereof does
hereby irrevocably grant, bargain, sell, alien, demise, release, convey,
assign, transfer, deed, hypothecate, pledge, set over, warrant, mortgage and
confirm to Trustee, forever

 

 

in trust WITH POWER OF SALE, all right, title and
interest of Borrower, whether now owned or hereafter acquired, in and to all of
the following property, rights, interests and estates:

(a)           the plot(s), piece(s) or parcel(s) of real property described in Exhibit A
attached hereto and made a part hereof (individually and collectively,
hereinafter referred to as the “Premises”);

(b)           (i)
all buildings, foundations, structures, fixtures, additions, enlargements,
extensions, modifications, repairs, replacements and improvements of every kind
or nature now or hereafter located on the Premises (hereinafter collectively
referred to as the “Improvements”); and (ii) to the extent
permitted by law, the name or names, if any, as may now or hereafter be used
for any of the Improvements, and the goodwill associated therewith;

(c)           all
easements, servitudes, rights-of-way, strips and gores of land, streets, ways,
alleys, passages, sewer rights, water, water courses, water rights and powers,
ditches, ditch rights, reservoirs and reservoir rights, air rights and
development rights, lateral support, drainage, gas, oil and mineral rights,
tenements, hereditaments and appurtenances of any nature whatsoever, in any way
belonging, relating or pertaining to the Premises or the Improvements and the
reversion and reversions, remainder and remainders, whether existing or
hereafter acquired, and all land lying in the bed of any street, road or
avenue, opened or proposed, in front of or adjoining the Premises to the center
line thereof and any and all sidewalks, drives, curbs, passageways, streets,
spaces and alleys adjacent to or used in connection with the Premises and/or
Improvements and all the estates, rights, titles, interests, property,
possession, claim and demand whatsoever, both in law and in equity, of Borrower
of, in and to the Premises and Improvements and every part and parcel thereof,
with the appurtenances thereto;

(d)           all
machinery, equipment, systems, fittings, apparatus, appliances, furniture,
furnishings, tools, fixtures, Inventory (as hereinafter defined) and articles
of personal property and accessions thereof and renewals, replacements thereof
and substitutions therefor (including, but not limited to, all plumbing,
lighting and elevator fixtures, office furniture, beds, bureaus, chiffonniers,
chests, chairs, desks, lamps, mirrors, bookcases, tables, rugs, carpeting,
drapes, draperies, curtains, shades, venetian blinds, wall coverings, screens,
paintings, hangings, pictures, divans, couches, luggage carts, luggage racks,
stools, sofas, chinaware, flatware, linens, pillows, blankets, glassware,
foodcarts, cookware, dry cleaning facilities, dining room wagons, keys or other
entry systems, bars, bar fixtures, liquor and other drink dispensers,
icemakers, radios, television sets, intercom and paging equipment, electric and
electronic equipment, dictating equipment, telephone systems, computerized
accounting systems, engineering equipment, vehicles, medical equipment, potted
plants, heating, lighting and plumbing fixtures, fire prevention and
extinguishing apparatus, theft prevention equipment, cooling and
air-conditioning systems, elevators, escalators, fittings, plants, apparatus,
stoves, ranges, refrigerators, laundry machines, tools, machinery, engines,
dynamos, motors, boilers, incinerators, switchboards, conduits, compressors,
vacuum cleaning systems, floor cleaning, waxing and polishing equipment, call
systems, brackets, signs, bulbs,

 2
 

 

bells, ash and fuel,
conveyors, cabinets, lockers, shelving, spotlighting equipment, dishwashers,
garbage disposals, washers and dryers), other customary hotel equipment and
other property of every kind and nature whatsoever owned by Borrower, or in
which Borrower has or shall have an interest, now or hereafter located upon, or
in, and used in connection with the Premises or the Improvements, or
appurtenant thereto, and all building equipment, materials and supplies of any
nature whatsoever owned by Borrower, or in which Borrower has or shall have an
interest, now or hereafter located upon, or in, and used in connection with the
Premises or the Improvements or appurtenant thereto, (hereinafter, all of the
foregoing items described in this paragraph (d) are collectively called the “Equipment”),
all of which, and any replacements, modifications, alterations and additions
thereto, to the extent permitted by applicable law, shall be deemed to
constitute fixtures (the “Fixtures”), and are part of the real estate
and security for the payment of the Debt and the performance of Borrower’s
obligations.  To the extent any portion
of the Equipment is not real property or fixtures under applicable law, it
shall be deemed to be personal property, and this Security Instrument shall
constitute a security agreement creating a security interest therein in favor
of Lender under the UCC;

(e)           all
awards or payments, including interest thereon, which may hereafter be made
with respect to the Premises, the Improvements, the Fixtures, or the Equipment,
whether from the exercise of the right of eminent domain (including but not
limited to any transfer made in lieu of or in anticipation of the exercise of
said right), or for a change of grade, or for any other injury to or decrease
in the value of the Premises, the Improvements or the Equipment or refunds with
respect to the payment of property taxes and assessments, and all other
proceeds of the conversion, voluntary or involuntary, of the Premises,
Improvements, Equipment, Fixtures or any other Property or part thereof into
cash or liquidated claims;

(f)            all
leases, tenancies, franchises, licenses and permits, Property Agreements and
other agreements affecting the use, enjoyment or occupancy of the Premises, the
Improvements, the Fixtures, or the Equipment or any portion thereof now or
hereafter entered into, whether before or after the filing by or against
Borrower of any petition for relief under the Bankruptcy Code and all
reciprocal easement agreements, license agreements and other agreements with
Pad Owners (hereinafter collectively referred to as the “Leases”),
together with all receivables, revenues, rentals, credit card receipts,
receipts and all payments received which relate to the rental, lease, franchise
and use of space at the Premises or which relate to the Food and Beverage
Lessee/Operators (it being acknowledged by Lender that the security interest
granted hereunder in receivables, revenues, rentals, credit card receipts,
receipts and all payments received which relate to the Food and Beverage
Lessee/Operators shall not attach to interests of third-party joint venture
partners of Borrower which are not Affiliates of Borrower) and rental and use
of guest rooms or meeting rooms or banquet rooms or recreational facilities or
bars, beverage or food sales, vending machines, mini-bars, room service,
telephone, video and television systems, electronic mail, internet connections,
guest laundry, bars, the provision or sale of other goods and services, and all
other payments received from guests or visitors of the Premises, and other
items of revenue, receipts or

 3
 

 

income as identified in
the Uniform System of Accounts (as hereinafter defined), all cash or security
deposits, lease termination payments, advance rentals and payments of similar
nature and guarantees or other security held by, or issued in favor of,
Borrower in connection therewith to the extent of Borrower’s right or interest
therein and all remainders, reversions and other rights and estates appurtenant
thereto, and all base, fixed, percentage or additional rents, and other rents,
oil and gas or other mineral royalties, and bonuses, issues, profits and
rebates and refunds or other payments made by any Governmental Authority from
or relating to the Premises, the Improvements, the Fixtures or the Equipment
plus all rents, common area charges and other payments now existing or
hereafter arising, whether paid or accruing before or after the filing by or
against Borrower of any petition for relief under the Bankruptcy Code (the “Rents”)
and all proceeds from the sale or other disposition of the Leases and the right
to receive and apply the Rents to the payment of the Debt;

(g)           all
proceeds of and any unearned premiums on any insurance policies covering the
Premises, the Improvements, the Fixtures, the Rents or the Equipment,
including, without limitation, the right to receive and apply the proceeds of
any insurance, judgments, or settlements made in lieu thereof, for damage to
the Premises, the Improvements, the Fixtures or the Equipment and all refunds
or rebates of Impositions, and interest paid or payable with respect thereto;

(h)           all deposit accounts, securities accounts,
funds or other accounts maintained or deposited with Lender, or its assigns, in
connection herewith, including, without limitation, the Security Deposit
Account (to the extent permitted by law), the Engineering Escrow Account, the
Central Account, the Sub-Accounts and the Escrow Accounts and all monies and
investments deposited or to be deposited in such accounts;

(i)            all accounts receivable, contract rights,
franchises, interests, estate or other claims, both at law and in equity, now
existing or hereafter arising, and relating to the Premises, the Improvements,
the Fixtures or the Equipment, not included in Rents;

(j)            all now existing or hereafter arising claims
against any Person with respect to any damage to the Premises, the
Improvements, the Fixtures or the Equipment, including, without limitation,
damage arising from any defect in or with respect to the design or construction
of the Improvements, the Fixtures or the Equipment and any damage resulting therefrom;

(k)           all
deposits or other security or advance payments, including rental payments now
or hereafter made by or on behalf of Borrower to others, with respect to (i)
insurance policies, (ii) utility services, (iii) cleaning, maintenance, repair
or similar services, (iv) refuse removal or sewer service, (v) parking or
similar services or rights and (vi) rental of Equipment, if any, relating to or
otherwise used in the operation of the Premises, the Improvements, the Fixtures
or the Equipment;

(l)            all
intangible property now or hereafter relating to the Premises, the
Improvements, the Fixtures or the Equipment or its operation, including,
without limitation, software, letter of credit rights, trade names, trademarks
(including, without

 4
 

 

limitation, any licenses
of or agreements to license trade names or trademarks now or hereafter entered
into by Borrower), logos, building names and goodwill;

(m)          all
now existing or hereafter arising advertising material, guaranties, warranties,
building permits, other permits, licenses, plans and specifications, shop and
working drawings, soil tests, appraisals and other documents, materials and/or
personal property of any kind now or hereafter existing in or relating to the
Premises, the Improvements, the Fixtures, and the Equipment;

(n)           all
now existing or hereafter arising drawings, designs, plans and specifications
prepared by architects, engineers, interior designers, landscape designers and
any other consultants or professionals for the design, development, construction,
repair and/or improvement of the Property, as amended from time to time;

(o)           the
right, in the name of and on behalf of Borrower, to appear in and defend any
now existing or hereafter arising action or proceeding brought with respect to
the Premises, the Improvements, the Fixtures or the Equipment and to commence
any action or proceeding to protect the interest of Lender in the Premises, the
Improvements, the Fixtures or the Equipment;

(p)           all accounts, chattel paper, deposit accounts, fixtures, general
intangibles, goods, instruments and securities accounts (each as defined in the
Uniform Commercial Code as in effect from time to time in the State of
California in which the Premises is located (the “UCC Collateral”); and

(q)           all proceeds, products,
substitutions and accessions (including claims and demands therefor) of each of
the foregoing.

AND FURTHER, in consideration of the foregoing
recitals and to secure the Debt as aforesaid, Borrower by these presents and by
the execution and delivery hereof does hereby irrevocably grant, bargain, sell,
alien, demise, release, convey, assign, transfer, deed, hypothecate, pledge,
set over, warrant, mortgage and confirm to Lender, forever, all right, title
and interest of Borrower, whether now owned or hereafter acquired, in and to
the Equipment, the Fixtures, the UCC Collateral and all other personal property
described above.  To the extent any
portion of the Equipment is not real property or fixtures under applicable law,
it shall be deemed to be personal property, and this Security Instrument shall
constitute a security agreement creating a security interest therein in favor
of Lender under the UCC.

All of the foregoing items
(a) through (p), together with all of the right, title and interest of Borrower
therein, are collectively referred to as the “Property”.

TO HAVE AND TO HOLD the
above granted and described Property unto Trustee, in trust, for the proper use
and benefit of Lender, and the successors and assigns of Lender in fee simple,
forever.

PROVIDED, ALWAYS, and these
presents are upon this express condition, if Borrower shall well and truly pay
and discharge the Debt and perform and observe the terms, covenants

 5
 

 

and conditions set forth in
the Loan Documents, then these presents and the estate hereby granted shall
cease and be void.

AND Borrower covenants with
and warrants to Lender that:

ARTICLE I: 
DEFINITIONS

Section
1.01.  Certain Definitions.

For all purposes of this
Security Instrument, except as otherwise expressly provided or unless the
context clearly indicates a contrary intent:

(i)            the capitalized terms defined in this Section
have the meanings assigned to them in this Section, and include the plural as
well as the singular;

(ii)           all accounting terms not otherwise defined herein shall be construed in
accordance with GAAP; and

(iii)          the words “herein”, “hereof”, and “hereunder” and other words of
similar import refer to this Security Instrument as a whole and not to any
particular Section or other subdivision.

“ACH” shall have the
meaning set forth in Section 5.01 hereof.

“ACM” shall have the
meaning set forth in Section 16.03 hereof.

“Adjusted Net Cash Flow”
shall mean, as of any date of calculation, the Net Operating Income over the twelve
(12)-month period preceding the date of calculation adjusted to reflect
(a) an annual replacement
reserve for furniture, fixtures and equipment of 4% of gross revenues
during such preceding twelve (12) month period and (b) scheduled increases in
real estate taxes over the subsequent twelve (12) month period resulting from,
among other things, increases in tax rates or the assessed value of the
Property and/or the expiration of any applicable tax abatements.  The Adjusted Net Cash Flow shall be calculated by
Borrower and shall be subject to the reasonable review and approval of Lender.

“Affiliate” of any
specified Person shall mean any other Person directly or indirectly Controlling
or Controlled by or under direct or indirect common Control with such specified
Person.

“Annual Budget” shall
mean an annual budget submitted by Borrower to Lender in accordance with the
terms of Section 2.09 hereof.

“Appraisal” shall
mean the appraisal of the Property and all supplemental reports or updates
thereto previously delivered to Lender in connection with the Loan as set forth
in the Receipt and Closing Certificate delivered to Lender by Borrower on the
Closing Date.

“Appraiser” shall
mean the Person who prepared the Appraisal.

 6
 

 

“Approved Annual Budget”
shall mean each Annual Budget approved by Lender in accordance with the terms
hereof.

“Approved Manager
Standard” shall mean the standard of business operations, practices and
procedures customarily employed by entities having a senior executive with at
least five (5) years’ experience in the management of full service luxury or full
service upscale hotel properties which manage not less than five (5) full
service luxury or full service upscale hotel properties having 2,000 hotel
rooms in the aggregate, including, without limitation, certain full service
luxury or full service upscale hotel properties which contain more than 250
hotel rooms.

“Architect” shall
have the meaning set forth in Section 3.04(b)(i) hereof.

“Assignment” shall
mean the Assignment of Leases and Rents and Security Deposits of even date
herewith relating to the Property given by Borrower to Lender, as the same may
be modified, amended or supplemented from time to time.

“Bank” shall mean the
bank, trust company, savings and loan association or savings bank designated by
Lender, in its sole and absolute discretion, in which the Central Account shall
be located.

“Bankruptcy Code”
shall mean 11 U.S.C. §101 et seq., as amended from time to time.

“Basic Carrying Costs”
shall mean the sum of the following costs associated with the Property:  (a) Impositions and (b) insurance premiums.

“Basic Carrying Costs
Escrow Account” shall mean the Escrow Account maintained pursuant to
Section 5.06 hereof.

“Basic Carrying Costs
Monthly Installment” shall mean Lender’s estimate of one-twelfth (1/12th)
of the annual amount for Basic Carrying Costs or with respect to insurance
premiums financed in accordance with the terms of this Security Instrument an
amount equal to the next installment of the insurance premiums then due.  “Basic Carrying Costs Monthly Installment”
shall also include, if required by Lender, a sum of money which, together with
such monthly installments, will be sufficient to make the payment of each such
Basic Carrying Cost at least thirty (30) days prior to the date initially
due.  Should such Basic Carrying Costs
not be ascertainable at the time any monthly deposit is required to be made,
the Basic Carrying Costs Monthly Installment shall be determined by Lender in
its reasonable discretion on the basis of the aggregate Basic Carrying Costs
for the prior Fiscal Year or month or the prior payment period for such
cost.  As soon as the Basic Carrying
Costs are fixed for the then current Fiscal Year, month or period, the next
ensuing Basic Carrying Costs Monthly Installment shall be adjusted to reflect
any deficiency or surplus in prior monthly payments.  If at any time during the term of the Loan
Lender determines that there will be insufficient funds in the Basic Carrying
Costs Escrow Account to make payments when they become due and payable, Lender
shall have the right to adjust the Basic Carrying Costs Monthly Installment
such that there will be sufficient funds to make such payments.

 7
 

 

“Basic Carrying Costs
Sub-Account” shall mean the Sub-Account of the Central Account established
pursuant to Section 5.02 into which the Basic Carrying Costs Monthly
Installments shall be deposited.

“Borrower” shall mean
Borrower named herein and any successor to the obligations of Borrower.

“Business Day” shall
mean any day other than (a) a Saturday or Sunday, or (b) a day on which banking
and savings and loan institutions in the State of New York or the State of
North Carolina are authorized or obligated by law or executive order to be
closed, or at any time during which the Loan is an asset of a Securitization,
the cities, states and/or commonwealths used in the comparable definition of “Business
Day” in the Securitization documents.

“Capital Expenditures”
shall mean for any period, the amount expended for items capitalized under GAAP
including expenditures for building improvements or major repairs, leasing
commissions and tenant improvements.

“Cash Expenses” shall
mean for any period, the operating expenses for the Property as set forth in an
Approved Annual Budget to the extent that such expenses are actually incurred
by Borrower minus payments into the Basic Carrying Costs Sub-Account, the Debt
Service Payment Sub-Account, the SAOT Sub-Account and the Recurring Replacement
Reserve Sub-Account.

“Central Account”
shall mean an Eligible Account, maintained at the Bank, in the name of Lender or
its successors or assigns (as secured party).

“Closing
Date” shall mean the date of the Note.

“Code” shall mean the
Internal Revenue Code of 1986, as amended and as it may be further amended from
time to time, any successor statutes thereto, and applicable U.S. Department of
Treasury regulations promulgated thereunder.

“Condemnation Proceeds”
shall mean all of the proceeds in respect of any Taking or purchase in lieu
thereof.

“Contest” shall have
the meaning set forth in Section 18.32 hereof.

“Contractual Obligation”
shall mean, as to any Person, any provision of any security issued by such
Person or of any agreement, instrument or undertaking to which such Person is a
party or by which it or any of the property owned by it is bound.

“Control” means, when
used with respect to any specific Person, the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person whether through ownership of voting securities,
beneficial interests, by contract or otherwise. 
The definition is to be construed to apply equally to variations of the
word “Control” including “Controlled,” “Controlling” or “Controlled by.”

“Counterparty” shall
have the meaning set forth in Section 5.10 hereof.

 8
 

 

“CPI” shall mean “The
Consumer Price Index (New Series) (Base Period 1982-84=100) (all items for all
urban consumers)” issued by the Bureau of Labor Statistics of the United States
Department of Labor (the “Bureau”). 
If the CPI ceases to use the 1982-84 average equaling 100 as the basis
of calculation, or if a change is made in the term, components or number of
items contained in said index, or if the index is altered, modified, converted
or revised in any other way, then the index shall be adjusted to the figure
that would have been arrived at had the change in the manner of computing the
index in effect at the date of this Security Instrument not been made.  If at any time during the term of this
Security Instrument the CPI shall no longer be published by the Bureau, then
any comparable index issued by the Bureau or similar agency of the United
States issuing similar indices shall be used in lieu of the CPI.

“Credit Card Company” shall have the meaning
set forth in Section 5.01 hereof.

“Credit Card Payment Direction Letter” shall
have the meaning set forth in Section 5.01 hereof.

“Curtailment Reserve
Escrow Account” shall mean the Escrow Account maintained pursuant to
Section 5.11 hereof into which sums shall be deposited during an O&M
Operative Period.

“Curtailment Reserve
Sub-Account” shall mean the Sub-Account of the Central Account established
pursuant to Section 5.02 hereof.

“Debt” shall have the
meaning set forth in the Recitals hereto.

“Debt Service” shall
mean the amount of interest and principal payments due and payable in
accordance with the Note during an applicable period.

“Debt Service Coverage”
shall mean the quotient obtained by dividing Adjusted Net Cash Flow by the sum
of the (a) aggregate payments of interest, principal and all other sums due for
such specified period under the Note (determined as of the date the calculation
of Debt Service Coverage is required or requested hereunder) and (b) aggregate
payments of interest, principal and all other sums due for such specified
period pursuant to the terms of subordinate or mezzanine financing, if any,
then affecting or related to the Property or, if Debt Service Coverage is being
calculated in connection with a request for consent to any subordinate or
mezzanine financing, then proposed.  In
determining Debt Service Coverage, the applicable interest rate for the Loan
and for any floating rate loan referred to in clause (b) above, if any, shall
be the LIBOR Margin, with respect to the Loan, and the applicable margin over
the applicable index, with respect to any other loan referred to in clause (b)
above, plus, in each case, 7.0% with respect to the Loan, and the applicable
strike price set forth in any rate cap or similar agreement applicable to any
other loan referred to in clause (b) above with respect to such loan.

“Debt Service Payment
Sub-Account” shall mean the Sub-Account of the Central Account established
pursuant to Section 5.02 hereof into which the Required Debt Service Payment
shall be deposited.

 9
 

 

“Default” shall mean
any Event of Default or event which would constitute an Event of Default if all
requirements in connection therewith for the giving of notice, the lapse of
time, and the happening of any further condition, event or act, had been
satisfied.

“Default Rate” shall
mean the lesser of (a) the highest rate allowable at law and (b) five percent
(5%) above the interest rate set forth in the Note.

“Default Rate Interest”
shall mean, to the extent the Default Rate becomes applicable, interest in
excess of the interest which would have accrued on (a) the Principal Amount and
(b) any accrued but unpaid interest, if the Default Rate was not applicable.

“Development Laws”
shall mean all applicable subdivision, zoning, environmental protection,
wetlands protection, or land use laws or ordinances, and any and all applicable
rules and regulations of any Governmental Authority promulgated thereunder or
related thereto.

“Disclosure Document” shall mean a prospectus,
prospectus supplement, private placement memorandum, or similar offering
memorandum or offering circular, in each case in preliminary or final form,
used to offer securities in connection with a Securitization.

“Dollar” and the sign
“$” shall mean lawful money of the United States of America.

“Eligible Account”
shall mean a segregated account which is either (a) an account or accounts
maintained with a federal or state chartered depository institution or trust
company the long term unsecured debt obligations of which are rated by each of
the Rating Agencies (or, if not rated by Fitch, Inc. (“Fitch”), otherwise
acceptable to Fitch, as confirmed in writing that such account would not, in
and of itself, result in a downgrade, qualification or withdrawal of the then
current ratings assigned to any certificates issued in connection with a
Securitization) in its highest rating category at all times (or, in the case of
the Basic Carrying Costs Escrow Account, the long term unsecured debt
obligations of which are rated at least “AA” (or its equivalent)) by each of
the Rating Agencies (or, if not rated by Fitch, otherwise acceptable to Fitch,
as confirmed in writing that such account would not, in and of itself, result
in a downgrade, qualification or withdrawal of the then current ratings
assigned to any certificates issued in connection with a Securitization) or, if
the funds in such account are to be held in such account for less than thirty
(30) days, the short term obligations of which are rated by each of the Rating
Agencies (or, if not rated by Fitch, otherwise acceptable to Fitch, as
confirmed in writing that such account would not, in and of itself, result in a
downgrade, qualification or withdrawal of the then current ratings assigned to
any certificates issued in connection with a Securitization) in its highest
rating category at all times or (b) a segregated trust account or accounts
maintained with a federal or state chartered depository institution or trust
company acting in its fiduciary capacity which, in the case of a state
chartered depository institution is subject to regulations substantially
similar to 12 C.F.R. § 9.10(b), having in either case a combined capital and
surplus of at least $100,000,000 and subject to supervision or examination by
federal and state authority, or otherwise acceptable (as evidenced by a written
confirmation from each Rating Agency that such account would not, in and of
itself, cause a downgrade, qualification or withdrawal of the then current
ratings assigned to any certificates issued in connection with a
Securitization) to each Rating Agency, which may be an account maintained by
Lender or its agents.  Eligible Accounts

 10
 

 

may bear interest.  The title of each Eligible Account shall
indicate that the funds held therein are held in trust for the uses and
purposes set forth herein.

“Engineer” shall have
the meaning set forth in Section 3.04(b)(i) hereof.

“Engineering Escrow
Account” shall mean an Escrow Account established and maintained pursuant
to Section 5.12 hereof relating to payments for any Required Engineering Work.

“Environmental Problem”
shall mean any of the following:

(a)           the presence of any Hazardous Material on, in, under, or above all or
any portion of the Property;

(b)           the release or threatened release of any Hazardous Material from or
onto the Property;

(c)           the violation or threatened violation of any Environmental Statute with
respect to the Property; or

(d)           the failure to obtain or to abide by the terms or conditions of any
permit or approval required under any Environmental Statute with respect to the
Property.

A condition described above
shall be an Environmental Problem regardless of whether or not any Governmental
Authority has taken any action in connection with the condition and regardless
of whether that condition was in existence on or before the date hereof.

“Environmental Report”
shall mean the environmental audit report for the Property and any supplements
or updates thereto, previously delivered to Lender in connection with the Loan.

“Environmental Statute”
shall mean any federal, state or local statute, ordinance, rule or regulation,
any judicial or administrative order (whether or not on consent) or judgment
applicable to Borrower or the Property including, without limitation, any
judgment or settlement based on common law theories, and any provisions or
condition of any permit, license or other authorization binding on Borrower
relating to (a) the protection of the environment, the safety and health of
persons (including employees) or the public welfare from actual or potential
exposure (or effects of exposure) to any actual or potential release, discharge,
disposal or emission (whether past or present) of any Hazardous Materials or
(b) the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of any Hazardous Materials, including, but not
limited to, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (“CERCLA”), as amended by the Superfund Amendments
and Reauthorization Act of 1986, 42 U.S.C. §9601 et  seq., the
Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery
Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42
U.S.C. §6901 et  seq., the Federal Water Pollution Control Act, as
amended by the Clean Water Act of 1977, 33 U.S.C. §1251 et  seq.,
the Toxic Substances Control Act of 1976, 15 U.S.C. §2601 et  seq.,
the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. §1101
et  seq., the Clean Air

 11
 

 

Act of 1966, as amended, 42
U.S.C. §7401 et  seq., the National Environmental Policy Act of
1975, 42 U.S.C. §4321, the Rivers and Harbors Act of 1899, 33 U.S.C. §401 et
seq., the Endangered Species Act of 1973, as amended, 16 U.S.C. §1531 et
seq., the Occupational Safety and Health Act of 1970, as amended, 29
U.S.C. §651 et  seq., and the Safe Drinking Water Act of 1974, as
amended, 42 U.S.C. §300(f) et  seq., and all rules, regulations
and guidance documents promulgated or published thereunder.

“Equipment” shall
have the meaning set forth in granting clause (d) of this Security Instrument.

“ERISA” shall mean
the Employee Retirement Income Security Act of 1974, as amended from time to
time, and the regulations promulgated thereunder.  Section references to ERISA are to ERISA, as
in effect at the date of this Security Instrument and, as of the relevant date,
any subsequent provisions of ERISA, amendatory thereof, supplemental thereto or
substituted therefor.

“ERISA Affiliate”
shall mean any corporation or trade or business that is a member of any group
of organizations (a) described in Section 414(b) or (c) of the Code of which
Borrower or Guarantor is a member and (b) solely for purposes of potential
liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code
and the lien created under Section 302(f) of ERISA and Section 412(n) of the
Code, described in Section 414(m) or (o) of the Code of which Borrower or
Guarantor is a member.

“Escrow Account”
shall mean each of the Engineering Escrow Account, the Basic Carrying Costs
Escrow Account, the SAOT Escrow Account, the Recurring Replacement Reserve
Escrow Account, the Operation and Maintenance Expense Escrow Account and the
Curtailment Reserve Escrow Account, each of which shall be an Eligible Account
or book entry sub-account of an Eligible Account.

“Event of Default”
shall have the meaning set forth in Section 13.01 hereof.

“Extraordinary
Expense” shall mean (a) a material extraordinary operating expense or
capital expense not set forth in the Approved Annual Budget or allotted for in
the Recurring Replacement Reserve Sub-Account and (b) the excess of Operating
Expenses over those set forth in the Approved Annual Budget for Interest
Accrual Periods prior to the Interest Accrual Period in which such
determination is being made resulting from revenues which have increased over
those set forth in the Approved Annual Budget for which, with respect to items
set forth in this clause (b) no Lender approval is required.

“First Interest Accrual
Period” shall have the meaning set forth in the Note.

“Fiscal Year” shall
mean the twelve (12) month period commencing on January 1 and ending on
December 31 during each year of the term of this Security Instrument, or such
other fiscal year of Borrower as Borrower may select from time to time with the
prior written consent of Lender, which consent shall not be unreasonably
withheld.

 12
 

 

“Fixtures” shall have
the meaning set forth in granting clause (d) of this Security Instrument.

“Food and Beverage Lessee/Operators” shall have
the meaning set forth on Exhibit H
attached hereto and made a part hereof.

“GAAP” shall mean
generally accepted accounting principles in the United States of America, as of
the date of the applicable financial report, consistently applied.

“General Partner”
shall mean, if Borrower or an SPE Pledgor is a partnership, each general
partner of Borrower or SPE Pledgor, as applicable, and, if Borrower or an SPE
Pledgor is a limited liability company, each managing member of Borrower or SPE
Pledgor and in each case, if applicable, each general partner or managing
member of such general partner or managing member.  In the event that Borrower, an SPE Pledgor or
any General Partner is a single member limited liability company, the term “General
Partner” shall include such single member.

“Governmental Authority”
shall mean, with respect to any Person, any federal or State government or other
political subdivision thereof and any entity, including any regulatory or
administrative authority or court, exercising executive, legislative, judicial,
regulatory or administrative or quasi-administrative functions of or
pertaining to government, and any arbitration board or tribunal, in each case
having jurisdiction over such applicable Person or such Person’s property and
any stock exchange on which shares of capital stock of such Person are listed
or admitted for trading.

“Guarantor” shall
mean Morgans Group LLC, a Delaware limited liability company, and each SPE
Pledgor.

“Hazardous Material”
shall mean any flammable, explosive or radioactive materials, hazardous
materials or wastes, hazardous or toxic substances, pollutants or related
materials, asbestos or any material containing asbestos, molds, spores and
fungus which may pose a risk to human health or the environment or any other
substance or material as defined in or regulated by any Environmental Statutes.

“Impositions” shall
mean all taxes (including, without limitation, all real estate, ad valorem,
assessments (including, without limitation, all assessments for public
improvements or benefits, whether or not commenced or completed prior to the
date hereof and whether or not commenced or completed within the term of this
Security Instrument), ground rents, condominium common charges, excises,
levies, fees (including, without limitation, license, permit, inspection,
authorization and similar fees), and all other governmental charges, in each case
whether general or special, ordinary or extraordinary, or foreseen or
unforeseen, of every character in respect of the Property and/or any Rent
(including all interest and penalties thereon), which at any time prior to,
during or in respect of the term hereof may be assessed or imposed on or in
respect of or be a lien upon (a) Borrower (including, without limitation, all
franchise, single business or other taxes imposed on Borrower for the privilege
of doing business in the jurisdiction in which the Property or any other
collateral delivered or pledged to Lender in connection with the Loan is
located) or Lender or (b) the Property or any part thereof or any

 13
 

 

Rents therefrom or any
estate, right, title or interest therein. 
Impositions shall not include any taxes imposed on Lender’s
income and franchise taxes imposed on Lender by the law or regulation of any
Governmental Authority.

“Improvements” shall
have the meaning set forth in granting clause (b) of this Security Instrument.

“Indemnified Parties”
shall have the meaning set forth in Section 12.01 hereof.

“Independent” shall
mean, when used with respect to any Person, a Person who (a) is in fact
independent, (b) does not have any direct financial interest or any material
indirect financial interest in Borrower, or in any Affiliate of Borrower or any
constituent partner, shareholder, member or beneficiary of Borrower, (c) is not
connected with Borrower or any Affiliate of Borrower or any constituent
partner, shareholder, member or beneficiary of Borrower as an officer,
employee, promoter, underwriter, trustee, partner, director or person
performing similar functions and (d) is not a member of the immediate family of
a Person defined in (b) or (c) above. 
Whenever it is herein provided that any Independent Person’s opinion or
certificate shall be provided, such opinion or certificate shall state that the
Person executing the same has read this definition and is Independent within
the meaning hereof.

“Independent
Director” shall have the meaning set forth in Section 2.02(g)(xvi) hereof.

“Initial Engineering
Deposit” shall equal the amount set forth on Exhibit B
attached hereto and made a part hereof.

“Institutional Lender”
shall mean any of the following Persons: 
(a) any bank, savings and loan association, savings institution,
trust company or national banking association, acting for its own account or in
a fiduciary capacity, (b) any charitable foundation, (c) any
insurance company or pension and/or annuity company, (d) any fraternal
benefit society, (e) any pension, retirement or profit sharing trust or
fund within the meaning of Title I of ERISA or for which any bank, trust
company, national banking association or investment adviser registered under
the Investment Advisers Act of 1940, as amended, is acting as trustee or agent,
(f) any investment company or business development company, as defined in
the Investment Company Act of 1940, as amended, (g) any small business
investment company licensed under the Small Business Investment Act of 1958, as
amended, (h) any broker or dealer registered under the Securities Exchange
Act of 1934, as amended, or any investment adviser registered under the
Investment Adviser Act of 1940, as amended, (i) any government, any public
employees’ pension or retirement system, or any other government agency
supervising the investment of public funds, or (j) any other entity all of
the equity owners of which are Institutional Lenders; provided that each of
said Persons shall have net assets in excess of $1,000,000,000 and a net worth
in excess of $500,000,000, be in the business of making commercial mortgage
loans, secured by properties of like type, size and value as the Property and
have a long term credit rating which is not less than “BBB-” (or its
equivalent) from each Rating Agency.

“Insurance Proceeds”
shall mean all of the proceeds received under the insurance policies required
to be maintained by Borrower pursuant to Article III hereof.

 14
 

 

“Insurance Requirements”
shall mean all terms of any insurance policy required by this Security
Instrument, all requirements of the issuer of any such policy, and all
regulations and then current standards applicable to or affecting the Property
or any use or condition thereof, which may, at any time, be recommended by the
Board of Fire Underwriters, if any, having jurisdiction over the Property, or
such other Person exercising similar functions.

“Interest Accrual Period”
shall have the meaning set forth in the Note.

“Interest Rate” shall
have the meaning set forth in the Note.

“Interest Shortfall”
shall mean any shortfall in the amount of interest required to be paid with
respect to the Loan Amount on any Payment Date.

“Inventory” shall have the meaning as such term
is defined in the Uniform Commercial Code applicable in the State in which the
Property is located, including, without limitation, provisions in storerooms,
refrigerators, pantries and kitchens, beverages in wine cellars and bars, other
merchandise for sale, fuel, mechanical supplies, stationery and other supplies
and similar items, as defined in the Uniform System of Accounts.

“Late Charge” shall
have the meaning set forth in Section 13.09 hereof.

“Leases” shall have
the meaning set forth in granting clause (f) of this Security Instrument.

“Legal Requirement”
shall mean as to any Person, the certificate of incorporation, by-laws,
certificate of limited partnership, agreement of limited partnership or other
organization or governing documents of such Person, and any law, statute,
order, ordinance, judgement, decree, injunction, treaty, rule or regulation
(including, without limitation, Environmental Statutes, Development Laws and
Use Requirements) or determination of an arbitrator or a court or other
Governmental Authority and all covenants, agreements, restrictions and
encumbrances contained in any instruments, in each case applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.

“Lender” shall mean
the Lender named herein and its successors or assigns.

“LIBOR Margin” shall
have the meaning set forth in the Note.

“LIBOR Rate” shall
have the meaning set forth in the Note.

“Loan”
shall have the meaning set forth in the Recitals hereto.

“Loan Amount”
shall have the meaning set forth in the Recitals hereto.

“Loan Documents” shall
mean this Security Instrument, the Note, the Assignment, and any and all other
agreements, instruments, certificates or documents executed and delivered by
Borrower or any Affiliate of Borrower in connection with the Loan, together
with any supplements, amendments, modifications or extensions thereof.

 15
 

 

“Loan Year” shall
mean each 365 day period (or 366 day period if the month of February in a leap
year is included) commencing on the first day of the month following the
Closing Date (provided, however, that the first Loan Year shall also include
the period from the Closing Date to the end of the month in which the Closing
Date occurs).

“Loss Proceeds” shall
mean, collectively, all Insurance Proceeds and all Condemnation Proceeds.

“Major Contracts” shall
mean all Space Leases in excess of 2,000 square feet, and all Leases,
consulting agreements, joint venture agreements or other contracts between
Borrower and a third party operator (including joint ventures in which Borrower
has an interest) relating to food and beverage operations at the Property.

“Major Space Lease”
shall mean any Space Lease of a tenant or Affiliate of such tenant where such
tenant or such Affiliate leases, in the aggregate, five percent (5%) or more of
the Total GLA.

“Management Agreement”
shall have the meaning set forth in Section 7.02(e) hereof.

“Manager” shall mean
Morgans Hotel Group Management LLC, a Delaware limited liability company or any
other Person which manages the Property on behalf of Borrower.

“Manager Certification”
shall have the meaning set forth in Section 2.09(d) hereof.

“Manager Control Notice”
shall have the meaning set forth in Section 7.02(e) hereof.

“Material Adverse Effect”
shall mean any event or condition that has a material adverse effect on (a) the
Property, (b) the business, profits, management, operations or condition
(financial or otherwise) of Borrower, (c) the enforceability, validity,
perfection or priority of the lien of any Loan Document or (d) the ability of
Borrower to perform any obligations under any Loan Document.

“Maturity”, when used
with respect to the Note, shall mean the Maturity Date set forth in the Note or
such other date pursuant to the Note on which the final payment of principal,
and premium, if any, on the Note becomes due and payable as therein or herein
provided, whether at Stated Maturity or by declaration of acceleration, or
otherwise.

“Maturity Date” shall
mean the Maturity Date set forth in the Note, as the same may be extended from
time to time pursuant to the terms of the Note.

“Multiemployer Plan”
shall mean a multiemployer plan defined as such in Section 3(37) of ERISA to
which contributions have been, or were required to have been, made by Borrower,
Guarantor or any ERISA Affiliate.

“Net Capital Expenditures”
shall mean for any period the amount by which Capital Expenditures during such
period exceed reimbursements for such items during such period from the
Engineering Escrow Account or any other Account established pursuant to the
Loan Documents.

 16
 

 

“Net Operating Income”
shall mean in each Fiscal Year or portion thereof during the term hereof,
Operating Income less Operating Expenses.

“Net Proceeds” shall
mean the excess of (a)(i) the purchase price (at foreclosure or otherwise)
actually received by Lender with respect to the Property as a result of the
exercise by Lender of its rights, powers, privileges and other remedies after
the occurrence of an Event of Default, or (ii) in the event that Lender (or
Lender’s nominee) is the purchaser at foreclosure by credit bid, then the amount
of such credit bid, in either case, over (b) all costs and expenses, including,
without limitation, all attorneys’ fees and disbursements and any brokerage
fees, if applicable, incurred by Lender in connection with the exercise of such
remedies, including the sale of such Property after a foreclosure against the
Property.

“Note” shall have the
meaning set forth in the Recitals hereto.

“O&M Operative Period”
shall mean the period of time commencing upon the determination by Lender,
which determination shall be made in Lender’s reasonable discretion, that the
Debt Service Coverage (tested quarterly except during the continuance of an
O&M Operative Period, in which event the Debt Service Coverage shall be
tested monthly and shall be calculated based upon information contained in the
reports furnished to Lender pursuant to Section 2.09 hereof) is less than
1.05:1.00 and terminating on the Payment Date next succeeding the date upon
which Lender reasonably determines that the Debt Service Coverage for two (2) consecutive
calendar quarters is 1.05:1.00 or greater.

“O&M Program”
shall have the meaning set forth in Section 16.03 hereof.

“OFAC List” shall
mean the list of specially designated nationals and blocked persons subject to
financial sanctions that is maintained by the U.S. Treasury Department, Office
of Foreign Assets Control and accessible through the internet website www.treas.gov/ofac/t11sdn.pdf.

“Officer’s Certificate”
shall mean a certificate delivered to Lender by Borrower which is signed on
behalf of Borrower by an authorized representative of Borrower which states
that the items set forth in such certificate are true, accurate and complete in
all respects.

“Operating Expenses”
shall mean, in each Fiscal Year or portion thereof during the term hereof, all
expenses directly attributable to the operation, repair and/or maintenance of
the Property including, without limitation, (a) Impositions, (b) insurance
premiums, (c) management fees, whether or not actually paid, equal to the
greater of the actual management fees and four percent (4%) of total
revenues of the Property, and
(d) costs attributable to the operation, repair and maintenance of the systems
for heating, ventilating and air conditioning the Improvements and actually
paid for by Borrower.  Operating Expenses
shall not include interest, principal and premium, if any, or any other amount
due under the Note or otherwise in connection with the Debt, income taxes,
extraordinary capital improvement costs, any non-cash charge or expense such as
depreciation or amortization or any item of expense otherwise includable in
Operating Expenses which is paid directly by any tenant except real estate
taxes paid directly to any taxing authority by any tenant.

 17
 

 

“Operating Income” shall mean, in each Fiscal
Year or portion thereof during the term hereof, all revenue derived by Borrower
arising from the Property including, without limitation, room revenues, vending
machines revenues, beverage revenues, food revenues, Borrower’s pro rata share
of net profits of Food and Beverage Lessee/Operators, and packaging revenues,
rental revenues (whether denominated as basic rent, additional rent, escalation
payments, electrical payments or otherwise) and other fees and charges payable
pursuant to Leases or otherwise in connection with the Property, and business
interruption, rent or other similar insurance proceeds.  Operating Income shall not include
(a) Insurance Proceeds (other than proceeds of rent, business interruption
or other similar insurance allocable to the applicable period) and Condemnation
Proceeds (other than Condemnation Proceeds arising from a temporary taking or
the use and occupancy of all or part of the applicable Property allocable to
the applicable period), or interest accrued on such Condemnation Proceeds, (b)
proceeds of any financing, (c) proceeds of any sale, exchange or transfer of
the Property or any part thereof or interest therein, (d) capital contributions
or loans to Borrower or an Affiliate of Borrower, (e) any item of income
otherwise includable in Operating Income but paid directly by any tenant to a
Person other than Borrower except for real estate taxes paid directly to any
taxing authority by any tenant, (f) any other material extraordinary,
non-recurring revenues which for the purposes hereof shall be deemed not to
include room revenues, (g) Rent paid by or on behalf of any lessee under a
Space Lease which is the subject of any proceeding or action relating to its
bankruptcy, reorganization or other arrangement pursuant to the Bankruptcy Code
or any similar federal or state law or which has been adjudicated a bankrupt or
insolvent unless such Space Lease has been affirmed by the trustee in such
proceeding or action, (h) Rent paid by or on behalf of any lessee under a Lease
the demised premises of which are not occupied either by such lessee or by a
sublessee thereof unless the lessee has a long-term unsecured debt rating of
not less than “A” (or its equivalent) from any Rating Agency; (i) Rent paid by
or on behalf of any lessee under a Lease in whole or partial consideration for
the termination of any Lease, or (j) sales tax rebates from any Governmental
Authority.

