Document:

Exhibit

 LOAN AGREEMENT
By and Among
Ardrey Kell Station LLC, Richmond Station LLC, Stockbridge Station LLC, Stockbridge Station Outparcel LLC, Harrison Pointe Station LLC, West Creek Station LLC, Deerwood Lake Station LLC, Northridge Station LLC, Goolsby Pointe Station LLC, Hamilton Village Station LLC, Cushing Station LLC, Red Maple Station LLC, Northtowne Station LLC, Dean Taylor Station LLC, Savage Station LLC, Sterling Point Station LLC and Lakewood Station LLC, 
as Borrower
and
TEACHERS INSURANCE AND ANNUITY ASSOCIATION
OF AMERICA,
as Lender
Dated as of October 4, 2017
Authorization #:AAA-7887
Investment ID#:0008464

TABLE OF CONTENTS
	
				
	RECITALS
	1
	

	AGREEMENT
	1
	

	ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION
	2
	

	Section 1.1
	Definitions
	2
	

	Section 1.2
	Rules of Construction
	2
	

	ARTICLE II PAYMENT TERMS
	2
	

	Section 2.1
	The Obligations; Cross Collateralization and Cross Default
	2
	

	Section 2.2
	Payments of Principal and Fixed Interest
	3
	

	Section 2.3
	Prepayment Provisions
	3
	

	Section 2.4
	Default Rate
	5
	

	Section 2.5
	Late Charges
	5
	

	Section 2.6
	Withholding
	5
	

	ARTICLE III TITLE AND AUTHORITY
	6
	

	Section 3.1
	Title to the Property
	6
	

	Section 3.2
	Authority
	6
	

	Section 3.3
	No Foreign Person
	7
	

	Section 3.4
	Litigation
	7
	

	ARTICLE IV PROPERTY STATUS, MAINTENANCE AND LEASES
	8
	

	Section 4.1
	Status of the Property
	8
	

	Section 4.2
	Maintenance of the Property
	8
	

	Section 4.3
	Change in Use
	8
	

	Section 4.4
	Waste
	9
	

	Section 4.5
	Inspection of the Property
	9
	

	Section 4.6
	Parking
	9
	

	Section 4.7
	Separate Tax Lot
	9
	

	Section 4.8
	Changes in Zoning or Restrictive Covenants
	9
	

	Section 4.9
	Lender’s Right to Appear
	9
	

	ARTICLE V IMPOSITIONS AND ACCUMULATIONS
	10
	

	Section 5.1
	Impositions
	10
	

	Section 5.2
	Accumulations
	10
	

	Section 5.3
	Changes in Tax Laws
	12
	

	ARTICLE VI INSURANCE, CASUALTY, CONDEMNATION AND RESTORATION
	12
	

	Section 6.1
	Insurance Coverages
	12
	

	Section 6.2
	Casualty and Condemnation
	14
	

	Section 6.3
	Application of Proceeds
	15
	

	Section 6.4
	Conditions to Availability of Proceeds for Restoration
	15
	

	Section 6.5
	Restoration
	16
	

	ARTICLE VII COMPLIANCE WITH LAW AND AGREEMENTS
	18
	

	Section 7.1
	Compliance with Law
	18
	

	Section 7.2
	Compliance with Agreements
	19
	

	Section 7.3
	ERISA Compliance
	19
	

	Section 7.4
	Anti-Terrorism
	20
	

	ARTICLE VIII LEASING
	21
	

	Section 8.1
	Representations, Warranties and Covenants with Respect to Leases
	21
	

	
				
	Section 8.2
	Covenants Regarding Future Leasing
	22
	

	Section 8.3
	Termination, Cancellation or Surrender of Leases
	23
	

	ARTICLE IX ENVIRONMENTAL
	24
	

	Section 9.1
	Environmental Representations and Warranties
	24
	

	Section 9.2
	Environmental Covenants
	25
	

	ARTICLE X FINANCIAL REPORTING
	26
	

	Section 10.1
	Financial Reporting
	26
	

	Section 10.2
	Annual Budget
	27
	

	Section 10.3
	Material Non-Public Information
	28
	

	ARTICLE XI EXPENSES AND DUTY TO DEFEND
	28
	

	Section 11.1
	Payment of Expenses
	28
	

	Section 11.2
	Duty to Defend
	28
	

	ARTICLE XII TRANSFERS, LIENS AND ENCUMBRANCES
	29
	

	Section 12.1
	Prohibitions on Transfers, Liens and Encumbrances
	29
	

	Section 12.2
	Permitted Transfers
	29
	

	Section 12.3
	Right to Contest Liens
	33
	

	Section 12.4
	Release Rights
	34
	

	Section 12.5
	Substitution
	36
	

	ARTICLE XIII ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
	38
	

	Section 13.1
	Further Assurances
	38
	

	Section 13.2
	Intentionally Omitted
	39
	

	Section 13.3
	Special Purpose Entity Representations, Warranties and Covenants
	39
	

	ARTICLE XIV DEFAULTS AND REMEDIES
	42
	

	Section 14.1
	Events of Default
	42
	

	Section 14.2
	Acceleration
	43
	

	Section 14.3
	Remedies
	43
	

	ARTICLE XV LIMITATION OF LIABILITY
	43
	

	Section 15.1
	Limitation of Liability
	43
	

	ARTICLE XVI WAIVERS
	47
	

	Section 16.1
	INTENTIONALLY OMITTED
	47
	

	Section 16.2
	WAIVER OF NOTICE
	47
	

	Section 16.3
	WAIVER OF MARSHALLING AND OTHER MATTERS
	47
	

	Section 16.4
	WAIVER OF TRIAL BY JURY
	47
	

	Section 16.5
	WAIVER OF COUNTERCLAIM
	47
	

	Section 16.6
	WAIVER OF JUDICIAL NOTICE AND HEARING
	48
	

	Section 16.7
	WAIVER OF SUBROGATION
	48
	

	Section 16.8
	GENERAL WAIVER
	48
	

	ARTICLE XVII NOTICES
	48
	

	Section 17.1
	Notices
	48
	

	Section 17.2
	Change in Borrower’s Legal Name, Place of Business or State of Formation
	50
	

	ARTICLE XVIII MISCELLANEOUS
	50
	

	Section 18.1
	Applicable Law
	50
	

	Section 18.2
	Usury Limitations
	51
	

	Section 18.3
	Lender’s Discretion
	51
	

	Section 18.4
	Unenforceable Provisions
	51
	

	Section 18.5
	Survival of Borrower’s Obligations
	51
	

	Section 18.6
	Relationship Between Borrower and Lender; No Third Party Beneficiaries
	51
	

	
				
	Section 18.7
	Partial Releases; Extensions; Waivers
	52
	

	Section 18.8
	Service of Process
	52
	

	Section 18.9
	Entire Agreement
	52
	

	Section 18.10
	No Oral Amendment
	52
	

	Section 18.11
	Lost or Destroyed Note
	53
	

	Section 18.12
	Time of the Essence
	53
	

	Section 18.13
	Subrogation
	53
	

	Section 18.14
	Joint and Several Liability
	53
	

	Section 18.15
	Successors and Assigns
	53
	

	Section 18.16
	Duplicates and Counterparts
	53
	

EXHIBIT A  BORROWER ENTITY AND INDIVIDUAL PROPERTY
EXHIBIT B  DEFINITIONS
EXHIBIT C  RULES OF CONSTRUCTION
EXHIBIT D CERTIFICATION OF RENT ROLL
SCHEDULE 1  ALLOCATED LOAN AMOUNTS AND APPRAISED VALUES
SCHEDULE 2  ORGANIZATIONAL CHART
SCHEDULE 3 ENVIRONMENTAL REPORT