“Operation and
Maintenance Expense Escrow Account” shall mean the Escrow Account
maintained pursuant to Section 5.09 hereof relating to the payment of Operating
Expenses (exclusive of Basic Carrying Costs).

“Operation and
Maintenance Expense Sub-Account” shall mean the Sub-Account of the Central
Account established pursuant to Section 5.02 hereof into which sums allocated
for the payment of Cash Expenses, Net Capital Expenditures and approved
Extraordinary Expenses shall be deposited.

“Pad Owners” shall
mean any owner of any fee interest in property contiguous to or surrounded by
the Property who has entered into or is subject to a reciprocal easement
agreement or other agreement or agreements with Borrower either (a) in
connection with an existing or potential improvement on such property or (b)
relating to or affecting the Property.

“Payment Date” shall
have the meaning set forth in the Note.

“Payment Guaranty”
shall have the meaning set forth in the Recitals hereto.

 18
 

 

“PBGC” shall mean the
Pension Benefit Guaranty Corporation established under ERISA, or any successor
thereto.

“Permitted Encumbrances”
shall have the meaning set forth in Section 2.05(a) hereof.

“Permitted Liens” shall mean:

(a)           the
liens created by the Loan Documents;

(b)           liens,
if any, for Impositions or other charges not yet due and payable and not
delinquent, or that are being contested in accordance with the terms of this
Security Instrument;

(c)           liens which arise by operation of law
(including statutory liens of landlords), judgment liens and materialmen’s,
mechanics’, carriers’, workmen’s and repairmen’s liens and other similar liens
securing obligations that are not overdue for more than thirty (30) days (and
if overdue by more than thirty (30) days, that are being contested in good
faith and as to which appropriate reserves are being maintained) or that have
been fully-bonded, paid or with respect to which enforcement action has been
stayed, all in accordance with the terms of this Security Instrument;

(d)           liens, pledges or deposits to secure
obligations under workmen’s compensation, unemployment insurance, social
security laws or similar legislation or to secure public or statutory
obligations of Borrower;

(e)           purchase money liens, including the lessor’s
interest in respect of any property subject to a capital lease, upon or in
property acquired or held by Borrower in the ordinary course of business to
secure the purchase price of such property or to secure indebtedness incurred
solely for the purpose of financing the acquisition of any such property to be
subject to such liens, or liens existing on any such property at the time of
acquisition, or extensions, renewals or replacements of any of the foregoing
for the same or lesser amount; provided, however, that no such
lien shall extend to any property other than the property being acquired, and
no such extension, renewal or replacement shall extend to or cover property not
theretofore subject to the lien being extended, renewed or replaced, all
subject to the limitations set forth in Section 2.02(g) of this Security
Instrument;

(f)            Permitted
Encumbrances and such other title and survey exceptions as Lender approves in writing
in Lender’s discretion; and

(g)           Space
Leases existing as of the date hereof or hereafter entered into in accordance
with the terms hereof.

“Permitted Transferee” shall mean any of the
following Persons:

(a)           a pension fund, pension trust or pension account
that immediately prior to such transfer owns, directly or indirectly, total
gross real estate assets of at least $1,000,000,000;

(b)           a pension fund advisor who (i) immediately
prior to such transfer, Controls, directly or indirectly, at least $1,000,000,000
of total gross real estate assets and (ii) is acting on

 19
 

 

behalf of one or more pension funds that, in the aggregate, satisfy the
requirements of clause (a) of this definition;

(c)           an insurance company which is subject to
supervision by the insurance commissioner, or a similar official or agency, of
a state or territory of the United States (including the District of Columbia)
(i) with a net worth, determined as of a date no more than six (6) months prior
to the date of the transfer of at least $500,000,000 and (ii) which,
immediately prior to such transfer, controls, directly or indirectly, total
gross real estate assets of at least $1,000,000,000;

(d)           a corporation organized under the banking
laws of the United States or any state or territory of the United States
(including the District of Columbia) (i) with, immediately prior to such
transfer, a combined capital and surplus of at least $500,000,000 and (ii)
which, immediately prior to such transfer, controls, directly or indirectly
total gross real estate assets of at least $1,000,000,000;

(e)           any Person who (i) owns or operates at least
five (5) full service luxury or full service upscale properties totaling no
less than 1,500 hotel rooms (exclusive of the Property), (ii) has a net worth,
determined as of a date no more than six (6) months prior to the date of such
transfer, of at least $500,000,000 and (iii) immediately prior to such
transfer, Controls, directly or indirectly, total gross real estate assets of
at least $1,000,000,000, provided such Person is reasonably acceptable to
Lender based upon, among other things, its credit history and general
reputation; or

(f)            any Person in which more than fifty percent
(50%) of the ownership interests are owned directly or indirectly by any of the
entities listed in subsections (a) through (e) of this definition of “Permitted
Transferee”, or any combination of more than one such entity, and which is
controlled directly or indirectly by such entity or entities;

in each event with respect to which Lender shall have
received information satisfactory to it confirming that neither the proposed
Permitted Transferee nor any Affiliate of the proposed Permitted Transferee (A)
is on the OFAC List or would, if such Person assumes the Loan or obtains an
interest in Borrower, cause Lender to be in violation of Legal Requirements or
(B) has been, within the seven (7) years prior to the proposed Transfer, the
subject of any bankruptcy, reorganization or insolvency proceeding.

“Person” shall mean
any individual, corporation, limited liability company, partnership, joint
venture, estate, trust, unincorporated association, any federal, state, county
or municipal government or any bureau, department or agency thereof and any
fiduciary acting in such capacity on behalf of any of the foregoing.

“Plan” shall mean an
employee benefit or other plan established or maintained by Borrower, Guarantor
or any ERISA Affiliate during the five-year period ended prior to the date of
this Security Instrument or to which Borrower, Guarantor or any ERISA Affiliate
makes, is obligated to make or has, within the five year period ended prior to
the date of this Security Instrument, been required to make contributions
(whether or not covered by Title IV of ERISA

 20
 

 

or Section 302 of ERISA or
Section 401(a) or 412 of the Code), other than a Multiemployer Plan.

“Premises” shall have the meaning set forth in
granting clause (a) of this Security Instrument.

“Principal Amount”
shall mean the Loan Amount as such amount may be reduced from time to time
pursuant to the terms of this Security Instrument, the Note or the other Loan
Documents.

“Principal Payments”
shall mean all payments of principal made pursuant to the terms of the Note.

“Prohibited Person” shall mean any Person
and/or any Affiliate thereof identified on the OFAC List or any other Person or
foreign country or agency thereof with whom a U.S. Person may not conduct
business or transactions by prohibition of Federal law or Executive Order of
the President of the United States of America.

“Property” shall have
the meaning set forth in the granting clauses of this Security Instrument.

“Property Agreements”
shall mean all agreements, grants of easements and/or rights-of-way, reciprocal
easement agreements, permits, declarations of covenants, conditions and
restrictions, disposition and development agreements, planned unit development
agreements, parking agreements, party wall agreements or other instruments
affecting the Property, including, without limitation any agreements with Pad
Owners, but not including any brokerage agreements, management agreements,
service contracts, Space Leases or the Loan Documents.

“Qualified Transferee”
shall have the meaning set forth in the form intercreditor agreement attached
as Appendix VI to the U.S. CMBS Legal and Structured Finance Criteria published
by Standard and Poor’s dated May 1, 2003.

“Rate Cap Agreement”
shall mean that certain interest rate protection agreement (together with the
confirmation and schedules relating thereto) with a notional amount which shall
not at any time be less than the Principal Amount and a LIBOR Rate strike price
equal to seven percent (7.0%) per annum entered into by Borrower in accordance
with the terms hereof or of the other Loan Documents and any similar interest
rate cap or collar agreements subsequently entered into in replacement or
substitution therefor by Borrower with respect to the Loan.

“Rating Agency” shall
mean each of Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Company, Inc. (“Standard & Poor’s”), Fitch, Inc., and
Moody’s Investors Service, Inc. (“Moody’s”) and any successor to any of
them; provided, however, that at any time after a Securitization, “Rating
Agency” shall mean those of the foregoing rating agencies that from time to
time rate the securities issued in connection with such Securitization.

“Realty” shall have
the meaning set forth in Section 2.05(b) hereof.

 21

 

“Recurring Replacement
Expenditures” shall mean Capital Expenditures for furniture, Fixtures and
Equipment to be located at the Property from time to time, as determined in
accordance with GAAP, which are set forth in the Approved Annual Budget.

“Recurring Replacement
Reserve Monthly Installment” shall mean the amount per month set forth on Exhibit B attached hereto and made a part hereof (the “Initial
Recurring Installments”)  until the
end of the first (1st) Loan Year and an amount per month in each subsequent
Loan Year or portion thereof occurring prior to the Maturity Date equal to four
percent (4%) of the total revenues of the Property during the prior Loan Year
(or portion thereof) divided by twelve (12).

“Recurring Replacement
Reserve Escrow Account” shall mean the Escrow Account maintained pursuant
to Section 5.08 hereof relating to the payment of Recurring Replacement
Expenditures.

“Recurring Replacement
Reserve Sub-Account” shall mean the Sub-Account of the Central Account
established pursuant to Section 5.02 hereof into which the Recurring
Replacement Reserve Monthly Installment shall be deposited.

“Regulation AB” shall mean Regulation AB under
the Securities Act and the Securities Exchange Act of 1934 (as amended).

“Rent Account”
shall mean one or more Eligible Account(s) maintained in a bank acceptable to
Lender in the joint names of Lender and Borrower.

“Rents” shall have
the meaning set forth in granting clause (f) of this Security Instrument.

“Rent Roll” shall
have the meaning set forth in Section 2.05(o) hereof.

“Required Debt Service
Coverage” shall mean a Debt Service Coverage of not less than 1.2:1.

“Required Debt Service
Payment” shall mean, as of any Payment Date, (a) the amount of interest and
principal then due and payable pursuant to the Note, together with any other
sums due thereunder, including, without limitation, any prepayments required to
be made or for which notice has been given under this Security Instrument,
Default Rate Interest and premium, if any, paid in accordance therewith plus
(b) pursuant to Section 5.04, reasonable out-of-pocket fees incurred by Lender
in connection with its administration and servicing of the Central Account.

“Required Engineering
Work” shall mean the work set forth on Exhibit D
attached hereto and made a part hereof.

“Retention Amount”
shall have the meaning set forth in Section 3.04(b)(vii) hereof.

“RevPAR” shall mean the average revenues per
available room per day.

“RevPAR Yield Index” shall mean the percentage
amount determined by dividing the RevPAR of the Property by the RevPAR of the
Property’s Competitive Set as determined by

 22
 

 

Smith Travel Research (“STR”) or if STR is no
longer publishing, a successor reasonably acceptable to Lender.

“Sale” shall have the
meaning set forth in Section 9.04 hereof.

“SAOT Deposit” shall
mean the amount required to be deposited into the SAOT Sub-Account pursuant to
Section 5.05 hereof which is equal to the SAOT Expenditures for the calendar
month immediately preceding the calendar month in which such deposit is made.

“SAOT Escrow Account”
shall mean the Escrow Account maintained pursuant to Section 5.07 hereof.

“SAOT Expenditures”
shall mean sales, use or occupancy or other taxes due to any Governmental
Authority imposed on charges for the use of guest rooms at the Property.

“SAOT Sub-Account”
shall mean the Sub-Account of the Central Account established pursuant to
Section 5.02 hereof into which the SAOT Deposit shall be deposited.

“Securities Act”
shall mean the Securities Act of 1933, as the same shall be amended from time
to time.

“Securitization”
shall mean a public or private offering of securities by Lender or any of its
Affiliates or their respective successors and assigns which are collateralized,
in whole or in part, by this Security Instrument.

“Security Deposit Account”
shall have the meaning set forth in Section 5.01 hereof.

“Security Instrument”
shall mean this Security Instrument as originally executed or as it may
hereafter from time to time be supplemented, amended, modified or extended by
one or more indentures supplemental hereto.

“Servicer” shall have
the meaning set forth in Section 5.04 hereof.

“Significant Obligor” shall have the meaning
set forth in Item 1101(k) of Regulation AB.

“Single Purpose Entity”
shall mean a corporation, partnership, joint venture, limited liability
company, trust or unincorporated association, which is formed or organized
solely for the purpose of holding, directly, an ownership interest in the
Property or, with respect to SPE Pledgor, holding an ownership interest in a Food
and Beverage Lessee/Operator or, with respect to General Partner, holding an
ownership interest in and managing a Person which holds an ownership interest
in the Property, does not engage in any business unrelated to the Property,
does not have any assets other than those related to its interest in the
Property or any indebtedness other than as permitted by this Security
Instrument or the other Loan Documents, has its own separate books and records
and has its own accounts, in each case which are separate and apart from the
books and records and accounts of any other Person, holds itself out as being a
Person separate and apart from any other Person and which otherwise satisfies
the criteria of the Rating Agency, as in effect on the Closing Date, for a special-purpose
bankruptcy-remote entity.

 23
 

 

“Solvent” shall mean,
as to any Person, that (a) the sum of the assets of such Person, at a fair
valuation, exceeds its liabilities, including contingent liabilities, (b) such
Person has sufficient capital with which to conduct its business as presently
conducted and as proposed to be conducted and (c) such Person has not incurred
debts, and does not intend to incur debts, beyond its ability to pay such debts
as they mature.  For purposes of this
definition, “debt” means any liability on a claim, and “claim”
means (a) a right to payment, whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed,
undisputed, legal, equitable, secured or unsecured, or (b) a right to an
equitable remedy for breach of performance if such breach gives rise to a
payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured,
or unsecured.  With respect to any such
contingent liabilities, such liabilities shall be computed in accordance with
GAAP at the amount which, in light of all the facts and circumstances existing
at the time, represents the amount which can reasonably be expected to become
an actual or matured liability.

“Space Leases” shall
mean any Lease or sublease thereunder (including, without limitation, any Major
Space Lease) or any other agreement providing for the use and occupancy of a
portion of the Property together with any supplements, renewals, amendments,
modifications or extensions thereof.

“SPE Pledgor” shall
have the meaning set forth on Exhibit I
attached hereto and made a part hereof.

“Spread Maintenance
Premium” shall mean (a) the amount of the prepayment, multiplied by
(b) the LIBOR Margin multiplied by (c) a fraction, the numerator of which is
the number of full and partial months from such prepayment date through the end
of the first (1st) Loan Year and the denominator of which is 12.

“State” shall mean
any of the states which are members of the United States of America.

“Stated Maturity”
when used with respect to the Note or any installment of interest and/or
principal payment thereunder, shall mean the date specified in the Note as the
fixed date on which a payment of all or any portion of principal and/or
interest is due and payable, as such date may be extended from time to time
pursuant to the terms of the Note.

“Sub-Accounts” shall
have the meaning set forth in Section 5.02 hereof.

“Substantial Casualty”
shall have the meaning set forth in Section 3.04(a)(iv) hereof.

“Taking” shall mean a
condemnation or taking pursuant to the lawful exercise of the power of eminent
domain.

“Third Party Disbursements” shall mean to the
extent actually deposited in the Central Account, (a) that portion of Rents
collected by Borrower or Manager, on behalf of Food and Beverage
Lessee/Operators consisting of the sum of (i) operating revenues and sales
taxes (to the extent not otherwise reserved for in the SAOT Sub-Account or SAOT
Escrow Account) of such Food and Beverage Lessee/Operators plus (ii)
distributions by such Food and Beverage

 24
 

 

Lessee/Operators to its members other than
distributions to members who are Affiliates of Borrower, (b) Rents and/or
deposits with respect to gift shop, laundry and parking facilities and movie
rentals, which Borrower is contractually obligated to collect on behalf of
third parties that are not Affiliates of Borrower, SPE Pledgor, Manager or
Guarantor which are to be, and actually have been, paid to such third parties,
and (c) gratuities or service charges or other similar receipts which are to be
paid to any employees of Manager and/or the Food and Beverage Lessee/Operators
or Persons occupying similar positions for performing similar duties and which
are actually paid to such Persons.

“Total GLA” shall
mean the total gross leasable area of the Property, including all Space Leases.

“Transfer” shall mean
the conveyance, assignment, sale, mortgaging, encumbrance, pledging,
hypothecation, granting of a security interest in, granting of options with
respect to, or other disposition of (directly or indirectly, voluntarily or
involuntarily, by operation of law or otherwise, and whether or not for
consideration or of record) all or any portion of any legal or beneficial
interest (a) in all or any portion of the Property; (b) if Borrower is a
corporation or, if Borrower is a partnership and any General Partner is a
corporation, in the stock of Borrower or any General Partner; (c) in Borrower
(or any trust of which Borrower is a trustee); or (d) if Borrower is a limited
or general partnership, joint venture, limited liability company, trust,
nominee trust, tenancy in common or other unincorporated form of business
association or form of ownership interest, in any Person having a legal or
beneficial ownership in Borrower, excluding any legal or beneficial interest in
any constituent limited partner, if Borrower is a limited partnership, or in
any non-managing member, if Borrower is a limited liability company, unless such
interest would, or together with all other direct or indirect interests in
Borrower which were previously transferred, aggregate 49% or more of the
partnership or membership, as applicable, interest in Borrower or would result
in any Person who, as of the Closing Date, did not own, directly or indirectly,
49% or more of the partnership or membership, as applicable, interest in
Borrower, owning, directly or indirectly, 49% or more of the partnership or
membership, as applicable, interest in Borrower and excluding any legal or
beneficial interest in any General Partner unless such interest would, or
together with all other direct or indirect interest in the General Partner
which were previously transferred, aggregate 49% or more of the partnership or
membership, as applicable, interest in the General Partner (or result in a
change in control of the management of the General Partner from the individuals
exercising such control immediately prior to the conveyance or other
disposition of such legal or beneficial interest) and shall also include,
without limitation to the foregoing, the following:  an installment sales agreement wherein
Borrower agrees to sell the Property or any part thereof or any interest
therein for a price to be paid in installments; an agreement by Borrower
leasing all or substantially all of the Property to one or more Persons
pursuant to a single or related transactions, or a sale, assignment or other
transfer of, or the grant of a security interest in, Borrower’s right, title
and interest in and to any Leases or any Rent; any instrument subjecting the
Property to a condominium regime or transferring ownership to a cooperative
corporation; and the dissolution or termination of Borrower or the merger or
consolidation of Borrower with any other Person.  Notwithstanding the foregoing or
anything to the contrary contained in any other Loan Document, “Transfer” shall
not include (a) transfers of publicly traded stock on a national stock exchange
or on the NASDAQ Stock Market in
the normal course of business and

 25
 

 

not in connection with a tender offer or a sale of
Morgans Hotel Group Co. or substantially all of the assets of such Person or
(b) pledges (but not the transfer of any direct or indirect interest in
Borrower in connection with the realization of such pledged interests) of
indirect (but not direct) interests in Borrower to Qualified Transferees in
connection with a financing secured by pledges of direct or indirect interests
in all or substantially all of the assets of Morgans Group LLC, provided that
the Net Operating Income at the time of the origination of the financing
constitutes ten percent (10%) or less of the net operating income of the assets
with respect to which the pledged interests which secure such debt relate or
(c) any Transfer which does not result in (i) a change of Control of Borrower
(it being acknowledged that any holder of more than forty percent of the direct
or indirect interest in Borrower may have veto rights over major decisions
which are customary in joint venture agreements between two fifty percent
owners of a Person and the same shall not constitute a change of Control) or
(ii) a Transfer of more than 49% of any direct or indirect interest in
Borrower.

“Trustee”
shall mean the Person or Persons identified in this Security Instrument as the
trustee hereunder and its or their successors and assigns.

“UCC” shall mean the
Uniform Commercial Code as in effect on the date hereof in the State in which
the Realty is located; provided, however, that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
or priority of the security interest in any item or portion of the collateral
is governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State in which the Realty is located (“Other UCC State”), “UCC”
means the Uniform Commercial Code as in effect in such Other UCC State for
purposes of the provisions hereof relating to such perfection or effect of
perfection or non-perfection or priority.

“Uniform System of Accounts” shall mean the
Uniform System of Accounts for the Lodging Industry, 9th Revised Edition,
Educational Institute of the American Hotel and Motel Association and Hotel
Association of New York City (1996), as from time to time amended.

“Unscheduled Payments”
shall mean (a) all Loss Proceeds that Borrower has elected or is required to
apply to the repayment of the Debt pursuant to this Security Instrument, the
Note or any other Loan Documents, (b) any funds representing a voluntary or involuntary
principal prepayment other than scheduled Principal Payments and (c) any
Net Proceeds.

“Use Requirements”
shall mean any and all building codes, permits, certificates of occupancy or
compliance, laws, regulations, or ordinances (including, without limitation,
health, pollution, fire protection, medical and day-care facilities, waste
product and sewage disposal regulations), restrictions of record, easements,
reciprocal easements, declarations or other agreements affecting the use of the
Property or any part thereof.

“Welfare Plan” shall
mean an employee welfare benefit plan as defined in Section 3(1) of ERISA
established or maintained by Borrower, Guarantor or any ERISA Affiliate or that
covers any current or former employee of Borrower, Guarantor or any ERISA
Affiliate.

“Work” shall have the
meaning set forth in Section 3.04(a)(i) hereof.

 26
 

 

ARTICLE II:  REPRESENTATIONS,
WARRANTIES 

AND COVENANTS OF BORROWER

Section
2.01.  Payment of Debt.  Borrower will pay the Debt at the time and in
the manner provided in the Note and the other Loan Documents, all in lawful
money of the United States of America in immediately available funds.

Section
2.02.  Representations, Warranties and
Covenants of Borrower.  Borrower
represents and warrants to and covenants with Lender:

(a)           Organization and Authority. 
Borrower (i) is a limited liability company, general partnership,
limited partnership or corporation, as the case may be, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
formation, (ii) has all requisite power and authority and all necessary
licenses and permits to own and operate the Property and to carry on its
business as now conducted and as presently proposed to be conducted and (iii)
is duly qualified, authorized to do business and in good standing in the
jurisdiction where the Property is located and in each other jurisdiction where
the conduct of its business or the nature of its activities makes such
qualification necessary.  If Borrower is
a limited liability company, limited partnership or general partnership, each
general partner or managing member, as applicable, of Borrower which is a
corporation is duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.

(b)           Power.  Borrower and, if applicable,
each General Partner has full power and authority to execute, deliver and
perform, as applicable, the Loan Documents to which it is a party, to receive
the borrowings thereunder, to execute and deliver the Note and to grant to
Lender a first priority, perfected and continuing lien on and security interest
in the Property, subject only to the Permitted Encumbrances.

(c)           Authorization of Borrowing.  The
execution, delivery and performance of the Loan Documents to which Borrower is
a party, the making of the borrowings thereunder, the execution and delivery of
the Note, the grant of the liens on the Property pursuant to the Loan Documents
to which Borrower is a party and the consummation of the Loan are within the powers
of Borrower and have been duly authorized by Borrower and, if applicable, the
General Partners, by all requisite action (and Borrower hereby represents that
no approval or action of any member, limited partner or shareholder, as
applicable, of Borrower, which has not been received or taken, is required to
authorize any of the Loan Documents to which Borrower is a party) and will
constitute the legal, valid and binding obligation of Borrower, enforceable
against Borrower in accordance with their terms, except as enforcement may be
stayed or limited by bankruptcy, insolvency or similar laws affecting the
enforcement of creditors’ rights generally and by general principles of equity
(whether considered in proceedings at law or in equity) and will not (i) violate
any provision of its partnership agreement or partnership certificate or
certificate of incorporation or by-laws, or operating agreement, certificate of
formation or articles of organization, as applicable, or, to its knowledge, any
law, judgment, order, rule or regulation of any court, arbitration panel or
other Governmental Authority, domestic or foreign, or other Person affecting or
binding upon Borrower or the Property, or (ii) violate any provision of any
indenture, agreement, mortgage, deed of trust, contract or other instrument to
which Borrower or, if applicable, any General Partner is a party or by which
any of their respective property, assets

 27
 

 

or revenues are bound, or be
in conflict with, result in an acceleration of any obligation or a breach of or
constitute (with notice or lapse of time or both) a default or require any
payment or prepayment under, any such indenture, agreement, mortgage, deed of
trust, contract or other instrument, or (iii) result in the creation or
imposition of any lien, except those in favor of Lender as provided in the Loan
Documents to which it is a party.

(d)           Consent.  Neither Borrower nor, if
applicable, any General Partner, is required to obtain any consent, approval or
authorization from, or to file any declaration or statement with, any
Governmental Authority or other agency in connection with or as a condition to
the execution, delivery or performance of this Security Instrument, the Note or
the other Loan Documents which has not been so obtained or filed.

(e)           Interest Rate.  To
Borrower’s knowledge, the rate of interest paid under the Note and the method
and manner of the calculation thereof do not violate any usury or other law or
applicable Legal Requirement.

(f)            Other Agreements. 
Borrower is not a party to nor is otherwise bound by any agreements or
instruments which, individually or in the aggregate, are reasonably likely to
have a Material Adverse Effect.  Neither
Borrower nor, if applicable, any General Partner, is in violation of its
organizational documents or other restriction or any agreement or instrument by
which it is bound, or any judgment, decree, writ, injunction, order or award of
any arbitrator, court or Governmental Authority, or any Legal Requirement, in
each case, applicable to Borrower or the Property, except for such violations
that would not, individually or in the aggregate, have a Material Adverse
Effect.

(g)           Maintenance of Existence.  (i)
Borrower is familiar with all of the criteria of the Rating Agency required to
qualify as a special-purpose bankruptcy-remote entity and Borrower, SPE Pledgor
and, if applicable, each General Partner at all times since their formation
have been duly formed and existing and shall preserve and keep in full force
and effect their existence as a Single Purpose Entity.

(ii)           Borrower, SPE Pledgor and, if applicable, each General Partner, at all
times since their organization have complied, and will continue to comply, with
the provisions of its certificate and agreement of partnership or certificate
of incorporation and by-laws or articles of organization, certificate of
formation and operating agreement, as applicable, and the laws of its
jurisdiction of organization relating to partnerships, corporations or limited
liability companies, as applicable.

(iii)          Borrower, SPE Pledgor and, if applicable, each General Partner have
done or caused to be done and will do all things necessary to observe
organizational formalities and preserve their existence and Borrower, SPE
Pledgor and, if applicable, each General Partner will not amend, modify or
otherwise change the certificate and agreement of partnership or certificate of
incorporation and by-laws or articles of organization, certificate of formation
and operating agreement, as applicable, or other organizational documents of
Borrower, SPE Pledgor and, if applicable, each General Partner except for
immaterial amendments which do not modify the Single Purpose Entity provisions.

 28
 

 

(iv)          Borrower, SPE Pledgor and, if applicable, each General Partner, have at
all times accurately maintained, and will continue to accurately maintain,
their respective financial statements, accounting records and other
partnership, company or corporate documents separate from those of any other
Person and Borrower and SPE Pledgor has filed and will file its own tax returns
or, if Borrower, SPE Pledgor and/or, if applicable, General Partner is part of
a consolidated group for purposes of filing tax returns, Borrower, SPE Pledgor
and General Partner, as applicable, have been shown and will be shown as
separate members of such group. 
Borrower, SPE Pledgor and, if applicable, each General Partner have not
at any time since their formation commingled, and will not commingle, their
respective assets with those of any other Person and each has maintained and
will maintain their assets in such a manner such that it will not be costly or
difficult to segregate, ascertain or identify their individual assets from
those of any other Person.  Borrower, SPE
Pledgor and, if applicable, each General Partner have not permitted and will
not permit any Affiliate independent access to their bank accounts.  Borrower, SPE Pledgor and, if applicable,
each General Partner have at all times since their formation accurately
maintained and utilized, and will continue to accurately maintain and utilize,
their own separate bank accounts, payroll and separate books of account,
stationery, invoices and checks.

(v)           Borrower, SPE Pledgor and, if applicable, each General Partner, have at
all times paid, and will continue to pay, their own liabilities from their own
separate assets and each has allocated and charged and each shall allocate and
charge fairly and reasonably any overhead which Borrower, SPE Pledgor and, if
applicable, any General Partner, shares with any other Person, including,
without limitation, for office space and services performed by any employee of
another Person.

(vi)          Borrower, SPE Pledgor and, if applicable, each General Partner, have at
all times identified themselves, and will continue to identify themselves, in
all dealings with the public, under their own names and as separate and
distinct entities and shall correct any known misunderstanding regarding their
status as separate and distinct entities. 
Borrower, SPE Pledgor and, if applicable, each General Partner, have not
at any time identified themselves, and will not identify themselves, as being a
division of any other Person.

(vii)         Borrower, SPE Pledgor and, if applicable, each General Partner, have
been at all times, and will continue to be, adequately capitalized in light of
the nature of their respective businesses.

(viii)        Borrower, SPE Pledgor and, if applicable, each General Partner, (A)
have not owned, do not own and will not own any assets or property other than,
with respect to Borrower, the Property and any incidental personal property
necessary for the ownership, management or operation of the Property, with
respect to the SPE Pledgor, the ownership of an interest in a Food and Beverage
Lessee/Operator and, with respect to General Partner, if applicable, its
interest in Borrower, (B) have not engaged and will not engage in any business
other than the ownership, management and operation of the Property or with
respect to the SPE Pledgor, the ownership of an interest in a Food and Beverage

 29
 

 

Lessee/Operator, or with respect to General Partner,
if applicable, its interest in Borrower, (C) have not incurred and will not
incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than (w) the Loan, (x) unsecured trade and
operational debt which (1) is not evidenced by a note, (2) is incurred in the
ordinary course of the operation of the Property, (3) does not, together with
any equipment financing, incurred pursuant to clause (y) hereof, exceed in the
aggregate one percent (1%) of the Loan Amount or, with respect to the SPE
Pledgor, $100,000, and (4) is, unless being contested in accordance with the
terms of this Security Instrument, paid prior to the earlier to occur of the
sixtieth (60th)  day after the date incurred
and the date when due and (y) equipment financing relating to equipment used in
connection with the operation of the Property which (1) is incurred in the
ordinary course of the operation of the Property, (2) does not, together with
any unsecured trade and operational debt incurred pursuant to clause (x)
hereof, exceed one percent (1%) of the Loan Amount or, with respect to the SPE
Pledgor,  $100,000, (3) which is secured
only by the financed equipment, and (4) is, unless being contested in accordance
with the terms of this Security Instrument, paid prior to the earlier to occur
of the sixtieth (60th) day after the date incurred and the date when due, (D)
have not pledged and will not pledge their assets for the benefit of any other
Person, other than the pledges by the SPE Pledgors and (E) have not made and
will not make any loans or advances to any Person (including any Affiliate).

(ix)           None of Borrower, SPE Pledgor nor, if applicable, any General Partner
will change its name or principal place of business unless thirty (30) days
prior written notice thereof is provided to Lender.

(x)            None of Borrower, SPE Pledgor nor, if
applicable, any General Partner has, and neither of such Persons will have, any
subsidiaries other than with respect to Borrower, General Partner and, with
respect to SPE Pledgor, as disclosed in writing to Lender.

(xi)           Each of Borrower and SPE Pledgor has preserved and maintained and will
preserve and maintain its existence as a Delaware limited liability company and
all material rights, privileges, tradenames, if any, and franchises.

(xii)          None of Borrower, SPE Pledgor nor, if applicable, any General Partner,
has merged or consolidated with, and none of them will merge or consolidate
with, and none of them have sold all or substantially all of its respective
assets to any Person, and none of them will sell all or substantially all of
its respective assets to any Person, or liquidate, wind up or dissolve itself
(or suffer any liquidation, winding up or dissolution).  None of Borrower, SPE Pledgor nor, if
applicable, any General Partner has acquired nor will acquire any business or
assets from, or capital stock or other ownership interest of, or be a party to
any acquisition of, any Person.

(xiii)         Borrower, SPE Pledgor and, if applicable, each General Partner, has not
at any time since their formation assumed, guaranteed or held themselves out to
be responsible for, and will not assume, guarantee or hold themselves out to be
responsible for the liabilities or the decisions or actions respecting the
daily business affairs of their

 30
 

 

partners, shareholders or members or any predecessor
company, corporation or partnership, each as applicable, any Affiliates, or any
other Persons other than (i) in connection with the Loan and (ii) obligations
relating to the Property which have been fully satisfied with proceeds of the
Loan.  Neither Borrower nor SPE Pledgor
has at any time since its formation acquired, and will not acquire, obligations
or securities of its partners or shareholders, members or any predecessor
company, corporation or partnership, each as applicable, or any
Affiliates.  Borrower, SPE Pledgor and,
if applicable, each General Partner, have not at any time since their formation
made, and will not make, loans to its partners, members or shareholders or any
predecessor company, corporation or partnership, each as applicable, or any
Affiliates of any of such Persons. 
Borrower, SPE Pledgor and, if applicable, each General Partner, have no
known contingent liabilities nor do they have any material financial
liabilities under any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which such Person is a party or by which it is
otherwise bound other than under the Loan Documents.

(xiv)        None of Borrower, SPE Pledgor nor, if applicable, General Partner, has
at any time since their formation entered into and are not a party to, and,
will not enter into or be a party to, any transaction with its Affiliates,
members, partners or shareholders, as applicable, or any Affiliates thereof
except in the ordinary course of business of Borrower or SPE Pledgor, as
applicable, on terms which are substantially similar to those which Borrower or
SPE Pledgor, as applicable, would obtain in a comparable arm’s length
transaction with an unrelated third party.

(xv)         If Borrower or SPE Pledgor is a limited partnership or a limited
liability company, the General Partner shall be a corporation or limited
liability company whose sole asset is its ownership interests in Borrower and
SPE Pledgor, as applicable, and the General Partner will at all times comply,
and will cause Borrower or SPE Pledgor to comply, with each of the
representations, warranties, and covenants contained in this Section 2.02(g) as
if such representation, warranty or covenant was made directly by such General
Partner.

(xvi)        Borrower and SPE Pledgor shall at all times cause there to be at least
two (2) duly appointed members, with respect to Borrower, and at least one (1)
duly appointed member, with respect to SPE Pledgor, of the board of directors
or board of managers or other governing board or body, as applicable (each an “Independent
Director”), of, if Borrower or SPE Pledgor is a corporation, Borrower and
SPE Pledgor, as applicable, and, if Borrower or SPE Pledgor is a limited
partnership or limited liability company, of the General Partner, reasonably
satisfactory to Lender who shall not have been at the time of such individual’s
appointment, and may not be or have been at any time (A) a shareholder of SPE
Pledgor, officer, director, attorney, counsel, partner, member or employee of
Borrower or any of the foregoing Persons or Affiliates thereof, (B) a customer
or creditor of, or supplier or service provider to, Borrower or SPE Pledgor or
any of its shareholders, partners, members or their Affiliates, (C) a member of
the immediate family of any Person referred to in (A) or (B) above or (D) a
Person Controlling, Controlled by or under common Control with any Person
referred to in (A)

 31
 

 

through (C) above. 
A natural person who otherwise satisfies the foregoing definition
except for being the Independent Director of a Single Purpose Entity Affiliated
with Borrower, SPE Pledgor
or General Partner shall not be disqualified from serving as an Independent
Director if such individual is at the time of initial appointment, or at any
time while serving as the Independent Director, an Independent Director of a
Single Purpose Entity Affiliated with Borrower or SPE Pledgor or General Partner if such individual is an
Independent Director provided by a nationally-recognized company that provides
professional independent directors.

(xvii)       Borrower, SPE Pledgor and, if applicable, each General Partner, shall
not cause or permit the board of directors or board of managers or other
governing board or body, as applicable, of Borrower, SPE Pledgor or, if
applicable, each General Partner, to take any action which, under the terms of
any certificate of incorporation, by-laws, certificate of formation, operating
agreement or articles of organization with respect to any common stock,
requires a vote of the board of directors of Borrower or SPE Pledgor, or, if
applicable, the General Partner, unless at the time of such action there shall
be at least two (2) members, with respect to Borrower, and at least one (1)
member, with respect to SPE Pledgor, who is or are Independent Director(s).

(xviii)      Borrower, SPE Pledgor and, if applicable, each General Partner has paid
and shall pay the salaries of their own employees and has maintained and shall
maintain a sufficient number of employees in light of their contemplated
business operations.

(xix)         Borrower and SPE Pledgor shall, and shall cause their Affiliates to,
and Borrower and SPE Pledgor have and have caused their Affiliates to, conduct
their business so that the assumptions made with respect to Borrower and SPE
Pledgor in that certain opinion letter relating to substantive
non-consolidation dated the date hereof (the “Insolvency Opinion”)
delivered in connection with the Loan shall be true and correct in all
respects.  Notwithstanding the foregoing,
holders of direct or indirect equity interests in Borrower may deliver to
Lender so called “bottom up” guarantees which do not result in a Material
Adverse Effect or result in a change in any obligation of Borrower or Guarantor
to Lender, provided (x) subsequent to a Securitization, Borrower shall deliver
to Lender a letter from each Rating Agency confirming that any rating issued by
the Rating Agency in connection with a Securitization will not, as a result of
the delivery of such guaranty, be downgraded from the then current ratings
thereof, qualified or withdrawn, and (y) Borrower shall deliver to Lender an
update of the Insolvency Opinion addressing the guaranty and confirming the
conclusions thereof which shall be in form and substance satisfactory to
Lender.

Notwithstanding
anything to the contrary contained in this Section 2.02(g), provided Borrower
and SPE Pledgor are each a
Delaware limited liability company which satisfies the single purpose bankruptcy
remote entity requirements of each Rating Agency for a single member limited
liability company, the foregoing provisions of this Section 2.02(g) shall not
apply to the General Partner.

(h)           No Defaults.  No Default or Event of Default
has occurred and is continuing or would occur as a result of the consummation
of the transactions contemplated by the Loan

 32
 

 

Documents.  Borrower is not in default in the payment or
performance of any of its Contractual Obligations in any respect.

(i)            Consents and Approvals.  Borrower and, if applicable, each General
Partner, have obtained or made all necessary (i) consents, approvals and
authorizations, and registrations and filings of or with all Governmental
Authorities and (ii) consents, approvals, waivers and notifications of
partners, stockholders, members, creditors, lessors and other nongovernmental
Persons, in each case, which are required to be obtained or made by Borrower
or, if applicable, the General Partner, in connection with the execution and
delivery of, and the performance by Borrower of its obligations under, the Loan
Documents.

(j)            Investment Company Act Status, etc. 
Borrower is not (i) an “investment company,” or a company “controlled”
by an “investment company,” as such terms are defined in the Investment Company
Act of 1940, as amended, (ii) a “holding company” or a “subsidiary company” of
a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary
company” within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or (iii) subject to any other federal or state law or regulation
which purports to restrict or regulate its ability to borrow money.

(k)           Compliance with Law. 
Borrower is in compliance in all material respects with all Legal
Requirements to which it or the Property is subject, including, without
limitation, all Environmental Statutes, the Occupational Safety and Health Act
of 1970, the Americans with Disabilities Act and ERISA.  No portion of the Property has been or will
be purchased, improved, fixtured, equipped or furnished with proceeds of any
illegal activity and, to the best of Borrower’s knowledge, no illegal
activities are being conducted at or from the Property.

(l)            Financial
Information.  All financial data that
has been delivered by Borrower to Lender (i) is true, complete and correct in
all material respects, (ii) accurately represents the financial condition and
results of operations of the Persons covered thereby as of the date on which
the same shall have been furnished, and (iii) in the case of audited financial
statements, has been prepared in accordance with GAAP and the Uniform System of
Accounts (or such other accounting basis as is reasonably acceptable to Lender)
throughout the periods covered thereby. 
As of the date hereof, none of Borrower, SPE Pledgor nor, if applicable, any General Partner, has any
contingent liability, liability for taxes or other unusual or forward
commitment not reflected in such financial statements delivered to Lender.  Since the date of the last financial
statements delivered by Borrower to Lender except as otherwise disclosed in
such financial statements or notes thereto, there has been no change in the
assets, liabilities or financial position of Borrower SPE Pledgor nor, if applicable, any General Partner, or in the
results of operations of Borrower which would have a Material Adverse
Effect.  None of Borrower, SPE Pledgor nor, if applicable, any
General Partner, has incurred any obligation or liability, contingent or
otherwise not reflected in such financial statements which would have a
Material Adverse Effect.

(m)          Transaction Brokerage Fees. 
Borrower has not dealt with any financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the
transactions contemplated by this Security Instrument.  Borrower hereby agrees to indemnify and hold
Lender harmless for, from and against any and all claims, liabilities, costs
and expenses of any kind in any way relating to or arising from (i) a claim by
any Person, including without limitation

 33
 

 

the Carlton Group and any of
their Affiliates, that such Person acted on behalf of Borrower in connection
with the transactions contemplated herein or (ii) any breach of the foregoing
representation.  The provisions of this
subsection (m) shall survive the repayment of the Debt.

(n)           Federal Reserve Regulations.  No
part of the proceeds of the Loan will be used for the purpose of “purchasing”
or “carrying” any “margin stock” within the meaning of Regulations T, U or X of
the Board of Governors of the Federal Reserve System or for any other purpose
which would be inconsistent with such Regulations T, U or X or any other
Regulations of such Board of Governors, or for any purposes prohibited by Legal
Requirements or by the terms and conditions of the Loan Documents.

(o)           Pending Litigation. 
There are no actions, suits or proceedings pending or, to the best
knowledge of Borrower, threatened against or affecting Borrower or the Property
in any court or before any Governmental Authority which if adversely determined
either individually or collectively has or is reasonably likely to have a
Material Adverse Effect.