LOAN AGREEMENT

THIS LOAN AGREEMENT (this “Loan Agreement”) is made as of this 4th day of October, 2017 by and among ARDREY KELL STATION LLC, RICHMOND STATION LLC, STOCKBRIDGE STATION LLC, STOCKBRIDGE STATION OUTPARCEL LLC, HARRISON POINTE STATION LLC, WEST CREEK STATION LLC, DEERWOOD LAKE STATION LLC, NORTHRIDGE STATION LLC, GOOLSBY POINTE STATION LLC, HAMILTON VILLAGE STATION LLC, CUSHING STATION LLC, RED MAPLE STATION LLC, NORTHTOWNE STATION LLC, DEAN TAYLOR STATION LLC, SAVAGE STATION LLC, STERLING POINT STATION LLC and LAKEWOOD STATION LLC, each a Delaware limited liability company (collectively, jointly and severally, “Borrower” and individually, a “Borrower Entity”), having its principal place of business at c/o Phillips Edison & Company, 11501 Northlake Drive, Cincinnati, Ohio 45249, and TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA, a New York corporation, having an address at 730 Third Avenue, New York, New York 10017 (“Lender”).
RECITALS:
A.    Lender agreed to make and Borrower agreed to accept a loan (the “Loan”) in the aggregate maximum principal amount of $175,000,000.00.
B.    Each Borrower Entity is the owner of the parcel of real property designated on Exhibit A attached hereto (collectively, the “Property” and individually, an “Individual Property”). Notwithstanding the foregoing, however,  with respect to Stockbridge Station LLC and Stockbridge Station Outparcel LLC, for purposes of (x) any Transfer under Article XII and (y) any calculation of loan to value and Debt Service Coverage hereunder under this Loan Agreement, the Individual Property owned by each such Borrower Entity shall be treated collectively.
C.    To evidence the Loan, each Borrower Entity has executed certain promissory notes (collectively, the “Note” and individually, an “Individual Note”)), dated of even date herewith, in the principal amounts set forth on Schedule 1 attached hereto (individually, an “Allocated Loan Amount” and collectively, the “Allocated Loan Amounts”; each Allocated Loan Amount or so much as is outstanding from time to time under each Individual Note is referred to individually as the “Individual Principal”, and the Allocated Loan Amounts or so much as is outstanding from time to time under the Note (being the sum of each Individual Principal) is referred to the “Principal”).  Collectively, Borrower has promised to pay the Principal with interest thereon to Lender as set forth in the Note and with the balance, if any, of the Debt being due and payable on November 1, 2026 (the “Maturity Date”).
AGREEMENT
NOW, THEREFORE, in consideration of the Loan and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, Borrower and Lender agree as follows:

ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
Section 1.1    Definitions.  Capitalized terms used in this Loan Agreement are defined in Exhibit B or in the text with a cross-reference in Exhibit B.
Section 1.2    Rules of Construction.  This Loan Agreement will be interpreted in accordance with the rules of construction set forth in Exhibit C.
ARTICLE II
PAYMENT TERMS
Section 2.1    The Obligations; Cross Collateralization and Cross Default.  
(a)This Loan Agreement secures the Principal, the Interest, the Late Charges, the Prepayment Premiums, the Expenses, any additional advances made by Lender in connection with the Property or the Loan and all other amounts payable under the Loan Documents (the “Debt”) and also secures both the timely payment of the Debt as and when required and the timely performance of all other obligations and covenants to be performed under the Loan Documents (the “Obligations”).
(b)(i)    Borrower acknowledges and agrees that Lender has made the Loan to Borrower based upon each Borrower Entity’s respective interests in the Property and in reliance upon the Property being of greater value as collateral security than the Allocated Loan Amounts as of the date hereof.  Each Borrower Entity shall be jointly and severally liable with each and every other Borrower Entity with respect to all of the Obligations.  Borrower expressly acknowledges and agrees that such joint and several liability is material consideration for the making of the Loan by Lender, that Lender would not have made the Loan without such joint and several liability on the part of Borrower, and that each Borrower Entity derives material benefit from the making of the Loan.  Without limitation of the any of the foregoing, each representation and warranty of “Borrower” (with respect to the “Property” or otherwise) shall be an individual representation and warranty of each and every Borrower Entity for itself and with respect to the Individual Property owned by such Borrower Entity, and each covenant and obligation (including the Obligations) on the part of “Borrower” (with respect to the “Property” or otherwise) shall be an individual covenant and obligation of each and every Borrower Entity for itself and with respect to the Individual Property owned by such Borrower Entity.  Unless otherwise expressly set forth to the contrary, each reference to “Property” herein shall mean and refer to the Property and each Individual Property.
(ii)Any term or condition of this Loan Agreement or any other Loan Document relating to the Property or any portion thereof or estate or interest therein shall be deemed to mean and refer to the property, rights, interests and estates of each and every Borrower Entity, individually and collectively.  Each Borrower Entity agrees (i) that its interests in the Property shall be and are cross-collateralized pursuant to each and every Security Instrument to secure the Obligations of each and every other Borrower Entity, and (ii) that its obligations under this Loan Agreement and the other Loan Documents are cross-defaulted with the obligations of each other Borrower Entity comprising “Borrower”, so that (X) an Event of Default under this Loan Agreement or any other Loan Document by any Borrower Entity constitutes an Event of Default by each and every Borrower Entity and (Y) each and every Security Instrument shall secure each and every Individual Note.

Section 2.2    Payments of Principal and Fixed Interest.
(a)Borrower will make monthly installment payments (“Debt Service Payments”) as follows:
(i)On the date hereof, a payment of accrued interest on the Principal at the Fixed Interest Rate pertaining to the period from the date hereof through November 1, 2017;
(ii)On December 1, 2017, and on the first day of each succeeding calendar month through and including October 1, 2026, payments in the amount of $517,708.33, each of which will be applied to accrued interest on the Principal at the Fixed Interest Rate; and
(b)Interest on the Principal shall be calculated on a 30 day month/360 day year, except that any Interest due for the first and last months of the Term, if such payments pertain to partial months, shall be based upon the actual number of days in such months that the Principal is outstanding and a 365 day or 366 day year, as applicable.
(c)On the Maturity Date, Borrower will pay the Principal in full together with accrued interest at the Fixed Interest Rate and all other amounts due under the Loan Documents.
Section 2.3    Prepayment Provisions.
(a)Except as otherwise expressly set forth herein, including pursuant to Section 12.4 and Section 12.5, the Note may not be prepaid in full or in part before November 1, 2020.  Commencing on November 1, 2020, Borrower may prepay the Note in full, but not in part, on the first day of any calendar month (or on any other date, provided that Interest is paid through the next payment date, upon not less than 30 days’ prior notice to Lender  and upon payment in full of the Debt which will include a payment (the “Prepayment Premium”) equal to the greater of (i) an amount equal to the product of 1% (the “Prepayment Percentage”) times the Prepayment Date Principal and (ii) the amount by which the sum of the Discounted Values of the Note Payments, derived by using the Discount Rate, exceeds the Prepayment Date Principal.  In order to calculate (ii) in the foregoing, each remaining Note Payment will be discounted and the resulting Discounted Values will be added together.  Commencing on May 1, 2026, the Note may be prepaid in full without payment of the Prepayment Premium.  Except as otherwise expressly set forth herein, no Individual Note may be prepaid without simultaneous prepayment in full of all other Individual Notes.  Notwithstanding the foregoing, if Lender elects to apply Insurance Proceeds or Condemnation Awards resulting from any Casualty or Condemnation, as the case may be, or a Termination Fee (to the extent not retained by Borrower in accordance with the provisions of this Agreement) to the Principal, the prepayment resulting from such application, whether in full or in part, may be applied against the Allocated Loan Amounts as Lender may reasonably determine and shall be without payment of the Prepayment Premium.
(b)Any prepayment not permitted by the this Loan Agreement and the other Loan Documents, including, without limitation, any tender of payment of the amount necessary to satisfy the Debt accelerated, any judgment of foreclosure, any statement of amount due at the time of foreclosure (including foreclosure by power of sale) and any tender of payment made during any redemption period after foreclosure, will include, to the extent permitted by law, a payment (the “Evasion of Prepayment Premium”) equal to the greater of (i) an amount equal to the product of the Prepayment Percentage plus 200 basis points times the Prepayment Date Principal, and (ii) the amount by which the sum of the Discounted Values of the Note Payments, derived by using the Default Discount Rate, exceeds the Prepayment Date Principal.  In order to calculate (ii) in the foregoing, each remaining Note Payment will be discounted and the resulting Discounted Values will be added together.

(c)The calculation of any amount paid to or due Lender in conjunction with any applicable prepayment, applicable tender of payment or applicable payment of any other amount with respect to the Prepayment Date Principal, as described in this Section 2.3 shall include interest to and including the date of receipt thereof by Lender.
(d)Borrower acknowledges that:
(i)a prepayment that is not permitted pursuant to the terms of the Loan Documents without a Prepayment Premium or Evasion of Prepayment Premium will cause damage to Lender;
(ii)the Evasion of Prepayment Premium is intended to compensate Lender for the loss of its investment and the expense incurred and time and effort associated with making the Loan, which will not be fully repaid if the Loan is prepaid;
(iii)it will be extremely difficult and impractical to ascertain the extent of Lender’s damages caused by a prepayment not permitted by the Loan Documents; and
(iv)the Evasion of Prepayment Premium represents Lender and Borrower’s reasonable estimate of Lender’s damages for an applicable prepayment and is not a penalty.
Section 2.4    Default Rate.  Interest on the Principal will accrue at the Default Interest Rate from the date an Event of Default occurs and for so long as such Event of Default is continuing.