(p)           Solvency; No Bankruptcy.  Each
of Borrower, SPE Pledgor and, if applicable, the General Partner, (i) is and
has at all times been Solvent and will remain Solvent immediately upon the
consummation of the transactions contemplated by the Loan Documents and (ii) is
free from bankruptcy, reorganization or arrangement proceedings or a general
assignment for the benefit of creditors and is not contemplating the filing of
a petition under any state or federal bankruptcy or insolvency laws or the
liquidation of all or a major portion of such Person’s assets or property and
Borrower has no knowledge of any Person contemplating the filing of any such petition
against it or, if applicable, the General Partner.  None of the transactions contemplated hereby
will be or have been made with an intent to hinder, delay or defraud any
present or future creditors of Borrower or SPE Pledgor and Borrower has received
reasonably equivalent value in exchange for its obligations under the Loan
Documents.  Borrower’s assets do not, and
immediately upon consummation of the transaction contemplated in the Loan
Documents will not, constitute unreasonably small capital to carry out its
business as presently conducted or as proposed to be conducted.  Borrower does not intend to, nor believes
that it will, incur debts and liabilities beyond its ability to pay such debts
as they may mature.

(q)           Use of Proceeds.  The
proceeds of the Loan shall be applied by Borrower to, inter  alia,
(i) satisfy certain loans presently encumbering all or a part of the Property
and (ii) pay certain transaction costs incurred by Borrower in connection with
the Loan.  No portion of the proceeds of
the Loan will be used for family, personal, agricultural or household use.

(r)            Tax Filings.  Borrower, SPE Pledgor and, if
applicable, each General Partner, have filed all federal, state and local tax
returns required to be filed and have paid or made adequate provision for the
payment of all federal, state and local taxes, charges and assessments payable
by Borrower, SPE Pledgor and, if applicable, the General Partners.  Borrower, SPE Pledgor and, if applicable, the
General Partners, believe that their respective tax returns properly reflect
the income and taxes of Borrower, SPE Pledgor and said General Partner, if any,
for the periods covered thereby, subject only to reasonable adjustments
required by the Internal Revenue Service or other applicable tax authority upon
audit.

 34
 

 

(s)           Not Foreign Person. 
Borrower is not a “foreign person” within the meaning of §1445(f)(3) of
the Code.

(t)            ERISA.  (i) The
assets of Borrower and Guarantor are not and will not become treated as “plan
assets”, whether by operation of law or under regulations promulgated under
ERISA.  If any Person having a
legal or beneficial ownership interest in Borrower is using (or is deemed under
ERISA to be using) “plan assets”, Borrower will qualify as a “real estate
operating company” within the meaning of 29 C.F.R. §2510.3-101(e) at all times
that the Loan is outstanding.  Each Plan and Welfare Plan, and, to the
knowledge of Borrower, each Multiemployer Plan, is in compliance in all
material respects with, and has been administered in all material respects in
compliance with, its terms and the applicable provisions of ERISA, the Code and
any other applicable Legal Requirement, and no event or condition has occurred
and is continuing as to which Borrower would be under an obligation to furnish
a report to Lender under clause (ii)(A) of this Section.  Other than an application for a favorable
determination letter with respect to a Plan, there are no pending issues or
claims before the Internal Revenue Service, the United States Department of
Labor or any court of competent jurisdiction related to any Plan or Welfare
Plan under which Borrower, Guarantor or any ERISA Affiliate, directly or
indirectly (through an indemnification agreement or otherwise), could be
subject to any material risk of liability under Section 409 or 502(i) of ERISA
or Section 4975 of the Code.  No Welfare
Plan, other than a Multiemployer Plan, provides or will provide benefits,
including, without limitation, death or medical benefits (whether or not
insured) with respect to any current or former employee of Borrower, Guarantor
or any ERISA Affiliate beyond his or her retirement or other termination of
service other than (A) coverage mandated by applicable law, (B) death or
disability benefits that have been fully provided for by fully paid up
insurance or (C) severance benefits.

(ii)           Borrower will furnish to Lender as soon as possible, and in any event
within ten (10) days after Borrower knows or has reason to believe that any of
the events or conditions specified below with respect to any Plan, Welfare Plan
or Multiemployer Plan has occurred or exists, an Officer’s Certificate setting
forth details respecting such event or condition and the action, if any, that
Borrower or its ERISA Affiliate proposes to take with respect thereto (and a
copy of any report or notice required to be filed with or given to the PBGC (or
any other relevant Governmental Authority)) by Borrower or an ERISA Affiliate
with respect to such event or condition, if such report or notice is required
to be filed with the PBGC or any other relevant Governmental Authority:

(A)          any reportable event, as defined in Section 4043 of ERISA and the
regulations issued thereunder, with respect to a Plan, as to which PBGC has not
by regulation waived the requirement of Section 4043(a) of ERISA that it be
notified within thirty (30) days of the occurrence of such event (provided that
a failure to meet the minimum funding standard of Section 412 of the Code and
of Section 302 of ERISA, including, without limitation, the failure to make on
or before its due date a required installment under Section 412(m) of the Code
and of Section 302(e) of ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the Code), and any
request for a waiver under Section 412(d) of the Code for any Plan;

 35
 

 

(B)           the distribution under Section 4041 of ERISA of a notice of intent to
terminate any Plan or any action taken by Borrower or an ERISA Affiliate to
terminate any Plan;

(C)           the institution by PBGC of proceedings under Section 4042 of ERISA for
the termination of, or the appointment of a trustee to administer, any Plan, or
the receipt by Borrower or any ERISA Affiliate of a notice from a Multiemployer
Plan that such action has been taken by PBGC with respect to such Multiemployer
Plan;

(D)          the complete or partial withdrawal from a Multiemployer Plan (or other
employee benefit plan) by Borrower or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or the receipt
by Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it
is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or
that it intends to terminate or has terminated under Section 4041A of ERISA;

(E)           the institution of a
proceeding by a fiduciary of any Multiemployer Plan against Borrower or any
ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not
dismissed within thirty (30) days;

(F)           the adoption of an
amendment to any Plan that, pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA, would result in the loss of tax-exempt status of the
trust of which such Plan is a part if Borrower or an ERISA Affiliate fails to
timely provide security to the Plan in accordance with the provisions of said
Sections; or

(G)           the imposition of a
lien or a security interest in connection with a Plan.

(iii)          No liability under Title
IV of ERISA has been incurred by Borrower,
Guarantor or any ERISA Affiliate that has not been satisfied in full,
and no condition exists that presents a material risk to Borrower, Guarantor or any ERISA Affiliate
of incurring any liability under such Title, other than liability for premiums
due the PBGC, which payments have been or will be made when due.  To the extent this representation applies to
Sections 4064, 4069 or 4204 of Title IV of ERISA, it is made not only with
respect to the ERISA Plans but also with respect to any employee benefit plan,
program, agreement or arrangement subject to Title IV of ERISA to which Borrower, Guarantor or any ERISA Affiliate made,
or was required to make, contributions during the past six years.

(iv)          Borrower shall not knowingly engage in or permit any transaction in
connection with which Borrower, Guarantor or any ERISA Affiliate could be
reasonably subject to either a material civil penalty or material tax assessed
pursuant to Section 502(i) or 502(l) of ERISA or Section 4975 of the Code;
Borrower shall not permit any Welfare Plan, other than a Multiemployer
Plan,  to provide benefits, including
without

 36
 

 

limitation, medical benefits (whether or not
insured), with respect to any current or former employee of Borrower, Guarantor
or any ERISA Affiliate beyond his or her retirement or other termination of
service other than (A) coverage mandated by applicable law, (B) death or
disability benefits that have been fully provided for by paid up insurance or
otherwise or (C) severance benefits, permit the assets of Borrower or Guarantor
to become “plan assets”, whether by operation of law or under regulations
promulgated under ERISA; and Borrower and Guarantor shall not adopt, amend
(except as may be required by applicable law) or increase the amount of any
benefit or amount payable under, or permit any ERISA Affiliate to adopt, amend
(except as may be required by applicable law) or increase the amount of any
benefit or amount payable under, any employee benefit plan (including, without
limitation, any employee welfare benefit plan that is not a Multiemployer Plan)
or other plan, policy or arrangement, except for normal increases in the
ordinary course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits expense to
Borrower, Guarantor or any ERISA Affiliate.

(u)           Labor Matters.  No
organized work stoppage or labor strike is pending or threatened by employees
or other laborers at the Property and none of Borrower, SPE Pledgor nor Manager
(i) is involved in or threatened with any material labor dispute, grievance or
litigation relating to labor matters involving any employees and other laborers
at the Property, including, without limitation, violation of any federal, state
or local labor, safety or employment laws (domestic or foreign) and/or charges
of unfair labor practices or discrimination complaints; (ii) has engaged in any
unfair labor practices within the meaning of the National Labor Relations Act
or the Railway Labor Act; or (iii) except as otherwise disclosed in writing to
Lender, is a party to, or bound by, any collective bargaining agreement or
union contract with respect to employees and other laborers at the Property and
no such agreement or contract is currently being negotiated by Borrower, SPE
Pledgor, Manager or any of their Affiliates.

(v)           Borrower’s Legal Status. 
Borrower’s exact legal name that is indicated on the signature page
hereto, organizational identification number and place of business or, if more
than one, its chief executive office, as well as Borrower’s mailing address, if
different, which were identified by Borrower to Lender and contained in this
Security Instrument, are true, accurate and complete.  Borrower (i) will not change its name, its
place of business or, if more than one place of business, its chief executive
office, or its mailing address or organizational identification number if it
has one without giving Lender at least thirty (30) days prior written notice of
such change, (ii) if Borrower does not have an organizational identification
number and later obtains one, Borrower shall promptly notify Lender of such
organizational identification number and (iii) Borrower will not change its
type of organization, jurisdiction of organization or other legal structure.

(w)          Compliance with Anti-Terrorism, Embargo and
Anti-Money Laundering Laws.   (i) None of Borrower, SPE Pledgor, General
Partner, any Guarantor, or any Person who owns any equity interest in or
Controls Borrower, SPE Pledgor, General Partner or any Guarantor currently is
identified on the OFAC List or otherwise qualifies as a Prohibited Person, and
Borrower and SPE Pledgor have implemented procedures, approved by Borrower and,
if applicable, General Partner, to ensure that no Person who now or hereafter
owns an equity

 37
 

 

interest in Borrower, SPE
Pledgor or General Partner is a Prohibited Person or Controlled by a Prohibited
Person, (ii) no proceeds of the Loan will be used to fund any operations in,
finance any investments or activities in or make any payments to, Prohibited
Persons, and (iii) none of Borrower, SPE Pledgor, General Partner, or any
Guarantor are in violation of any Legal Requirements relating to anti-money
laundering or anti-terrorism, including, without limitation, Legal Requirements
related to transacting business with Prohibited Persons or the requirements of
the Uniting and Strengthening America by Providing Appropriate Tools Required
to Intercept and Obstruct Terrorism Act of 2001, U.S. Public Law 107-56, and
the related regulations issued thereunder, including temporary regulations, all
as amended from time to time.  No tenant
under a Space Lease at the Property currently is identified on the OFAC List or
otherwise qualifies as a Prohibited Person, and, to the best of Borrower’s
knowledge, no tenant at the Property is owned or Controlled by a Prohibited
Person.  Borrower has determined that
Manager has implemented procedures, approved by Borrower, to ensure that no
tenant under a Space Lease at the Property is a Prohibited Person or owned or
Controlled by a Prohibited Person.

Section
2.03.  Further Acts, etc.  Borrower will, at the cost of Borrower, and
without expense to Lender, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages or deeds of trust, as applicable,
assignments, notices of assignments, transfers and assurances as Lender or
Trustee shall, from time to time, reasonably require for the better assuring,
conveying, assigning, transferring, and confirming unto Lender and Trustee the
property and rights hereby mortgaged, given, granted, bargained, sold,
alienated, enfeoffed, conveyed, confirmed, pledged, assigned and hypothecated,
or which Borrower may be or may hereafter become bound to convey or assign to
Lender and Trustee, or for carrying out or facilitating the performance of the
terms of this Security Instrument or for filing, registering or recording this
Security Instrument and, on demand, will execute and deliver and hereby
authorizes Lender to execute in the name of Borrower or without the signature
of Borrower to the extent Lender may lawfully do so, one or more financing
statements, chattel mortgages or comparable security instruments to evidence
more effectively the lien hereof upon the Property.  Borrower hereby authorizes Lender and Trustee,
severally, to file any financing statements, and amendments to financing
statements, in any jurisdictions and with any filing offices as Lender or
Trustee, severally, may determine, in its sole discretion, are necessary or
advisable to perfect the security interest granted to Trustee hereunder.  Such financing statements may describe the
collateral in the same manner as described in this document or may contain an
indication or description of collateral that describes such property in any
other manner Lender or Trustee so chooses, including, without limitation,
describing such property as “all assets, whether now owned or hereafter
acquired” or “all personal property, whether now owned or hereafter acquire”.  Borrower grants to Lender an irrevocable
power of attorney coupled with an interest for the purpose of protecting,
perfecting, preserving and realizing upon the interests granted pursuant to
this Security Instrument and to effect the intent hereof, all as fully and
effectually as Borrower might or could do; and Borrower hereby ratifies all
that Lender shall lawfully do or cause to be done by virtue hereof.  Upon receipt of an affidavit of an officer of
Lender as to the loss, theft, destruction or mutilation of the Note or any
other Loan Document which is not of public record, and, in the case of any such
mutilation, upon surrender and cancellation of such Note or other applicable
Loan Document, Borrower will issue, in lieu thereof, a replacement Note or
other applicable Loan Document, dated the date of such lost, stolen, destroyed
or

 38
 

 

mutilated Note or other Loan
Document in the same principal amount thereof and otherwise of like tenor.

Section
2.04.  Recording of Security
Instrument, etc.  Borrower forthwith
upon the execution and delivery of this Security Instrument and thereafter,
from time to time, will cause this Security Instrument, and any security
instrument creating a lien or security interest or evidencing the lien hereof
upon the Property and each instrument of further assurance to be filed, registered
or recorded 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 protect the lien or
security interest hereof upon, and the interest of Lender in, the Property.  Borrower will pay all filing, registration or
recording fees, and all expenses incident to the preparation, execution and
acknowledgment of this Security Instrument, any mortgage or deed of trust, as
applicable, supplemental hereto, any security instrument with respect to the
Property and any instrument of further assurance, and all federal, state,
county and municipal, taxes, duties, imposts, assessments and charges arising
out of or in connection with the execution and delivery of this Security
Instrument, any mortgage or deed of trust, as applicable, supplemental hereto,
any security instrument with respect to the Property or any instrument of
further assurance, except where prohibited by law to do so, in which event
Lender may declare the Debt to be immediately due and payable.  Borrower shall hold harmless and indemnify
Lender and Trustee, and their successors and assigns, against any liability
incurred as a result of the imposition of any tax on the making and recording
of this Security Instrument.

Section
2.05.  Representations, Warranties and
Covenants Relating to the Property. 
Borrower represents and warrants to and covenants with Lender with
respect to the Property as follows:

(a)           Lien Priority.  This
Security Instrument is a valid and enforceable first lien on the Property, free
and clear of all encumbrances and liens having priority over the lien of this
Security Instrument, except for the items set forth as exceptions to,
subordinate matters in, or otherwise disclosed in the title insurance policy
insuring the lien of this Security Instrument, none of which, individually or
in the aggregate, materially interfere with the benefits of the security
intended to be provided by this Security Instrument, materially affect the
value or marketability of the Property, materially impair the use or operation
of the Property for the use currently being made thereof or impair Borrower’s
ability to pay its obligations in a timely manner (such items being the “Permitted
Encumbrances”).

(b)           Title.  Borrower has, subject only to
the Permitted Encumbrances, good, insurable and marketable fee simple title to
the Premises, Improvements and Fixtures (the Improvements and Fixtures,
together with the Premises are referred to collectively as the “Realty”)
and good, insurable and marketable title to all easements and rights
benefiting the Realty and has the right, power and authority to mortgage,
encumber, give, grant, bargain, sell, alien, enfeoff, convey, confirm, pledge,
assign, and hypothecate the Property. 
Borrower will preserve its interest in and title to the Property and
will forever warrant and defend the same to Lender against any and all claims
made by, through or under Borrower and will forever warrant and defend the
validity and priority of the lien and security interest created herein against
the claims of all Persons whomsoever claiming by, through or under
Borrower.  The foregoing warranty of
title shall

 39
 

 

survive the
foreclosure of this Security Instrument and shall inure to the benefit of and
be enforceable by Lender in the event Lender acquires title to the Property
pursuant to any foreclosure.  In
addition, there are no outstanding options or rights of first refusal to
purchase the Property or Borrower’s ownership thereof.

(c)           Taxes and Impositions.  All
taxes and other Impositions and governmental assessments due and payable in
respect of, and affecting, the Property have been paid to the extent due and
payable as of the date hereof.  Borrower
has paid all Impositions which constitute special governmental assessments in
full, except for those assessments which are permitted by applicable Legal
Requirements to be paid in installments, in which case all installments which
are due and payable have been paid in full. 
There are no pending, or to Borrower’s best knowledge, proposed special
or other assessments for public improvements or otherwise affecting the
Property, nor are there any contemplated improvements to the Property that may
result in such special or other assessments.

(d)           Casualty; Flood Zone.  The
Realty is in good repair and free and clear of any damage, destruction or
casualty (whether or not covered by insurance) that would materially affect the
value of the Realty or the use for which the Realty is currently being used,
there exists no structural or other material defects or damages in or to the
Property and Borrower has not received any written notice from any insurance
company or bonding company of any material defect or inadequacies in the
Property, or any part thereof, which would materially and adversely affect the
insurability of the same or cause the imposition of extraordinary premiums or
charges thereon or of any termination or threatened termination of any policy
of insurance or bond.  No portion of the
Premises is located in an “area of special flood hazard,” as that term is
defined in the regulations of the Federal Insurance Administration, Department
of Housing and Urban Development, under the National Flood Insurance Act of
1968, as amended (24 CFR § 1909.1), other than as disclosed in the surveys
of the Property delivered to Lender by Borrower in connection with the
origination of the Loan, or Borrower has obtained the flood insurance required
by Section 3.01(a)(vi) hereof. The Premises either does not lie in a 100 year
flood plain that has been identified by the Secretary of Housing and Urban
Development or any other Governmental Authority or, if it does, Borrower has
obtained the flood insurance required by Section 3.01(a)(vi) hereof.

(e)           Completion; Encroachment.  All
Improvements necessary for the efficient use and operation of the Premises have
been completed and, other than as disclosed in the surveys of the Property
delivered to Lender by Borrower in connection with the origination of the Loan,
none of said Improvements lie outside the boundaries and building restriction
lines of the Premises.  Except as set
forth in the title insurance policy insuring the lien of this Security
Instrument, no improvements on adjoining properties encroach upon the Premises.

(f)            Separate Lot.  The
Premises are taxed separately without regard to any other real estate and
constitute a legally subdivided lot under all applicable Legal Requirements
(or, if not subdivided, no subdivision or platting of the Premises is required
under applicable Legal Requirements), and for all purposes may be mortgaged,
encumbered, conveyed or otherwise dealt with as an independent parcel.  The Property does not benefit from any tax
abatement or exemption.

 40

 

(g)           Use.  The existence of all
Improvements, the present use and operation thereof and the access of the
Premises and the Improvements to all of the utilities and other items referred
to in paragraph (k) below are in compliance in all material respects with all
Leases affecting the Property and all applicable Legal Requirements, including,
without limitation, Environmental Statutes, Development Laws and Use
Requirements.  Borrower has not received
any notice from any Governmental Authority alleging any uncured violation
relating to the Property of any applicable Legal Requirements.

(h)           Licenses and Permits. 
Borrower currently holds and will continue to hold all certificates of
occupancy, licenses, registrations, permits, consents, franchises and approvals
of any Governmental Authority or any other Person which are material for the
lawful occupancy and operation of the Realty or which are material to the
ownership or operation of the Property or the conduct of Borrower’s
business.  All such certificates of occupancy,
licenses, registrations, permits, consents, franchises and approvals are
current and in full force and effect.

(i)            Intentionally Omitted.

(j)            Property Proceedings. 
There are no actions, suits or proceedings pending or, to Borrower’s
knowledge, threatened in any court or before any Governmental Authority or
arbitration board or tribunal (i) relating to (A) the zoning of the
Premises or any part thereof, (B) any certificates of occupancy, licenses,
registrations, permits, consents or approvals issued with respect to the
Property or any part thereof, (C) the condemnation of the Property or any
part thereof, or (D) the condemnation or relocation of any roadways
abutting the Premises required for access or the denial or limitation of access
to the Premises or any part thereof from any point of access to the Premises,
(ii) asserting that (A) any such zoning, certificates of occupancy,
licenses, registrations, permits, consents and/or approvals do not permit the
operation of any material portion of the Realty as presently being conducted,
(B) any material improvements located on the Property or any part thereof
cannot be located thereon or operated with their intended use or (C) the
operation of the Property or any part thereof is in violation in any material
respect of any Environmental Statutes, Development Laws or other Legal
Requirements or Space Leases or Property Agreements or (iii) which could
reasonably be expected to (A) affect the validity or priority of any Loan
Document or (B) have a Material Adverse Effect. 
Borrower is not aware of any facts or circumstances which may give rise
to any actions, suits or proceedings described in the preceding sentence.

(k)           Utilities.  The Premises has all necessary
legal access to water, gas and electrical supply, storm and sanitary sewerage
facilities, other required public utilities (with respect to each of the
aforementioned items, by means of either a direct connection to the source of
such utilities or through connections available on publicly dedicated roadways
directly abutting the Premises or through permanent insurable easements
benefiting the Premises), fire and police protection, parking, and means of
direct access between the Premises and public highways over recognized curb
cuts (or such access to public highways is through private roadways which may
be used for ingress and egress pursuant to permanent insurable easements).

(l)            Mechanics’ Liens.  The
Property is free and clear of any mechanics’ liens or liens in the nature
thereof, and to Borrower’s knowledge no rights are outstanding that under law
could give rise to any such liens, any of which liens are or may be prior to,
or equal with, the lien

 41
 

 

of this Security Instrument,
except those which are insured against by the title insurance policy insuring
the lien of this Security Instrument.

(m)          Intentionally Omitted.

(n)           Insurance.  The Property is insured in
accordance with the requirements set forth in Article III hereof.

(o)           Space Leases.

(i)            Borrower has delivered a true, correct and
complete schedule of all Space Leases as of the date hereof, which accurately
and completely sets forth in all material respects, for each such Space Lease,
the following (collectively, the “Rent Roll”):  the name and address of the tenant with the
name, title and telephone number of the contact person of such tenant; the
lease expiration date, extension and renewal provisions; the base rent and
percentage rent payable; all additional rent and pass-through
obligations; and the security deposit held thereunder and the location of such
deposit.

(ii)           Each Space Lease constitutes the legal, valid and binding obligation of
Borrower and, to the knowledge of Borrower, is enforceable against the tenant
thereof.  No default exists, or with the
passing of time or the giving of notice would exist, (A) under any Major Space
Lease or (B) under any other Space Leases which would, in the aggregate, have a
Material Adverse Effect.

(iii)          No tenant under any Space Lease has, as of the date hereof, paid Rent
more than thirty (30) days in advance, and the Rents under such Space Leases
have not been waived, released, or otherwise discharged or compromised other
than in accordance with the terms of such Space Lease.

(iv)          All work to be performed by Borrower under the Space Leases has been
substantially performed, all contributions to be made by Borrower to the
tenants thereunder have been made except for any held-back amounts, and all
other conditions precedent to the commencement of the term thereunder have been
satisfied.

(v)           Except as previously disclosed to Lender in writing, there are no
options to terminate any Space Lease.

(vi)          Each tenant under a Major Space Lease has entered into occupancy of the
demised premises to the extent required under the terms of its Major Space
Lease, and each such tenant is open and conducting business with the public in
the demised premises.  To the best
knowledge of Borrower, after due inquiry, each tenant under a Lease other than
a Major Space Lease has entered into occupancy of its demised premises under
its Lease to the extent required under the terms of its Lease and each such
tenant is open and conducting business with the public in the demised premises.

(vii)         Borrower has delivered to Lender true, correct and complete copies of
all Space Leases described in the Rent Roll.

 42
 

 

(viii)        Each Space Lease is in full force and effect and (except as disclosed
on the Rent Roll) has not been assigned, modified, supplemented or amended in
any way.

(ix)           To Borrower’s best knowledge, no tenant under a Space Lease has filed any
bankruptcy, reorganization or arrangement proceedings or made a general
assignment for the benefit of creditors.

(x)            No Space Lease provides any party with the
right to obtain a lien or encumbrance upon the Property superior to the lien of
this Security Instrument.

(p)           Property Agreements.

(i)            Borrower has delivered to Lender true,
correct and complete copies of all Property Agreements.

(ii)           No Property Agreement provides any party with the right to obtain a
lien or encumbrance upon the Property superior to the lien of this Security
Instrument.

(iii)          No default exists or with the passing of time or the giving of notice
or both would exist under any Property Agreement which would, individually or
in the aggregate, have a Material Adverse Effect.

(iv)          Borrower has not received or given any written communication which
alleges that a default exists or, with the giving of notice or the lapse of
time, or both, would exist under the provisions of any Property Agreement.

(v)           No condition exists whereby Borrower or any future owner of the
Property may be required to purchase any other parcel of land which is subject
to any Property Agreement or which gives any Person a right to purchase, or
right of first refusal with respect to, the Property.

(vi)          To the best knowledge of Borrower, no offset or any right of offset
exists respecting continued contributions to be made by any party to any
Property Agreement except as expressly set forth therein. Except as previously
disclosed to Lender in writing, no material exclusions or restrictions on the
utilization, leasing or improvement of the Property (including non-compete
agreements) exists in any Property Agreement.

(vii)         All “pre-opening” requirements contained in all Property
Agreements (including, but not limited to, all off-site and on-site
construction requirements), if any, have been fulfilled in all material
respects, and, to the best of Borrower’s knowledge, no condition now exists
which would permit any party to any such Property Agreement to refuse to honor
its obligations thereunder in accordance with the terms thereof.

(viii)        All work, if any, to be performed by Borrower under each of the
Property Agreements has been substantially performed, all contributions to be
made by Borrower to any party to such Property Agreements have been made, and
all other conditions to such party’s obligations thereunder have been satisfied
in all material respects.

 43
 

 

(q)           Personal Property. 
Borrower has delivered to Lender a true, correct and complete schedule
of all material personal property, if any, owned by Borrower and located upon
the Property or used in connection with the use or operation of the Realty and
Borrower represents that it has good and marketable title to all such material
personal property, free and clear of any liens, except for Permitted
Encumbrances and liens which describe the equipment and other personal property
owned by tenants.

(r)            Leasing Brokerage and Management Fees. 
Except as disclosed pursuant to the Management Agreements, there are no
brokerage fees or commissions payable by Borrower with respect to the leasing
of space at the Property and there are no management fees payable by Borrower
with respect to the management of the Property.

(s)           Security Deposits.  All
security deposits with respect to the Property, if any, on the date hereof have
been transferred to the Security Deposit Account on the date hereof, and
Borrower is in compliance with all Legal Requirements relating to such security
deposits as to which failure to comply could reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect.

(t)            Appraisal.  Borrower has no knowledge that any of the
facts or assumptions on which the Appraisal was based are false or incomplete
in any material respect and has no information that would reasonably suggest
that the fair market value determined in the Appraisal does not reflect the
actual fair market value of the Property.

(u)           Representations
Generally.  The representations and
warranties contained in this Security Instrument, and the review and inquiry
made on behalf of Borrower therefor, have all been made by Persons having the
requisite expertise and knowledge to provide such representations and
warranties.  No representation, warranty
or statement of fact made by or on behalf of Borrower in this Security
Instrument or in any certificate, document or schedule furnished to Lender
pursuant hereto, contains any untrue statement of a material fact or omits to
state any material fact necessary to make statements contained therein or herein
not misleading (which may be to Borrower’s best knowledge where so provided
herein).  There are no facts presently
known to Borrower which have not been disclosed to Lender which would,
individually or in the aggregate, have a Material Adverse Effect nor which
could reasonably be expected to, individually or in the aggregate, have a
Material Adverse Effect.

(v)           Liquor
License.  All licenses, permits,
approvals and consents which are required for the sale and service of alcoholic
beverages on the Premises have been obtained from the applicable Governmental
Authorities.

(w)          Credit
Card Companies.  The only Credit Card
Companies are Chase Merchant Services and American Express.

Section
2.06.  Removal of Lien.  (a) Borrower
shall, at its expense, maintain this Security Instrument as a first lien on the
Property and shall keep the Property free and clear of all liens and
encumbrances of any kind and nature other than the Permitted Encumbrances.  Borrower shall, within ten (10) days
following the filing thereof, promptly discharge of record, by bond or

 44
 

 

otherwise, any such liens
and, promptly upon request by Lender, shall deliver to Lender evidence
reasonably satisfactory to Lender of the discharge thereof.

(b)           Without limitation to the provisions of Section 2.06(a) hereof,
Borrower shall (i) unless being contested in good faith by appropriate
proceedings in accordance with Section 2.06(c) hereof, pay, from time to time
when the same shall become due, all claims and demands of mechanics,
materialmen, laborers, and others which, if unpaid, might result in, or permit
the creation of, a lien on the Property or any part thereof, (ii) cause to be
removed of record (by payment or posting of bond or settlement or otherwise)
any mechanics’, materialmens’, laborers’ or other lien on the Property, or any
part thereof, or on the revenues, rents, issues, income or profit arising
therefrom, and (iii) in general, do or cause to be done, without expense to
Lender, everything reasonably necessary to preserve in full the lien of this
Security Instrument.  If Borrower fails
to comply with the requirements of this Section 2.06(b), then, upon five (5)
Business Days’ prior notice to Borrower, Lender may, but shall not be obligated
to, pay any such lien, and Borrower shall, within five (5) Business Days after
Lender’s demand therefor, reimburse Lender for all sums so expended, together
with interest thereon at the Default Rate from the date advanced, all of which
shall be deemed part of the Debt. 
Nothing contained herein shall be deemed a consent or request of Lender,
express or implied, by inference or otherwise, to the performance of any
alteration, repair or other work by any contractor, subcontractor or laborer or
the furnishing of any materials by any materialmen in connection therewith.

(c)           Notwithstanding the foregoing, Borrower may contest any lien (other
than a lien relating to non-payment of Impositions, the contest of which shall
be governed by Section 4.04 hereof) of the type set forth in subparagraph
(b)(ii) of this Section 2.06 provided that, following prior notice to Lender
(i) Borrower is contesting the validity of such lien with due diligence and in
good faith and by appropriate proceedings, without cost or expense to Lender or
any of its agents, employees, officers, or directors, (ii) Borrower shall
preclude the collection of, or other realization upon, any contested amount
from the Property or any revenues from or interest in the Property, (iii)
neither the Property nor any part thereof nor interest therein, shall be in any
danger of being sold, forfeited or lost by reason of such contest by Borrower,
(iv) such contest by Borrower shall not affect the ownership, use or occupancy
of the Property, (v) such contest by Borrower shall not subject Lender, Trustee
or Borrower to the risk of civil or criminal liability (other than the civil
liability of Borrower for the amount of the lien in question), (vi) such lien
is subordinate to the lien of this Security Instrument, (vii) Borrower has not
consented to such lien, (viii) Borrower has given Lender prompt notice of the
filing of such lien and the bonding thereof by Borrower and, upon request by
Lender from time to time, notice of the status of such contest by Borrower
and/or confirmation of the continuing satisfaction of the conditions set forth
in this Section 2.06(c), (ix) Borrower shall promptly pay the obligation
secured by such lien upon a final determination of Borrower’s liability
therefor, and (x) Borrower shall deliver to Lender cash, a bond or other
security acceptable to Lender equal to 125% of the contested amount pursuant to
collateral arrangements reasonably satisfactory to Lender.

Section
2.07.  Cost of Defending and Upholding
this Security Instrument Lien.  If
any action or proceeding is commenced to which Lender or Trustee is made a
party relating to the Loan Documents and/or the Property or Lender’s or Trustee’s
interest therein or in which it becomes necessary to defend or uphold the lien
of this Security Instrument or any other Loan

 45
 

 

Document, Borrower shall, on
demand, reimburse Lender and/or Trustee, as applicable, for all expenses
(including, without limitation, reasonable attorneys’ fees and disbursements)
incurred by Lender and/or Trustee, as applicable, in connection therewith, and
such sum, together with interest thereon at the Default Rate from and after
such demand until fully paid, shall constitute a part of the Debt.

Section
2.08.  Use of the Property.  Borrower will use, or cause to be used, the
Property for such use as is permitted pursuant to applicable Legal Requirements
including, without limitation, under the certificate of occupancy applicable to
the Property, and which is required by the Loan Documents.  Borrower shall not suffer or permit the
Property or any portion thereof to be used by the public, any tenant, or any
Person not subject to a Lease, in a manner as is reasonably likely to impair
Borrower’s title to the Property, or in such manner as may give rise to a claim
or claims of adverse usage or adverse possession by the public, or of implied
dedication of the Property or any part thereof.

Section
2.09.  Financial Reports.  (a) Borrower will
keep and maintain or will cause to be kept and maintained on a Fiscal Year
basis, in accordance with GAAP, the Uniform System of Accounts (or such other accounting basis reasonably
acceptable to Lender) consistently applied, proper and accurate books, tax
returns, records and accounts reflecting (i) all of the financial affairs
of Borrower, Guarantor and (ii) all items of income and expense in connection with
the operation of the Property or in connection with any services, equipment or
furnishings provided in connection with the operation thereof, whether such
income or expense may be realized by Borrower or by any other Person
whatsoever, excepting lessees unrelated to and unaffiliated with Borrower who
have leased from Borrower portions of the Premises for the purpose of occupying
the same.  Lender shall have the right
from time to time at all times during normal business hours upon reasonable
notice to examine such books, tax returns, records and accounts at the office
of Borrower or other Person maintaining such books, tax returns, records and
accounts and to make such copies or extracts thereof as Lender shall
desire.  After the occurrence and during
the continuance of an Event of Default, Borrower shall pay any costs and
expenses incurred by Lender to examine Borrower’s, Guarantor’s accounting
records with respect to the Property, as Lender shall determine to be necessary
or appropriate in the protection of Lender’s interest.

(b)           Borrower will furnish Lender (i) annually, within one hundred twenty
(120) days following the end of each Fiscal Year of Borrower and (ii) on a
quarterly basis, within forty-five (45) days following the end of the first
three (3) fiscal quarters of Borrower, with a complete copy of Borrower’s
financial statement consistently applied covering (i) all of the financial
affairs of Borrower and (ii) the operation of the Property for such Fiscal Year
or fiscal quarters, as applicable, and containing a statement of revenues and
expenses, a statement of assets and liabilities and a statement of Borrower’s
equity.  Each annual financial statement
shall be audited by a nationally recognized Independent certified public
accountant that is reasonably acceptable to Lender in accordance with GAAP,
the Uniform System of Accounts (or such
other accounting basis reasonably acceptable to Lender).  Together with the financial statements
required to be furnished pursuant to this Section 2.09(b), Borrower shall
furnish to Lender an Officer’s Certificate certifying as of the date thereof
(1) that the financial statements accurately represent the results of
operations and financial condition of Borrower and the Property all in
accordance with GAAP, the Uniform System of Accounts (or such other accounting basis reasonably

 46
 

 

acceptable to Lender)
consistently applied, and (2) whether there exists a Default under the
Note or any other Loan Document executed and delivered by Borrower, and if such
event or circumstance exists, the nature thereof, the period of time it has
existed and the action then being taken to remedy such event or circumstance.

(c)           During the continuance of an O&M Operative Period and when
requested by Lender, Borrower will furnish Lender monthly, within twenty (20)
days following the end of each month, with a true, complete and correct cash
flow statement with respect to the Property in the form attached hereto as Exhibit C and made a part hereof, showing
(i) all cash receipts of any kind whatsoever and all cash payments and
disbursements and (ii) year-to-date summaries of such cash receipts,
payments and disbursements, together with a certification of Manager stating
that such cash flow statement is true, complete and correct and a list of all
litigation and proceedings affecting Borrower or the Property in which the
amount involved is $250,000 or more, if not covered by insurance (or $1,000,000
or more whether or not covered by insurance).

(d)           During the continuance of an O&M Operative Period and when
requested by Lender, Borrower will furnish Lender monthly, within twenty (20)
days following the end of each month, with a certification of Manager stating
that all sums released from the Operation and Maintenance Expense Escrow
Account to Borrower have been used to pay Operating Expenses or will be used
within thirty (30) days of the date released to Borrower to pay Operating
Expenses pursuant to Section 5.09 hereof (any such certification or any
certification furnished by a Manager pursuant to clause (c) above, a “Manager
Certification”).

(e)           Borrower will furnish Lender annually, within twenty (20) days
following the end of each year and within twenty (20) days following receipt of
such request therefor, with a true, complete and correct rent roll for the
Property, including a list of which tenants are in default under their
respective Leases, dated as of the date of Lender’s request, identifying the
items set forth in the Rent Roll and each tenant that, to Borrower’s knowledge,
has filed a bankruptcy, insolvency, or reorganization proceeding since delivery
of the last such rent roll, and the arrearages, if any, for each tenant, if
any, and such rent roll shall be accompanied by an Officer’s Certificate, dated
as of the date of the delivery of such rent roll, certifying that such rent
roll is true, correct and complete in all material respects as of its date.

(f)            Borrower shall furnish to Lender, within
thirty (30) days after Lender’s request therefor, with such further detailed
information with respect to the operation of the Property and the financial
affairs of Borrower as may be reasonably requested by Lender.

(g)           Borrower shall cause Manager to furnish to Lender, within one hundred
twenty (120) days following the end of each Fiscal Year of Borrower and upon
request of Lender, a schedule of tenant security deposits showing any activity
in the Security Deposit Account for such month, together with a certification
of Manager as to the balance in such Security Deposit Account and that such
tenant security deposits are being held in accordance with all Legal
Requirements.

(h)           Borrower will furnish Lender annually, within one hundred twenty (120)
days after the end of each Fiscal Year, with a report setting forth (i) the Net
Operating Income for such Fiscal Year, (ii) the average occupancy rate of
the Property during such Fiscal Year, (iii) the

 47
 

 

Capital Expenditures
incurred at the Property during such Fiscal Year and the aggregate Recurring
Replacement Expenditures made in connection therewith, and (iv) the
balance contained in each of the Escrow Accounts as of the end of such Fiscal
Year (which balance Lender shall provide upon Borrower’s written request
therefor).

(i)            Borrower
shall cause Manager to keep and maintain on a Fiscal Year basis, in accordance
with GAAP and the Uniform System of Accounts (or such other accounting basis
reasonably acceptable to Lender) consistently
applied, proper and accurate books, records and accounts on an accrual basis
reflecting (i) all of the financial results of operation and financial
conditions of Manager and (ii) all items of income and expense in connection
with the operation of the Property or in connection with any services,
equipment or furnishings provided in connection with the operation thereof,
whether such income or expense may be realized by Manager or by any other
Person whatsoever.  Lender shall have the
right from time to time at all times during normal business hours upon
reasonable notice to examine such books, records and accounts at the office of
Manager or other Person maintaining such books, records and accounts and to
make such copies or extracts thereof as Lender shall desire.  After the occurrence and during the
continuance of an Event of Default, Borrower shall pay any costs and expenses
incurred by Lender to examine Manager’s accounting records with respect to the
Property, as Lender shall determine to be necessary or appropriate in the
protection of Lender’s interest.

(j)            Borrower
will furnish Lender monthly, within thirty (30) days following the end of each
month, an occupancy summary for
the Property setting forth the occupancy rates, average daily room rates,
RevPAR Yield Index, RevPAR and room revenues for each month of the current
calendar year, as well as year-to-date averages, and such other information as
may customarily be reflected thereon or reasonably requested by Lender,
together with all STR Reports received by Borrower during the preceding month.

(k)           Borrower shall and shall cause Guarantor to furnish to Lender annually,
within thirty (30) days of filing its respective tax return, a copy of such tax
return and within one hundred twenty (120) days after the end of each Fiscal
Year or in lieu thereof deliver annual financial statements of Guarantor
prepared in accordance with GAAP which are audited by a nationally recognized
Independent certified public accountant that is reasonably acceptable to
Lender.

(l)            Borrower shall submit to Lender for Lender’s
written approval an Annual Budget not later than fifteen (15) days prior to the
commencement of each Fiscal Year, in form reasonably satisfactory to Lender
setting forth in reasonable detail budgeted monthly operating income and
monthly operating capital and other expenses for the Property.  Each Annual Budget shall contain, among other
things, management fees, third party service fees, and other expenses as
Borrower may reasonably determine. 
Lender shall have the right to approve such Annual Budget which approval
shall not be unreasonably withheld, and in the event that Lender objects to the
proposed Annual Budget submitted by Borrower, Lender shall advise Borrower of
such objections within fifteen (15) days after receipt thereof (and deliver to
Borrower a reasonably detailed description of such objections) and Borrower
shall, within ten (10) days after receipt of notice of any such objections,
revise such Annual Budget and resubmit the same to Lender.  Lender shall advise Borrower of any
objections to such revised Annual Budget within ten (10)

 48
 

 

days after receipt thereof
(and deliver to Borrower a reasonably detailed description of such objections)
and Borrower shall revise the same in accordance with the process described
herein until Lender approves an Annual Budget, provided, however, that if
Lender shall not advise Borrower of its objections to any proposed Annual
Budget within the applicable time period set forth in this Section, then such
proposed Annual Budget shall be deemed approved by Lender.  Until such time that Lender approves a
proposed Annual Budget, the most recently Approved Annual Budget shall apply;
provided that, such Approved Annual Budget shall be adjusted to reflect actual
increases in Basic Carrying Costs and utilities expenses and to delete any
non-recurring expenses.  In the event
that Borrower must incur an Extraordinary Expense of the type described in
clause (a) of the definition of Extraordinary Expense, then Borrower shall
promptly deliver to Lender a reasonably detailed explanation of such proposed
Extraordinary Expense for Lender’s approval, which approval may be granted or
denied in Lender’s sole and absolute discretion.

(m)          In the event that Borrower fails to deliver any of the financial
statements, reports or other information required to be delivered to Lender
pursuant to this Section 2.09 on or prior to their due dates, if any such
failure shall continue for ten (10) days following notice thereof from Lender,
Borrower shall pay to Lender on each Payment Date for each month or portion
thereof that any such financial statements, reports or other information remains
undelivered, an administrative fee in the amount of Two Thousand Five Hundred
Dollars ($2,500) in the aggregate for all failures occurring in any applicable
month.  Borrower agrees that such
administrative fee (i) is a fair and reasonable fee necessary to compensate
Lender for its additional administrative costs and increased costs relating to
Borrower’s failure to deliver the aforementioned statements, reports or other
items as and when required hereunder and (ii) is not a penalty.