Section 2.5    Late Charges.
(a)If Borrower fails to pay any Debt Service Payment when due and the failure continues for a period of 5 days or more, which 5-day period shall commence on the day after the day payment is actually due, Borrower agrees to pay to Lender an amount (a “Late Charge”) equal to four percent (4%) of the delinquent payment (provided that no such Late Charge shall be applicable to the outstanding balance of the Loan due on the Maturity Date).
(b)Borrower acknowledges that:
(i)a delinquent payment requiring a Late Charge will cause damage to Lender;
(ii)the Late Charge is intended to compensate Lender for loss of use of the applicable delinquent payment and the expense incurred and time and effort associated with recovering the applicable delinquent payment;
(iii)it will be extremely difficult and impractical to ascertain the extent of Lender’s damages caused by the applicable delinquency; and
(iv)the Late Charge represents Lender and Borrower’s reasonable estimate of Lender’s damages from a delinquency requiring a Late Charge and is not a penalty.
Section 2.6    Withholding.  If Borrower has a commercially reasonable basis to believe that Lender is not entitled to an exemption from or reduction of withholding tax with respect to payments made under any Loan Document, Lender shall deliver to Borrower, at the time or times reasonably requested by Borrower, such properly completed and executed documentation reasonably requested by Borrower (including, without limitation, appropriate IRS Forms W-8 or W-9) as will permit such payments to be made without withholding or at a reduced rate of withholding.  In addition, if Borrower has a commercially reasonable basis to believe that Lender is subject to backup withholding or information reporting requirements, Lender shall deliver such other documentation prescribed by applicable law or reasonably requested by Borrower as will enable Borrower to determine whether or not Lender is subject to such backup withholding or information reporting requirements.  Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation shall not be required if in Lender’s reasonable judgment such completion, execution or submission would subject Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of Lender in which case Borrower shall withhold the amount of tax required by applicable Law.

ARTICLE III
TITLE AND AUTHORITY
Section 3.1    Title to the Property.
(a)Borrower has and will continue to have insurable title in fee simple absolute to the Land and the Improvements and insurable title to the Fixtures and Personal Property, all free and clear of liens, encumbrances and charges except the Permitted Exceptions.  To Borrower’s knowledge, there are no facts or circumstances that might give rise to a lien, encumbrance or charge on the Property which would have a material adverse effect on the value of the Property if unpaid.
(b)The Security Instrument, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create a valid and enforceable first lien on and security interest in the Property, subject only to the Permitted Exceptions.
Section 3.2    Authority.
(a)Borrower is and will do or cause to be done all things reasonably necessary to continue to be (i) duly organized, validly existing and in good standing under the Laws of the state or commonwealth in which it was formed, organized or incorporated as set forth in Section 2.3 of the Security Instruments and (ii) duly qualified to conduct business, in good standing, in the state or commonwealth where the Property is located.
(b)Borrower has and will do or cause to be done all things reasonably necessary to, in all material respects, continue to have all approvals required by Law or otherwise and full right, power and authority to (i) own and operate the Property and carry on Borrower’s business as now conducted or as proposed to be conducted, in all material respects; (ii) execute and deliver the Loan Documents; (iii) grant, mortgage, convey, assign and pledge the Property to Lender pursuant to the provisions of the Security Instrument; and (iv) perform the Obligations.
(c)The execution and delivery of the Loan Documents and the performance of the Obligations do not and will not conflict with or result in a default under any Laws or any Leases or Property Documents and do not and will not conflict with or result in a default under any agreement binding upon any Borrower Entity.
(d)The Loan Documents constitute and will continue to constitute legal, valid and binding obligations of Borrower enforceable in accordance with their respective terms, subject to any applicable provisions of the Bankruptcy Code and insolvency Laws and Laws governing the rights of creditors generally.
(e)Borrower has not changed its legal name or its state or commonwealth of formation, as set forth in Section 2.3 of the Security Instruments, in the four months prior to the date hereof, except as Borrower has disclosed any such change to Lender in writing and delivered to Lender appropriate Uniform Commercial Code search reports in connection therewith.
(f)Borrower has not (i) merged with or into any other Person or otherwise been involved in any reorganization or (ii) acquired substantially all of the assets of any other Person where Borrower became subject to the obligations of such Person, for a period of one year ending on the date hereof, except as Borrower has disclosed any such change, merger, reorganization or acquisition to Lender in writing and delivered to Lender appropriate Uniform Commercial Code search reports in connection therewith.

Section 3.3    No Foreign Person.  Borrower is not a “foreign person” within the meaning of Section 1445(f)(3) of the Code.
Section 3.4    Litigation.  As of the date hereof, except as disclosed by Borrower to Lender in writing, there are no current Proceedings or Government investigations against Borrower or the Property, and Borrower has not received written notice of any threatened Proceeding or Government investigation which if adversely determined would have a material adverse effect on the Borrower or the Property.  Borrower is not aware of any facts or circumstances that may reasonably give rise to a Proceeding or Government investigation which, if adversely determined would have a material adverse effect on the Borrower or the Property. Borrower will give Lender prompt notice of the commencement of any Proceeding or investigation against the Property or Borrower which is not covered by insurance or which could have a material adverse effect on the Property or on Lender’s interests in the Property or under the Loan Documents and, at Borrower’s expense, will appear in and defend any such Proceeding or investigation or tender defense to its Insurer.  Borrower also will deliver to Lender such additional information relating to such Proceeding or investigation as Lender may reasonably request from time to time.
ARTICLE IV
PROPERTY STATUS, MAINTENANCE AND LEASES
Section 4.1    Status of the Property.
(a)    The Property is serviced, and Borrower will use commercially reasonable efforts to cause the Property to continue to be serviced, by all public utilities required for the Permitted Use of the Property.
(b)    As of the date hereof, except as shown on a survey of the Property delivered to Lender, all roads and streets necessary for service of and access to the Property for the current or contemplated use of the Property are serviceable, physically open and to Borrower’s knowledge dedicated to and accepted by the Government for use by the public.
(c)    Except as disclosed in the property condition report obtained by the Lender, as of the date hereof, the Property is free from material unrepaired damage caused by a Casualty.
(d)    All costs and expenses of labor, materials, supplies and equipment engaged by Borrower or ordered by Borrower and used in the construction of the Improvements made by  Borrower which are due and owing have been paid in full.

Section 4.2    Maintenance of the Property.  
(a)Subject to the rights and obligations of tenants under Leases, Borrower will maintain the Property in good repair, ordinary wear and tear, Casualty, and Condemnation excepted, and safe condition, suitable for the Permitted Use, including, to the extent necessary, replacing the Fixtures and Personal Property with property at least equal in quality and condition to that being replaced and free of liens, subject to the rights and obligations of tenants under Leases.  
(b)Borrower will not erect any new buildings, building additions or other structures on the Land or otherwise materially alter the Improvements without Lender’s prior consent which may be withheld in Lender’s sole but reasonable discretion; provided that (i) any alterations or tenant improvements required by the provisions of any Lease and that do not require Borrower’s consent (as landlord), (ii) any alterations or tenant improvements required to be performed by Borrower, as landlord, by the provisions of any Lease that do not add to or decrease the square footage of any Improvements in any material respect, (iii) any repairs or replacements in the ordinary course of Borrower’s business that require capital expenditures (e.g., roof replacements, parking lot repaving and restriping, or updates to a building façade) of less than $2,000,000.00 per project and (iv) any non-structural alterations shall not require Lender’s consent.  
(c)The Property will be managed by a Manager reasonably satisfactory to Lender pursuant to a management agreement reasonably satisfactory to Lender; provided, however, that (i) the current Manager (and its property management agreement) are hereby deemed to be acceptable to Lender and (ii) a Qualified Manager (and its applicable Replacement Management Agreement) are hereby deemed to be acceptable to Lender.
Section 4.3    Change in Use.  Borrower will use the Property for the Permitted Use and for no other purpose.
Section 4.4    Waste.  Borrower will not commit or knowingly permit any material physical waste, material impairment or deterioration, other than ordinary wear and tear, of the Property or any material demolition or removal of any of the Property, subject to removal for obsolesce without Lender’s prior consent, not to be unreasonably withheld, conditioned or delayed.
Section 4.5    Inspection of the Property.  Subject to the rights of tenants under the Leases, Lender, or its agent or independent expert, has the right to enter and inspect the Property during normal business hours and upon reasonable prior notice, with Borrower having the right to be present during such inspections, except during the existence of an Event of Default, when no prior notice is necessary, provided that neither Lender nor its agents or any such independent expert shall unreasonably interfere with the operation of the Property or the rights of the tenants under the Leases.  Lender has the right, at Lender’s sole cost and expense, to engage an independent expert to review and report on Borrower’s compliance with Borrower’s obligations under this Loan Agreement and the other Loan Documents to maintain the Property, comply with Law and refrain from waste, impairment or deterioration of the Property and the alteration, demolition or removal of any of the Property except in each case as may be permitted by the provisions of this Loan Agreement and the other Loan Documents.  If the independent expert’s report discloses material failure to comply with such obligations, or if Lender engages the independent expert after the occurrence of an Event of Default, then the independent expert’s review and report will be at Borrower’s expense, payable on demand.