Section
2.10.  Litigation.  Borrower will give prompt written notice to
Lender of any litigation or governmental proceedings pending or threatened (in
writing) against Borrower which are reasonably likely to have a Material
Adverse Effect.

Section
2.11.  Updates of Representations.  Borrower shall deliver to Lender within ten
(10) days of the request of Lender an Officer’s Certificate updating all of the
representations and warranties contained in this Security Instrument and the
other Loan Documents and certifying that all of the representations and
warranties contained in this Security Instrument and the other Loan Documents,
as updated pursuant to such Officer’s Certificate, are true, accurate and
complete as of the date of such Officer’s Certificate.  Notwithstanding the foregoing,
provided that no Event of Default has occurred and is continuing, Borrower
shall not be required to deliver the foregoing Officer’s Certificate more than
three (3) times during the term of the Loan. 
For the avoidance of doubt, Lender acknowledges and agrees that it shall
not be the basis of a Default or Event of Default hereunder if any
representation that was true when made ceases to continue to be true thereafter
(unless and only to the extent that the same constitutes a breach of a covenant
hereunder or an “Event of Default” as expressly defined in Section 13.01
hereof).

Section 2.12.  Major Contracts.  Borrower shall not enter into any new Major
Contracts or amend any existing Major Contracts without, in each instance,
first obtaining Lender’s prior consent, which consent shall not be unreasonably
withheld.  Notwithstanding the foregoing,

 49
 

 

Lender hereby
approves Jeffrey Chodorow or any entity Controlled by Jeffrey Chodorow as a
restaurant and bar operator for the bars and restaurants situated at the
Premises, but reserves the right to approve any economic terms of any new Major
Contracts with Jeffrey Chodorow or any entity Controlled by Jeffrey Chodorow
unless such new Major Contracts are on terms which are substantially the same
or more favorable to the Property than the terms of the applicable Major
Contracts in effect prior to the amendment or renewal thereof, in which case
such new Major Contracts shall be deemed approved by Lender.

ARTICLE III:  INSURANCE AND
CASUALTY RESTORATION

Section
3.01.  Insurance Coverage.  Borrower shall, at its expense, maintain the
following insurance coverages with respect to the Property during the term of
this Security Instrument:

(a)           (i)
Insurance against loss or damage by fire, casualty and other hazards included
in an “all-risk” coverage endorsement or its equivalent (which, in the
case of insurance during the time of any construction work (“Construction”)
shall be in “builder’s risk completed value non-reporting form” together with
rents, earnings and extra expense insurance covering loss due to delay in
completion of the Improvements), with
such endorsements as Lender may from time to time reasonably require and which
are customarily required by Institutional Lenders of similar properties
similarly situated, including, without limitation, if the Property constitutes
a legal non-conforming use, an ordinance of law coverage endorsement which
contains “Demolition Cost”, “Loss Due to Operation of Law” and “Increased Cost
of Construction” coverages, covering the Property in an amount not less than
the greater of (A) 100% of the insurable replacement value of the Property
(exclusive of the Premises and footings and foundations) and (B) such other
amount as is necessary to prevent any reduction in such policy by reason of and
to prevent Borrower, Lender or any other insured thereunder from being deemed
to be a co-insurer.  Not less frequently
than once every three (3) years, Borrower, at its option, shall either (A) have
the Appraisal updated or obtain a new appraisal of the Property, (B) have a
valuation of the Property made by or for its insurance carrier conducted by an
appraiser experienced in valuing properties of similar type to that of the
Property which are in the geographical area in which the Property is located or
(C) provide such other evidence as will, in Lender’s sole judgment, enable
Lender to determine whether there shall have been an increase in the insurable
value of the Property and Borrower shall deliver such updated Appraisal, new
appraisal, insurance valuation or other evidence acceptable to Lender, as the
case may be, and, if such updated Appraisal, new appraisal, insurance
valuation, or other evidence acceptable to Lender reflects an increase in the
insurable value of the Property, the amount of insurance required hereunder
shall be increased accordingly and Borrower shall deliver evidence satisfactory
to Lender that such policy has been so increased.

(ii)           Commercial general liability insurance against claims for personal and
bodily injury and/or death to one or more persons or property damage, occurring
on, in or about the Property (including the adjoining streets, sidewalks and
passageways therein) in such amounts as Lender may from time to time reasonably
require (but in no event shall Lender’s requirements be increased more
frequently than once during each twelve (12)

 50
 

 

month period) and which are customarily required by
Institutional Lenders for similar properties similarly situated, but not less
than $1,000,000 per occurrence and $2,000,000 general aggregate on a per
location basis and, in addition thereto, not less than $75,000,000 excess
and/or umbrella liability insurance shall be maintained for any and all claims.

(iii)          Business interruption, rent loss or other similar insurance with an
unlimited indemnity period (A) with loss payable to Lender, (B) covering all
risks required to be covered by the insurance provided for in Section
3.01(a)(i) hereof and (C) in an amount not less than 100% of the projected
total revenues derived from the Property for the succeeding twenty-four (24)
month period based on an occupancy rate taking into account historical and
projected occupancy.  The amount of such
insurance shall be determined upon the execution of this Security Instrument,
and not more frequently than once each calendar year thereafter based on
Borrower’s reasonable estimate of projected fixed or base rent plus percentage
rent, from the Property for the next succeeding twenty-four (24) months.  In the event the Property shall be damaged or
destroyed, Borrower shall and hereby does assign to Lender all payment of
claims under the policies of such insurance, and all amounts payable
thereunder, and all net amounts, shall be collected by Lender under such
policies and shall be applied in accordance with this Security Instrument;
provided, however, that nothing herein contained shall be deemed to relieve
Borrower of its obligations to timely pay all amounts due under the Loan
Documents.

(iv)          War risk insurance when such insurance is obtainable from the United
States of America or any agency or instrumentality thereof at reasonable rates
(for the maximum amount of insurance obtainable) and if requested by Lender,
and such insurance is then customarily required by Institutional Lenders of
similar properties similarly situated. 
As of the Closing Date, no insurance of the type set forth in this
Section 3.01(a)(iv) is required.

(v)           Insurance against loss or damages from (A) leakage of sprinkler systems
and (B) explosion of steam boilers, air conditioning equipment, pressure
vessels or similar apparatus now or hereafter installed at the Property, in
such amounts as Lender may from time to time reasonably require and which are
then customarily required by Institutional Lenders of similar properties
similarly situated.

(vi)          Flood insurance in an amount equal to the full insurable value of the
Property or the maximum amount available, whichever is less, if the
Improvements are located in an area designated by the Secretary of Housing and
Urban Development as being “an area of special flood hazard” under the National
Flood Insurance Program (i.e., having a one percent or greater chance of
flooding), and if flood insurance is available under the National Flood
Insurance Act.

(vii)         Worker’s compensation insurance or other similar insurance which may be
required by Governmental Authorities or Legal Requirements.

(viii)        Intentionally omitted.

 51
 

 

(ix)           Insurance against
damage resulting from acts of terrorism, or an insurance policy without an
exclusion for damages resulting from terrorism, on terms consistent with the
commercial property insurance policy required under subsections (i), (ii) and
(iii) above; provided, however, Borrower shall not be required to carry more
than the amount of insurance required pursuant to this Section 3.01(a)(ix) as
is available for an annual premium of 200% of the total annual premium of the
insurance required pursuant to this Section 3.01(a)(ix) during the previous
policy year.

(x)            At all times during
Construction, contractor’s liability insurance to a limit acceptable to Lender
in its reasonable discretion based upon, among other things, then current
market standards and the scope of work, covering each contractor’s construction
operation at the Premises (which insurance may be provided by the contractor).

(xi)           Such other insurance as may from time to time be required by Lender and
which is then customarily required by Institutional Lenders for similar
properties similarly situated, against other insurable hazards, including, but
not limited to, malicious mischief, vandalism, loss resulting from mold, spores
or fungus on or about the Premises, (which Lender acknowledges, as of the
Closing Date is not required hereunder), sinkhole and mine subsidence,
windstorm and/or earthquake, due regard to be given to the size and type of the
Premises, Improvements, Fixtures and Equipment and their location, construction
and use.

(xii)          If Borrower, any of its Affiliates or Manager holds a liquor license
for the Premises, liquor liability insurance in the amount of no less than
$10,000,000.

(xiii)         Automobile liability insurance covering owned, hired and not
owned vehicles in an amount of not less than $1,000,000 per accident.

(b)           Borrower shall cause any Manager of the Property to maintain fidelity
insurance in an amount equal to or greater than $10,000,000.

Section
3.02.  Policy Terms.  (a) All insurance required by
this Article III shall be in the form (other than with respect to Sections
3.01(a)(vi) and (vii) above when insurance in those two sub-sections is placed
with a governmental agency or instrumentality on such agency’s forms) and
amount and with deductibles as, from time to time, shall be reasonably
acceptable to Lender, under valid and enforceable policies issued by
financially responsible insurers authorized to do business in the State where
the Property is located, which shall have a claims paying ability rating and/or
financial strength rating, as applicable, of not less than “A-” (or its
equivalent), or such lower claims paying ability rating and/or financial
strength rating, as applicable, as Lender shall, in its reasonable discretion
(taking into account then current Rating Agency guidelines), consent to, from a
Rating Agency (one of which after a Securitization in which Standard & Poor’s
rates any securities issued in connection with such Securitization, shall be
Standard & Poor’s).  Originals or certified copies of all
insurance policies shall be delivered to and held by Lender.  All such policies (except policies for worker’s
compensation) shall name Lender, its successors and/or assigns as an additional
named insured, with respect to the insurance required pursuant to Section
3.01(a)(iii) above, shall provide for loss payable to Lender, its successors
and/or assigns and shall contain (or have attached):  (i) standard “non-contributory mortgagee”

 52
 

 

endorsement or its
equivalent relating, inter  alia, to recovery by Lender
notwithstanding the negligent or willful acts or omissions of Borrower; (ii) a
waiver of subrogation endorsement as to Lender; (iii) an endorsement indicating
that neither Lender nor Borrower shall be or be deemed to be a co-insurer with
respect to any casualty risk insured by such policies and shall provide for a
deductible per loss of an amount not more than the lesser of (x) that which is
customarily maintained by owners of similar properties similarly situated and
(y) $250,000 or, with respect to the deductible under any insurance against
losses resulting from windstorms, 5% of the values at risk or, with respect to
the deductible under any insurance against losses resulting from earthquake, 5%
of the values at risk, and (iv) a provision that such policies shall not be
canceled, terminated, denied renewal or amended, including, without limitation,
any amendment reducing the scope or limits of coverage, without at least thirty
(30) days’ prior written notice to Lender in each instance.  Not less than thirty (30) days prior to the
expiration dates of the insurance policies obtained pursuant to this Security
Instrument, originals or certified copies of renewals of such policies (or
certificates evidencing such renewals) bearing notations evidencing the payment
of premiums or accompanied by other reasonable evidence of such payment (which
premiums shall not be paid by Borrower through or by any financing arrangement
which would entitle an insurer to terminate a policy; provided, however,
premiums for the insurance required pursuant to Section 3.01(a)(i) may be paid
quarterly in advance or as otherwise reasonably acceptable to Lender, it being
acknowledged that paying the premium for such policies by financing the same,
paying twenty percent (20%) of the total annual premium (inclusive of finance
charges) at the time of the applicable policy renewal and paying the remaining
eighty percent (80%) of the total annual premium (inclusive of finance charges)
in nine (9) equal monthly installments is acceptable to Lender) shall be
delivered by Borrower to Lender. 
Borrower shall not carry separate insurance, concurrent in kind or form
or contributing in the event of loss, with any insurance required under this
Article III.

(b)           If
Borrower fails to maintain and deliver to Lender the original policies or
certificates of insurance required by this Security Instrument, or if there are
insufficient funds in the Basic Carrying Costs Escrow Account to pay the
premiums for same, Lender may, at its option, procure such insurance, and
Borrower shall pay, or as the case may be, reimburse Lender for, all premiums
thereon promptly, upon demand by Lender, with interest thereon at the Default
Rate from the date paid by Lender to the date of repayment and such sum shall
constitute a part of the Debt.

(c)           Borrower
shall notify Lender of the renewal premium of each insurance policy and Lender
shall be entitled to pay such amount on behalf of Borrower from the Basic
Carrying Costs Escrow Account in accordance with the financing schedule of the
payments for such premiums, if any, or, if an Event of Default has occurred and
is continuing, in full or such other manner as Lender may elect.  With respect to insurance policies which
require periodic payments (i.e., monthly or quarterly) of premiums, Lender
shall be entitled to pay such amounts ten (10) days (or such lesser number of
days as Lender shall determine) prior to the respective due dates of such
installments.

(d)           The
insurance required by this Security Instrument may, at the option of Borrower,
be effected by blanket and/or umbrella policies issued to Borrower covering the
Property provided that, in each case, the policies otherwise comply with the
provisions of this

 53
 

 

Security
Instrument and allocate to the Property, from time to time (but in no event
less than once a year), the coverage specified by this Security Instrument,
without possibility of reduction or coinsurance by reason of damage to any
other property (real or personal) named therein.  If the insurance required by this Security
Instrument shall be effected by any such blanket or umbrella policies, Borrower
shall furnish to Lender (i) original policies or certified copies thereof, or
an original certificate of insurance together with reasonable access to the
original of such policy to review such policy’s coverage of the Property, with
schedules attached thereto showing the amount of the insurance provided under
such policies applicable to the Property and (ii) an Officer’s Certificate
setting forth (A) the number of properties covered by such policy, (B) the
location by city (if available, otherwise, county) and state of the properties,
(C) the average square footage of the properties, (D) a brief description of
the typical construction type included in the blanket policy and (E) such other
information as Lender may reasonably request.

Section
3.03.  Assignment of Policies.  (a) Borrower
hereby assigns to Lender the proceeds of all insurance (other than worker’s
compensation and liability insurance) obtained pursuant to this Security
Instrument, all of which proceeds shall be payable to Lender as collateral and
further security for the payment of the Debt and the performance of Borrower’s
obligations hereunder and under the other Loan Documents, and Borrower hereby
authorizes and directs the issuer of any such insurance to make payment of such
proceeds directly to Lender.  Except as
otherwise expressly provided in Section 3.04 or elsewhere in this Article III,
Lender shall have the option, in its discretion, and without regard to the
adequacy of its security, to apply all or any part of the proceeds it may
receive pursuant to this Article in such manner as Lender may elect to any one
or more of the following:  (i) the
payment of the Debt, whether or not then due, in accordance with the provisions
of the Note, (ii) the repair or restoration of the Property, (iii) the cure of
any Default or (iv) the reimbursement of the costs and expenses of Lender
incurred pursuant to the terms hereof in connection with the recovery of the
Insurance Proceeds.  Subject to Section
15.03(a), nothing herein contained shall be deemed to excuse Borrower from
repairing or maintaining the Property as provided in this Security Instrument
or restoring all damage or destruction to the Property, regardless of the
sufficiency of the Insurance Proceeds, and the application or release by Lender
of any Insurance Proceeds shall not cure or waive any Default or notice of
Default.

(b)           In the event of the foreclosure of this Security Instrument or any
other transfer of title or assignment of all or any part of the Property in
extinguishment, in whole or in part, of the Debt, all right, title and interest
of Borrower in and to all policies of insurance required by this Security
Instrument shall inure to the benefit of the successor in interest to Borrower
or the purchaser of the Property (it being acknowledged that the policy
required pursuant to Section 3.01(a)(ii) hereof shall not be required to be
assigned to Lender).  If, prior to the
receipt by Lender of any proceeds, the Property or any portion thereof shall
have been sold on foreclosure of this Security Instrument or by deed in lieu
thereof or otherwise, or any claim under such insurance policy arising during
the term of this Security Instrument is not paid until after the extinguishment
of the Debt, and Lender shall not have received the entire amount of the Debt
outstanding at the time of such extinguishment, whether or not a deficiency
judgment on this Security Instrument shall have been sought or recovered or
denied, then, the proceeds of any such insurance to the extent of the amount of
the Debt not so received, shall be paid to and be the property of Lender,
together with interest thereon at the Default Rate, and the reasonable

 54
 

 

attorney’s fees, costs and
disbursements incurred by Lender in connection with the collection of the
proceeds which shall be paid to Lender and Borrower hereby assigns, transfers
and sets over to Lender all of Borrower’s right, title and interest in and to
such proceeds.  Notwithstanding any
provisions of this Security Instrument to the contrary, Lender shall not be
deemed to be a trustee or other fiduciary with respect to its receipt of any
such proceeds, which may be commingled with any other monies of Lender;
provided, however, that Lender shall use such proceeds for the purposes and in
the manner permitted by this Security Instrument.  Any proceeds deposited with Lender shall be
held by Lender in an interest-bearing account, but Lender makes no
representation or warranty as to the rate or amount of interest, if any, which
may accrue on such deposit and shall have no liability in connection therewith.  Interest accrued, if any, on the proceeds
shall be deemed to constitute a part of the proceeds for purposes of this
Security Instrument.  The provisions of
this Section 3.03(b) shall survive the termination of this Security Instrument
by foreclosure, deed in lieu thereof or otherwise as a consequence of the
exercise of the rights and remedies of Lender hereunder after a Default.

Section
3.04.  Casualty Restoration.  (a) (i) In the
event of any damage to or destruction of the Property, Borrower shall give
prompt written notice to Lender (which notice shall set forth Borrower’s good
faith estimate of the cost of repairing or restoring such damage or
destruction, or if Borrower cannot reasonably estimate the anticipated cost of
restoration, Borrower shall nonetheless give Lender prompt notice of the
occurrence of such damage or destruction, and will diligently proceed to obtain
estimates to enable Borrower to quantify the anticipated cost and time required
for such restoration, whereupon Borrower shall promptly notify Lender of such good
faith estimate) and, provided that restoration does not violate any Legal
Requirements, Borrower shall promptly commence and diligently prosecute to
completion the repair, restoration or rebuilding of the Property so damaged or
destroyed to a condition such that the Property shall be at least equal in
value to that immediately prior to the damage to the extent practicable, in
full compliance with all Legal Requirements and the provisions of all Leases,
and in accordance with Section 3.04(b) below. 
Such repair, restoration or rebuilding of the Property including,
without limitation, preparation of plans and specifications in connection
therewith, and also including the repair and replacement of furniture, fixtures
and equipment, are sometimes hereinafter collectively referred to as the “Work”.

(ii)           Borrower shall not adjust, compromise or settle any claim for Insurance
Proceeds without the prior written consent of Lender, which shall not be
unreasonably withheld or delayed and Lender shall have the right, at Borrower’s
sole cost and expense, to participate in any settlement or adjustment of
Insurance Proceeds; provided, however, that, except during the continuance of
an Event of Default, Lender’s consent shall not be required with respect to the
adjustment, compromising or settlement of any claim for Insurance Proceeds in
an amount less than $250,000.

(iii)          Subject to Section 3.04(a)(iv), Lender shall apply any Insurance
Proceeds which it may receive towards the Work in accordance with Section
3.04(b) and the other applicable sections of this Article III.

(iv)          If (A) an Event of Default shall have occurred and be continuing, (B)
Lender is not reasonably satisfied that the Debt Service Coverage, after
substantial completion of

 55
 

 

the Work, will be at least
equal to the Required Debt Service Coverage, (C) more than thirty percent (30%)
of the reasonably estimated fair market value of the Property is damaged or
destroyed, (D) Lender is not reasonably satisfied that the Work can be
completed six (6) months prior to Maturity or (E) Lender is not reasonably
satisfied that the Work can be completed within twelve (12) months of the
damage to or destruction of the Property (each, a “Substantial Casualty”),
Lender shall have the option, in its sole discretion to apply any Insurance
Proceeds it may receive pursuant to this Security Instrument (less any cost to
Lender of recovering and paying out such proceeds incurred pursuant to the
terms hereof and not otherwise reimbursed to Lender, including, without
limitation, reasonable attorneys’ fees and expenses) to the payment of the
Debt, without any prepayment fee or charge of any kind, or to allow such
proceeds to be used for the Work pursuant to the terms and subject to the
conditions of Section 3.04(b) hereof and the other applicable sections of this
Article III.

(v)           In the event that Lender elects or is obligated hereunder to allow
Insurance Proceeds to be used for the Work, any excess proceeds remaining after
completion of such Work shall be applied to the payment of the Debt without any
prepayment fee or charge of any kind.

(b)           If any Condemnation Proceeds in accordance with Section 6.01(a), or any
Insurance Proceeds in accordance with Section 3.04(a), are to be applied to the
repair, restoration or rebuilding of the Property, then such Condemnation
Proceeds or Insurance Proceeds shall be deposited into a segregated
interest-bearing bank account at the Bank, which shall be an Eligible Account,
held by Lender and shall be paid out from time to time to Borrower as the Work
progresses (less any cost to Lender of recovering and paying out such proceeds,
including, without limitation, reasonable attorneys’ fees and costs allocable
to inspecting the Work and the plans and specifications therefor) subject to
Section 5.13 hereof and to all of the following conditions:

(i)            An Independent architect or engineer selected
by Borrower and reasonably acceptable to Lender (an “Architect” or “Engineer”)
or a Person otherwise reasonably acceptable to Lender, shall have delivered to
Lender a certificate estimating the cost of completing the Work, and, if the
amount set forth therein is more than the sum of the amount of Insurance
Proceeds then being held by Lender in connection with a casualty and amounts
agreed to be paid as part of a final settlement under the insurance policy upon
or before completion of the Work, Borrower shall have delivered to Lender (A)
cash collateral in an amount equal to such excess, (B) an unconditional,
irrevocable, clean sight draft letter of credit, in form, substance and issued
by a bank reasonably acceptable to Lender, in the amount of such excess and
draws on such letter of credit shall be made by Lender to make payments
pursuant to this Article III following exhaustion of the Insurance Proceeds or
Condemnation Proceeds, as applicable, therefor or (C) a completion bond in
form, substance and issued by a surety company reasonably acceptable to Lender.

(ii)           If the cost of the Work is reasonably estimated by an Architect or
Engineer in a certification reasonably acceptable to Lender to be equal to or
exceed five percent (5%) of the Loan Amount, such Work shall be performed under
the supervision of an Architect or Engineer, it being understood that the plans
and specifications with

 56
 

 

respect thereto shall provide for Work so that, upon
completion thereof, the Property shall be at least equal in replacement value
and general utility to the Property prior to the damage or destruction.

(iii)          Each request for payment shall be made on not less than ten (10) days’
prior notice to Lender and shall be accompanied by a certificate of an
Architect or Engineer, or, if the Work is not required to be supervised by an
Architect or Engineer, by an Officer’s Certificate stating (A) that payment is
for Work completed in material compliance with the plans and specifications, if
required under clause (ii) above, (B) that the sum requested is required to
reimburse Borrower for payments by Borrower to date, or is due to the
contractors, subcontractors, materialmen, laborers, engineers, architects or
other Persons rendering services or materials for the Work (giving a brief
description of such services and materials), and that when added to all sums
previously paid out by Lender does not exceed the value of the Work done to the
date of such certificate, (C) if the sum requested is to cover payment relating
to repair and restoration of personal property required or relating to the
Property, that title to the personal property items covered by the request for
payment is vested in Borrower (unless Borrower is lessee of such personal
property), and (D) that the Insurance Proceeds and/or letters of credit,
completion and similar bonds, each of which is satisfactory to Lender in its
reasonable discretion, and other amounts deposited by Borrower held by Lender
after such payment is more than the estimated remaining cost to complete such
Work; provided, however, that if such certificate is given by an Architect or
Engineer, such Architect or Engineer shall certify as to clause (A) above, and
such Officer’s Certificate shall certify as to the remaining clauses above, and
provided, further, that Lender shall not be obligated to disburse such funds if
Lender determines, in Lender’s reasonable discretion, that Borrower shall not
be in compliance with this Section 3.04(b). 
Additionally, each request for payment shall contain a statement signed
by Borrower stating that the requested payment is for Work completed to date.

(iv)          Each request for payment shall be accompanied by waivers of lien, in
customary form and substance, covering that part of the Work for which payment
or reimbursement is being requested and, if required by Lender, a search
prepared by a title company or licensed abstractor, or by other evidence
reasonably satisfactory to Lender that there has not been filed with respect to
the Property any mechanic’s or other lien or instrument for retention of title
relating to any part of the Work not discharged of record.  Additionally, as to any personal property
covered by the request for payment, Lender shall be furnished with evidence of
Borrower having incurred a payment obligation therefor and such further
evidence reasonably satisfactory to assure Lender that UCC filings therefor
provide a valid first lien on the personal property.

(v)           Lender shall have the right to inspect the Work at all reasonable times
upon reasonable prior notice and may condition any disbursement of Insurance
Proceeds upon satisfactory compliance by Borrower with the provisions
hereof.  Neither the approval by Lender
of any required plans and specifications for the Work nor the inspection by
Lender of the Work shall make Lender responsible for the preparation of

 57
 

 

such plans and specifications, or the compliance of
such plans and specifications of the Work, with any applicable law, regulation,
ordinance, covenant or agreement.

(vi)          Insurance Proceeds shall not be disbursed more frequently than once
every thirty (30) days.

(vii)         Until such time as the Work has been substantially completed, Lender
shall not be obligated to disburse up to ten percent (10%) of the cost of the
Work (the “Retention Amount”) to Borrower.  Upon substantial completion of the Work,
Borrower shall send notice thereof to Lender and, subject to the conditions of
Section 3.04(b)(i)-(iv), Lender shall disburse one-half of the Retention Amount
to Borrower; provided, however, that the remaining one-half of the Retention
Amount shall be disbursed to Borrower when Lender shall have received copies of
any and all certificates of occupancy or other certificates, licenses and permits
required for the ownership, occupancy and operation of the Property in
accordance with all Legal Requirements. 
Borrower hereby covenants to diligently seek to obtain any such
certificates, licenses and permits.

(viii)        Upon failure on the part of Borrower promptly after a casualty or
Taking to commence the Work or to proceed diligently and continuously to
completion of the Work, which failure shall continue after notice for thirty
(30) days, Lender may apply any Insurance Proceeds or Condemnation Proceeds it
then or thereafter holds to the payment of the Debt in accordance with the
provisions of the Note; provided, however, that Lender shall be entitled to
apply at any time all or any portion of the Insurance Proceeds or Condemnation
Proceeds it then holds to the extent necessary to cure any Event of Default.

(c)           If Borrower (i) within one hundred twenty (120) days after the
occurrence of any damage to the Property or any portion thereof shall fail to
submit to Lender for approval plans and specifications for the Work (approved
by the Architect and by all Governmental Authorities whose approval is
required), (ii) after any such plans and specifications are approved by all
Governmental Authorities, the Architect and Lender, shall fail to promptly
commence such Work after a casualty or Taking or (iii) shall fail to diligently
prosecute such Work to completion, then, in addition to all other rights
available hereunder, at law or in equity, Lender, or any receiver of the
Property or any portion thereof, upon five (5) days’ prior notice to Borrower
(except in the event of emergency in which case no notice shall be required),
may (but shall have no obligation to) perform or cause to be performed such
Work, and may take such other steps as it reasonably deems advisable.  Borrower hereby waives, for Borrower, any
claim, other than for gross negligence or willful misconduct, against Lender
and any receiver arising out of any act or omission of Lender or such receiver
pursuant hereto, and Lender may apply all or any portion of the Insurance
Proceeds (without the need to fulfill any other requirements of this Section
3.04) to reimburse Lender and such receiver, for all costs not reimbursed to
Lender or such receiver upon demand together with interest thereon at the Default
Rate from the date such amounts are advanced until the same are paid to Lender
or the receiver.

(d)           Borrower hereby irrevocably appoints Lender as its attorney-in-fact,
coupled with an interest, to collect and receive any Insurance Proceeds paid
with respect to any portion of the

 58
 

 

Property or the insurance
policies required to be maintained hereunder, and to endorse any checks, drafts
or other instruments representing any Insurance Proceeds whether payable by
reason of loss thereunder or otherwise.

Section
3.05.  Compliance with Insurance
Requirements.  Borrower promptly
shall comply with, and shall cause the Property to comply with, all Insurance
Requirements, even if such compliance requires structural changes or
improvements or would result in interference with the use or enjoyment of the
Property or any portion thereof provided Borrower shall have a right to contest
in good faith and with diligence such Insurance Requirements provided (a) no
Event of Default shall exist during such contest and such contest shall not
subject the Property or any portion thereof to any lien or affect the priority
of the lien of this Security Instrument, (b) failure to comply with such
Insurance Requirements will not subject Lender, Trustee or any of their agents,
employees, officers or directors to any civil or criminal liability, (c) such
contest will not cause any reduction in insurance coverage, (d) such contest
shall not affect the ownership, use or occupancy of the Property, (e) the
Property or any part thereof or any interest therein shall not be in any danger
of being sold, forfeited or lost by reason of such contest by Borrower, (f)
Borrower has given Lender prompt notice of such contest and, upon request by
Lender from time to time, notice of the status of such contest by Borrower
and/or information of the continuing satisfaction of the conditions set forth
in clauses (a) through (e) of this Section 3.05, (g) upon a final determination
of such contest, Borrower shall promptly comply with the requirements thereof, and
(h) prior to and during such contest, Borrower shall furnish to Lender security
satisfactory to Lender, in its reasonable discretion, against loss or injury by
reason of such contest or the non-compliance with such Insurance Requirement
(and if such security is cash, Lender shall deposit the same in an
interest-bearing account and interest accrued thereon, if any, shall be deemed
to constitute a part of such security for purposes of this Security Instrument,
but Lender (i) makes no representation or warranty as to the rate or amount of
interest, if any, which may accrue thereon and shall have no liability in
connection therewith and (ii) shall not be deemed to be a trustee or fiduciary
with respect to its receipt of any such security and any such security may be
commingled with other monies of Lender). 
If Borrower shall use the Property or any portion thereof in any manner
which could permit the insurer to cancel any insurance required to be provided
hereunder, Borrower immediately shall obtain a substitute policy which shall
satisfy the requirements of this Security Instrument and which shall be
effective on or prior to the date on which any such other insurance policy
shall be canceled.  Borrower shall not by
any action or omission invalidate any insurance policy required to be carried
hereunder unless such policy is replaced as aforesaid, or materially increase
the premiums on any such policy above the normal premium charged for such
policy.  Borrower shall cooperate with
Lender in obtaining for Lender the benefits of any Insurance Proceeds lawfully
or equitably payable to Lender in connection with the transaction contemplated
hereby.

Section
3.06.  Event of Default During
Restoration.   Notwithstanding
anything to the contrary contained in this Security Instrument including,
without limitation, the provisions of this Article III, if, at the time of any
casualty affecting the Property or any part thereof, or at any time during any
Work, or at any time that Lender is holding or is entitled to receive any Insurance
Proceeds pursuant to this Security Instrument, a Default exists and is
continuing (whether or not it constitutes an Event of Default), Lender shall
then have no obligation to make such proceeds available for Work and Lender
shall have the right and option, to be exercised in its sole and

 59
 

 

absolute discretion and
election, with respect to the Insurance Proceeds, either to retain and apply
such proceeds in reimbursement for the actual costs, fees and expenses incurred
by Lender in accordance with the terms hereof in connection with the adjustment
of the loss and any balance toward payment of the Debt in such priority and
proportions as Lender, in its sole discretion, shall deem proper, or towards
the Work, upon such terms and conditions as Lender shall determine, or to cure
an Event of Default, or to any one or more of the foregoing as Lender, in its
sole and absolute discretion, may determine. 
If Lender shall receive and retain such Insurance Proceeds, the lien of
this Security Instrument shall be reduced only by the amount thereof received,
after reimbursement to Lender of expenses of collection, and actually applied
by Lender in reduction of the principal sum payable under the Note in
accordance with the Note.

Section
3.07.  Application of Proceeds to Debt
Reduction.  (a)
No damage to the Property, or any part thereof, by fire or other casualty
whatsoever, whether such damage be partial or total, shall relieve Borrower
from its liability to pay in full the Debt and to perform its obligations under
this Security Instrument and the other Loan Documents.

(b)           If any Insurance Proceeds are applied to reduce the Debt, Lender shall
apply the same in accordance with the provisions of the Note.

ARTICLE IV:  IMPOSITIONS

Section
4.01.  Payment of Impositions, Utilities
and Taxes, etc. 
(a) Borrower shall pay or cause to be paid all Impositions and
remit or cause to be remitted all SAOT Expenditures at least five (5) days
prior to the date upon which any fine, penalty, interest or cost for nonpayment
is imposed, and furnish to Lender, upon request, receipted bills of the
appropriate taxing authority or other documentation reasonably satisfactory to
Lender evidencing the payment thereof. 
If Borrower shall fail to pay any Imposition or remit any SAOT
Expenditures in accordance with this Section and is not contesting or causing a
contesting of such Imposition in accordance with Section 4.04 hereof, or if
there are insufficient funds in the Basic Carrying Costs Escrow Account to pay
any Imposition, Lender shall have the right, but shall not be obligated, to pay
that Imposition or remit that SAOT Expenditure, as applicable, and Borrower
shall repay to Lender, on demand, any amount paid by Lender, with interest
thereon at the Default Rate from the date of the advance thereof to the date of
repayment, and such amount shall constitute a portion of the Debt secured by
this Security Instrument.

(b)           Borrower shall, prior to the date upon which any fine, penalty,
interest or cost for the nonpayment is imposed, pay or cause to be paid all
charges for electricity, power, gas, water and other services and utilities in
connection with the Property, and shall, upon request, deliver to Lender
receipts or other documentation reasonably satisfactory to Lender evidencing
payment thereof.  If Borrower shall fail
to pay any amount required to be paid by Borrower pursuant to this Section 4.01
and is not contesting such charges in accordance with Section 4.04 hereof,
Lender shall have the right, but shall not be obligated, to pay that amount, and
Borrower will repay to Lender, on demand, any amount paid by Lender with
interest thereon at the Default Rate from the date of the advance thereof to
the date of repayment, and such amount shall constitute a portion of the Debt
secured by this Security Instrument.

 60

 

(c)           Borrower shall pay all taxes, charges, filing, registration and
recording fees, excises and levies imposed upon Lender by reason of or in
connection with its ownership of any Loan Document or any other instrument
related thereto, or resulting from the execution, delivery and recording of, or
the lien created by, or the obligation evidenced by, any of them, other than
income, franchise and other similar taxes imposed on Lender and shall pay all
corporate stamp taxes, if any, and other taxes, required to be paid on the Loan
Documents other than taxes imposed on Lender’s income and franchise taxes
imposed on Lender by the law or regulations of any Governmental Authority.  If Borrower shall fail to make any such
payment within ten (10) days after written notice thereof from Lender, Lender
shall have the right, but shall not be obligated, to pay the amount due, and
Borrower shall reimburse Lender therefor, on demand, with interest thereon at
the Default Rate from the date of the advance thereof to the date of repayment,
and such amount shall constitute a portion of the Debt secured by this Security
Instrument.

Section
4.02.  Deduction from Value.  In the event of the passage after the date of
this Security Instrument of any Legal Requirement deducting from the value of
the Property for the purpose of taxation, any lien thereon or changing in any
way the Legal Requirements now in force for the taxation of this Security
Instrument and/or the Debt for federal, state or local purposes, or the manner
of the operation of any such taxes so as to adversely affect the interest of
Lender, or imposing any tax or other charge on any Loan Document, then Borrower
will pay such tax, with interest and penalties thereon, if any, within the
statutory period.  In the event the payment
of such tax or interest and penalties by Borrower would be unlawful, or taxable
to Lender or unenforceable or provide the basis for a defense of usury, then in
any such event, Lender shall have the option, by written notice of not less
than thirty (30) days, to declare the Debt immediately due and payable, with no
prepayment fee or charge of any kind.

Section
4.03.  No Joint Assessment.  Borrower shall not consent to or initiate the
joint assessment of the Premises or the Improvements (a) with any other real
property constituting a separate tax lot and Borrower represents and covenants
that the Premises and the Improvements are and shall remain a separate tax lot
or lots separate from other real property that is not part of the Premises or
(b) with any portion of the Property which may be deemed to constitute personal
property, or any other procedure whereby the lien of any taxes which may be
levied against such personal property shall be assessed or levied or charged to
the Property as a single lien.

Section
4.04.  Right to Contest.  Borrower shall have the right, after prior
notice to Lender, at its sole expense, to contest by appropriate legal
proceedings diligently conducted in good faith, without cost or expense to
Lender or any of its agents, employees, officers or directors, the validity,
amount or application of any Imposition or any charge described in Section
4.01(b), provided that (a) no Event of Default shall exist during such
proceedings and such contest shall not (unless Borrower shall comply with
clause (d) of this Section 4.04) subject the Property or any portion thereof to
any lien or affect the priority of the lien of this Security Instrument, (b)
failure to pay such Imposition or charge will not subject Lender, Trustee or
any of their agents, employees, officers or directors to any civil or criminal
liability, (c) the contest suspends enforcement of the Imposition or charge
(unless Borrower first pays the Imposition or charge), (d) prior to and during
such contest, Borrower shall furnish to Lender security satisfactory to Lender,
in its reasonable discretion, against loss or injury by reason of such

 61
 

 

contest or the non-payment
of such Imposition or charge (and if such security is cash, Lender may deposit
the same in an interest-bearing account and interest accrued thereon, if any,
shall be deemed to constitute a part of such security for purposes of this
Security Instrument, but Lender (i) makes no representation or warranty as to
the rate or amount of interest, if any, which may accrue thereon and shall have
no liability in connection therewith other than with respect to Lender’s gross
negligence or willful misconduct and (ii) shall not be deemed to be a trustee
or fiduciary with respect to its receipt of any such security and any such
security may be commingled with other monies of Lender), (e) such contest shall
not affect the ownership, use or occupancy of the Property, (f) the Property or
any part thereof or any interest therein shall not be in any danger of being
sold, forfeited or lost by reason of such contest by Borrower, (g) Borrower has
given Lender notice of the commencement of such contest and upon request by
Lender, from time to time, notice of the status of such contest by Borrower
and/or confirmation of the continuing satisfaction of clauses (a) through (f)
of this Section 4.04, and (h) upon a final determination of such contest,
Borrower shall promptly comply with the requirements thereof.  Upon completion of any contest, Borrower
shall immediately pay the amount due, if any, and deliver to Lender proof of
the completion of the contest and payment of the amount due, if any, following
which Lender shall return the security, if any, deposited with Lender pursuant
to clause (d) of this Section 4.04. 
Borrower shall not pay any Imposition in installments unless permitted
by applicable Legal Requirements or the applicable Governmental Authority, and
shall, upon the request of Lender, deliver copies of all notices and bills
relating to any Imposition or other charge covered by this Article IV to
Lender.

Section
4.05.  No Credits on Account of the
Debt.  Borrower will not claim or
demand or be entitled to any credit or credits on account of the Debt for any
part of the Impositions assessed against the Property or any part thereof and
no deduction shall otherwise be made or claimed from the taxable value of the
Property, or any part thereof, by reason of this Security Instrument or the
Debt.  In the event such claim, credit or
deduction shall be required by Legal Requirements, Lender shall have the
option, by written notice of not less than thirty (30) days, to declare the
Debt immediately due and payable, and Borrower hereby agrees to pay such
amounts not later than thirty (30) days after such notice.

Section
4.06.  Documentary Stamps.  If, at any time, the United States of
America, any State or Commonwealth thereof or any subdivision of any such State
shall require revenue or other stamps to be affixed to the Note, this Security
Instrument or any other Loan Document, or impose any other tax or charges on
the same, Borrower will pay the same, with interest and penalties thereon, if
any.

ARTICLE V:  CENTRAL CASH
MANAGEMENT

Section
5.01.  Cash Flow.  Borrower hereby acknowledges and agrees that
(a) the Rents (which for the purposes of this Section 5.01 shall not include
security deposits from tenants under Leases held by Borrower and not applied
towards Rent) derived from the Property, (b) Loss Proceeds and (c) all proceeds
of the Rate Cap Agreement shall be utilized to fund the Sub-Accounts.  Borrower shall cause Manager to collect all
security deposits from tenants under valid Leases, which shall be held by
Manager, as agent for Borrower, in accordance with applicable law and in a
segregated demand deposit bank account at such commercial or savings bank or

 62
 

 

banks as may
be reasonably satisfactory to Lender (the “Security Deposit Account”).  Borrower shall notify Lender of any security
deposits held as letters of credit and, upon Lender’s request, such letters of
credit shall be promptly delivered to Lender. 
Borrower shall have no right to withdraw funds from the Security Deposit
Account; provided that, as long as no Event of Default has occurred and
is continuing, Borrower may withdraw funds from the Security Deposit Account to
refund or apply security deposits as required by the Leases or by applicable
Legal Requirements.  After the occurrence
and during the continuance of an Event of Default, all withdrawals from the
Security Deposit Account must be approved by Lender.  All rental payments made by tenants and other
payments constituting Rent, other than direct payments by credit cards which
shall be paid directly into the Rent Account, shall be delivered to
Manager.  Manager shall collect all of
such Rent and shall deposit such funds, within one (1) Business Day after
receipt thereof in the Rent Account, the name and address of the bank in which
such account is located and the account number of which to be identified in
writing by Manager to Lender.  Borrower
shall cause Manager to give to the bank in which the Rent Account is located an
irrevocable written instruction, in form and substance reasonably acceptable to
Lender, that all funds deposited in such account shall be automatically
transferred through automated clearing house funds (“ACH”) or by Federal
wire to the Central Account prior to 5:00 p.m. (New York City time) on a daily
basis.  On the Closing Date, Borrower
shall deliver to Lender a copy of the irrevocable notice which Borrower
delivered to the bank in which the Rent Account is located pursuant to the
provisions of this Section 5.01, the receipt of which is acknowledged in
writing by such bank.  Additionally,
Borrower shall, or shall cause Manager to send to each respective credit card
company or credit card clearing bank with which Borrower or Manager has entered
into merchant’s agreements (each, a “Credit Card Company”) a direction
letter in the form of Exhibit G
annexed hereto and made a part hereof (the “Credit Card Payment Direction
Letter”) directing such Credit Card Company to make all payments due in
connection with goods or services furnished at or in connection with the
Property by Federal wire or through ACH directly to the Rent Account.  Without the prior written consent of Lender,
neither Borrower nor Manager shall (i) terminate, amend, revoke or modify any
Credit Card Payment Direction Letter in any manner or (ii) direct or cause any
Credit Card Company to pay any amount in any manner other than as specifically
provided in the related Credit Card Payment Direction Letter.  Lender may elect to change the financial
institution in which the Central Account shall be maintained; however,
Lender shall give Borrower and the bank in which the Rent Account is located
not fewer than five (5) Business Days’ prior notice of such change.  Neither Borrower nor Manager shall change
such bank or the Rent Account without the prior written consent of Lender.  All fees and charges of the bank(s) in which
the Rent Account and the Central Account are located shall be paid by Borrower.