Section 4.6    Parking.  Borrower will provide parking areas within the Property in a manner consistent with the Permitted Use and sufficient to accommodate the greatest of: (i) the number of parking spaces required by Law (or such lesser number as may be expressly approved by Lender); or (ii) the number of parking spaces required by the Leases and the Property Documents, subject in all events to permitted exceptions, variances or waivers of such requirements.
Section 4.7    Separate Tax Lot.  The Property is and will remain assessed for real estate tax purposes as one or more wholly independent tax lots, separate from any property that is not part of the Property.
Section 4.8    Changes in Zoning or Restrictive Covenants.  Without Lender’s consent, which consent shall not be unreasonably conditioned, withheld or delayed, Borrower will not (i) initiate, join in or affirmatively consent to any change in any Laws pertaining to zoning or other restriction which would modify the Permitted Use for the Property; (ii) knowingly permit the Property to be used for any purpose not included in the Permitted Use; or (iii) impair the integrity of the Property as a single, legally subdivided zoning lot separate from all other property.
Section 4.9    Lender’s Right to Appear.  During the continuance of an Event of Default, Lender has the right to appear in and defend any Proceeding brought regarding the Property and to bring any Proceeding, in Lender’s name, which Lender, in its sole discretion, determines should be brought to protect Lender’s interest in the Property.  
ARTICLE V
IMPOSITIONS AND ACCUMULATIONS
Section 5.1    Impositions.
(a)Subject to Borrower’s consent rights set forth below, Borrower will pay each Imposition before the date (the “Imposition Penalty Date”) the date on which the Imposition becomes delinquent.
(b)Borrower, at its own expense, may contest any Impositions, provided that the following conditions are met:
(i)not less than twenty (20) days prior to the Imposition Penalty Date, Borrower delivers to Lender notice of the proposed contest;
(ii)the contest is by a Proceeding promptly initiated and conducted diligently and in good faith;
(iii)the Proceeding suspends the collection of the contested Imposition, or Borrower pays same prior to initiating the applicable Proceeding (provided, the foregoing need not be satisfied if clause (vi) is satisfied);
(iv)the Proceeding is not prohibited under and is conducted in accordance with the Leases and the Property Documents;
(v)the Proceeding precludes imposition of criminal or civil penalties and sale or forfeiture of the Property as a result of the contest and Lender will not be subject to any civil suit as a result of the contest; and