Section
5.02.  Establishment of Accounts.  Lender has established the Escrow
Accounts and the Central Account in the name of Lender as secured party and
Borrower has established the Rent Account in the joint names of Lender, as
secured party, and Borrower.  The Rent Account,
the Central Account and the Escrow Accounts shall be under the sole dominion
and control of Lender and funds held therein shall not constitute trust
funds.  Borrower hereby irrevocably
directs and authorizes Lender to withdraw funds from the Rent Account, the
Central Account and the Escrow Accounts, all in accordance with the terms and
conditions of this Security Instrument. 
Borrower shall have no right of withdrawal in respect of the Rent
Account, the Central Account or the Escrow Accounts.  Each transfer of funds to be made hereunder
shall

 63
 

 

be made only
to the extent that funds are on deposit in the Rent Account or the Central
Account or the affected Sub-Account or Escrow Account, and Lender shall have no
responsibility to make additional funds available in the event that funds on
deposit are insufficient.  The Central Account shall contain the Basic
Carrying Costs Sub-Account, the Debt Service Payment Sub-Account, the Recurring
Replacement Reserve Sub-Account, the SAOT Sub-Account, the Operation and
Maintenance Expense Sub-Account and the Curtailment Reserve Sub-Account, each
of which accounts shall be Eligible Accounts or book-entry sub-accounts of an
Eligible Account (each a “Sub-Account” and collectively, the “Sub-Accounts”)
to which certain funds shall be allocated and from which disbursements shall be
made pursuant to the terms of this Security Instrument.  Sums held in the Escrow Accounts may be
commingled with other monies held by Lender.

Section
5.03.  Intentionally Omitted.

Section
5.04.  Servicing Fees.  At the option of Lender, the Loan may be
serviced by a servicer (the “Servicer”) selected by Lender and Lender
may delegate all or any portion of its responsibilities under this Security
Instrument to the Servicer.  Provided
that no Default has occurred and is continuing, Borrower shall have no
obligation to reimburse Lender for servicing fees incurred in connection with
the ordinary, routine servicing of the Loan; provided, however, that Borrower
shall reimburse Lender for (a) any and all out of pocket costs and expenses
incurred after the occurrence and during the continuance of an Event of Default
or as a result of an Event of Default (but not including special servicing fees
unless Lender forecloses on the lien of this Security Instrument or exercises
any power of sale granted hereunder) and (b) as otherwise provided for in this
Security Instrument.

Section
5.05.  Monthly Funding of Sub-Accounts
and Escrow Accounts.  (a) On or
before each Payment Date during the term of the Loan, commencing on the first
(1st) Payment Date occurring after the month in which the Loan is initially
funded, Borrower shall pay or cause to be paid to the Central Account
(including from the Rent Account) all sums required to be deposited in the
Sub-Accounts pursuant to this Section 5.05(a) and all funds transferred or
deposited into the Central Account shall be allocated among the Sub-Accounts as
follows and in the following priority:

(i)            first, to the SAOT Sub-Account until an
amount equal to the SAOT Deposit for the Payment Date occurring for such
Interest Accrual Period has been allocated to the SAOT Sub-Account;

(ii)           second, to the Basic Carrying Costs Sub-Account, until an amount equal
to the Basic Carrying Costs Monthly Installment for such Interest Accrual Period
has been allocated to the Basic Carrying Costs Sub-Account;

(iii)          third, to the Debt Service Payment Sub-Account, until an amount equal
to the Required Debt Service Payment for the Payment Date occurring for such
Interest Accrual Period has been allocated to the Debt Service Payment
Sub-Account, it being acknowledged that any sums deposited into the Central
Account for such Interest Accrual Period by Borrower which are allocated to the
Debt Service Payment Sub-Account for

 64
 

 

such Interest Accrual Period shall be credited
towards sums required to be deposited therein by Borrower;

(iv)          fourth, to the Operation and Maintenance Expense Sub-Account in an
amount equal to the Cash Expenses, other than management fees in excess of four
percent (4%) of total revenues of the Property, for such Interest Accrual
Period pursuant to the related Approved Annual Budget;

(v)           fifth, to the Operation and Maintenance Expense Sub-Account in an
amount equal to the amount, if any, of the Net Capital Expenditures for such
Interest Accrual Period pursuant to the related Approved Annual Budget;

(vi)          sixth, to the Operation and Maintenance Expense Sub-Account until an
amount equal to the amount, if any, of the Extraordinary Expenses approved by
Lender for such Interest Accrual Period;

(vii)         seventh, to the Recurring Replacement Reserve Sub-Account, until an
amount equal to the Recurring Replacement Reserve Monthly Installment for such
Interest Accrual Period has been allocated to the Recurring Replacement Reserve
Sub-Account; and

(viii)        eighth, but only during an O&M Operative Period,
the balance, if any, to the Curtailment Reserve Sub-Account.

Provided that no Event of
Default has occurred and is continuing, Lender agrees that in each Interest
Accrual Period any amounts deposited into or remaining in the Central Account
after the Sub-Accounts have been funded as set forth in this Section
5.05(a) with respect to such
Interest Accrual Period and any periods prior thereto, shall be disbursed by
Lender to Borrower on the Payment Date applicable to such Interest Accrual
Period.  In addition, Lender shall pay
and apply all funds on deposit in the Sub-Accounts from time to time in
accordance with Sections 5.06 through 5.11, as applicable.  The balance of the funds distributed to
Borrower after payment of all Operating Expenses by or on behalf of Borrower
may be retained by Borrower.  After the
occurrence, and during the continuance, of an Event of Default, no such excess
funds held in the Central Account shall be distributed to, or withdrawn by,
Borrower, and Lender shall have the right to apply all or any portion of the
funds held in the Central Account or any Sub-Account or any Escrow Account
(excluding the SAOT Sub-Account) to the Debt in Lender’s sole discretion.

(b)           On each Payment Date, or with respect to sums in the Operation and
Maintenance Sub-Account and SAOT Sub-Account, on Wednesday of each week unless
such day is not a Business Day, in which case on the first Business Day
thereafter, (i) sums held in the Basic Carrying Costs Sub-Account shall be
transferred to the Basic Carrying Costs Escrow Account, (ii) sums held in the
Debt Service Payment Sub-Account, together with any amounts deposited into the
Central Account that are either (x) Loss Proceeds that Lender has elected to
apply to reduce the Debt in accordance with the terms of Article III hereof or
(y) excess Loss Proceeds remaining after the completion of any restoration
required hereunder, shall be transferred to Lender to be applied towards the
Required Debt Service Payment, (iii) sums held in the SAOT

 65
 

 

Sub-Account shall be
transferred to the SAOT Escrow Account, (iv) sums held in the Recurring
Replacement Reserve Sub-Account shall be transferred to the Recurring
Replacement Escrow Account, (v) sums held in the Operation and Maintenance
Expense Sub-Account shall be transferred to the Operation and Maintenance
Expense Escrow Account and (vi) sums held in the Curtailment Reserve
Sub-Account shall be transferred to the Curtailment Reserve Escrow Account.

Section
5.06.  Payment of Basic Carrying Costs.  Borrower hereby agrees to pay all Basic
Carrying Costs (without regard to the amount of money in the Basic Carrying
Costs Sub-Account or the Basic Carrying Costs Escrow Account).  At least ten (10) Business Days prior to the
due date of any Basic Carrying Costs, and not more frequently than once each
month, Borrower may notify Lender in writing and request that Lender pay such
Basic Carrying Costs on behalf of Borrower on or prior to the due date thereof,
and, provided that no Event of Default has occurred and that there are
sufficient funds available in the Basic Carrying Costs Escrow Account, Lender
shall make such payments out of the Basic Carrying Costs Escrow Account before
same shall be delinquent.  Together with
each such request, Borrower shall furnish Lender with bills and all other
documents necessary, as reasonably determined by Lender, for the payment of the
Basic Carrying Costs which are the subject of such request. Borrower’s
obligation to pay (or cause Lender to pay) Basic Carrying Costs pursuant to
this Security Instrument shall include, to the extent permitted by applicable
law, Impositions resulting from future changes in law which impose upon Lender
an obligation to pay any property taxes or other Impositions or which otherwise
adversely affect Lender’s interests.  Notwithstanding
the foregoing, in the event that Lender receives a tax bill directly from a
Governmental Authority relating to any Impositions, Lender shall pay all sums
due thereunder prior to the date such Impositions would accrue late charges or
interest thereon or within ten (10) Business Days of the receipt of such tax
bill, whichever is later.  In making any
payment of Impositions, Lender may rely on any bill, statement or estimate
obtained from the applicable Governmental Authority without inquiry into the
accuracy of such bill, statement or estimate or into the validity of any
Imposition or claim with respect thereto.

Provided that no Event of
Default shall have occurred and be continuing, all funds deposited into the
Basic Carrying Costs Escrow Account shall be held by Lender pursuant to the
provisions of this Security Instrument and shall be applied in payment of Basic
Carrying Costs in accordance with the terms hereof.  Should an Event of Default occur and be
continuing, the sums on deposit in the Basic Carrying Costs Sub-Account and the
Basic Carrying Costs Escrow Account may be applied by Lender in payment of any
Basic Carrying Costs or may be applied to the payment of the Debt or any other
charges affecting all or any portion of the Property as Lender in its sole
discretion may determine; provided, however, that no such
application shall be deemed to have been made by operation of law or otherwise
until actually made by Lender as herein provided.

Section
5.07.  SAOT Escrow Account.  Borrower agrees to pay all SAOT Expenditures
(without regard to the amount of money then available in the SAOT Sub-Account
or the SAOT Escrow Account).  Lender
will, at Lender’s option, either, (a) apply funds in the SAOT Escrow
Account to payments of SAOT Expenditures required to be made by Borrower to the
appropriate Governmental Authorities, provided that Borrower has promptly
supplied Lender with notices of

 66
 

 

all SAOT
Expenditures due or has certified to Lender that such funds are required to
make payments of SAOT Expenditures required to be made by Borrower,
(b) reimburse Borrower for such amounts upon presentation of evidence of
payment by Borrower of such SAOT Expenditures or (c) release to Borrower funds
in the SAOT Escrow Account for payment of SAOT Expenditures required to be made
by Borrower to the appropriate Governmental Authorities, provided that Borrower
has promptly supplied Lender with notices of all SAOT Expenditures due or has
certified to Lender that such funds will be used to make payments of SAOT
Expenditures required to be made by Borrower.

Provided that no Event of
Default shall have occurred and be continuing, all funds deposited into the
SAOT Escrow Account shall be held by Lender pursuant to the provisions of this
Security Instrument and shall be disbursed to Borrower for payment of SAOT
Expenditures.  Should an Event of Default
occur, the sums on deposit in the SAOT Sub-Account and the SAOT Escrow Account
may be applied by Lender in payment of any SAOT Expenditures.

Section
5.08.  Recurring Replacement Reserve
Escrow Account.  Borrower hereby
agrees to pay all Recurring Replacement Expenditures with respect to the
Property (without regard to the amount of money then available in the Recurring
Replacement Reserve Sub-Account or the Recurring Replacement Reserve Escrow
Account).  Provided that Lender has
received written notice from Borrower and not more frequently than once each
month, and further provided that no Event of Default has occurred and is continuing,
that there are sufficient funds available in the Recurring Replacement Reserve
Escrow Account and Borrower shall have theretofore furnished Lender with lien
waivers, copies of bills, invoices and other reasonable documentation as may be
required by Lender to establish that the Recurring Replacement Expenditures
which are the subject of such request represent amounts due for completed or
partially completed capital work and improvements performed at the Property,
Lender shall make such payments out of the Recurring Replacement Reserve Escrow
Account or shall reimburse Borrower out of the Recurring Replacement Reserve
Escrow Account if Borrower delivers to Lender evidence satisfactory to Lender
evidencing prior payment for the Recurring Replacement Expenditures which are
the subject of the draw request or an Officer’s Certificate certifying that the
funds will be used to pay for the Recurring Replacement Expenditures which are
the subject of the draw request together with evidence reasonably satisfactory to
Lender evidencing payment in full for all Recurring Replacement Expenditures
which were the subject of prior draw requests with respect to which Borrower
did not deliver such proof.

Provided that no Event of
Default shall have occurred and be continuing, all funds deposited into the
Recurring Replacement Reserve Escrow Account shall be held by Lender pursuant
to the provisions of this Security Instrument and shall be applied in payment
of Recurring Replacement Expenditures. 
Should an Event of Default occur and be continuing, the sums on deposit
in the Recurring Replacement Reserve Sub-Account and the Recurring Replacement
Reserve Escrow Account may be applied by Lender in payment of any Recurring
Replacement Expenditures or may be applied to the payment of the Debt or any
other charges affecting all or any portion of the Property, as Lender in its
sole discretion may determine; provided, however, that no such
application shall be deemed to have been made by operation of law or otherwise
until actually made by Lender as herein provided.

 67
 

 

Section
5.09.  Operation and Maintenance
Expense Escrow Account.  Borrower
hereby agrees to pay all Operating Expenses with respect to the Property
(without regard to the amount of money then available in the Operation and Maintenance
Expense Sub-Account or the Operation and Maintenance Expense Escrow
Account).  All funds allocated to the
Operation and Maintenance Expense Escrow Account shall be held by Lender
pursuant to the provisions of this Security Instrument.  Provided no O&M Operative Period
has occurred and is continuing, either (a) Lender shall disburse to Borrower
from the Operation and Maintenance Expense Escrow Account on each Payment Date
an amount equal to (i) the Operating Expenses set forth in the Approved Annual
Budget for such month provided for in the Approved Annual Budget plus (ii) the
Third Party Disbursements which have been substantiated in a manner reasonably
acceptable to Lender and (iii) any Extraordinary Expenses for which sums have
been deposited into the Operation and Maintenance Expense Escrow Account
pursuant to Section 5.05 hereof ((i), (ii) and (iii) are hereinafter referred
to as an “Operating Expense Disbursement”) or (b) if requested by
Borrower and if sufficient funds have been collected in the Central Account to
make the payments required under clauses (i) - (iv) of Section 5.05(a) hereof
on the next succeeding Payment Date, Borrower shall be entitled to request
disbursements from the Operation and Maintenance Expense Escrow Account on a weekly
basis, for payment of the Operating Expense Disbursement incurred or to be
incurred during the then-current Interest Accrual Period or during any prior
Interest Accrual Period.  During the
continuance of an O&M Operative Period, Lender shall disburse funds held in
the Operation and Maintenance Expense Escrow Account to Borrower on a weekly
basis, within ten (10) days after delivery by Borrower to Lender of a request
therefor, in increments of at least $1,000, provided (a) such disbursement is
for the Operating Expense Disbursement; and (b) such disbursement is
accompanied by (i) an Officer’s Certificate provided monthly certifying (A)
that such funds will be used to pay Operating Expenses set forth in the
Approved Annual Budget and a description thereof, (B) that all outstanding
trade payables (other than those to be paid from the requested disbursement or
those permitted pursuant to Section 2.02(g)(viii)(C) hereof) have been paid in
full, (C) that the same has not been the subject of a previous disbursement,
and (D) that all previous disbursements have been or will be used to pay the
previously identified Operating Expenses set forth in the Approved Annual
Budget, and (B) reasonably detailed documentation satisfactory to Lender as to
the amount, necessity and purpose therefor. 
Should an Event of
Default occur and be continuing, the sums on deposit in the Operation and
Maintenance Expense Sub-Account or the Operation and Maintenance Expense Escrow
Account may be applied by Lender in payment of any Operating Expenses for the
Property or may be applied to the payment of the Debt or any other charges
affecting all or any portion of the Property as Lender, in its sole discretion,
may determine; provided, however, that no such application shall
be deemed to have been made by operation of law or otherwise until actually
made by Lender as herein provided. 
During any O&M Operative Period, the management fee payable
to Manager shall be limited to 4% per annum of the total revenues of the
Property and shall not include the 2.5% Allocable Chain Expense (as defined in
the Management Agreement).  Failure to
pay such 2.5% Allocable Chain Expense shall not be a default under the
Management Agreement.

Section
5.10.  Rate Cap Agreement.  Borrower shall at all times during the term
of the Loan maintain the Rate Cap Agreement at all times during the term of the
Loan which shall be in form and substance and issued by a bank reasonably
acceptable to Lender, and shall pay all fees, charges and expenses incurred in
connection therewith.  Borrower shall
comply with all of its

 68
 

 

obligations under the terms
of the Rate Cap Agreement.  All amounts
paid by the issuer of the Rate Cap Agreement (the “Counterparty”) to
Borrower or Lender shall be deposited immediately into the Central Account.  Borrower shall take all actions reasonably
requested by Lender to enforce Lender’s rights under the Rate Cap Agreement in
the event of a default by the Counterparty. 
In the event that (a) the long-term unsecured debt obligations of
the Counterparty are downgraded by the Rating Agency below “A+” or its
equivalent or (b) the Counterparty shall default in any of its obligations
under the Rate Cap Agreement, Borrower shall, at the request of Lender,
promptly but in all events within thirty (30) days, replace the Rate Cap
Agreement with an agreement having identical payment terms and maturity as the
Rate Cap Agreement and which is otherwise in form and substance substantially
similar to the Rate Cap Agreement and otherwise acceptable to Lender with a cap
provider, the long-term unsecured debt of which is rated at least “AA-” (or its
equivalent) by each Rating Agency, or which will allow each Rating Agency to
reaffirm their then current ratings of all rated certificates issued in
connection with the Securitization.  In
the event that Borrower fails to maintain the Rate Cap Agreement as provided in
this Section 5.10, Lender may purchase the Rate Cap Agreement and the cost
incurred by Lender in connection therewith shall be paid by Borrower to Lender
with interest thereon at the Default Rate from the date such cost is incurred
until such cost is paid by Borrower to Lender.

Section 5.11.  Curtailment
Reserve Escrow Account.  Funds
deposited into the Curtailment Reserve Escrow Account shall be held by Lender
in the Curtailment Reserve Escrow Account as additional security for the Loan
until the Loan has been paid in full; provided, that whenever, from time to
time, the Debt Service Coverage exceeds 1.10:1.0 for two (2) consecutive
calendar quarters, Lender shall, promptly upon written request from Borrower,
release all sums contained in the Curtailment Reserve Escrow Account to
Borrower.  In the event the Debt Service
Coverage is 1.05:1.0 or lower for one or more calendar quarters, Lender may, in
its sole discretion, apply any sums in the Curtailment Reserve Escrow Account
to the Debt, without any prepayment fee or charge of any kind.  Should an Event of Default occur and be
continuing, the sums on deposit in the Curtailment Reserve Sub-Account and the
Curtailment Reserve Escrow Account may be applied by Lender to the payment of
the Debt or other charges affecting all or any portion of the Property, as
Lender, in its sole discretion, may determine; provided, however, that no such
application shall be deemed to have been made by operation of law or otherwise
until actually made by Lender as herein provided.

Section
5.12.  Performance of Engineering Work.  (a) Lender
shall reimburse Borrower for Required Engineering Work with respect to which
Borrower wishes to withdraw sums from the Engineering Escrow Account, not more
frequently than once each month, provided that no Event of Default has
occurred, that there are sufficient funds available in the Engineering Escrow
Account to make such reimbursement and Borrower shall have theretofore
furnished Lender with lien waivers, copies of bills, invoices and other
reasonable documentation as may be required by Lender to establish that the
Required Engineering Work which is the subject of such request represent
amounts due for completed or partially completed capital work and improvements
performed at the Property, in which case Lender shall make such payments out of
the Engineering Escrow Account.  In order
to request such a reimbursement for Required Engineering Work, Borrower shall
submit to Lender for Lender’s written approval a reimbursement request for such
Required Engineering Work not later than fifteen (15) days prior to the date
for which such reimbursement is requested, in form reasonably satisfactory to
Lender

 69
 

 

setting forth
in reasonable detail the basis for Borrower’s request and a detailed
description of the completed or partially completed capital work and
improvements performed at the Property. 
Lender shall have the right to approve such request, which approval
shall not be unreasonably withheld, and in the event that Lender objects to the
proposed request submitted by Borrower, Lender shall advise Borrower of such
objections within fifteen (15) days after receipt thereof (and deliver to
Borrower a reasonably detailed description of such objections) and Borrower
may, within ten (10) days after receipt of notice of any such objections revise
such request and resubmit the same to Lender whereupon Lender agrees to review
such new submission.

(b)           Should an Event of Default occur and be continuing, the sums on deposit
in the Engineering Escrow Account may be applied by Lender in payment of any
Required Engineering Work or may be applied to the payment of the Debt or any
other charges affecting all or any portion of the Property, as Lender in its
sole discretion may determine; provided, however, that no such
application shall be deemed to have been made by operation of law or otherwise
until actually made by Lender as herein provided

Section
5.13.  Loss Proceeds.  In the event of a casualty to the Property,
unless Lender elects, or is required pursuant to Article III hereof to make all
of the Insurance Proceeds available to Borrower for restoration, Lender and
Borrower shall cause all such Insurance Proceeds to be paid by the insurer
directly to the Central Account, whereupon Lender shall, after deducting Lender’s
costs of recovering and paying out such Insurance Proceeds, including without
limitation, reasonable attorneys’ fees, apply the same to reduce the Debt in
accordance with the terms of the Note; provided, however, that if
Lender elects, or is deemed to have elected, to make the Insurance Proceeds
available for restoration, all Insurance Proceeds in respect of rent loss,
business interruption or similar coverage shall be maintained in the Central
Account, to be applied by Lender in the same manner as Rent received with
respect to the operation of the Property; provided, further, however,
that in the event that the Insurance Proceeds with respect to such rent loss,
business interruption or similar insurance policy are paid in a lump sum in
advance, Lender shall hold such Insurance Proceeds in a segregated
interest-bearing escrow account, which shall be an Eligible Account, shall
estimate, in Lender’s reasonable discretion, the number of months required for
Borrower to restore the damage caused by the casualty, shall divide the
aggregate rent loss, business interruption or similar Insurance Proceeds by
such number of months, and shall disburse from such bank account into the Central
Account each month during the performance of such restoration such monthly
installment of said Insurance Proceeds. 
In the event that Insurance Proceeds are to be applied toward
restoration, Lender shall hold such funds in a segregated bank account at the
Bank, which shall be an Eligible Account, and shall disburse same in accordance
with the provisions of Section 3.04 hereof. 
Unless Lender elects, or is required pursuant to Section 6.01 hereof to
make all of the Condemnation Proceeds available to Borrower for restoration,
Lender and Borrower shall cause all such Condemnation Proceeds to be paid to
the Central Account, whereupon Lender shall, after deducting Lender’s costs of
recovering and paying out such Condemnation Proceeds, including without limitation,
reasonable attorneys’ fees, apply same to reduce the Debt in accordance with
the terms of the Note; provided, however, that any Condemnation
Proceeds received in connection with a temporary Taking shall be maintained in
the Central Account, to be applied by Lender in the same manner as Rent
received with respect to the operation of the Property; provided, further,
however, that in the event that the Condemnation Proceeds of any

 70
 

 

such temporary Taking are
paid in a lump sum in advance, Lender shall hold such Condemnation Proceeds in
a segregated interest-bearing bank account, which shall be an Eligible Account,
shall estimate, in Lender’s reasonable discretion, the number of months that
the Property shall be affected by such temporary Taking, shall divide the
aggregate Condemnation Proceeds in connection with such temporary Taking by
such number of months, and shall disburse from such bank account into the
Central Account each month during the pendency of such temporary Taking such
monthly installment of said Condemnation Proceeds.  In the event that Condemnation Proceeds are
to be applied toward restoration, Lender shall hold such funds in a segregated
bank account at the Bank, which shall be an Eligible Account, and shall
disburse same in accordance with the provisions of Section 3.04 hereof.  If any Loss Proceeds are received by
Borrower, such Loss Proceeds shall be received in trust for Lender, shall be
segregated from other funds of Borrower, and shall be forthwith paid into the
Central Account, or paid to Lender to hold in a segregated bank account at the
Bank, in each case to be applied or disbursed in accordance with the
foregoing.  Any Loss Proceeds made
available to Borrower for restoration in accordance herewith, to the extent not
used by Borrower in connection with, or to the extent they exceed the cost of,
such restoration, shall be deposited into the Central Account, whereupon Lender
shall apply the same to reduce the Debt in accordance with the terms of the
Note.

ARTICLE VI:  CONDEMNATION

Section
6.01.  Condemnation.  (a) 
Borrower shall notify Lender promptly of the commencement or threat of
any Taking of the Property or any portion thereof.  Lender is hereby irrevocably appointed as
Borrower’s attorney-in-fact, coupled with an interest, with exclusive power to
collect, receive and retain the proceeds of any such Taking as to which
Borrower is or may be entitled and to make any compromise or settlement in
connection with such proceedings (subject to Borrower’s reasonable approval,
except after the occurrence and during the continuance of an Event of Default,
in which event Borrower’s approval shall not be required), subject to the
provisions of this Security Instrument; provided, however, that
Borrower may participate in any such proceedings (without regard to the extent
of the Taking) and Borrower shall be authorized and entitled to compromise or
settle any such proceeding with respect to Condemnation Proceeds in an amount
less than five percent (5%) of the Loan Amount. 
Borrower shall execute and deliver to Lender any and all instruments
reasonably required in connection with any such proceeding promptly after
request therefor by Lender.  Except as
set forth above, Borrower shall not adjust, compromise, settle or enter into
any agreement with respect to such proceedings without the prior consent of
Lender.  All Condemnation Proceeds are
hereby assigned to and shall be paid to Lender to be applied in accordance with
the terms hereof.  With respect to
Condemnation Proceeds in an amount in excess of five percent (5%) of the Loan
Amount, Borrower hereby authorizes Lender to compromise, settle, collect and
receive such Condemnation Proceeds, and to give proper receipts and acquittance
therefor.  Subject to the provisions of
this Article VI, Lender may apply such Condemnation Proceeds (less any cost to
Lender of recovering and paying out such proceeds, including, without
limitation, reasonable attorneys’ fees and disbursements and costs allocable to
inspecting any repair, restoration or rebuilding work and the plans and
specifications therefor) toward the payment of the Debt or to allow such
proceeds to be used for the Work.

 71
 

 

(b)           “Substantial Taking”
shall mean (i) a Taking of such portion of the Property that would, in Lender’s
reasonable discretion, leave remaining a balance of the Property which would
not under then current economic conditions, applicable Development Laws and
other applicable Legal Requirements, permit the restoration of the Property so
as to constitute a complete, rentable facility of the same type as existed
prior to the Taking, having adequate ingress and egress to the Property,
capable of producing a projected Net Operating Income (as reasonably determined
by Lender) yielding a projected Debt Service Coverage therefrom for the next
two (2) years of not less than the Required Debt Service Coverage or (ii) a
Taking which Lender is not reasonably satisfied could be repaired within twelve
(12) months and at least six (6) months prior to the Maturity Date or (iii) a
Taking of fifteen percent (15%) or more of the Premises.

(c)           In the case of a
Substantial Taking, Condemnation Proceeds shall be payable to Lender in
reduction of the Debt but without any prepayment fee or charge of any kind and,
if Borrower elects to apply any Condemnation Proceeds it may receive pursuant
to this Security Instrument to the payment of the Debt, Borrower may prepay the
balance of the Debt without any prepayment fee or charge of any kind.

(d)           In
the event of a Taking which is less than a Substantial Taking, Borrower at its
sole cost and expense (whether or not the award shall have been received or
shall be sufficient for restoration) shall proceed diligently to restore, or
cause the restoration of, the remaining Improvements not so taken, to maintain
a complete, rentable, self-contained fully operational facility of the same
sort as existed prior to the Taking in as good a condition as is reasonably
possible.  In the event of such a Taking,
Lender shall receive the Condemnation Proceeds and shall pay over the same:

(i)            first, provided no
Event of Default shall have occurred and be continuing, to Borrower to the
extent of any portion of the award as may be necessary to pay the reasonable
cost of restoration of the Improvements remaining, and

(ii)           second, to Lender, in
reduction of the Debt without any prepayment premium or charge of any kind.

If one or more
Takings in the aggregate create a Substantial Taking, then, in such event, the
sections of this Article VI above applicable to Substantial Takings shall
apply.

(e)           In
the event Lender is obligated to or elects to make Condemnation Proceeds
available for the restoration or rebuilding of the Property, such proceeds
shall be disbursed in the manner and subject to the conditions set forth in
Section 3.04(b) hereof.  If, in
accordance with this Article VI, any Condemnation Proceeds are used to reduce
the Debt, they shall be applied in accordance with the provisions of the Note
and, with no prepayment fee or charge of any kind.  Borrower shall promptly upon request by Lender
execute and deliver all instruments requested by Lender for the purpose of
confirming the assignment of the Condemnation Proceeds to Lender.  Application of all or any part of the
Condemnation Proceeds to the Debt shall be made in accordance with the provisions
of Sections 3.06 and 3.07 hereof.  No
application of the Condemnation Proceeds to the reduction of the Debt shall
have the effect of releasing the lien of this Security Instrument until the
remainder of the Debt has been paid in full. 
In the case of any Taking, Lender, to the extent that Lender has not
been reimbursed by Borrower, shall be entitled,

 72
 

 

as a first priority out of any Condemnation Proceeds, to reimbursement
for all costs, fees and expenses reasonably incurred in the determination and collection
of any Condemnation Proceeds.  All
Condemnation Proceeds deposited with Lender pursuant to this Section, until
expended or applied as provided herein, shall be held in accordance with
Section 3.04(b) hereof and shall constitute additional security for the payment
of the Debt and the payment and performance of Borrower’s obligations, but
Lender shall not be deemed a trustee or other fiduciary with respect to its
receipt of such Condemnation Proceeds or any part thereof.  All awards so deposited with Lender shall be
held by Lender in an Eligible Account, but Lender makes no representation or
warranty as to the rate or amount of interest, if any, which may accrue on any
such deposit and shall have no liability in connection therewith other than with
respect to Lender’s gross negligence or willful misconduct.  For purposes hereof, any reference to the
award shall be deemed to include interest, if any, which has accrued thereon.

ARTICLE VII:  LEASES AND RENTS

Section
7.01.  Assignment.  (a) Borrower does
hereby bargain, sell, assign and set over unto Lender, all of Borrower’s
interest in the Leases and Rents.  The
assignment of Leases and Rents in this Section 7.01 is an absolute,
unconditional and present assignment from Borrower to Lender and not an assignment
for security and the existence or exercise of Borrower’s revocable license to
collect Rent shall not operate to subordinate this assignment to any subsequent
assignment.  The exercise by Lender of
any of its rights or remedies pursuant to this Section 7.01 shall not be deemed
to make Lender a mortgagee-in-possession. 
In addition to the provisions of this Article VII, Borrower shall comply
with all terms, provisions and conditions of the Assignment.

(b)           So long as there shall exist and be continuing no Event of Default,
Borrower shall have a revocable license to take all actions with respect to all
Leases and Rents, present and future, including the right to collect and use
the Rents, subject to the terms of this Security Instrument and the Assignment.

(c)           In a separate instrument Borrower shall, as requested from time to time
by Lender, assign to Lender or its nominee by specific or general assignment,
any and all Leases, such assignments to be in form and content reasonably
acceptable to Lender, but subject to the provisions of Section 7.01(b)
hereof.  Borrower agrees to deliver to
Lender, within thirty (30) days after Lender’s request, a true and complete
copy of every Lease and, within ten (10) Business Days after Lender’s request,
a complete list of the Leases, certified by Borrower to be true, accurate and
complete and stating the demised premises, the names of the lessees, the Rent
payable under the Leases, the date to which such Rents have been paid, the
material terms of the Leases, including, without limitation, the dates of
occupancy, the dates of expiration, any Rent concessions, work obligations or
other inducements granted to the lessees thereunder, and any renewal options.

(d)           The rights of Lender contained in this Article VII, the Assignment or
any other assignment of any Lease shall not result in any obligation or
liability of Lender to Borrower or any lessee under a Lease or any party
claiming through any such lessee.

 73
 

 

(e)           At any time after and during the continuance of an Event of Default,
the license granted hereinabove may be revoked by Lender, and Lender or a
receiver appointed in accordance with this Security Instrument may enter upon
the Property, and collect, retain and apply the Rents toward payment of the
Debt in such priority and proportions as Lender in its sole discretion shall
deem proper.

(f)            In addition to the rights which Lender may
have herein, upon the occurrence and during the continuance of any Event of
Default, Lender, at its option, may require Borrower to pay monthly in advance
to Lender, or any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of such part of the Property
as may be used and occupied by Borrower and may require Borrower to vacate and
surrender possession of the Property to Lender or to such receiver and, in
default thereof, Borrower may be evicted by summary proceedings or otherwise.

Section
7.02.  Management of Property.  (a) Borrower shall manage the Property or
cause the Property to be managed in a manner which is consistent with the
Approved Manager Standard.  All Space
Leases shall provide for rental rates comparable to then existing local market
rates and terms and conditions which constitute good and prudent business
practice and are consistent with prevailing market terms and conditions, and
shall be arms-length transactions.  All
Leases shall provide that they are subordinate to this Security Instrument and
that the lessees thereunder attorn to Lender. 
Borrower shall deliver copies of all Leases, amendments, modifications
and renewals thereof to Lender. All proposed Leases for the Property shall be
subject to the prior written approval of Lender (which approval shall not be
unreasonably withheld or delayed), provided, however that Borrower may enter
into new leases with unrelated third parties without obtaining the prior
consent of Lender provided that: (i) the proposed tenant is unrelated to a
tenant under an existing Lease; (ii) the proposed leases conform with the
requirements of this Section 7.02; (iii) the space to be leased pursuant to
such proposed lease does not exceed 5,000 square feet; and (iv) the term of the
proposed lease inclusive of all extensions and renewals, does not exceed five
(5) years.

(b)           Borrower (i) shall observe and perform all of its material obligations
under the Leases pursuant to applicable Legal Requirements and shall not do or
permit to be done anything to impair the value of the Leases as security for
the Debt; (ii) shall promptly send copies to Lender of all notices of default
which Borrower shall receive under the Leases; (iii) shall, consistent with the
Approved Manager Standard, enforce all of the material terms, covenants and
conditions contained in the Leases to be observed or performed; (iv) shall not
collect any of the Rents under the Leases more than one (1) month in advance
(except that Borrower may collect in advance such security deposits as are
permitted pursuant to applicable Legal Requirements and are commercially
reasonable in the prevailing market); (v) shall not execute any other
assignment of lessor’s interest in the Leases or the Rents except as otherwise
expressly permitted pursuant to this Security Instrument; (vi) shall not cancel
or terminate any of the Leases or accept a surrender thereof in any manner
inconsistent with the Approved Manager Standard; (vii) shall not convey,
transfer or suffer or permit a conveyance or transfer of all or any part of the
Premises or the Improvements or of any interest therein so as to effect a
merger of the estates and rights of, or a termination or diminution of the
obligations of, lessees thereunder; (viii) shall not alter, modify or
change the terms of any guaranty of any Major Space Lease or cancel or
terminate any

 74
 

 

such guaranty; (ix) shall,
in accordance with the Approved Manager Standard, make all reasonable efforts
to seek lessees for space as it becomes vacant and enter into Leases in
accordance with the terms hereof; (x) shall not cancel or terminate or
materially modify, alter or amend any Major Space Lease or Property Agreement
without Lender’s consent, which consent will not be unreasonably withheld or
delayed; (xi) shall notify Lender promptly if any Pad Owner shall cease
business operations or of the occurrence of any event of which it becomes aware
affecting a Pad Owner or its property which could reasonably be expected to
have any material effect on the Property; and (xii) shall, without limitation
to any other provision hereof, execute and deliver at the request of Lender all
such further assurances, confirmations and assignments in connection with the
Property as are required herein and as Lender shall from time to time
reasonably require.

(c)           All security deposits of lessees, whether held in cash or any other
form, shall be treated by Borrower as trust funds, shall not be commingled with
any other funds of Borrower and, if cash, shall be deposited by Borrower in the
Security Deposit Account.  Any bond or
other instrument which Borrower is permitted to hold in lieu of cash security
deposits under applicable Legal Requirements shall be maintained in full force
and effect unless replaced by cash deposits as hereinabove described, shall be
issued by a Person reasonably satisfactory to Lender, shall, if permitted
pursuant to Legal Requirements, at Lender’s option, name Lender as payee or
mortgagee thereunder or be fully assignable to Lender and shall, in all
respects, comply with applicable Legal Requirements and otherwise be reasonably
satisfactory to Lender.  Borrower shall,
upon request, provide Lender with evidence reasonably satisfactory to Lender of
Borrower’s compliance with the foregoing. 
Following the occurrence and during the continuance of any Event of
Default, Borrower shall, upon Lender’s request, if permitted by applicable
Legal Requirements, turn over the security deposits (and any interest thereon)
to Lender to be held by Lender in accordance with the terms of the Leases and
all Legal Requirements.

(d)           If requested by Lender,
Borrower shall furnish, or shall cause the applicable lessee to furnish, to
Lender financial data and/or financial statements in accordance with Regulation
AB for any lessee of the Property if, in connection with a Securitization,
Lender expects there to be, with respect to such lessee or any group of
affiliated lessees, a concentration within all of the mortgage loans included
or expected to be included, as applicable, in such Securitization such that
such lessee or group of affiliated lessees would constitute a Significant
Obligor; provided, however, that in the event the related Space Lease does not
require the related lessee to provide the foregoing information, Borrower shall
use commercially reasonable efforts to cause the applicable lessee to furnish
such information.

(e)           Borrower covenants and agrees with Lender that (i) the Property will be
managed at all times by Manager pursuant to the management agreements approved
by Lender, which approval Lender shall not unreasonably withhold or delay
(each, a “Management Agreement”), (ii) after Borrower has knowledge of a
fifty percent (50%) or more change in Control of the ownership of Manager,
Borrower will promptly give Lender notice thereof (a “Manager Control Notice”)
and (iii) the Management Agreement may be terminated by Lender at any time for
cause (including, but not limited to, Manager’s gross negligence,
misappropriation of funds, willful misconduct or fraud) or at any time
following (A) the occurrence and during the

 75
 

 

continuance of an Event of
Default, or (B) the receipt of a Manager Control Notice  and a substitute managing agent shall be
appointed by Borrower, subject to Lender’s prior written approval, which
approval Lender shall not unreasonably withhold or delay, but which may be
conditioned on, inter alia, a letter from each Rating Agency confirming that any
rating issued by the Rating Agency in connection with a Securitization will
not, as a result of the proposed change of Manager, be downgraded from the then
current ratings thereof, qualified or withdrawn.  Borrower may from time to time appoint a
successor manager to manage the Property with Lender’s prior written consent
which consent shall not be unreasonably withheld or delayed, provided that any
such successor manager shall be a reputable management company which meets the
Approved Manager Standard and each Rating Agency shall have confirmed in
writing that any rating issued by the Rating Agency in connection with a
Securitization will not, as a result of the proposed change of Manager, be
downgraded from the then current ratings thereof, qualified or withdrawn.  Borrower further covenants and agrees that
Borrower shall require Manager (or any successor managers) to maintain at all
times during the term of the Loan worker’s compensation insurance as required
by Governmental Authorities.

(f)            There
are no franchise agreements relating to
the Property and Borrower shall not enter into any franchise agreements
relating to the Property.

(g)           Borrower
covenants that it shall not, nor permit Manager, to sell or deliver rooms or
suites and accept payment therefor for more than thirty (30) days in advance of
delivery except in the ordinary course of Borrower’s business and in accordance
with the Approved Manager Standard.

(h)           Borrower
shall fund and operate, or shall cause Manager to fund and operate, the
Property in a manner consistent with a hotel of the same type and category as
the Property.

(i)            Borrower
shall maintain or cause Manager to maintain Inventory in kind and amount
sufficient to meet hotel industry standards for hotels comparable to the hotel
located at the Premises and at levels sufficient for the operation of the hotel
located at the Premises at historic occupancy levels.

(j)            Borrower
shall deliver to Lender all notices of default or termination received by
Borrower or Manager with respect to any licenses and permits, contracts,
Property Agreements, Leases or insurance policies within three (3) Business
Days of receipt of the same.

(k)           If
Borrower or SPE Pledgor is a party to a Food and Beverage Lease/Operating
Agreement, Borrower and/or SPE Pledgor, as applicable, shall (i) diligently
perform and observe all of the terms, covenants and conditions of the Food and
Beverage Leases/Operating Agreements on the part of Borrower and the SPE
Pledgor to be performed and observed, (ii) promptly notify Lender of any
material default under any Food and Beverage Lease/Operating Agreement of which
it is aware and (iii) diligently enforce all of the material obligations of the
Food and Beverage Lessees/Operators under the Food and Beverage
Leases/Operating Agreements.  If Borrower
or SPE Pledgor shall default in the performance or observance of any material
term, covenant or condition of any Food and Beverage Leases/Operating
Agreements on the part of such Borrower or SPE Pledgor to be performed or
observed beyond any applicable grace or cure period, then, without limiting
Lender’s other rights or remedies under this Security

 76
 

 

Instrument or
any other Loan Documents, and without waiving or releasing Borrower from any of
its obligations hereunder or Borrower or the SPE Pledgor under the Food and
Beverage Leases/Operating Agreements, Lender shall have the right, but shall be
under no obligation, to pay any sums and to perform any act as may be
reasonably appropriate to cause all the terms, covenants and conditions of the
Food and Beverage Leases/Operating Agreements on the part of Borrower or SPE
Pledgor to be performed or observed.

(l)            Neither
Borrower nor SPE Pledgor shall, and neither Borrower nor SPE Pledgor shall
permit any other Person to (i) materially modify, or to renew or terminate or
extend, any Food and Beverage Lease/Operating Agreement, transfer its interest
in any Food and Beverage Lease/Operating Agreement or consent to the assignment
of any Food and Beverage Lease/Operating Agreement, (ii) waive or release any
of its rights under any Food and Beverage Lease/Operating Agreement or (iii)
consent to any increase in its obligations under any Food and Beverage
Lease/Operating Agreement, in each case without the express consent of Lender,
which consent shall not be unreasonably withheld.  Any action taken in violation of the
foregoing without the prior express consent of Lender shall be void and of no
force and effect.

(m)          None
of Borrower, SPE Pledgor nor any Affiliate of any Borrower or SPE Pledgor shall
direct, solicit or otherwise collude to cause any Food and Beverage SPE Pledgor
Distributions (as defined in the Pledge Agreement of even date herewith given
by SPE Pledgor to Lender in connection with the origination of the Loan) to be
applied, disbursed or remitted in any manner inconsistent with the terms and
provisions of the Loan Documents and/or the payment instructions provided by
Lender to each Food and Beverage Lessee/Operator.  None of Borrower, SPE Pledgor nor any Affiliate
of Borrower or SPE Pledgor shall interfere with the application, disbursement
or remittance of Food and Beverage SPE Pledgor Distributions as required under
the terms and provisions of the Loan Documents and/or the payment instructions
provided by Lender to each Food and Beverage Lessee/Operator.  Borrower and each SPE Pledgor shall take all
commercially reasonable steps necessary to cause all revenues of the Food and
Beverage Lessees/Operators to continue to be collected by Borrower.  None of Borrower, SPE Pledgor nor Affiliate
of Borrower or SPE Pledgor shall revoke or attempt to revoke the payment
instructions provided by Lender to each Food & Beverage Lessee/Operator.

ARTICLE VIII:  MAINTENANCE AND
REPAIR

Section
8.01.  Maintenance and Repair of the
Property; Alterations; Replacement of Equipment.  Borrower hereby covenants and agrees:

(a)           Borrower shall not (i) desert or abandon the Property, (ii) change the
use of the Property or cause or permit the use or occupancy of any part of the
Property to be discontinued if such discontinuance or use change would violate
any zoning or other law, ordinance or regulation; (iii) consent to or seek any
lowering of the zoning classification, or greater zoning restriction affecting
the Property; or (iv) without Lender’s consent, which may be granted or
withheld in Lender’s sole and absolute discretion and may be subject to such
conditions as Lender shall, in its sole and absolute discretion, impose, take
any steps whatsoever to convert the Property, or any portion thereof, to a
condominium or cooperative form of ownership.

 77
 

 

(b)           Borrower shall, at its expense, (i) take good care of the Property
including grounds generally, and utility systems and sidewalks, roads, alleys,
and curbs therein, and shall keep the same in good, safe and insurable
condition and in compliance with all applicable Legal Requirements, (ii)
promptly make all repairs to the Property, above grade and below grade,
interior and exterior, structural and nonstructural, ordinary and
extraordinary, unforeseen and foreseen, and maintain the Property in a manner
appropriate for the facility and (iii) not commit or suffer to be committed any
waste of the Property or do or suffer to be done anything which will increase
the risk of fire or other hazard to the Property or impair the value thereof.  Borrower shall keep the sidewalks, vaults,
gutters and curbs comprising, or adjacent to, the Property, clean and free from
dirt, snow, ice, rubbish and obstructions (unless such obstructions are as a
result of repairs made in accordance with the terms hereof or if necessary to
preserve safety or if required by Legal Requirements).  All repairs made by Borrower shall be made
with first-class materials, in a good and workmanlike manner, shall be equal or
better in quality and class to the original work and shall comply with all
applicable Legal Requirements and Insurance Requirements.  To the extent any of the above obligations
are obligations of tenants under Space Leases or Pad Owners or other Persons
under Property Agreements, Borrower may fulfill its obligations hereunder by
causing such tenants, Pad Owners or other Persons, as the case may be, to
perform their obligations thereunder.  As
used herein, the terms “repair” and “repairs” shall be deemed to include all
necessary replacements.

(c)           Borrower shall not demolish, remove, construct, or, except as otherwise
expressly provided herein, restore, or alter the Property or any portion
thereof nor consent to or permit any such demolition, removal, construction,
restoration, addition or alteration, in each case in a manner which would
diminish the value of the Property without Lender’s prior written consent in
each instance, which consent shall not be unreasonably withheld or delayed.

(d)           Borrower represents and warrants to Lender that (i) there are no fixtures,
machinery, apparatus, tools, equipment or articles of personal property
attached or appurtenant to, or located on, or used in connection with the
management, operation or maintenance of the Property, except for the Equipment
and equipment leased by Borrower for the management, operation or maintenance
of the Property in accordance with the Loan Documents; (ii) the Equipment and
the leased equipment constitute all of the fixtures, machinery, apparatus,
tools, equipment and articles of personal property necessary to the proper
operation and maintenance of the Property; and (iii) all of the Equipment is
free and clear of all liens, except for the lien of this Security Instrument,
the lien, if any, of equipment financing permitted pursuant to Section 2.02(g)(viii)
hereof and the Permitted Encumbrances. 
All right, title and interest of Borrower in and to all extensions,
improvements, betterments, renewals and appurtenances to the Property hereafter
acquired by, or released to, Borrower or constructed, assembled or placed by
Borrower in the Property, and all changes and substitutions of the security
constituted thereby, shall be and, in each such case, without any further
mortgage, encumbrance, conveyance, assignment or other act by Lender or
Borrower, shall become subject to the lien and security interest of this
Security Instrument as fully and completely, and with the same effect, as
though now owned by Borrower and specifically described in this Security
Instrument, but at any and all times Borrower shall execute and deliver to
Lender any documents Lender may reasonably deem necessary or appropriate for
the purpose of specifically subjecting the same to the lien and security
interest of this Security Instrument.

 78
 

 

(e)           Notwithstanding the provisions of this Security Instrument to the
contrary, Borrower shall have the right, at any time and from time to time, to
remove and dispose of Equipment which may have become obsolete or unfit for use
or which is no longer useful in the management, operation or maintenance of the
Property.  Borrower shall promptly
replace any such Equipment so disposed of or removed with other Equipment of
equal value and utility, free of any security interest or superior title, liens
or claims other than Permitted Encumbrances, Permitted Liens or equipment
financing permitted pursuant to Section 2.02(g)(viii) hereof; except that, if
by reason of technological or other developments, replacement of the Equipment
so removed or disposed of is not necessary or desirable for the proper management,
operation or maintenance of the Property, Borrower shall not be required to
replace the same.  All such replacements
or additional equipment shall be deemed to constitute “Equipment” and shall be
covered by the security interest herein granted.

ARTICLE IX:  TRANSFER OR
ENCUMBRANCE OF THE PROPERTY

Section
9.01.  Other Encumbrances.  Other than with respect to Permitted Liens
and Permitted Encumbrances, Borrower shall not further encumber or permit the
further encumbrance in any manner (whether by grant of a pledge, security
interest or otherwise) of the Property or any part thereof or interest therein,
including, without limitation, of the Rents therefrom.  In addition, Borrower shall not further
encumber and shall not permit the further encumbrance in any manner (whether by
grant of a pledge, security interest or otherwise) of Borrower or any direct or
indirect interest in Borrower except as expressly permitted pursuant to this
Security Instrument.

Section
9.02.  No Transfer.  Borrower acknowledges that Lender has
examined and relied on the expertise of Borrower and, if applicable, each
General Partner, in owning and operating properties such as the Property in
agreeing to make the Loan and will continue to rely on Borrower’s ownership of
the Property as a means of maintaining the value of the Property as security
for repayment of the Debt and Borrower acknowledges that Lender has a valid
interest in maintaining the value of the Property.  Borrower shall not Transfer, nor permit any
Transfer, without the prior written consent of Lender, which consent Lender may
withhold in its sole and absolute discretion. 
Lender shall not be required to demonstrate any actual impairment of its
security or any increased risk of default hereunder in order to declare the
Debt immediately due and payable upon a Transfer without Lender’s consent.  This provision shall apply to every Transfer
regardless of whether voluntary or not, or whether or not Lender has consented
to any previous Transfer.

Section
9.03.  Due on Sale.  Lender may declare the Debt immediately due
and payable upon any Transfer or further encumbrance without Lender’s consent
unless otherwise specifically permitted hereunder without regard to whether any
impairment of its security or any increased risk of default hereunder can be
demonstrated.  This provision shall apply
to every Transfer or further encumbrance of the Property or any part thereof or
interest in the Property or in Borrower regardless of whether voluntary or not,
or whether or not Lender has consented to any previous Transfer or further
encumbrance of the Property or interest in Borrower unless otherwise
specifically permitted hereunder.

 79

 

Section
9.04.  Permitted Transfer.  Notwithstanding the foregoing provisions of
this Article IX, a conveyance of the Property in its entirety or a Transfer
(hereinafter, “Sale”) shall be permitted hereunder from time to time
provided that each of the following terms and conditions are satisfied:

(a)           no Event of Default is then continuing hereunder or under any of the
other Loan Documents;

(b)           If the proposed Sale is to occur at any time after a Securitization,
each Rating Agency shall have delivered written confirmation that any rating
issued by such Rating Agency in connection with the Securitization will not, as
a result of the proposed Sale, be downgraded from the then current ratings
thereof, qualified or withdrawn; provided, however, that no request for consent
to the Sale will be entertained by Lender if the proposed Sale is to occur
within sixty (60) days of any contemplated sale of the Loan by Lender, whether
in connection with a Securitization or otherwise;

(c)           Borrower gives Lender written notice of the terms of the proposed Sale
not less than sixty (60) days before the date on which such Sale is scheduled
to close and, concurrently therewith, gives Lender (i) all such information
concerning the proposed transferee of the Property (hereinafter, “Buyer”)
as Lender would require in evaluating an initial extension of credit to a
borrower and Lender determines, in its reasonable discretion that the Buyer is
acceptable to Lender in all material respects (it being acknowledged
that any Permitted Transferee shall be deemed acceptable to Lender provided
that not more than 75% in the aggregate of the direct or indirect interests in
Borrower (but without including more
than once one or more transfers of the same interest) has been
transferred subsequent to the Closing Date in one or more transactions and
Borrower continues to be Controlled by the same Persons which Controlled
Borrower prior to such transfer (it being acknowledged that (x) any holder of
more than forty percent of the direct or indirect interest in Borrower may have
veto rights over major decisions which are customary in joint venture
agreements between two fifty percent owners of a Person and the same shall not
constitute a change in Control) and (y) it further being acknowledged that any
Transfer of a direct or indirect interest in Morgans Group LLC otherwise
requiring approval hereunder shall not be subject to the approval of Lender if
Morgans Group LLC continues to own and manage hotel rooms located in full
service luxury or full service upscale properties numbering not less than
eighty percent (80%) of the number of hotel rooms which it owns and eighty
percent (80%) of the number of hotel rooms it manages as of the Closing Date
(and such numbers shall be calculated on a pro rata basis, so that, for
example, if Morgans Group LLC has a fifty percent (50%) interest in a Person
that owns two hundred (200) hotel rooms, Morgans Group LLC shall be deemed to
own one hundred (100) hotel rooms) and the conditions set forth in clauses (A)
and (B) of the definition of Permitted Transferee are met) and (ii) a non-refundable application fee
equal to $15,000;

(d)           Borrower pays Lender, concurrently with the closing of any conveyance
of the Property in its entirety or a direct or indirect interest in Borrower of
75% or more (in the aggregate whether in one or a series of transactions but
without including more than once one or more transfers of the same interest) of
the direct or indirect interest in Borrower, a non-refundable assumption
fee in an amount equal to one percent (1%) of the then outstanding

 80
 

 

Loan Amount (which fee shall
be waived in the event of a Transfer of the type set forth in clause (y) of
Section 9.04(c)(i)) together with all out-of-pocket costs and
expenses, including, without limitation, reasonable attorneys’ fees, incurred
by Lender in connection with the Sale;

(e)           In the event the applicable Transfer will result in Borrower no longer
owning the Property, Buyer assumes all of the obligations under the Loan
Documents and, prior to or concurrently with the closing of such Sale, Buyer
executes, without any cost or expense to Lender, such documents and agreements
as Lender shall reasonably require to evidence and effectuate said assumption
and delivers such legal opinions as Lender may reasonably require;

(f)            In the event the applicable Transfer will
result in Borrower no longer owning the Property, Borrower and Buyer execute,
without any cost or expense to Lender, new financing statements or financing
statement amendments and any additional documents reasonably requested by
Lender;

(g)           In the event the applicable Transfer will result in Borrower no longer
owning the Property, Borrower delivers to Lender, without any cost or expense
to Lender, such endorsements to Lender’s title insurance policy, hazard
insurance policy endorsements or certificates and other similar materials as
Lender may reasonably deem necessary at the time of the Sale, all in form and
substance reasonably satisfactory to Lender, including, without limitation, an
endorsement or endorsements to Lender’s title insurance policy insuring the
lien of this Security Instrument, extending the effective date of such policy
to the date of execution and delivery (or, if later, of recording) of the
assumption agreement referenced above in subparagraph (e) of this Section, with
no additional exceptions added to such policy, and insuring that fee simple
title to the Property is vested in Buyer;

(h)           In the event the applicable Transfer will result in Borrower no longer
owning the Property, Borrower executes and delivers to Lender, without any cost
or expense to Lender, a release of Lender, its officers, directors, employees
and agents, from all claims and liability relating to the transactions
evidenced by the Loan Documents, through and including the date of the closing
of the Sale, which agreement shall be in form and substance satisfactory to
Lender and shall be binding upon Buyer;

(i)            In the event the applicable Transfer will
result in Borrower no longer owning the Property, subject to the provisions of
Section 18.32 hereof, such Sale does not relieve Borrower of any personal
liability under the Note or any of the other Loan Documents for any acts or
events occurring or obligations arising prior to or simultaneously with the
closing of such Sale, and Borrower executes, without any cost or expense to
Lender, such documents and agreements as Lender shall reasonably require to
evidence and effectuate the ratification of said personal liability;

(j)            In the event the applicable Transfer will
result in Borrower no longer owning the Property, such Sale does not relieve
any Guarantor of its obligations under any guaranty or indemnity agreement
executed in connection with the Loan and each such Guarantor executes, without
any cost or expense to Lender, such documents and agreements as Lender shall
reasonably require to evidence and effectuate the ratification of each such
guaranty agreement, provided that if Buyer or a party associated with Buyer
approved by Lender in its reasonable

 81
 

 

discretion assumes the obligations
of the current Guarantor under its guaranty and Buyer or such party associated
with Buyer, as applicable, executes, without any cost or expense to Lender, a
new guaranty in similar form and substance to the existing guaranty and
otherwise satisfactory to Lender, then Lender shall release the current
Guarantor from all obligations arising under its guaranty after the closing of
such Sale; and

(k)           In the event the applicable Transfer will
result in Borrower no longer owning the Property, Buyer is a Single
Purpose Entity and Lender receives a non-consolidation opinion relating to
Buyer from Buyer’s counsel, which opinion is in form and substance reasonably
acceptable to Lender.

ARTICLE X:  CERTIFICATES

Section
10.01.  Estoppel Certificates.  (a) After request
by Lender, Borrower, within fifteen (15) days following Lender’s request and at
Borrower’s expense, will furnish Lender with a statement, duly acknowledged and
certified, setting forth (i) the amount of the original principal amount of the
Note, and the unpaid principal amount of the Note, (ii) the rate of interest of
the Note, (iii) the date payments of interest and/or principal were last paid,
(iv) whether to its knowledge there exists any offsets or defenses to the
payment of the Debt, and if any are alleged, the nature thereof, (v) that the
Note and this Security Instrument have not been modified or if modified, giving
particulars of such modification and (vi) that there has occurred and is then
continuing no Default or if such Default exists, the nature thereof, the period
of time it has existed, and the action being taken to remedy such Default.

(b)           Within thirty (30) days after written request by Borrower, Lender shall
furnish to Borrower a written statement confirming (i) the outstanding amount of
the Debt, (ii) the rate of interest set forth in the Note, (iii) the maturity
date of the Note and (iv) the date to which interest and/or principal has been
paid.

(c)           Borrower shall use all
reasonable efforts to obtain estoppel certificates from tenants in form and
substance reasonably acceptable to Lender, but, provided no Event of Default
has occurred and is continuing, in no event shall Borrower be required to
deliver estoppel certificates more than twice during any Loan Year.

ARTICLE XI:  NOTICES

Section
11.01.  Notices.  Any notice, demand, statement, request or
consent made hereunder shall be in writing and delivered personally or sent to
the party to whom the notice, demand or request is being made by overnight
delivery by Federal Express or other nationally recognized overnight delivery
service, as follows and shall be deemed given when delivered personally or one
(1) Business Day after being deposited with Federal Express or such other
nationally recognized delivery service:

	
  If to Lender:

  	
  Wachovia Bank, National Association

  
	
   

  	
  Commercial Real
  Estate Services

  
	
   

  	
  8739 Research
  Drive URP 4

  
	
   

  	
  NC 1075

  

 

 82
 

 

 

	
  

  	
  Charlotte, North
  Carolina  28262

  
	
   

  	
  Loan Number:
  509850400

  
	
   

  	
  Attention:
  Portfolio Management

  
	
   

  	
  Fax No.: (704)
  715-0036

  
	
   

  	
   

  
	
  with a copy to:

  	
  Proskauer Rose LLP

  
	
   

  	
  1585 Broadway

  
	
   

  	
  New York, New
  York 10036

  
	
   

  	
  Attn: David J.
  Weinberger, Esq.

  
	
   

  	
  Facsimile No.:
  (212) 969-2900

  
	
   

  	
   

  
	
  If to Borrower:

  	
  To Borrower, at the address first written above, to
  the attention of Chief Financial Officer, Facsimile No. (212) 277-4268,

  
	
   

  	
   

  
	
  with a copy to:

  	
  To Borrower, at the address first written above, to
  the attention of General Counsel, Facsimile No. (212) 277-4268,

  
	
   

  	
   

  
	
  If to Trustee:

  	
  To Trustee at the address first written above,

  

 

or such other address as
either Borrower, Trustee or Lender shall hereafter specify by not less than ten
(10) days prior written notice as provided herein; provided, however, that notwithstanding
any provision of this Article to the contrary, such notice of change of address
shall be deemed given only upon actual receipt thereof.  Rejection or other refusal to accept or the
inability to deliver because of changed addresses of which no notice was given
as herein required shall be deemed to be receipt of the notice, demand,
statement, request or consent.

ARTICLE XII:  INDEMNIFICATION

Section
12.01.  Indemnification Covering
Property.  In addition, and without
limitation, to any other provision of this Security Instrument or any other
Loan Document, Borrower shall protect, indemnify and save harmless Lender,
Trustee and their successors and assigns, and each of their agents, employees,
officers, directors, stockholders, partners and members (collectively, “Indemnified
Parties”) for, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature, known or unknown, contingent or otherwise, whether incurred or imposed
within or outside the judicial process, including, without limitation,
reasonable attorneys’ fees and disbursements imposed upon or incurred by or
asserted against any of the Indemnified Parties by reason of (a) ownership of
this Security Instrument, the Assignment, the Property or any part thereof or
any interest therein or receipt of any Rents; (b) any accident, injury to or
death of any person or loss of or damage to property occurring in, on or about
the Property or any part thereof or on the adjoining sidewalks, curbs, parking
areas, streets or ways; (c) any use, nonuse or condition in, on or about, or
possession, alteration, repair, operation, maintenance or management of, the
Property or any part thereof or on the adjoining sidewalks, curbs, parking areas,
streets or ways; (d) any failure on the part of Borrower to perform or comply
with any of the terms of this Security Instrument or the Assignment; (e)
performance of any labor or services or the furnishing of any materials or
other property in respect of the Property or any part thereof; (f) any claim by
brokers, finders or similar

 83
 

 

Persons claiming to be
entitled to a commission in connection with any Lease or other transaction
involving the Property or any part thereof; (g) any Imposition including, without
limitation, any Imposition attributable to the execution, delivery, filing, or
recording of any Loan Document, Lease or memorandum thereof; (h) any lien or
claim arising on or against the Property or any part thereof under any Legal
Requirement or any liability asserted against any of the Indemnified Parties
with respect thereto; (i) any claim arising out of or in any way relating to
any tax or other imposition on the making and/or recording of this Security
Instrument, the Note or any of the other Loan Documents; (j) a Default under
Sections 2.02(f), 2.02(g), 2.02(k), 2.02(t) or 2.02(w) hereof, (k) the failure
of any Person to file timely with the Internal Revenue Service an accurate Form
1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and
Barter Exchange Transactions, which may be required in connection with the
Loan, or to supply a copy thereof in a timely fashion to the recipient of the
proceeds of the Loan; (l) the claims of any lessee or any Person acting through
or under any lessee or otherwise arising under or as a consequence of any Lease
or (m) the failure to pay any insurance premiums.  Notwithstanding the foregoing provisions of
this Section 12.01 to the contrary, Borrower shall have no obligation to
indemnify the Indemnified Parties pursuant to this Section 12.01 for
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses relative to the foregoing which result from Lender’s, and its
successors’ or assigns’, willful misconduct or gross negligence.  Any amounts payable to Lender by reason of
the application of this Section 12.01 shall constitute a part of the Debt
secured by this Security Instrument and the other Loan Documents and shall
become immediately due and payable and shall bear interest at the Default Rate
from the date the liability, obligation, claim, cost or expense is sustained by
Lender, as applicable, until paid.  The
provisions of this Section 12.01 shall survive the termination of this Security
Instrument whether by repayment of the Debt, foreclosure or delivery of a deed
in lieu thereof, assignment or otherwise. 
In case any action, suit or proceeding is brought against any of the
Indemnified Parties by reason of any occurrence of the type set forth in (a)
through (m) above, Borrower shall, at Borrower’s expense, resist and defend
such action, suit or proceeding or will cause the same to be resisted and
defended by counsel at Borrower’s expense for the insurer of the liability or
by counsel designated by Borrower (unless reasonably disapproved by Lender
promptly after Lender has been notified of such counsel); provided, however,
that nothing herein shall compromise the right of Lender (or any other
Indemnified Party) to appoint its own counsel at Borrower’s expense for its defense
with respect to any action which, in the reasonable opinion of Lender or such
other Indemnified Party, as applicable, presents a conflict or potential
conflict between Lender or such other Indemnified Party that would make such
separate representation advisable.  Any
Indemnified Party will give Borrower prompt notice after such Indemnified Party
obtains actual knowledge of any potential claim by such Indemnified Party for
indemnification hereunder.  The
Indemnified Parties shall not settle or compromise any action, proceeding or
claim as to which it is indemnified hereunder without notice to Borrower.  Notwithstanding the foregoing, so long
as no Default has occurred and is continuing and Borrower is resisting and
defending such action, suit or proceeding as provided above in a prudent and
commercially reasonable manner, in order to obtain the benefit of this Section
12.01 with respect to such action, suit or proceeding, Lender and the
Indemnified Parties agree that they shall not settle such action, suit or
proceeding without obtaining Borrower’s consent which Borrower agrees not to
unreasonably withhold, condition or delay; provided, however, (x)
if Borrower is not diligently defending such action, suit or proceeding in a
prudent and commercially reasonable manner as provided above and Lender has
provided Borrower with

 84
 

 

thirty (30)
days’ prior written notice, or shorter period if mandated by the requirements
of the applicable law, and Borrower has failed to correct such failure, or (y)
failure to settle could, in Lender’s reasonable judgment, expose Lender to
criminal liability, Lender may settle such action, suit or proceeding without
the consent of but upon notice to Borrower and be entitled to the benefits of
this Section 12.01 with respect to the settlement of such action, suit or
proceeding.

ARTICLE XIII:  DEFAULTS

Section
13.01.  Events of Default.  The Debt shall become immediately due at the
option of Lender upon any one or more of the following events (“Event of
Default”):

(a)           if the final payment or prepayment premium, if any, due under the Note
or hereunder shall not be paid on Maturity;

(b)           if any monthly payment of interest and/or principal due under the Note
(other than the sums described in (a) above) shall not be fully paid on the
date upon which the same is due and payable thereunder; provided, that the
failure of any such amount to be paid when due shall not be an Event of Default
if adequate funds were on deposit in the relevant Sub-Account (or would have
been on deposit therein if Lender had timely allocated such funds thereto from
the Central Account and/or the Rent Account in accordance with the provisions
of Article V hereof);

(c)           if payment of any sum (other than the sums described in (a) above or
(b) above) required to be paid pursuant to the Note, this Security Instrument
or any other Loan Document shall not be paid within five (5) days after Lender
delivers written notice to Borrower that same is due and payable thereunder or
hereunder; provided, that the failure of any such amount to be paid when due
shall not be an Event of Default if adequate funds were on deposit in the
relevant Sub-Account (or would have been on deposit therein if Lender had
timely allocated such funds thereto from the Central Account and/or the Rent
Account in accordance with the provisions of Article V hereof) and, if
required, Borrower timely instructed Lender as to the application of such
funds;

(d)           if Borrower, Guarantor or, if Borrower or Guarantor is a partnership,
any general partner of Borrower or Guarantor, or, if Borrower or Guarantor is a
limited liability company, any member of Borrower or managing member of
Guarantor, shall institute or cause to be instituted any proceeding for the
termination or dissolution of Borrower, Guarantor or any such general partner
or member;

(e)           if the insurance policies required hereunder are not kept in full force
and effect, or if the insurance policies are not assigned and delivered to
Lender as herein provided;

(f)            if Borrower or Guarantor attempts to assign
its rights under this Security Instrument or any other Loan Document or any
interest herein or therein, or if any Transfer occurs other than in accordance
with the provisions hereof;

(g)           if any representation or warranty of Borrower or Guarantor made herein
or in any other Loan Document or in any certificate, report, financial
statement or other instrument or

 85
 

 

agreement furnished to
Lender shall prove false or misleading in any material respect as of the date
made or furnished;

(h)           if Borrower, Guarantor or any general partner of Borrower, or Guarantor
shall make an assignment for the benefit of creditors or shall admit in writing
its inability to pay its debts generally as they become due;

(i)            if a receiver, liquidator or trustee of
Borrower, Guarantor or any general partner of Borrower, or Guarantor shall be
appointed or if Borrower, Guarantor or their respective general partners shall
be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any
similar federal or state law, shall be filed by or against, consented to, or
acquiesced in, by Borrower, Guarantor or their respective general partners or
if any proceeding for the dissolution or liquidation of Borrower, Guarantor or
their respective general partners shall be instituted; however, if such
appointment, adjudication, petition or proceeding was involuntary and not
consented to by Borrower, Guarantor or their respective general partners, as
applicable, upon the same not being discharged, stayed or dismissed within
ninety (90) days or if Borrower, Guarantor or their respective general partners
shall generally not be paying its debts as they become due;

(j)            if Borrower shall be in default beyond any
notice or grace period, if any, under any other mortgage or deed of trust or
security agreement covering any part of the Property without regard to its
priority relative to this Security Instrument; provided, however, this
provision shall not be deemed a waiver of the provisions of Article IX
prohibiting further encumbrances affecting the Property or any other provision
of this Security Instrument;

(k)           if the Property becomes subject to any lien which is superior to the
lien of this Security Instrument, other than Permitted Encumbrances;

(l)            if Borrower or SPE Pledgor discontinues
operations with respect to a material portion of the Property for reasons other
than repair or restoration arising from a casualty or condemnation for ten (10)
days or more;

(m)          except as permitted in this Security Instrument, any material
alteration, demolition or removal of any of the Improvements without the prior
consent of Lender;

(n)           if Borrower or SPE Pledgor consummates a transaction which would cause
this Security Instrument or Lender’s rights under this Security Instrument, the
Note or any other Loan Document to constitute a non-exempt prohibited
transaction under ERISA or result in a violation of a state statute regulating
government plans subjecting Lender to liability for a violation of ERISA or a
similar state statute; or

(o)           if a default shall occur under any of the other terms, covenants or
conditions of the Note, this Security Instrument or any other Loan Document,
other than as set forth in (a) through (n) above, for ten (10) days after
notice from Lender in the case of any default which can be cured by the payment
of a sum of money, or for thirty (30) days after notice from Lender in the case
of any other default or an additional ninety (90) days if Borrower is
diligently and continuously effectuating a cure of a curable non-monetary
default, other than as set forth in (a)

 86
 

 

through (n) above.  Notwithstanding the foregoing, Borrower’s
failure to promptly commence the Work subsequent to a casualty or Taking shall
not be a default hereunder if (i) a Substantial Casualty or Substantial Taking
has occurred, (ii) Lender has not made available Loss Proceeds to Borrower for
the Work for any reason other than because a Default exists and (iii) Borrower
has given written notice to Lender that it shall repay the Loan within six (6)
months of Lender applying Loss Proceeds from the Property towards the repayment
of the Debt and Borrower diligently seeks construction financing for the Work
during such period and delivers to Lender evidence thereof.

Section
13.02.  Remedies.  (a) Upon the
occurrence and during the continuance of any Event of Default, Lender may, in
addition to any other rights or remedies available to it hereunder or under any
other Loan Document, at law or in equity, take such action, without notice or
demand, as it reasonably deems advisable to protect and enforce its rights
against Borrower and in and to the Property including, but not limited to, the
following actions, each of which may be pursued singly, concurrently or
otherwise, at such time and in such order as Lender may determine, in its sole
discretion, without impairing or otherwise affecting any other rights and
remedies of Lender hereunder, at law or in equity:  (i) declare all or any portion of the unpaid
Debt to be immediately due and payable; provided, however, that upon the
occurrence of any of the events specified in Section 13.01(i), the entire Debt
will be immediately due and payable without notice or demand or any other
declaration of the amounts due and payable; or (ii) bring, or instruct Trustee
to bring, an action to foreclose this Security Instrument and without applying
for a receiver for the Rents, but subject to the rights of the tenants under
the Leases, enter into or upon the Property or any part thereof, either
personally or by its agents, nominees or attorneys, and dispossess Borrower and
its agents and servants therefrom, and thereupon Lender may (A) use, operate,
manage, control, insure, maintain, repair, restore and otherwise deal with all
and every part of the Property and conduct the business thereat, (B) make
alterations, additions, renewals, replacements and improvements to or on the
Property or any part thereof, (C) exercise all rights and powers of Borrower
with respect to the Property or any part thereof, whether in the name of
Borrower or otherwise, including, without limitation, the right to make,
cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue
for, collect and receive all earnings, revenues, rents, issues, profits and
other income of the Property and every part thereof, and (D) apply the receipts
from the Property or any part thereof to the payment of the Debt, after
deducting therefrom all expenses (including, without limitation, reasonable
attorneys’ fees and disbursements) reasonably incurred in connection with the
aforesaid operations and all amounts necessary to pay the Impositions,
insurance and other charges in connection with the Property or any part
thereof, as well as just and reasonable compensation for the services of Lender’s
third party agents; or (iii) have an appraisal or other valuation of the
Property or any part thereof performed by an Appraiser (and Borrower covenants
and agrees it shall cooperate in causing any such valuation or appraisal to be
performed) and any cost or expense incurred by Lender in connection therewith
shall constitute a portion of the Debt and be secured by this Security
Instrument and shall be immediately due and payable to Lender with interest, at
the Default Rate, until the date of receipt by Lender; or (iv) sell, or
instruct Trustee to sell, the Property or institute, or instruct Trustee to
institute, proceedings for the complete foreclosure of this Security
Instrument, or take such other action as may be allowed pursuant to Legal
Requirements, at law or in equity, for the enforcement of this Security
Instrument in which case the Property or any part thereof may be sold for cash
or credit in one or more parcels; or (v)

 87
 

 

with or without entry, and
to the extent permitted and pursuant to the procedures provided by applicable
Legal Requirements, institute proceedings for the partial foreclosure of this
Security Instrument, or take such other action as may be allowed pursuant to
Legal Requirements, at law or in equity, for the enforcement of this Security
Instrument for the portion of the Debt then due and payable, subject to the
lien of this Security Instrument continuing unimpaired and without loss of
priority so as to secure the balance of the Debt not then due; or (vi) sell, or
instruct Trustee to sell, the Property or any part thereof and any or all
estate, claim, demand, right, title and interest of Borrower therein and rights
of redemption thereof, pursuant to power of sale or otherwise, at one or more
sales, in whole or in parcels, in any order or manner, at such time and place,
upon such terms and after such notice thereof as may be required or permitted
by law, at the discretion of Lender, and in the event of a sale, by foreclosure
or otherwise, of less than all of the Property, this Security Instrument shall
continue as a lien on the remaining portion of the Property; or (vii) institute
an action, suit or proceeding in equity for the specific performance of any
covenant, condition or agreement contained in the Loan Documents, or any of
them; or (viii) recover judgment on the Note or any guaranty either before,
during or after (or in lieu of) any proceedings for the enforcement of this
Security Instrument; or (ix) apply, or direct Trustee to apply, ex parte, for
the appointment of a custodian, trustee, receiver, keeper, liquidator or
conservator of the Property or any part thereof, irrespective of the adequacy
of the security for the Debt and without regard to the solvency of Borrower or
of any Person liable for the payment of the Debt, to which appointment Borrower
does hereby consent and such receiver or other official shall have all rights
and powers permitted by applicable law and such other rights and powers as the
court making such appointment may confer, but the appointment of such receiver or
other official shall not impair or in any manner prejudice the rights of Lender
to receive the Rent with respect to any of the Property pursuant to this
Security Instrument or the Assignment; or (x) require, at Lender’s option,
Borrower to pay monthly in advance to Lender, or any receiver appointed to
collect the Rents, the fair and reasonable rental value for the use and
occupation of any portion of the Property occupied by Borrower and may require
Borrower to vacate and surrender possession to Lender of the Property or to
such receiver and Borrower may be evicted by summary proceedings or otherwise;
or (xi) without notice to Borrower (A) apply all or any portion of the cash
collateral in any Sub-Account and Escrow Account, including any interest and/or
earnings therein, to carry out the obligations of Borrower under this Security
Instrument and the other Loan Documents, to protect and preserve the Property
and for any other purpose permitted under this Security Instrument and the
other Loan Documents and/or (B) have all or any portion of such cash collateral
immediately paid to Lender to be applied against the Debt in the order and
priority set forth in the Note; or (xii) pursue any or all such other rights or
remedies as Lender and Trustee may have under applicable law or in equity;
provided, however, that the provisions of this Section 13.02(a) shall not be
construed to extend or modify any of the notice requirements or grace periods
provided for hereunder or under any of the other Loan Documents.  Borrower hereby waives, to the fullest extent
permitted by Legal Requirements, any defense Borrower might otherwise raise or
have by the failure to make any tenants parties defendant to a foreclosure
proceeding and to foreclose their rights in any proceeding instituted by Lender
or Trustee.

(b)           To the extent not prohibited by law, any time after and during the
continuance of an Event of Default, Trustee, at the request of Lender, shall
have the power to sell the Property or any part thereof at public auction, in
such manner, at such time and place, upon such terms

 88
 

 

and conditions, and upon
such public notice as Lender may deem best for the interest of Lender, or as
may be required or permitted by applicable law, consisting of advertisement in
a newspaper of general circulation in the jurisdiction and for such period as
applicable law may require and at such other times and by such other methods,
if any, as may be required by law to convey the Property in fee simple by
Trustee’s deed with special warranty of title to and at the cost of the
purchaser, who shall not be liable to see to the application of the purchase
money.  The proceeds or avails of any
sale made under or by virtue of this Section 13.02, together with any other
sums which then may be held by Lender under this Security Instrument, whether
under the provisions of this Section 13.02 or otherwise, shall be applied as
follows:

First:  To the payment of the third-party costs
and expenses reasonably incurred in connection with any such sale and to
advances, fees and expenses, including, without limitation, reasonable fees and
expenses of Lender’s and Trustee’s legal counsel as applicable, and of any
judicial proceedings wherein the same may be made, and of all expenses,
liabilities and advances reasonably made or incurred by Lender or Trustee under
this Security Instrument, together with interest as provided herein on all such
advances made by Lender, and all Impositions, except any Impositions or other
charges subject to which the Property shall have been sold;

Second:  To the payment of the whole amount then due,
owing and unpaid under the Note for principal and interest thereon, with
interest on such unpaid principal at the Default Rate from the date of the
occurrence of the earliest Event of Default that formed a basis for such sale
until the same is paid;

Third:  To the payment of any other portion of the
Debt required to be paid by Borrower pursuant to any provision of this Security
Instrument, the Note, or any of the other Loan Documents; and

Fourth:  The surplus, if any, to Borrower unless
otherwise required by Legal Requirements.

Lender and any receiver or
custodian of the Property or any part thereof shall be liable to account for
only those rents, issues, proceeds and profits actually received by it.

(c)           Lender or Trustee, as applicable, may adjourn from time to time any
sale by it to be made under or by virtue of this Security Instrument by
announcement at the time and place appointed for such sale or for such
adjourned sale or sales and, except as otherwise provided by any applicable
provision of Legal Requirements, Lender or Trustee, as applicable, without
further notice or publication, may make such sale at the time and place to
which the same shall be so adjourned.

(d)           Upon the completion of any sale or sales made by Lender or Trustee
under or by virtue of this Section 13.02, Lender or Trustee, as applicable, or
any officer of any court empowered to do so, shall execute and deliver to the
accepted purchaser or purchasers a good and sufficient instrument, or good and
sufficient instruments, granting, conveying, assigning and transferring all
estate, right, title and interest in and to the property and rights sold.  Lender is hereby irrevocably appointed the
true and lawful attorney-in-fact of Borrower (coupled with an

 89
 

 

interest), in its name and
stead, to make all necessary conveyances, assignments, transfers and deliveries
of the property and rights so sold and for that purpose Lender may execute all
necessary instruments of conveyance, assignment, transfer and delivery, and may
substitute one or more Persons with like power, Borrower hereby ratifying and
confirming all that its said attorney-in-fact or such substitute or
substitutes shall lawfully do by virtue hereof. 
Nevertheless, Borrower, if so requested by Lender, shall ratify and
confirm any such sale or sales by executing and delivering to Lender, or to
such purchaser or purchasers all such instruments as may be advisable, in the
sole judgement of Lender, for such purpose, and as may be designated in such
request.  Any such sale or sales made
under or by virtue of this Section 13.02, whether made under the power of sale
herein granted or under or by virtue of judicial proceedings or a judgment or
decree of foreclosure and sale, shall operate to divest all the estate, right,
title, interest, claim and demand whatsoever, whether at law or in equity, of
Borrower in and to the property and rights so sold, and shall, to the fullest
extent permitted under Legal Requirements, be a perpetual bar, both at law and
in equity against Borrower and against any and all Persons claiming or who may
claim the same, or any part thereof, from, through or under Borrower.

(e)           In the event of any sale made under or by virtue of this Section 13.02
(whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or a judgment or decree of foreclosure and sale), the
entire Debt immediately thereupon shall, anything in the Loan Documents to the
contrary notwithstanding, become due and payable.

(f)            Upon any sale made under or by virtue of this
Section 13.02 (whether made under the power of sale herein granted or under or
by virtue of judicial proceedings or a judgment or decree of foreclosure and
sale), Lender may bid for and acquire the Property or any part thereof and in
lieu of paying cash therefor may make settlement for the purchase price by
crediting upon the Debt the net sales price after deducting therefrom the
expenses of the sale and the costs of the action.

(g)           No recovery of any judgment by Lender and no levy of an execution under
any judgment upon the Property or any part thereof or upon any other property
of Borrower shall release the lien of this Security Instrument upon the
Property or any part thereof, or any liens, rights, powers or remedies of
Lender hereunder, but such liens, rights, powers and remedies of Lender shall
continue unimpaired until all amounts due under the Note, this Security
Instrument and the other Loan Documents are paid in full.

(h)           Upon the exercise by Lender of any power, right, privilege, or remedy
pursuant to this Security Instrument which requires any consent, approval,
registration, qualification, or authorization of any Governmental Authority,
Borrower agrees to execute and deliver, or will cause the execution and
delivery of, all applications, certificates, instruments, assignments and other
documents and papers that Lender or any purchaser of the Property may be
required to obtain for such governmental consent, approval, registration,
qualification, or authorization and Lender is hereby irrevocably appointed the
true and lawful attorney-in-fact of Borrower (coupled with an interest), in its
name and stead, to execute all such applications, certificates, instruments,
assignments and other documents and papers.

Section
13.03.  Payment of Debt After Default.  If, following the occurrence of any Event of
Default, Borrower shall tender payment of an amount sufficient to satisfy the
Debt in whole or

 90
 

 

in part at any time prior to
a foreclosure sale of the Property, and if at the time of such tender
prepayment of the principal balance of the Note is not permitted by the Note or
this Security Instrument, Borrower shall, in addition to the entire Debt, also
pay to Lender a sum equal to interest which would have accrued on the principal
balance of the Note at an interest rate equal to the LIBOR Margin for the Note
plus the greater of (x) the then current LIBOR Rate and (y) the then current
average yield for “This Week” as published by the Federal Reserve Board during
the most recent full week preceding the date on which Borrower tenders such
payment in Federal Reserve Statistical Release H.15 (519) for instruments
having a ten (10) year maturity, from the date of such tender to the earlier of
(a) the Maturity Date or (b) the first day of the period during which
prepayment of the principal balance of the Note would have been permitted
together with a prepayment consideration equal to the prepayment consideration
which would have been payable as of the first day of the period during which
prepayment would have been permitted.  If
at the time of such tender, prepayment of the principal balance of the Note is
permitted, such tender by Borrower shall be deemed to be a voluntary prepayment
of the principal balance of the Note and Borrower shall, in addition to the
entire Debt, also pay to Lender the applicable prepayment consideration
specified in the Note and this Security Instrument.

Section
13.04.  Possession of the Property.  Upon the occurrence and during the
continuance of any Event of Default and the acceleration of the Debt or any
portion thereof, Borrower, if an occupant of the Property or any part thereof,
upon demand of Lender, shall immediately surrender possession of the Property
(or the portion thereof so occupied) to Lender, and if Borrower is permitted to
remain in possession, the possession shall be as a month-to-month
tenant of Lender and, on demand, Borrower shall pay to Lender monthly, in
advance, a reasonable rental for the space so occupied and in default thereof
Borrower may be dispossessed.  The
covenants herein contained may be enforced by a receiver of the Property or any
part thereof.  Nothing in this Section
13.04 shall be deemed to be a waiver of the provisions of this Security
Instrument making the Transfer of the Property or any part thereof without
Lender’s prior written consent an Event of Default.

Section
13.05.  Interest After Default.  If any amount due under the Note, this
Security Instrument or any of the other Loan Documents is not paid within any
applicable notice and grace period after same is due, whether such date is the
stated due date, any accelerated due date or any other date or at any other
time specified under any of the terms hereof or thereof, then, in such event,
Borrower shall pay interest on the amount not so paid from and after the date
on which such amount first becomes due at the Default Rate; and such interest
shall be due and payable at such rate until the earlier of the cure of all
Events of Default or the payment of the entire amount due to Lender, whether or
not any action shall have been taken or proceeding commenced to recover the
same or to foreclose this Security Instrument. 
All unpaid and accrued interest shall be secured by this Security
Instrument as part of the Debt.  Nothing
in this Section 13.05 or in any other provision of this Security Instrument
shall constitute an extension of the time for payment of the Debt.

Section
13.06.  Borrower’s Actions After
Default.  Upon the occurrence and
during the continuance of any Event of Default and immediately upon the
commencement of any action, suit or other legal proceedings by Lender to obtain
judgment for the Debt, or of any other nature

 91
 

 

in aid of the enforcement of
the Loan Documents, Borrower will (a) after receipt of notice of the
institution of any such action, waive the issuance and service of process and
enter its voluntary appearance in such action, suit or proceeding, and (b) if
required by Lender, consent to the appointment of a receiver or receivers of
the Property or any part thereof and of all the earnings, revenues, rents,
issues, profits and income thereof.

Section
13.07.  Control by Lender After
Default.  Notwithstanding the
appointment of any custodian, receiver, liquidator or trustee of Borrower, or
of any of its property, or of the Property or any part thereof, to the extent
permitted by Legal Requirements, Lender shall be entitled to obtain possession
and control of all property now and hereafter covered by this Security
Instrument and the Assignment in accordance with the terms hereof.

Section
13.08.  Right to Cure Defaults.  (a) Upon the
occurrence and during the continuance of any Event of Default, Lender or its
agents may, but without any obligation to do so and without notice to or demand
on Borrower and without releasing Borrower from any obligation hereunder, make
or do the same in such manner and to such extent as Lender may deem necessary
to protect the security hereof.  Lender
and its agents are authorized to enter upon the Property or any part thereof
for such purposes, or appear in, defend, or bring any action or proceedings to
protect Lender’s interest in the Property or any part thereof or to foreclose
this Security Instrument or collect the Debt, and the cost and expense thereof
(including reasonable attorneys’ fees to the extent permitted by law), with
interest as provided in this Section 13.08, shall constitute a portion of the
Debt and shall be immediately due and payable to Lender upon demand.  All such costs and expenses incurred by
Lender or its agents in remedying such Event of Default or in appearing in,
defending, or bringing any such action or proceeding shall bear interest at the
Default Rate, for the period from the date so demanded to the date of payment
to Lender.  All such costs and expenses
incurred by Lender or its agents together with interest thereon calculated at
the above rate shall be deemed to constitute a portion of the Debt and be
secured by this Security Instrument.

(b)           If Lender makes any payment or advance that Lender is authorized by
this Security Instrument to make in the place and stead of Borrower (i)
relating to the Impositions or tax liens asserted against the Property, Lender
may do so according to any bill, statement or estimate procured from the
appropriate public office without inquiry into the accuracy of the bill,
statement or estimate or into the validity of any of the Impositions or the tax
liens or claims thereof; (ii) relating to any apparent or threatened adverse
title, lien, claim of lien, encumbrance, claim or charge, Lender will be the
sole judge of the legality or validity of same; or (iii) relating to any other
purpose authorized by this Security Instrument but not enumerated in this
Section 13.08, Lender may do so whenever, in its judgment and discretion, the
payment or advance seems necessary or desirable to protect the Property and the
full security interest intended to be created by this Security Instrument.  In connection with any payment or advance
made pursuant to this Section 13.08, Lender has the option and is authorized,
but in no event shall be obligated, to obtain a continuation report of title
prepared by a title insurance company. 
The payments and the advances made by Lender pursuant to this Section
13.08 and the cost and expenses of said title report will be due and payable by
Borrower on demand, together with interest at the Default Rate, and will be
secured by this Security Instrument.

 92
 

 

Section
13.09.  Late Payment Charge.  If any portion of the Debt is not paid in
full on or before the day on which it is due and payable hereunder (other than
the principal portion of the Debt due on the Maturity Date), Borrower shall pay
to Lender an amount equal to five percent (5%) of such unpaid portion of the
Debt (“Late Charge”) to defray the expense incurred by Lender in
handling and processing such delinquent payment, and such amount shall
constitute a part of the Debt.

Section
13.10.  Recovery of Sums Required to
Be Paid.  Lender shall have the right
from time to time to take action to recover any sum or sums which constitute a
part of the Debt as the same become due and payable hereunder (after the
expiration of any grace period or the giving of any notice herein provided, if
any), without regard to whether or not the balance of the Debt shall be due,
and without prejudice to the right of Lender thereafter to bring an action of
foreclosure, or any other action, for a default or defaults by Borrower
existing at the time such earlier action was commenced.

Section
13.11.  Marshalling and Other Matters.  Borrower hereby waives, to the fullest extent
permitted by law, the benefit of all appraisement, valuation, stay, extension,
reinstatement, redemption (both equitable and statutory) and homestead laws now
or hereafter in force and all rights of marshalling in the event of any sale
hereunder of the Property or any part thereof or any interest therein.  Further, Borrower hereby expressly waives any
and all rights of redemption from sale under any order or decree of foreclosure
of this Security Instrument on behalf of Borrower, whether equitable or
statutory and on behalf of each and every Person acquiring any interest in or
title to the Property or any part thereof subsequent to the date of this
Security Instrument and on behalf of all Persons to the fullest extent
permitted by applicable law.

Section
13.12.  Tax Reduction Proceedings.  Upon the occurrence and during the
continuance of an Event of Default, Borrower shall be deemed to have appointed
Lender as its attorney-in-fact to seek a reduction or reductions in the
assessed valuation of the Property for real property tax purposes or for any
other purpose and to prosecute any action or proceeding in connection
therewith.  This power, being coupled
with an interest, shall be irrevocable for so long as any part of the Debt
remains unpaid and any Event of Default shall be continuing.

Section
13.13.  General Provisions Regarding
Remedies.

(a)           Right to Terminate Proceedings. 
Lender or Trustee may terminate or rescind any proceeding or other
action brought in connection with its exercise of the remedies provided in
Section 13.02 at any time before the conclusion thereof, as determined in
Lender’s sole discretion and without prejudice to Lender or Trustee.

(b)           No Waiver or Release.  The
failure of Lender or Trustee to exercise any right, remedy or option provided
in the Loan Documents shall not be deemed a waiver of such right, remedy or
option or of any covenant or obligation contained in the Loan Documents.  No acceptance by Lender of any payment upon
the occurrence and during the continuance of an Event of Default and no payment
by Lender of any payment or obligation for which Borrower is liable hereunder
shall be deemed to waive or cure any Event of Default.  No sale of all or any portion of the
Property, no forbearance on the part of Lender, and no extension of time for
the payment of the whole or any portion of the Debt or any other indulgence
given by Lender to

 93
 

 

Borrower or any other
Person, shall operate to release or in any manner affect the interest of Lender
in the Property or the liability of Borrower to pay the Debt.  No waiver by Lender shall be effective unless
it is in writing and then only to the extent specifically stated.

(c)           No Impairment; No Releases.  The
interests and rights of Lender under the Loan Documents shall not be impaired
by any indulgence, including (i) any renewal, extension or modification which
Lender may grant with respect to any of the Debt; (ii) any surrender,
compromise, release, renewal, extension, exchange or substitution which Lender
may grant with respect to the Property or any portion thereof; or (iii) any
release or indulgence granted to any maker, endorser, guarantor or surety of
any of the Debt.

ARTICLE XIV:  COMPLIANCE WITH
REQUIREMENTS

Section
14.01.  Compliance with Legal
Requirements. 
(a) Borrower shall promptly comply with all present and future
Legal Requirements, foreseen and unforeseen, ordinary and extraordinary,
whether requiring structural or nonstructural repairs or alterations including,
without limitation, all zoning, subdivision, building, safety and environmental
protection, land use and development Legal Requirements, all Legal Requirements
which may be applicable to the curbs adjoining the Property or to the use or
manner of use thereof, and all rent control, rent stabilization and all other
similar Legal Requirements relating to rents charged and/or collected in
connection with the Leases.  Borrower
represents and warrants that the Property is in compliance in all respects with
all Legal Requirements as of the date hereof, no notes or notices of violations
of any Legal Requirements have been entered or received by Borrower and to its
best knowledge there is no basis for the entering of such notes or notices.

(b)           Borrower shall have the right to contest by appropriate legal
proceedings diligently conducted in good faith, without cost or expense to
Lender or Trustee, the validity or application of any Legal Requirement and to
suspend compliance therewith if permitted under applicable Legal Requirements,
provided (i) failure to comply therewith may not subject Lender or Trustee to
any civil or criminal liability, (ii) prior to and during such contest,
Borrower shall furnish to Lender security reasonably satisfactory to Lender, in
its discretion, against loss or injury by reason of such contest or non-compliance
with such Legal Requirement, (iii) no Event of Default shall exist during such
proceedings and such contest shall not otherwise violate any of the provisions
of any of the Loan Documents, (iv) such contest shall not (unless Borrower
shall comply with the provisions of clause (ii) of this Section 14.01(b))
subject the Property to any lien or encumbrance the enforcement of which is not
suspended or otherwise affect the priority of the lien of this Security Instrument;
(v) such contest shall not affect the ownership, use or occupancy of the
Property; (vi) the Property or any part thereof or any interest therein shall
not be in any danger of being sold, forfeited or lost by reason of such contest
by Borrower; (vii) Borrower shall give Lender prompt notice of the commencement
of such proceedings and, upon request by Lender, notice of the status of such
proceedings and/or confirmation of the continuing satisfaction of the
conditions set forth in clauses (i) - (vi) of this Section 14.01(b); and (viii)
upon a final determination of such proceeding, Borrower shall take all steps
necessary to comply with any requirements arising therefrom.

(c)           Borrower shall at all times comply with all applicable Legal
Requirements with respect to the construction, use and maintenance of any
vaults adjacent to the Property.  If by

 94
 

 

reason of the failure to pay
taxes, assessments, charges, permit fees, franchise taxes or levies of any kind
or nature, the continued use of the vaults adjacent to Property or any part
thereof is discontinued, Borrower nevertheless shall, with respect to any
vaults which may be necessary for the continued use of the Property, take such
steps (including the making of any payment) to ensure the continued use of
vaults or replacements.

Section
14.02.  Compliance with Recorded
Documents; No Future Grants. 
Borrower shall promptly perform and observe or cause to be performed and
observed, all of the terms, covenants and conditions of all Property Agreements
and all things necessary to preserve intact and unimpaired any and all
appurtenances or other interests or rights affecting the Property.

ARTICLE XV:  PREPAYMENT

Section
15.01.  Prepayment.  (a) Except as set
forth in Section 15.01(b) hereof, no prepayment of the Debt may be made in
whole or in part.

(b)           Borrower may voluntarily prepay the Loan, in whole or in part, on any
Business Day, in accordance with the following provisions:

(i)            Lender shall have received from Borrower not
less than thirty (30) days, nor more than ninety (90) days, prior written
notice specifying the date proposed for such prepayment and the amount which is
to be prepaid (which notice shall be revocable by Borrower up to three (3)
times during the term of the Loan by giving Lender not less than one (1)
Business Day prior written notice of such revocation, provided that Borrower
shall remain obligated to pay Lender’s costs and expenses including, without
limitation, breakage costs incurred by Lender in connection with such
revocation).

(ii)           Borrower shall also pay to Lender all interest due through and
including the last day of the Interest Accrual Period in which such prepayment
is being made, together with any and all other amounts due and owing pursuant
to the terms of the Note, this Security Instrument or the other Loan Documents,
provided that the amount prepaid shall be deposited in an interest-bearing
account until the Final Payment Date, and all interest accruing thereon through
the date immediately preceding the Final Payment Date shall be remitted to
Borrower, provided that Borrower acknowledges that Lender makes no
representation or warranty as to the rate of return.  For the sake of clarity, if Borrower
shall have paid interest on the Payment Date in the month in which the
repayment occurs through the then current Interest Accrual Period and repays
the Debt in full on or before the Final Payment Date, no additional interest
shall be due or payable by Borrower with respect to the period subsequent to
the Payment Date.

(iii)          Any partial prepayment shall be in a minimum amount of not less than
$25,000 and shall be in whole multiples of $1,000 in excess thereof.

(iv)          Intentionally omitted.

(v)           Intentionally omitted.

 95
 

 

(vi)          In the event that the
Loan is prepaid in whole or in part prior to the first (1st) anniversary of the
date hereof, Borrower shall pay to Lender, together with such prepayment and
all other amounts due in connection therewith, a non-refundable amount which
shall be deemed earned by Lender upon the funding of the Loan and shall not
count to or be credited to payment of the Principal Amount, any interest
thereon or any other amounts payable under the Note, the Security Instrument or
any of the Loan Documents, equal to the Spread Maintenance Premium.  Thereafter, all prepayments of the Loan shall
be without any prepayment fee or charge of any kind.

ARTICLE XVI:  ENVIRONMENTAL
COMPLIANCE

Section
16.01.  Covenants, Representations and
Warranties.  (a) Borrower
has not, at any time, and, to Borrower’s best knowledge after due inquiry and
investigation, except as set forth in the Environmental Report, no other Person
has at any time, handled, buried, stored, retained, refined, transported,
processed, manufactured, generated, produced, spilled, allowed to seep, leak,
escape or leach, or pumped, poured, emitted, emptied, discharged, injected,
dumped, transferred or otherwise disposed of or dealt with Hazardous Materials
on, to or from the Premises or any other real property owned and/or occupied by
Borrower, and Borrower does not intend to and shall not use the Property or any
part thereof or any such other real property for the purpose of handling,
burying, storing, retaining, refining, transporting, processing, manufacturing,
generating, producing, spilling, seeping, leaking, escaping, leaching, pumping,
pouring, emitting, emptying, discharging, injecting, dumping, transferring or
otherwise disposing of or dealing with Hazardous Materials, except for use and
storage for use of heating oil, cleaning fluids, pesticides and other substances
customarily used in the operation of properties that are being used for the
same purposes as the Property is presently being used, provided such use and/or
storage for use is in compliance with the requirements hereof and the other
Loan Documents and does not give rise to liability under applicable Legal
Requirements or Environmental Statutes or be the basis for a lien against the
Property or any part thereof.  In
addition, without limitation to the foregoing provisions, Borrower represents
and warrants that, to the best of its knowledge, after due inquiry and
investigation, except as previously disclosed in writing to Lender, there is no
asbestos in, on, over, or under all or any portion of the fire-proofing or any
other portion of the Property.

(b)           Borrower, after due inquiry and investigation, knows of no seepage,
leak, escape, leach, discharge, injection, release, emission, spill, pumping,
pouring, emptying or dumping of Hazardous Materials into waters on, under or
adjacent to the Property or any part thereof or any other real property owned
and/or occupied by Borrower, or onto lands from which such Hazardous Materials
might seep, flow or drain into such waters, except as disclosed in the
Environmental Report.

(c)           Borrower shall not permit any Hazardous Materials to be handled,
buried, stored, retained, refined, transported, processed, manufactured,
generated, produced, spilled, allowed to seep, leak, escape or leach, or to be
pumped, poured, emitted, emptied, discharged, injected, dumped, transferred or otherwise
disposed of or dealt with on, under, to or from the Property or any portion
thereof at any time, except for use and storage for use of heating oil,
ordinary cleaning fluids, pesticides and other substances customarily used in
the operation of properties

 96
 

 

that are being used for the
same purposes as the Property is presently being used, provided such use and/or
storage for use is in compliance with the requirements hereof and the other
Loan Documents and does not give rise to liability under applicable Legal
Requirements or be the basis for a lien against the Property or any part
thereof.

(d)           Borrower represents and warrants that no actions, suits, or proceedings
have been commenced, or are pending, or to the best knowledge of Borrower, are
threatened with respect to any Legal Requirement governing the use,
manufacture, storage, treatment, transportation, or processing of Hazardous
Materials with respect to the Property or any part thereof.  Borrower has received no notice of, and,
except as disclosed in the Environmental Report, after due inquiry, has no
knowledge of any fact, condition, occurrence or circumstance which with notice
or passage of time or both would give rise to a claim under or pursuant to any
Environmental Statute pertaining to Hazardous Materials on, in, under or
originating from the Property or any part thereof or any other real property
owned or occupied by Borrower or arising out of the conduct of Borrower,
including, without limitation, pursuant to any Environmental Statute.

(e)           Borrower has not waived any Person’s liability with regard to Hazardous
Materials in, on, under or around the Property, nor has Borrower retained or
assumed, contractually or by operation of law, any other Person’s liability
relative to Hazardous Materials or any claim, action or proceeding relating
thereto.

(f)            In the event that there shall be filed a lien
against the Property or any part thereof pursuant to any Environmental Statute
pertaining to Hazardous Materials, Borrower shall, within sixty (60) days or,
in the event that the applicable Governmental Authority has commenced steps to
cause the Premises or any part thereof to be sold pursuant to the lien, within
fifteen (15) days, from the date that Borrower receives notice of such lien,
either (i) pay the claim and remove the lien from the Property, or (ii) furnish
(A) a bond satisfactory to Lender in the amount of the claim out of which the
lien arises, (B) a cash deposit in the amount of the claim out of which the
lien arises, or (C) other security reasonably satisfactory to Lender in an
amount sufficient to discharge the claim out of which the lien arises.

(g)           Borrower represents and warrants that (i) except as disclosed in the
Environmental Report, Borrower has no knowledge of any violation of any Environmental
Statute or any Environmental Problem in connection with the Property,  nor has Borrower been requested or required
by any Governmental Authority to perform any remedial activity or other
responsive action in connection with any Environmental Problem and
(ii) neither the Property nor any other property owned by Borrower is
included or, to Borrower’s best knowledge, after due inquiry and investigation,
proposed for inclusion on the National Priorities List issued pursuant to
CERCLA by the United States Environmental Protection Agency (the “EPA”)
or on the inventory of other potential “Problem” sites issued by the EPA or has
been identified by the EPA as a potential CERCLA site or included or, to
Borrower’s knowledge, after due inquiry and investigation, proposed for
inclusion on any list or inventory issued pursuant to any other Environmental
Statute, if any, or issued by any other Governmental Authority.  Borrower covenants that Borrower will comply
with all Environmental Statutes affecting or imposed upon Borrower or the
Property.

 97
 

 

(h)           Borrower covenants that it shall promptly notify Lender of the presence
and/or release of any Hazardous Materials and of any request for information or
any inspection of the Property or any part thereof by any Governmental
Authority with respect to any Hazardous Materials and provide Lender with
copies of such request and any response to any such request or inspection.  Borrower covenants that it shall, in
compliance with applicable Legal Requirements, conduct and complete all
investigations, studies, sampling and testing (and promptly shall provide
Lender with copies of any such studies and the results of any such test) and
all remedial, removal and other actions necessary to clean up and remove all
Hazardous Materials in, on, over, under, from or affecting the Property or any
part thereof in accordance with all such Legal Requirements applicable to the
Property or any part thereof to the satisfaction of Lender.

(i)            Following the occurrence and during the
continuance of an Event of Default hereunder, and without regard to whether
Lender shall have taken possession of the Property or a receiver has been
requested or appointed or any other right or remedy of Lender has or may be
exercised hereunder or under any other Loan Document, Lender shall have the
right (but no obligation) to conduct such investigations, studies, sampling
and/or testing of the Property or any part thereof as Lender may, in its
discretion, determine to conduct, relative to Hazardous Materials.  All costs and expenses incurred in connection
therewith including, without limitation, consultants’ fees and disbursements
and laboratory fees, shall constitute a part of the Debt and shall, upon demand
by Lender, be immediately due and payable and shall bear interest at the
Default Rate from the date so demanded by Lender until reimbursed.  Borrower shall, at its sole cost and expense,
fully and expeditiously cooperate in all such investigations, studies,
samplings and/or testings including, without limitation, providing all relevant
information and making knowledgeable people available for interviews.

(j)            Borrower represents and warrants that all
paint and painted surfaces existing within the interior or on the exterior of
the Improvements are not flaking, peeling, cracking, blistering, or chipping in
a manner which could reasonably be expected to have a Material Adverse Effect,
and do not contain lead or are maintained in a condition that prevents exposure
of young children to lead-based paint, as of the date hereof, and that the
current inspections, operation, and maintenance program at the Property with
respect to lead-based paint sufficient to ensure that all painted surfaces
within the Property shall be maintained in a condition that prevents exposure
of tenants to lead-based paint.  To
Borrower’s knowledge, there have been no claims for adverse health effects from
exposure on the Property to lead-based paint or requests for the investigation,
assessment or removal of lead-based paint at the Property.

(k)           Borrower represents and warrants that except in accordance with all
applicable Environmental Statutes and as disclosed in the Environmental Report,
(i) no underground treatment or storage tanks or pumps or water, gas, or oil
wells are or have been located about the Property, (ii) no PCBs or
transformers, capacitors, ballasts or other equipment that contain dielectric
fluid containing PCBs are located about the Property, (iii) no insulating
material containing urea formaldehyde is located about the Property and (iv) no
asbestos-containing material is located about the Property, in a manner
which could reasonably be expected to have a Material Adverse Effect.

 98
 

 

Section
16.02.  Environmental Indemnification.  Borrower shall defend, indemnify and hold
harmless the Indemnified Parties for, from and against any claims, demands,
penalties, fines, liabilities, settlements, damages, costs and expenses of
whatever kind or nature, known or unknown, contingent or otherwise, whether
incurred or imposed within or outside the judicial process, including, without
limitation, reasonable attorneys’ and consultants’ fees and disbursements and
investigations and laboratory fees arising out of, or in any way related to any
Environmental Problem, including without limitation:

(a)           the presence, disposal, escape, seepage, leakage, spillage, discharge,
emission, release or threat of release of any Hazardous Materials in, on, over,
under, from or affecting the Property or any part thereof whether or not
disclosed by the Environmental Report;

(b)           any personal injury (including wrongful death, disease or other health
condition related to or caused by, in whole or in part, any Hazardous
Materials) or property damage (real or personal) arising out of or related to
any Hazardous Materials in, on, over, under, from or affecting the Property or
any part thereof whether or not disclosed by the Environmental Report;

(c)           any action, suit or proceeding brought or threatened, settlement
reached, or order of any Governmental Authority relating to such Hazardous
Material whether or not disclosed by the Environmental Report; and/or

(d)           any violation of the provisions, covenants, representations or
warranties of Section 16.01 hereof or of any Legal Requirement which is based
on or in any way related to any Hazardous Materials in, on, over, under, from
or affecting the Property or any part thereof including, without limitation,
the cost of any work performed and materials furnished in order to comply
therewith whether or not disclosed by the Environmental Report.

Notwithstanding the
foregoing provisions of this Section 16.02 to the contrary, Borrower shall have
no obligation to indemnify Lender for liabilities, claims, damages, penalties,
causes of action, costs and expenses relative to the foregoing which result directly
from Lender’s willful misconduct or gross negligence.  Any amounts payable to Lender by reason of
the application of this Section 16.02 shall be secured by this Security
Instrument and shall, upon demand by Lender, become immediately due and payable
and shall bear interest at the Default Rate from the date so demanded by Lender
until paid.

This indemnification shall
survive the termination of this Security Instrument whether by repayment of the
Debt, foreclosure or deed in lieu thereof, assignment, or otherwise.  The indemnity provided for in this Section
16.02 shall not be included in any exculpation of Borrower or its principals
from personal liability provided for in this Security Instrument or in any of
the other Loan Documents.  Nothing in
this Section 16.02 shall be deemed to deprive Lender of any rights or remedies
otherwise available to Lender, including, without limitation, those rights and
remedies provided elsewhere in this Security Instrument or the other Loan
Documents.

Section 16.03.  Development
and Implementation of Operations and Maintenance Program.  Borrower hereby covenants to prepare or cause
to be prepared an operations and maintenance program (the “O&M Program”)
for the Premises which addresses any requirements

 99
 

 

of the Environmental Report and which includes (a) if
recommended in the Environmental Report, a plan for the encapsulation, removal
or other action with respect to asbestos containing material (“ACM”)at
the Premises; and (b) compliance with such other recommendations contained in
the Environmental Report.  The O&M
Program shall be subject to Lender’s reasonable approval and within ninety (90)
days of the date hereof Borrower shall provide Lender with evidence reasonably
satisfactory to Lender that the O&M Program has been established and is in
operation.  Borrower hereby covenants and
agrees that, during the term of the Loan, including any extension or renewal
thereof, Borrower shall comply in all material respects with the terms and conditions
of the O&M Program.

ARTICLE XVII:  ASSIGNMENTS

Section
17.01.  Participations and Assignments.  Lender shall, at no cost to Borrower, have
the right to assign this Security Instrument and/or any of the Loan Documents,
and to transfer, assign or sell participations and subparticipations (including
blind or undisclosed participations and subparticipations) in the Loan
Documents and the obligations hereunder to any Person; provided, however, that
no such participation shall increase, decrease or otherwise affect either
Borrower’s or Lender’s rights or obligations under this Security Instrument or
the other Loan Documents.

ARTICLE XVIII:  MISCELLANEOUS

Section
18.01.  Right of Entry.  Lender and its agents shall have the right to
enter and inspect the Property or any part thereof at all reasonable times,
and, except in the event of an emergency, upon reasonable notice and to inspect
Borrower’s books and records and to make abstracts and reproductions thereof.

Section
18.02.  Cumulative Rights.  The rights of Lender under this Security
Instrument shall be separate, distinct and cumulative and none shall be given
effect to the exclusion of the others. 
No act of Lender shall be construed as an election to proceed under any
one provision herein to the exclusion of any other provision.  Lender shall not be limited exclusively to
the rights and remedies herein stated but shall be entitled, subject to the
terms of this Security Instrument, to every right and remedy now or hereafter
afforded by law.

Section
18.03.  Liability.  If Borrower consists of more than one Person,
the obligations and liabilities of each such Person hereunder shall be joint
and several.

Section
18.04.  Exhibits Incorporated.  The information set forth on the cover
hereof, and the Exhibits annexed hereto, are hereby incorporated herein as a
part of this Security Instrument with the same effect as if set forth in the
body hereof.

Section
18.05.  Severable Provisions.  If any term, covenant or condition of the
Loan Documents including, without limitation, the Note or this Security Instrument,
is held to be invalid, illegal or unenforceable in any respect, such Loan
Document shall be construed without such provision.

 100

 

Section
18.06.  Duplicate Originals.  This Security Instrument may be executed in
any number of duplicate originals and each such duplicate original shall be
deemed to constitute but one and the same instrument.

Section
18.07.  No Oral Change.  The terms of this Security Instrument,
together with the terms of the Note and the other Loan Documents, constitute
the entire understanding and agreement of the parties hereto and supersede all
prior agreements, understandings and negotiations between Borrower and Lender
with respect to the Loan.  This Security
Instrument, and any provisions hereof, may not be modified, amended, waived,
extended, changed, discharged or terminated orally or by any act on the part of
Borrower or Lender, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.

Section
18.08.  Waiver of Counterclaim, Etc.  BORROWER HEREBY WAIVES THE RIGHT TO ASSERT A
COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION OR PROCEEDING
BROUGHT AGAINST IT BY LENDER OR ITS AGENTS, AND WAIVES TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER OR IN ANY
COUNTERCLAIM BORROWER MAY BE PERMITTED TO ASSERT HEREUNDER OR WHICH MAY BE
ASSERTED BY LENDER OR ITS AGENTS, AGAINST BORROWER, OR IN ANY MATTERS
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS SECURITY INSTRUMENT
OR THE DEBT.

Section
18.09.  Headings; Construction of
Documents; etc.  The table of
contents, headings and captions of various paragraphs of this Security
Instrument are for convenience of reference only and are not to be construed as
defining or limiting, in any way, the scope or intent of the provisions hereof.  Borrower acknowledges that it was represented
by competent counsel in connection with the negotiation and drafting of this
Security Instrument and the other Loan Documents and that neither this Security
Instrument nor the other Loan Documents shall be subject to the principle of
construing the meaning against the Person who drafted same.

Section
18.10.  Sole Discretion of Lender.  Whenever Lender exercises any right given to
it to approve or disapprove, or any arrangement or term is to be satisfactory
to Lender, the decision of Lender to approve or disapprove or to decide that
arrangements or terms are satisfactory or not satisfactory shall be in the sole
discretion of Lender and shall be final and conclusive, except as may be
otherwise specifically provided herein.

Section
18.11.  Waiver of Notice.  Borrower shall not be entitled to any notices
of any nature whatsoever from Lender except with respect to matters for which
this Security Instrument specifically and expressly provides for the giving of
notice by Lender to Borrower and except with respect to matters for which
Borrower is not, pursuant to applicable Legal Requirements, permitted to waive
the giving of notice.

Section
18.12.  Covenants Run with the Land.  All of the grants, covenants, terms,
provisions and conditions herein shall run with the Premises, shall be binding
upon Borrower and shall inure to the benefit of Lender, subsequent holders of
this Security Instrument and their successors and assigns.  Without limitation to any provision hereof,
the term “Borrower” shall

 101
 

 

include and refer to the
borrower named herein, any subsequent owner of the Property, and its respective
heirs, executors, legal representatives, successors and assigns.  The representations, warranties and agreements
contained in this Security Instrument and the other Loan Documents are intended
solely for the benefit of the parties hereto, shall confer no rights hereunder,
whether legal or equitable, in any other Person and no other Person shall be
entitled to rely thereon.

Section
18.13.  Applicable Law.  THIS SECURITY INSTRUMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA.

Section 18.14.  Security
Agreement.  (a) (i) This
Security Instrument is both a real property mortgage, deed to secure debt or
deed of trust, as applicable, and a “security agreement” within the meaning of
the UCC.  The Property includes both real
and personal property and all other rights and interests, whether tangible or
intangible in nature, of Borrower in the Property.  This Security Instrument is filed as a
fixture filing and covers goods which are or are to become fixtures on the
Property.  Borrower by executing and
delivering this Security Instrument has granted to Lender, as security for the
Debt,  a security interest in the
Property to the full extent that the Property may be subject to the UCC (said
portion of the Property so subject to the UCC being called in this Section
18.14 the “Collateral”).  If an Event of
Default shall occur, and shall be continuing, Lender, in addition to any other
rights and remedies which it may have, shall have and may exercise immediately
and without demand, any and all rights and remedies granted to a secured party
upon default under the UCC, including, without limiting the generality of the
foregoing, the right to take possession of the Collateral or any part thereof,
and to take such other measures as Lender may deem necessary for the care,
protection and preservation of the Collateral. 
Upon request or demand of Lender following and during the continuance of
an Event of Default, Borrower shall, at its expense, assemble the Collateral
and make it available to Lender at a convenient place acceptable to
Lender.  Borrower shall pay to Lender on
demand any and all expenses, including reasonable legal expenses and attorneys’
fees, incurred or paid by Lender in protecting its interest in the Collateral
and in enforcing its rights hereunder with respect to the Collateral.  Any disposition pursuant to the UCC of so
much of the Collateral as may constitute personal property shall be considered
commercially reasonable if made pursuant to a public sale which is advertised
at least twice in a newspaper in which sheriff’s sales are advertised in the
county where the Premises is located. 
Any notice of sale, disposition or other intended action by Lender with
respect to the Collateral given to Borrower in accordance with the provisions
hereof at least ten (10) days prior to such action, shall constitute reasonable
notice to Borrower.  The proceeds of any
disposition of the Collateral, or any part thereof, may be applied by Lender to
the payment of the Debt in such priority and proportions as Lender in its
discretion shall deem proper.  It is not
necessary that the Collateral be present at any disposition thereof.  Lender shall have no obligation to clean-up
or otherwise prepare the Collateral for disposition.

(ii)           The mention in a financing statement filed in the records normally
pertaining to personal property of any portion of the Property shall not
derogate from or impair in any manner the intention of this Security Instrument.  Lender hereby declares

 102
 

 

that all items of Collateral are part of the real
property encumbered hereby to the fullest extent permitted by law, regardless
of whether any such item is physically attached to the Improvements or whether
serial numbers are used for the better identification of certain items.  Specifically, the mention in any such
financing statement of any items included in the Property shall not be
construed to alter, impair or impugn any rights of Lender as determined by this
Security Instrument or the priority of Lender’s lien upon and security interest
in the Property in the event that notice of Lender’s priority of interest as to
any portion of the Property is required to be filed in accordance with the UCC
to be effective against or take priority over the interest of any particular
class of persons, including the federal government or any subdivision or
instrumentality thereof.  No portion of
the Collateral constitutes or is the proceeds of “Farm Products”, as defined in
the UCC.

(iii)          If Borrower is at any time a beneficiary under a letter of credit now
or hereafter issued in favor of Borrower, Borrower shall promptly notify Lender
thereof and, at the request and option of Lender, Borrower shall, pursuant to
an agreement in form and substance reasonably satisfactory to Lender, either
(A) arrange for the issuer and any confirmer of such letter of credit to
consent to an assignment to Lender of the proceeds of any drawing under the
letter of credit or (B) arrange for Lender to become the transferee beneficiary
of the letter of credit, with Lender agreeing, in each case, that the proceeds
of any drawing under the letter to credit are to be applied as provided in this
Security Instrument.

(iv)          Borrower and Lender acknowledge that for the purposes of Article 9 of
the UCC, the law of the State of California shall be the law of the
jurisdiction of the bank in which the Central Account is located.

(v)           Lender may comply with any applicable Legal Requirements in connection
with the disposition of the Collateral, and Lender’s compliance therewith will
not be considered to adversely affect the commercial reasonableness of any sale
of the Collateral.

(vi)          Lender may sell the Collateral without giving any warranties as to the
Collateral. Lender may specifically disclaim any warranties of title,
possession, quiet enjoyment or the like. 
This procedure will not be considered to adversely affect the commercial
reasonableness of any sale of the Collateral.

(vii)         If Lender sells any of the Collateral upon credit, Borrower will be
credited only with payments actually made by the purchaser, received by Lender
and applied to the indebtedness of Borrower. 
In the event the purchaser of the Collateral fails to fully pay for the
Collateral, Lender may resell the Collateral and Borrower will be credited with
the proceeds of such sale.

(b)           Borrower hereby irrevocably appoints Lender as its attorney-in-fact,
coupled with an interest, to file with the appropriate public office on its
behalf any financing or other statements signed only by Lender, as secured
party, or, to the extent permitted under the UCC, unsigned, in connection with
the Collateral covered by this Security Instrument.

 103
 

 

Section
18.15.  Actions and Proceedings.  Lender has the right to appear in and defend
any action or proceeding brought with respect to the Property in its own name
or, if required by Legal Requirements or, if in Lender’s reasonable judgment,
it is necessary, in the name and on behalf of Borrower, which Lender believes
will adversely affect the Property or this Security Instrument and to bring any
action or proceedings, in its name or in the name and on behalf of Borrower,
which Lender, in its discretion, decides should be brought to protect its
interest in the Property.

Section
18.16.  Usury Laws.  This Security Instrument and the Note are
subject to the express condition, and it is the expressed intent of the
parties, that at no time shall Borrower be obligated or required to pay
interest on the principal balance due under the Note at a rate which could
subject the holder of the Note to either civil or criminal liability as a
result of being in excess of the maximum interest rate which Borrower is
permitted by law to contract or agree to pay. 
If by the terms of this Security Instrument or the Note, Borrower is at
any time required or obligated to pay interest on the principal balance due
under the Note at a rate in excess of such maximum rate, such rate of interest
shall be deemed to be immediately reduced to such maximum rate and the interest
payable shall be computed at such maximum rate and all prior interest payments
in excess of such maximum rate shall be applied and shall be deemed to have
been payments in reduction of the principal balance of the Note.  No application to the principal balance of
the Note pursuant to this Section 18.16 shall give rise to any requirement to
pay any prepayment fee or charge of any kind due hereunder, if any.

Section
18.17.  Remedies of Borrower.  In the event that a claim or adjudication is
made that Lender has acted unreasonably or unreasonably delayed acting in any
case where by law or under the Note, this Security Instrument or the Loan
Documents, it has an obligation to act reasonably or promptly, Lender shall not
be liable for any monetary damages, and Borrower’s remedies shall be limited to
injunctive relief or declaratory judgment.

Section
18.18.  Offsets, Counterclaims and
Defenses.  Any assignee of this
Security Instrument, the Assignment and the Note shall take the same free and
clear of all offsets, counterclaims or defenses which are unrelated to the
Note, the Assignment or this Security Instrument which Borrower may otherwise
have against any assignor of this Security Instrument, the Assignment and the
Note and no such unrelated counterclaim or defense shall be interposed or asserted
by Borrower in any action or proceeding brought by any such assignee upon this
Security Instrument, the Assignment or the Note and any such right to interpose
or assert any such unrelated offset, counterclaim or defense in any such action
or proceeding is hereby expressly waived by Borrower.

Section
18.19.  No Merger.  If Borrower’s and Lender’s estates become the
same including, without limitation, upon the delivery of a deed by Borrower in
lieu of a foreclosure sale, or upon a purchase of the Property by Lender in a
foreclosure sale, this Security Instrument and the lien created hereby shall
not be destroyed or terminated by the application of the doctrine of merger and
in such event Lender shall continue to have and enjoy all of the rights and
privileges of Lender as to the separate estates; and, as a consequence thereof,
upon the foreclosure of the lien created by this Security Instrument, any
Leases or subleases then existing and created by Borrower shall not be
destroyed or terminated by application of the law of merger

 104
 

 

or as a result of such
foreclosure unless Lender or any purchaser at any such foreclosure sale shall
so elect.  No act by or on behalf of
Lender or any such purchaser shall constitute a termination of any Lease or sublease
unless Lender or such purchaser shall give written notice thereof to such
lessee or sublessee.

Section
18.20.  Restoration of Rights.  In case Lender shall have proceeded to
enforce any right under this Security Instrument by foreclosure sale, entry or
otherwise, and such proceedings shall have been discontinued or abandoned for
any reason or shall have been determined adversely, then, in every such case,
Borrower and Lender shall be restored to their former positions and rights
hereunder with respect to the Property subject to the lien hereof.

Section
18.21.  Waiver of Statute of
Limitations.  The pleadings of any
statute of limitations as a defense to any and all obligations secured by this
Security Instrument are hereby waived to the full extent permitted by Legal Requirements.

Section
18.22.  Advances.  This Security Instrument shall cover any and
all advances made pursuant to the Loan Documents, rearrangements and renewals
of the Debt and all extensions in the time of payment thereof, even though such
advances, extensions or renewals be evidenced by new promissory notes or other
instruments hereafter executed and irrespective of whether filed or
recorded.  Likewise, the execution of
this Security Instrument shall not impair or affect any other security which
may be given to secure the payment of the Debt, and all such additional
security shall be considered as cumulative. 
The taking of additional security, execution of partial releases of the
security, or any extension of time of payment of the Debt shall not diminish
the force, effect or lien of this Security Instrument and shall not affect or
impair the liability of Borrower and shall not affect or impair the liability
of any maker, surety, or endorser for the payment of the Debt.

Section
18.23.  Application of Default Rate
Not a Waiver.  Application of the
Default Rate shall not be deemed to constitute a waiver of any Default or Event
of Default or any rights or remedies of Lender under this Security Instrument,
any other Loan Document or applicable Legal Requirements, or a consent to any
extension of time for the payment or performance of any obligation with respect
to which the Default Rate may be invoked.

Section
18.24.  Intervening Lien.  To the fullest extent permitted by law, any
agreement hereafter made pursuant to this Security Instrument shall be superior
to the rights of the holder of any intervening lien.

Section
18.25.  No Joint Venture or
Partnership.  Borrower and Lender
intend that the relationship created hereunder be solely that of mortgagor and
mortgagee or grantor and beneficiary or borrower and lender, as the case may
be.  Nothing herein is intended to create
a joint venture, partnership, tenancy-in-common, or joint tenancy
relationship between Borrower and Lender nor to grant Lender any interest in
the Property other than that of mortgagee, beneficiary or lender.

Section
18.26.  Time of the Essence.  Time shall be of the essence in the
performance of all obligations of Borrower hereunder.

 105
 

 

Section
18.27.  Borrower’s Obligations
Absolute.  Borrower acknowledges that
Lender and/or certain Affiliates of Lender are engaged in the business of
financing, owning, operating, leasing, managing, and brokering real estate and
in other business ventures which may be viewed as adverse to or competitive
with the business, prospect, profits, operations or condition (financial or
otherwise) of Borrower.  Except as set
forth to the contrary in the Loan Documents, all sums payable by Borrower
hereunder shall be paid without notice or demand, counterclaim, set-off, deduction
or defense and without abatement, suspension, deferment, diminution or
reduction, and the obligations and liabilities of Borrower hereunder shall in
no way be released, discharged, or otherwise affected (except as expressly
provided herein) by reason of:  (a) any
damage to or destruction of or any Taking of the Property or any portion
thereof; (b) any restriction or prevention of or interference with any use of
the Property or any portion thereof; (c) any title defect or encumbrance or any
eviction from the Premises or any portion thereof by title paramount or
otherwise; (d) any bankruptcy proceeding relating to Borrower, any General
Partner, or any guarantor or indemnitor, or any action taken with respect to
this Security Instrument or any other Loan Document by any trustee or receiver
of Borrower or any such General Partner, guarantor or indemnitor, or by any
court, in any such proceeding; (e) any claim which Borrower has or might have
against Lender; (f) any default or failure on the part of Lender to perform or
comply with any of the terms hereof or of any other agreement with Borrower; or
(g) any other occurrence whatsoever, whether similar or dissimilar to the
foregoing, whether or not Borrower shall have notice or knowledge of any of the
foregoing.

Section
18.28.  Publicity.   All promotional news releases, publicity or
advertising by Manager, Borrower or their respective Affiliates through any
media intended to reach the general public shall not refer to the Loan
Documents or the financing evidenced by the Loan Documents, or to Lender or to
any of its Affiliates without the prior written approval of Lender or such
Affiliate, as applicable, in each instance, such approval not to be
unreasonably withheld or delayed. 
Notwithstanding anything herein to the contrary, Borrower shall be
authorized to provide information relating to the Loan Documents or the
financing evidenced by the Loan Documents, or to Lender or to any of its
Affiliates, to rating agencies, underwriters, potential securities investors,
auditors, regulatory authorities and to any Persons which may be entitled to
such information by operation of law and without limiting the foregoing to
issue press releases and make Form 8-K and other securities filings containing
the above-described information as it or its counsel reasonably deems required
by law.  Lender shall be authorized to
provide information relating to the Property, the Loan and matters relating
thereto to rating agencies, underwriters, potential securities investors,
auditors, regulatory authorities and to any Persons which may be entitled to
such information by operation of law and may use basic transaction information
(including, without limitation, the name of Borrower, the name and address of
the Property and the Loan Amount) in press releases or other marketing
materials.

Section
18.29.  Securitization Opinions.  In the event the Loan is included as an asset
of a Securitization by Lender or any of its Affiliates, Borrower shall, within
fifteen (15) Business Days after Lender’s written request therefor, at Lender’s
sole cost and expense, deliver opinions in form and substance and delivered by
counsel reasonably acceptable to Lender and the Rating Agency, as may be
reasonably required by Lender and/or the Rating Agency in connection with such
securitization.  Borrower’s failure to
deliver the opinions required hereby within such fifteen (15) Business Day
period shall constitute an “Event of Default” hereunder.

 106
 

 

Notwithstanding the
foregoing, in no event shall Borrower be required to deliver a “10b-5 opinion”
in connection with any Securitization.

Section
18.30.  Cooperation with Rating
Agencies.  Borrower covenants and
agrees that in the event the Loan is to be included as an asset of a
Securitization, Borrower shall (a) gather any information reasonably required
by each Rating Agency in connection with such a Securitization, (b) at Lender’s
request, meet with representatives of each Rating Agency to discuss the
business and operations of the Property, (c) cooperate with the reasonable
requests of each Rating Agency and Lender, at Borrower’s sole cost and expense
with respect to the first such request made by Lender following the Closing
Date and at Lender’s expense for any additional requests thereafter, in
connection with all of the foregoing as well as in connection with all other
matters and the preparation of any offering documents with respect thereto,
including, without limitation, entering into any amendments or modifications to
this Security Instrument or to any other Loan Document which may be requested
by Lender to conform to Rating Agency or market standards for a Securitization;
provided, that no such modification shall modify (i) the interest rate payable
under the Note, (ii) the stated maturity of the Note or (iii) the principal
amount of or the amortization of principal under the Note, (d) Section 18.32
hereof, (e) any other material economic term of the Loan or (f) any provision,
the effect of which would increase Borrower’s obligations or decrease Borrower’s
rights under the Loan Documents to more than a de minimis extent.  Borrower acknowledges that the information
provided by Borrower to Lender may be incorporated into the offering documents
for a Securitization and to the fullest extent permitted, Borrower irrevocably
waives all rights, if any, to prohibit such disclosures including, without
limitation, any right of privacy.  Lender
and each Rating Agency shall be entitled to rely on the information supplied
by, or on behalf of, Borrower and Borrower indemnifies and holds harmless the
Indemnified Parties, their Affiliates and each Person who controls such Persons
within the meaning of Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as same may be amended from time to time, for,
from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature, known or
unknown, contingent or otherwise, whether incurred or imposed within or outside
the judicial process, including, without limitation, reasonable attorneys’ fees
and disbursements that arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in such information or
arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated in such information or necessary
in order to make the statements in such information, or in light of the
circumstances under which they were made, not misleading.

Section
18.31.  Securitization Financials.  Borrower covenants and agrees that, upon
Lender’s written request therefor in connection with a Securitization, Borrower
shall, at Lender’s sole cost and expense, promptly deliver (a) audited
financial statements and related documentation prepared by an Independent
certified public accountant that satisfy securities laws and requirements for
use in a public registration statement (which may include up to three (3) years
of historical audited financial statements) and (b) if, at the time one
or more Disclosure Documents are being prepared in connection with a
Securitization, Lender expects that Borrower alone or Borrower and one or more
of its Affiliates collectively, or the Property alone or the Property and any
other parcel(s) of real property, together with improvements thereon and
personal property related thereto, that is “related”, within the meaning of the
definition of

 107
 

 

Significant
Obligor, to the Property (a “Related Property”) collectively, will be a
Significant Obligor, Borrower shall furnish to Lender upon request (i) the
selected financial data or, if applicable, net operating income, required under
Item 1112(b)(1) of Regulation AB and meeting the requirements thereof, if
Lender expects that the principal amount of the Loan, together with any loans
made to an Affiliate of Borrower or secured by a Related Property that is
included in a Securitization with the Loan (a “Related Loan”), as of the
cut-off date for such Securitization may, or if the principal amount of the
Loan together with any Related Loans as of the cut-off date for such
Securitization and at any time during which the Loan and any Related Loans are
included in a Securitization does, equal or exceed ten percent (10%) (but less
than twenty percent (20%)) of the aggregate principal amount of all mortgage
loans included or expected to be included, as applicable, in the Securitization
or (ii) the financial statements required under Item 1112(b)(2) of Regulation
AB and meeting the requirements thereof, if Lender expects that the principal
amount of the Loan together with any Related Loans as of the cut-off date for
such Securitization may, or if the principal amount of the Loan together with
any Related Loans as of the cut-off date for such Securitization and at any
time during which the Loan and any Related Loans are included in a
Securitization does, equal or exceed twenty percent (20%) of the aggregate
principal amount of all mortgage loans included or expected to be included, as
applicable, in the Securitization.  Such
financial data or financial statements shall be furnished to Lender within ten
(10) Business Days after notice from Lender in connection with the preparation
of Disclosure Documents for the Securitization and, with respect to the data or
financial statements required pursuant to clause (b) hereof, (A) not later than
thirty (30) days after the end of each fiscal quarter of Borrower and (B) not
later than seventy-five (75) days after the end of each Fiscal Year; provided,
however, that Borrower shall not be obligated to furnish financial data or
financial statements pursuant to clauses (A) or (B) of this sentence with
respect to any period for which a filing pursuant to the Securities Exchange
Act of 1934 in connection with or relating to the Securitization is not
required.

Section
18.32.  Exculpation.  Notwithstanding anything herein or in any
other Loan Document to the contrary, except as otherwise set forth in this
Section 18.32 to the contrary, Lender shall not enforce the liability and
obligation of Borrower and (a) if Borrower is a partnership, its constituent
partners or any of their respective partners, (b) if Borrower is a trust, its
beneficiaries or any of their respective Partners (as hereinafter defined), (c)
if Borrower is a corporation, any of its shareholders, directors, principals,
officers or employees, or (d) if Borrower is a limited liability company, any
of its members and their respective legal, equitable and beneficial owner (the
Persons described in the foregoing clauses (a) - (d), as the case may be,
together with any direct or indirect beneficial or legal owners of such
Persons, are hereinafter referred to as the “Partners”) to perform and
observe the obligations contained in this Security Instrument or any of the
other Loan Documents by any action or proceeding wherein a money judgment shall
be sought against Borrower or the Partners, except that Lender may bring a
foreclosure action, action for specific performance, or other appropriate
action or proceeding (including, without limitation, an action to obtain a
deficiency judgment) solely for the purpose of enabling Lender to realize upon
(i) Borrower’s interest in the Property and (ii) any other collateral given to
Lender under the Loan Documents (the “Default Collateral”); provided,
however, that any judgment in any such action or proceeding shall be
enforceable against Borrower and the Partners only to the extent of any such
Default Collateral.  The provisions of
this Section shall not, however, (a) impair the validity of the Debt evidenced
by the Note or in

 108
 

 

any way affect or impair the
lien of this Security Instrument or any of the other Loan Documents or the
right of Lender to foreclose this Security Instrument following the occurrence
and during the continuance of an Event of Default; (b) impair the right of
Lender to name Borrower as a party defendant in any action or suit for judicial
foreclosure and sale under this Security Instrument; (c) affect the validity or
enforceability of the Note, this Security Instrument, or any of the other Loan
Documents, or impair the right of Lender to seek a personal judgment against
Guarantor; (d) impair the right of Lender to obtain the appointment of a
receiver; (e) impair the enforcement of the Assignment; (f) impair the right of
Lender to bring suit for monetary judgment with respect to damages incurred by
Lender resulting from fraud or intentional misrepresentation by Borrower, or
any other Person in connection with this Security Instrument, the Note or the
other Loan Documents, and the foregoing provisions shall not modify, diminish
or discharge the liability of Borrower or the Partners with respect to same;
(g) impair the right of Lender to bring suit for a monetary judgment with
respect to Borrower’s misappropriation of tenant security deposits or Rent, and
the foregoing provisions shall not modify, diminish or discharge the liability
of Borrower or the Partners with respect to same; (h) impair the right of
Lender to obtain Loss Proceeds due to Lender pursuant to this Security
Instrument; (i) impair the right of Lender to enforce the provisions of
Sections 2.02(g), 16.01 or 16.02, inclusive of this Security Instrument, even
after repayment in full by Borrower of the Debt or to bring suit for a monetary
judgment against Borrower or the Partners with respect to any obligation set
forth in said Sections; (j) prevent or in any way hinder Lender from
exercising, or constitute a defense, or counterclaim, or other basis for relief
in respect of the exercise of, any other remedy against any or all of the collateral
securing the Note as provided in the Loan Documents; (k) impair the right of
Lender to bring suit for a monetary judgment with respect to damages incurred
by Lender resulting from any misapplication or conversion of Loss Proceeds, and
the foregoing provisions shall not modify, diminish or discharge the liability
of Borrower or the Partners with respect to same; (l) impair the right of
Lender to sue for, seek or demand a deficiency judgment against Borrower solely
for the purpose of foreclosing the Property or any part thereof, or realizing
upon the Default Collateral; provided, however, that any such
deficiency judgment referred to in this clause (l) shall be enforceable against
Borrower and the Partners only to the extent of any of the Default Collateral;
(m) impair the ability of Lender to bring suit for a monetary judgment with
respect to damages incurred by Lender resulting from arson or waste to or of
the Property or damage to the Property committed by Borrower or its Affiliates;
(n) impair the right of Lender to bring a suit for a monetary judgment in the
event of the exercise of any right or remedy under any federal, state or local
forfeiture laws resulting in the loss of the lien of this Security Instrument,
or the priority thereof, against the Property; (o) be deemed a waiver of any
right which Lender may have under Sections 506(a), 506(b), 1111(b) or any other
provision of the Bankruptcy Code to file a claim for the full amount of the
Debt or to require that all collateral shall continue to secure all of the
Debt; (p) impair the right of Lender to bring suit for monetary judgment with
respect to damages incurred by Lender resulting from any losses resulting from
any claims, actions or proceedings initiated by Borrower (or any Affiliate of
Borrower) alleging that the relationship of Borrower and Lender is that of
joint venturers, partners, tenants in common, joint tenants or any relationship
other than that of debtor and creditor; (q) impair the right of Lender to bring
suit for a monetary judgment for damages incurred by Lender in the event of a
Transfer in violation of the provisions of Article IX hereof, including,
without limitation, the failure to obtain Lender’s consent to a Transfer as,
when and to the extent required thereunder; (r) impair the right of
Lender to bring suit for a monetary judgment in the event that

 109
 

 

Borrower moves
its principal place of business or its books and records relating to the
Property which are governed by the UCC, or changes its name, its jurisdiction
of organization, type of organization or other legal structure or, if it has
one, organizational identification number, without first giving Lender thirty
(30) days prior written notice or (s) impair the right of Lender to bring suit
for a monetary judgment in the event that Borrower changes its name of
otherwise does anything which would make the information set forth in any UCC
Financing Statements relating to the Property materially misleading without
giving Lender thirty (30) days prior written notice thereof.  The
provisions of this Section 18.32 shall be inapplicable to Borrower if (a) any
proceeding, action, petition or filing under the Bankruptcy Code, or any
similar state or federal law now or hereafter in effect relating to bankruptcy,
reorganization or insolvency, or the arrangement or adjustment of debts, shall
be filed by, consented to or acquiesced in by or with respect to Borrower, or
if Borrower shall institute any proceeding for its dissolution or liquidation,
or shall make an assignment for the benefit of creditors or (b) Lender
obtains a judgment that Borrower or any Affiliate of Borrower has, other than
in good faith, contested or in any material way interfered with, directly or
indirectly (collectively, a “Contest”), any foreclosure action, UCC sale
or other material remedy exercised by Lender upon the occurrence of any Event
of Default whether by making any motion, bringing any counterclaim, claiming
any defense, seeking any injunction or other restraint, commencing any action,
or otherwise, in which event Lender
shall have recourse against all of the assets of Borrower including, without
limitation, any right, title and interest of Borrower in and to the Property
and any partnership interests in Borrower (but excluding the other assets of
such Partners to the extent Lender would not have had recourse thereto other
than in accordance with the provisions of this Section 18.32).

Section
18.33.  Component Notes.  Lender, at its sole cost and expense, without
in any way limiting Lender’s other rights hereunder, in its sole and absolute
discretion, shall have the right at any time to require Borrower to execute and
deliver “component” notes (including senior and junior notes), in
substitution for one (1) or both of Note A-1 and/or Note A-2, which notes may
be paid in such order of priority as may be designated by Lender, provided that (a) the aggregate principal
amount of such “component” notes shall equal the outstanding principal balance
of the Loan immediately prior to the creation of such “component” notes, (b)
the weighted average interest rate of all such “component” notes shall on the
date created equal the interest rate which was applicable to the Loan
immediately prior to the creation of such “component” notes, (c) the debt
service payments on all such “component” notes shall on the date created equal
the debt service payment which was due under the Loan immediately prior to the
creation of such component notes and (d) the other terms and provisions of each
of the “component” notes shall be identical in substance and substantially
similar in form to the Loan Documents. 
Borrower shall cooperate with all reasonable requests of Lender in order
to establish the “component” notes and shall execute and deliver such documents
as shall reasonably be required by Lender in connection therewith, all in form
and substance reasonably satisfactory to Lender, including, without limitation,
the severance of security documents if requested.  It shall be an Event of Default if Borrower
fails to comply with any of the terms, covenants or conditions of this Section
18.33 after the expiration of fifteen (15) Business Days after notice thereof.

Section
18.34.  Mezzanine Loan Option.  Lender shall have the right at any time to
divide the Loan into two or more parts (the “Mezzanine Option”):  a “mortgage loan” and one or more

 110
 

 

“mezzanine loans.”  The principal amount of the mortgage loan
plus the principal amount of the mezzanine loan(s) shall equal the outstanding
principal balance of the Loan immediately prior to the creation of the mortgage
loan and the mezzanine loan(s).  In
effectuating the foregoing, Lender will make one or more loans to one or more
entities that will be the direct or indirect equity owner(s) of Borrower as
described in Section 18.34(b) (collectively, the “Mezzanine Borrower”).  The Mezzanine Borrower will contribute the
amount of the mezzanine loan(s) to Borrower (in its capacity as borrower under
the mortgage loan, “mortgage borrower”) and the mortgage borrower will apply
the contribution to pay down the Loan to the mortgage loan amount.  The mortgage loan and the mezzanine loan(s)
will be on the same terms and subject to the same conditions set forth in the
Loan Documents except as follows.  The
mezzanine loan(s) shall be made pursuant to Lender’s standard mezzanine loan
documents.

(a)           Lender shall have the right to establish different interest rates and
debt service payments for the mortgage loan and the mezzanine loan(s) and to
require the payment of the mortgage loan and the mezzanine loan(s) in such order
of priority as may be designated by Lender; provided, that (i) the total loan
amounts for the mortgage loan and the mezzanine loan(s) shall equal the amount
of the Loan immediately prior to the creation of the mortgage loan and the
mezzanine loan(s), (ii) the weighted average interest rate of the mortgage loan
and the mezzanine loan(s) shall on the date created equal the interest rate
which was applicable to the Loan immediately prior to creation of the mortgage
loan and mezzanine loan(s) and (iii) the debt service payments on the mortgage
loan note and the mezzanine loan note(s) shall on the date created equal the
debt service payment which was due under the Loan immediately prior to creation
of a mortgage loan and a mezzanine loan(s).

(b)           The Mezzanine Borrower shall be a special purpose, bankruptcy remote
entity pursuant to applicable Rating Agency criteria and shall own directly or
indirectly one hundred percent (100%) of the mortgage borrower.  The security for the mezzanine loan(s) shall
be a pledge of one hundred percent (100%) of the direct and indirect ownership
interests in the mortgage borrower.

(c)           Borrower shall cooperate with all reasonable requests of Lender in
order to convert the Loan into a mortgage loan and one or more mezzanine loans
and shall execute and deliver such documents as shall reasonably be required by
Lender in connection therewith, including, without limitation, the delivery of
non-consolidation, enforceability, authorization and execution opinions and an “Eagle
9” or “UCC plus” (or equivalent) UCC insurance policy and the modification of
organizational documents and loan documents and the transfer of the membership
interest in Borrower to the Mezzanine Borrower.

It shall be an Event of Default if Borrower fails to comply with any of
the terms, covenants or conditions of this Section 18.34 after expiration of
ten (10) Business Days notice thereof.

Section
18.35.  Trustee’s Fees.  Borrower shall pay all costs, fees and
expenses incurred by Trustee and Trustee’s agents and counsel in connection
with the performance by Trustee of Trustee’s duties hereunder, and all such
costs, fees and expenses shall be secured by this Security Instrument.

 111
 

 

Section
18.36.  Concerning the Trustee.  Trustee shall be under no duty to take any
action hereunder except as expressly required hereunder or by law, or to
perform any act which would involve Trustee in any expense or liability or to
institute or defend any suit in respect hereof, unless properly indemnified to
Trustee’s reasonable satisfaction.  Trustee,
by acceptance of this Security Instrument, covenants to perform and fulfill the
trusts herein created, being liable, however, only for gross negligence or
willful misconduct, and hereby waives any statutory fee and agrees to accept
reasonable compensation, in lieu thereof, for any services rendered by Trustee
in accordance with the terms hereof. 
Trustee may resign at any time by written instrument to that effect
delivered to Lender.  Lender may remove
Trustee at any time or from time to time and select a successor trustee.  In the event of the death, removal,
resignation, refusal to act, or inability to act of Trustee, or in its sole
discretion for any reason whatsoever Lender may, without notice and without specifying
any reasons therefor and without applying to any court, select and appoint a
successor trustee, by an instrument recorded wherever this Security Instrument
is recorded, and all powers, rights, duties and authority of Trustee, as
aforesaid, shall thereupon become vested in such successor.  Such substitute trustee shall not be required
to give bond for the faithful performance of the duties of Trustee hereunder
unless required by Lender.  The procedure
provided for in this Section 18.36 for substitution of Trustee shall be in
addition to and not in exclusion of any other provisions for substitution, by
law or otherwise.

Section 18.37.  Assignment
Upon Repayment.  At Borrower’s
request, upon (a) Borrower’s prepayment or repayment of the Debt in full,
whether by prepayment or otherwise and (b) payment by Borrower of Lender’s reasonable counsel fees and disbursements and
other reasonable costs, if any, and provided Borrower (i) refinances
the Loan through any institution other than Lender, or (ii) sells any of
the Premises, and an institution other than Lender is involved in the financing of such sale, Lender shall deliver
to Borrower or Borrower’s designee (x) an assignment of the Note, this Security Instrument and the
other Loan Documents, without recourse, representation or warranty,
together with the Note (or an affidavit of lost note) duly endorsed by Lender
to Borrower’s designee, or (y) a satisfaction and release of lien in respect
hereof, in recordable form, as well as all appropriate UCC termination
statements and the release and termination of all other security for the
Loan.  Borrower shall pay all of Lender’s
reasonable out-of-pocket costs and expenses incurred in connection with the
foregoing.

Section 18.38.  Primary
Servicer.  Notwithstanding anything
to the contrary contained herein or in any other Loan Document, in the event
that Note A-1 and Note A-2 are held by different Persons, Borrower shall be
required to deal with only one Person acting on behalf of all Persons
comprising Lender (the “Primary Servicer”), with respect to any
consents, approvals or notices required or permitted from, or to, Lender
pursuant to the Loan Documents (it being understood that the Primary Servicer
may need to consult with other Persons that hold a portion of Lender’s rights
and obligations under the Loan or with the Rating Agencies in connection with
any such consent, approval or notice and that a so-called “special servicer”
may act as such Primary Servicer). 
Lender may replace such Primary Servicer with another Primary Servicer
at any time in Lender’s sole discretion. 
As of the date hereof, Wachovia Bank, National Association is hereby
designated as the Primary Servicer and unless and until Borrower is notified by
Wachovia Bank, National Association of a new Primary Servicer, Borrower shall
be permitted to rely conclusively and irrevocably on such designation.

 112
 

 

Section 18.39.  Certain
Matters Relating to Property Located in the State of California.  With respect to the Property which is located
in the State of California, notwithstanding anything contained herein:

(a)           Power
of Sale.  Lender may deliver to
Trustee a written declaration of an Event of Default and demand for sale which
requests that Trustee record and serve a written notice of default and of
election to cause the Property to be sold, and cause any or all of the Property
to be sold under the power of sale granted by this Security Instrument in the
manner hereinbelow specified in this Section 18.39.

(i)            Declaration of
Default; Acceptance.  Lender shall
(1) deliver to Trustee a written declaration of an Event of Default which
recites facts which demonstrate Borrower’s default, and a demand that Trustee
sell the Property, and (2) deposit the Note and this Security Instrument, if
required by law, with Trustee.  Trustee
shall accept Lender’s declaration of an Event of Default as true and as
demonstrative of Borrower’s default, and shall record and serve a written
notice of default and of election to cause the Property to be sold in the
manner required by applicable law.

(ii)           Rescission of Notice
of Default.  Lender may rescind any
notice of default at any time before Trustee’s sale by executing a notice of
rescission and recording it.  The
recordation of the notice will constitute a cancellation of any prior
declaration of an Event of Default and demand for sale and of any acceleration
of maturity of the Debt affected by any prior declaration or notice of an Event
of Default.  The exercise by Lender of
the right of rescission will not constitute a waiver of any default then
existing or subsequently occurring, or impair the right of Lender to execute
other declarations of default and demand for sale, or notices of default and of
election to cause the Property to be sold, nor otherwise affect the Note or
this Security Instrument, or any of the rights, obligations or remedies of
Lender or Trustee hereunder or under applicable law.

(iii)          Date of Trustee’s
Sale.  If, after the expiration of
any period of time provided by applicable law, Borrower’s Event of Default has
not been cured and Borrower’s Debt has not been reinstated in the manner
required by applicable law, Trustee shall establish a date for the sale of the
Property and record and serve a notice of sale in the manner required by
applicable law.

(iv)          Trustee’s Sale.  If, on or before the date scheduled for the
sale of the Property, Borrower’s Event of Default has not been cured and the
Debt has not been reinstated, Trustee, without demand on Borrower, shall sell
the Property at the time and place fixed by Trustee in the notice of sale,
either as a whole or in separate parcels, and in such order as Trustee may
determine, at public auction, and to any Person, including Borrower, Lender or
Trustee.  The Property shall be sold to
the highest bidder for cash payable at the time of sale.  Notwithstanding the foregoing, instead of
paying cash for the Property, Lender may credit the amount of its auction sale
bid by the amount of the Debt, or any fraction thereof, including, without
limitation, Trustee’s cost and expenses from the sale of the Property.  Lender will be entitled to bid, at any
trustee’s or foreclosure sale of the Property, the amount of the Environmental
Damages (as hereinafter defined), any costs incurred by Lender with respect to
any Environmental Problem and interest in

 113
 

 

addition to the amount of other Debt as a
credit bid, the equivalent of cash. 
Furthermore, if a bid has been made by Lender in the amount of the Debt,
other than Debt for Environmental Damages and any costs incurred by Lender with
respect to any Environmental Problem incurred by Lender, any Debt comprised of
the Environmental Damages and any costs incurred by Lender with respect to any
Environmental Problem shall not be discharged by virtue of the full credit bid
and shall remain an obligation of Borrower to be satisfied under this Security
Instrument.

(v)           Delivery of Deed.  Trustee shall deliver to the purchaser of the
Property a deed which conveys title to the Property without any covenant or
warranty, express or implied.  The
recitals in the deed of any matters or facts shall be conclusive proof of their
truthfulness.

(vi)          Postponement of
Trustee’s Sale.  Trustee may postpone
the sale of all or any portion of the Property in accordance with California
Civil Code §2924g, by public announcement at the time and place of sale, and
from time to time thereafter Trustee may postpone such sale by public
announcement at the time fixed by the preceding postponement or as otherwise
allowed by said statute.

(vii)         Application of Sale
Proceeds.  The proceeds of Trustee’s
public auction of the Property shall be applied in the following manner: (1)
payment of the portion of the Debt attributable to the costs and expenses of
the sale; (2) repayment of the portion of the Debt attributable to any sums
expended or advanced by Lender (other than the Environmental Damages and costs
incurred by Lender with respect to any Environmental Problem) under the terms
of this Security Instrument, plus interest at the Default Rate; (3) payment of
all other Debt and all other obligations of Borrower secured by this Security
Instrument, in any order that Lender chooses; (4) repayment of the portion of
the Debt attributable to the Environmental Damages and costs incurred by Lender
with respect to any Environmental Problem under the terms of this Security
Instrument, plus interest at the Default Rate; and (5) the remainder, if any,
to satisfy the outstanding balance of obligations secured by any junior
encumbrances in the order of their priority, then to Borrower or Borrower’s
successor in interest.

(viii)        Proof of Compliance
with the Law.  If there is a sale of
the Property, or any part of it, and the execution of a deed for it, the
recital of default and of recording notice of breach and election of sale, and
of the elapsing of the required time between the recording and the following
notice, and of the sale should be made, will be conclusive proof of the
default, recording, election, elapsing of time, and the due giving of notice,
and that the sale was regularly and validly made on proper demand by Lender.  Any deed with these recitals will be
effectual and conclusive against Borrower, its successors, and assigns, and all
other Persons.  The receipt for the
purchase money recited or in any deed executed to the purchaser will be
sufficient discharge to the purchaser from all obligations to see to the proper
application of the purchase money.

(b)           Acceptance
by Trustee.  Trustee accepts this
trust when this Security Instrument, duly executed and acknowledged, is made a
public record as provided by law. 
Trustee is not

 114
 

 

obligated to
notify any party hereto of pending sale under any other deed of trust or of any
action or proceeding in which Borrower, Lender or Trustee shall be a party
unless brought by Trustee.

(c)           Rights
and Duties.  It shall be no part of
the duty of Trustee to see to any recording, filing or registration of this
Security Instrument or any other instrument in addition or supplemental hereto,
or to give any notice thereof, or to see to the payment of or be under any duty
in respect of any tax or assessment or other governmental charge which may be
levied or assessed on the Property, or any part thereof, or against Trustee, or
to see to the performance or observance by Borrower of any of the covenants and
agreements contained herein.  Trustee
shall not be responsible for the execution, acknowledgement or validity of this
Security Instrument or of any instrument in addition or supplemental hereto or
for the sufficiency of the security purported to be created hereby, and makes
no representation in respect thereof or in respect of the rights of
Lender.  Trustee shall have the right to
advice of counsel upon any matters arising hereunder and shall be fully
protected in relying as to legal matters on the advice of counsel.  Trustee shall not incur any personal liability
hereunder except for its own gross negligence or willful misconduct and Trustee
shall have the right to rely on any instrument, document or signature
authorizing or supporting any action taken or proposed to be taken by Trustee
hereunder and believed by Trustee in good faith to be genuine.

(d)           Subrogation
to Existing Liens; Vendor’s Lien.  To
the extent that proceeds of the Note are used to pay Debt secured by any
outstanding lien, security interest, charge or prior encumbrance against the
Property, such proceeds have been advanced by Lender at Trustee’s request, and
Lender shall be subrogated to any and all rights, security interests and liens
owned by any owner or holder of such outstanding liens, security interests,
charges or encumbrances, however remote, irrespective of whether said liens,
security interests, charges or encumbrances are released, and all of the same
are recognized as valid and subsisting and are renewed and continued and merged
herein to secure the Debt, but the terms and provisions of this Security
Instrument shall govern and control the manner and terms of enforcement of the
liens, security interests, charges and encumbrances to which Lender is
subrogated hereunder.  It is expressly
understood that, in consideration of the payment of such indebtedness by
Lender, Borrower hereby waives and releases all demands and causes of action
for offsets and payments in connection with the said indebtedness.  If all or any portion of the proceeds of the
loan evidenced by the Note or of any other secured indebtedness has been
advanced for the purpose of paying the purchase price for all or a part of the
Property, no vendor’s lien is waived; and Lender shall have, and is hereby
granted, a vendor’s lien on the Property as cumulative additional security for
the secured indebtedness.  Lender may
foreclose under this Security Instrument or under the vendor’s lien without
waiving the other or may foreclose under both.

(e)           Substitute
Trustee.  Trustee may resign by an
instrument in writing addressed to Lender, or Trustee may be removed at any
time with or without cause by an instrument in writing executed by Lender.  In case of the death, resignation, removal or
disqualification of Trustee, or if for any reason Lender shall deem it
desirable to appoint a substitute or successor trustee to act instead of the
herein named trustee or any substitute or successor trustee, then Lender shall
have the right and is hereby authorized and empowered to appoint a successor
trustee, or a substitute trustee, without other formality than appointment and
designation in writing executed by Lender, and the authority hereby conferred shall
extend to the appointment

 115
 

 

of other
successor and substitute trustees successively until the Debt secured hereby
has been paid in full, or until the Property is fully and finally sold
hereunder.  In the event that the Debt is
owned by more than one person or entity, the holder or holders of not less than
a majority in amount of such indebtedness shall have the right and authority to
make the appointment of a successor or substitute trustee as provided for in
the preceding sentence or to remove Trustee as provided in the first sentence
of this Section 18.39(e).  Such
appointment and designation by Lender, or by the holder or holders of not less
than a majority of the Debt secured hereby, shall be full evidence of the right
and authority to make the same and of all facts therein recited.  If Lender is a corporation or association or
trust and such appointment is executed in its behalf by an officer or trustee
of such corporation or association or trust, such appointment shall be
conclusively presumed to be executed with authority and shall be valid and
sufficient without proof of any action by the board of directors or any
superior officer of the corporation or association or trust.  Upon the making of any such appointment and
designation, all of the estate and title of Trustee in the Property shall vest
in the named successor or substitute trustee, and it shall thereupon succeed to
and shall hold, possess and execute, all of the rights, powers, privileges,
immunities and duties herein conferred upon Trustee; but, nevertheless, upon
the written request of Lender or of the successor or substitute trustee, the
trustee ceasing to act shall execute and deliver an instrument transferring to
such successor or substitute trustee all of the estate and title in the
Property of the trustee so ceasing to act, together with all the rights,
powers, privileges, immunities and duties herein conferred upon the Trustee,
and shall duly assign, transfer and deliver any of the properties and moneys
held by said trustee hereunder to said successor or substitute trustee.  All references herein to “Trustee” shall be
deemed to refer to Trustee (including any successor or substitute appointed and
designated as herein provided) from time to time acting hereunder.

(f)            No
Liability of Trustee.  TRUSTEE SHALL
NOT BE LIABLE FOR ANY ERROR OF JUDGMENT OR ACT DONE BY TRUSTEE IN GOOD FAITH,
OR BE OTHERWISE RESPONSIBLE OR ACCOUNTABLE UNDER ANY CIRCUMSTANCES WHATSOEVER
(INCLUDING TRUSTEE’S NEGLIGENCE), EXCEPT FOR TRUSTEE’S GROSS NEGLIGENCE OR
MISCONDUCT.  Trustee shall have the right
to rely on any instrument, document or signature authorizing or supporting any
action taken or proposed to be taken by it hereunder, believed by it in good
faith to be genuine.  All moneys received
by Trustee shall, until used or applied as herein provided, be held in trust
for the purposes for which they were received, but need not be segregated in
any manner from any other moneys (except to the extent required by law), and
Trustee shall be under no liability for interest on any moneys received by it
hereunder.  Trustee hereby ratifies and
confirms any and all acts which the herein-named Trustee or its successor or
successors, substitute or substitutes, in this trust, shall do lawfully by
virtue hereof.

(g)           Judgment
on Environmental Provision.

(i)            Judgment Sought.  Pursuant to California Code of Civil
Procedure §736, Lender may bring an action (as such term is defined in
California Code of Civil Procedure §22) for breach of contract against Borrower
for breach of any provision contained in Article XVI hereof (the “Environmental
Provision”), for the recovery of the Environmental Damages listed in
Section (ii) hereof, and for the enforcement of the

 116
 

 

Environmental Provision, whether the
Environmental Provision is or was contained in or secured by this Security
Instrument and whether or not this Security Instrument has been discharged,
reconveyed or foreclosed upon. 
Notwithstanding the foregoing, no injunction for the enforcement of an
Environmental Provision may be issued after (x) satisfaction of the Debt or (y)
transfer of Borrower’s right, title and interest in and to the “Real Property
Security” (as such term is defined in California Code of Civil Procedure
§736(f)(4)) in a bona fide transaction to an unaffiliated third party for fair
value.

(ii)           Damages.  The damages that Lender may recover pursuant
to Section (i) above shall be limited to reimbursement or indemnification of
the following (collectively, the “Environmental Damages”): (w) if not
pursuant to an order of any Governmental Authority relating to the cleanup,
remediation, or other response action required by any applicable rule
promulgated by a Governmental Authority, those costs relating to a reasonable
and good faith cleanup, remediation, or other response action concerning a
Release (such term shall have the meaning ascribed to it under California Civil
Code §2929.5 and under California Civil Code of Procedure §726.5 and §736) or
threatened release of Hazardous Materials which is anticipated by the
Environmental Provision; (x) if pursuant to an order of any Governmental
Authority which is anticipated by the Environmental Provision, all amounts
reasonably advanced in good faith by Lender in connection therewith, provided
that Lender negotiated, or attempted to negotiate, in good faith to minimize
the amounts it was required to advance under the order; (y) indemnification
against all liabilities of Lender to any third party relating to the breach and
not arising from acts, omissions or other conduct which occur after Borrower is
no longer an owner or operator of the “Real Property Security” and provided
Lender is not responsible for the environmentally impaired condition of the
Real Property Security, in accordance with the standards set forth in
California Code of Civil Procedure §726.5(d) (for the purposes of this Section
(ii), the term “owner or operator” means those persons described in §101(20)(A)
of CERCLA); and (z) attorneys’ fees and costs incurred by Lender relating to
the breach.  Notwithstanding the
foregoing, the Environmental Damages recoverable by Lender shall not include
(w) any part of the principal amount or accrued interest of the Debt, except
for any amounts advanced by Lender to cure or mitigate the breach of any
Environmental Provision that is added to the principal amount, and contractual
interest thereon, or (x) amounts which relate to a Release which was knowingly
permitted, caused or contributed to by Lender or any affiliate or agent of
Lender.

(h)           Waiver
of Lien.  Pursuant to the terms of
California Code of Civil Procedure §726.5, Lender may (i) waive its lien
against (A) any parcel of “Real Property Security” that is “environmentally
impaired” (as such term is defined in California Code of Civil Procedure
§726.5(e)(3)), or is an “affected parcel” (as such term is defined in
California Code Civil Procedure §726.5(e)(1)), and (B) all or any portion of
the personal property attached to such parcels and (ii) exercise (A) the rights
and remedies of an unsecured creditor including reduction of its claim against
Borrower to judgment and (B) any other rights and remedies permitted by
law.  As between Lender and Borrower, for
purposes of California Code of Civil Procedure §726.5, Borrower shall have the
burden of proving that (1) the Release or threatened Release was not (x)
knowingly or negligently caused or contributed to, or (y) knowingly or
willfully

 117
 

 

permitted or
acquiesced to, by Borrower or any related party (as such term is defined in
California Code of Civil Procedure §726.5(e)(6)), or any affiliate or agent of
Borrower or any related party, and (2) in conjunction with the making, renewal
or modification of the Debt, (x) neither Borrower, any related party nor any
affiliate or agent of Borrower or any related party had actual knowledge or
notice of the Release or threatened Release of any Hazardous Materials, or (y)
if such a person had knowledge or notice of the Release or threatened Release,
Borrower made written disclosure thereof to Lender after Lender’s written
request for information concerning the environmental condition of the Real
Property Security, or (z) Lender otherwise obtained actual knowledge thereof
prior to the making, renewal or modification of the Debt.

(i)            Reconveyance
Upon Payment of Debt.  In the event
that Borrower shall cause to be paid the entire Debt and perform in full all of
its obligations under the Loan Documents, Lender shall release and shall cause
Trustee to release the Property from the lien of this Security Instrument and
to reconvey (without warranty by or recourse against Trustee or Lender) the
Property to Borrower.  Upon Trustee’s
receipt of Lender’s request for reconveyance, Trustee shall reconvey, without
warranty, the Property or that portion held. 
When the Property has been fully reconveyed, the last reconveyance will
operate as a reassignment of all future Rents to the Person legally entitled.

(j)            Environmental
Addendum.

(i)            Lender shall have the
right, but not the obligation, to enter upon the Property, from time to time
upon prior reasonable notice, and in its sole and absolute discretion, to
conduct inspections of the Property and the activities conducted thereon to
determine the compliance with all Environmental Statutes, the presence of
Hazardous Materials and the existence of any potential damages as a result of
the condition of the Property.  In
furtherance thereof, Borrower hereby grants to Lender and its agents, employees
and qualified consultants and contractors, the right to enter upon the Property
and to perform such tests on the Property (including invasive tests) as are
reasonably necessary.  Lender shall
conduct such inspections and tests at reasonable times, shall use its best
efforts to minimize interference with the operation of the Property and agrees
to restore the condition of the Property, but Lender shall not be liable for
any interference caused thereby unless due to the gross negligence or willful
misconduct or omission of Lender.  In
furtherance of the purposes above, without limitation of any of Lender’s other
rights, Lender may: (x) obtain a court order to enforce Lender’s right to enter
and inspect the Property under California Civil Code §2929.5, to which the
decision of Lender as to whether there exists any Hazardous Materials on or
about the Property in violation of any Environmental Statutes, or a breach by
Borrower of any environmental provision of this Security Instrument or any of
the other Loan Documents, will be deemed reasonable and conclusive as between
the parties; and (y) have a receiver be appointed under California Code of
Civil Procedure §564 to enforce Lender’s right to enter and inspect the
Property for the purpose set forth above.

(ii)           Borrower and Lender agree
that: (x) this paragraph is intended as Lender’s written request for
information and Borrower’s written response concerning the environmental
condition of the Property as provided in California Code of Civil

 118
 

 

Procedure §726.5; and (y) each representation,
warranty or covenant, or indemnity made by Borrower in this Security Instrument
or in the other Loan Documents that relates to the environmental condition of
the Property is intended by Borrower and Lender to be an “environmental
provision” for the purposes of California Code of Civil Procedure §736 and will
survive the payment of the Debt and the termination or expiration of this
Security Instrument and will not be affected by Lender’s acquisition of any
interest in the Property, whether by full credit bid at foreclosure, deed in
lieu of that, or otherwise.  If there is
any transfer of any portion of Borrower’s interest in the Property, any
successor-in-interest to Borrower agrees by its succession to that interest
that the written request made pursuant to this paragraph will be deemed remade
to the successor-in-interest without any further or additional action on the
part of Lender and that by assuming the Debt secured by this Security
Instrument or by accepting the interest of Borrower subject to the lien of this
Security Instrument, the successor remakes each of the representations and
warranties in this Security Instrument and agrees to be bound by each covenant
in this Security Instrument, including but not limited to any indemnity
provision.

(k)           Financing
Statement.  This Security Instrument
shall also constitute a financing statement pursuant to UCC §9502, and shall be
filed as a fixture filing in the Official Records of the County Recorder of the
County in which the Property is located and covers goods which are or are to
become fixtures on the Property.

(l)            Intentionally
Omitted.

(m)          Intentionally
Omitted.

(n)           Intentionally
Omitted.

(o)           Fixture
Filing.  The personal property in
which Lender has a security interest includes goods which are or shall become
fixtures on the Property.  This Security
Instrument is intended to serve as a fixture filing pursuant to the terms of
the California Uniform Commercial Code. 
This filing shall remain in effect as a fixture filing until this
Security Instrument is released or otherwise satisfied of record or its
effectiveness otherwise terminates with respect to the Property.  In that regard, the following information is
provided:

Name
of Debtor:                                                                                                         Mondrian Holdings LLC

Address
of Debtor:                                                                                         See Section 11.01 above.

Name
of Secured Party:                                                                    Wachovia Bank, National Association

Address
of Secured Party:                                                    See Section 11.01 above.

 119
 

 

(p)           Waiver
of Statutory Regulation.  By
initialing below, Borrower waives any right under California Civil Code
§2954.10 or otherwise to prepay the Note, in whole or in part, without a
Prepayment Charge (as described in Section 13.03 hereof). Borrower acknowledges
that prepayment of the Note may result in Lender’s incurring additional losses,
costs, expenses, and liabilities, including, but not limited to, lost revenue
and lost profits. Borrower therefore agrees to pay any prepayment charges on
the terms and conditions provided herein, including, without limitation, upon
any Event of Default attributable to the transfer or conveyance of any right,
title, or interest in the Property.

BORROWER AGREES THAT LENDER’S WILLINGNESS TO MAKE THE
LOAN AT THE INTEREST RATE FOR THE TERM SET FORTH HEREIN CONSTITUTES ADEQUATE
CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY BORROWER, FOR THIS WAIVER AND
AGREEMENT.

	
  

  	
   

  	
   

  
	
   

  	
  [Borrower’s
  Initials]

  

 

[THE
BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

 120

 

IN WITNESS WHEREOF, Borrower and Lender have duly executed this
Security Instrument the day and year first above written.

	
  Borrower’s
  Organizational Identification 

  	
  MONDRIAN HOLDINGS LLC, Borrower

  
	
  Number:

  	
  13-3880841

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc S. Gordon

  	
   

  
	
   

  	
   

  	
  Name: Marc S. Gordon

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
						

 

The undersigned
SPE Pledgors hereby agree and consent to the terms hereof.

	
  MONDRIAN PLEDGOR LLC, a
  Delaware

  	
   

  	
   

  
	
  limited
  liability company, SPE Pledgor

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Marc S.
  Gordon

  	
   

  	
   

  	
   

  
	
   

  	
  Name:  Marc S. Gordon

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Authorized
  Signatory

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  8440 LLC, a
  California limited

  	
   

  	
   

  
	
  liability
  company, SPE Pledgor

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Marc S.
  Gordon

  	
   

  	
   

  	
   

  
	
   

  	
  Name:  Marc S. Gordon

  	
   

  	
   

  
	
   

  	
  Title:   Authorized Signatory

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00111-of-00352.parquet"}]]