(vi)Borrower either deposits with the Accumulations Depositary reserves or furnishes a bond or other security reasonably satisfactory to Lender, in either case in an amount sufficient to pay the contested Impositions, together with all interest and penalties or Borrower pays all of the contested Impositions under protest (provided, the foregoing need not be satisfied if clause (iii) is satisfied).
Section 5.2    Accumulations.
(a)Subject to subsection (h) below, in accordance with the Tax Pledge, Borrower made an initial deposit with either Lender or a mortgage servicer or financial institution designated or approved by Lender from time to time, acting on behalf of Lender as Lender’s agent or otherwise such that Lender is the “customer”, as defined in the Uniform Commercial Code, of the depository bank with respect to the deposit account into which the Accumulations are deposited, to receive, hold and disburse the Accumulations in accordance with the Tax Pledge (the “Accumulations Depositary”).  On the first day of each calendar month during the Term, Borrower will deposit with the Accumulations Depositary an amount equal to 1/12th of the annual Taxes and Assessments as reasonably determined by Lender or its agent.  Except as otherwise required by the Tax Pledge, at least 20 days before each Imposition Penalty Date, Borrower will deliver to the Accumulations Depositary any bills and other documents that are necessary to pay the Taxes and Assessments.
(b)The Accumulations will be applied by Lender or its agent to the payment of Taxes and Assessments.  Any excess Accumulations after payment of Taxes and Assessments by Lender or its agent will be returned to Borrower or credited against the next installments of Accumulations or Obligations coming due, or as required by Law.  If the Accumulations are not sufficient to pay Taxes and Assessments, except as otherwise required by the Tax Pledge, Borrower shall promptly pay the deficiency to the Accumulations Depositary (any in any event, not less than ten (10) Business Days prior to the Imposition Penalty Date).
(c)The Accumulations Depositary will hold the Accumulations as security for the Obligations until applied in accordance with the provisions of this Loan Agreement and the Tax Pledge.  If Lender is not the Accumulations Depositary, the Accumulations Depositary will deliver the Accumulations to Lender upon Lender’s demand at any time after an Event of Default.
(d)If the Property is sold or conveyed other than by foreclosure or transfer in lieu of foreclosure, all right, title and interest of Borrower to the Accumulations will automatically be returned to Borrower.
(e)The Accumulations Depositary has deposited the initial deposit and will deposit the monthly deposits into an account with a financial institution selected by Lender, which funds may be held in either a separate or commingled account, all in accordance with the Tax Pledge.  If Lender is the Accumulations Depositary, Lender shall have no obligation to pay interest on such Accumulations.
(f)Lender shall pay, or shall direct the Accumulations Depositary to pay, any Taxes or Assessments unless Borrower is contesting the Taxes or Assessments in accordance with the provisions of this Loan Agreement, in which event any payment of the contested Taxes or Assessments will be made under protest in the manner prescribed by Law or, at Lender’s election, will be withheld.
(g)If Lender assigns this Loan Agreement and the other Loan Documents, in accordance with the provisions of this Loan Agreement, Lender will pay, or cause the Accumulations Depositary to pay, the unapplied balance of the Accumulations to or at the direction of the assignee.  Simultaneously with the payment, Lender and the Accumulations Depositary will be released from all liability with respect to the

Accumulations, except as the result of Lender’s gross negligence or willful misconduct, and Borrower will look solely to the assignee with respect to the Accumulations.  When the Obligations have been fully satisfied, any unapplied balance of the Accumulations will be returned to Borrower.  At any time after an Event of Default occurs, Lender may apply the Accumulations as a credit against any portion of the Debt selected by Lender in its sole discretion.
(h)Notwithstanding the foregoing, the provisions of this Section 5.2, for Borrower to escrow for Taxes and Assessments are hereby waived.  Borrower will provide paid Tax receipts upon Lender request.
The waiver shall only be effective (x) so long as there is no Event of Default under the Loan Documents and (y) for so long as all Taxes and Assessments relating to the Property are paid timely and in full.  In the event the waiver is no longer effective as aforesaid, the Tax Pledge will be required for the remainder of the Loan term.  
At Lender’s sole discretion, a Tax Pledge may be required in the event that the Loan’s annual Debt Service Coverage falls below 1.10x.  If the annual Debt Service Coverage returns to a level of 1.10x or higher for a period of twelve (12) consecutive months, Borrower may request Lender’s consent to a new waiver of the Tax Pledge, which consent shall be at Lender’s sole discretion.

Section 5.3     Changes in Tax Laws.  If any change effective after the date hereof in a Law requires the deduction of the Debt from the value of the Property for the purpose of taxation or imposes a tax, either directly or indirectly, on the Debt, any Loan Document or Lender’s interest in the Property, upon Lender’s written request Borrower will pay the additional tax with interest and penalties, if any, resulting from such change in Law.  If Lender reasonably and in good faith determines that Borrower’s payment of such tax is unlawful, unenforceable, usurious or taxable unless Borrower agrees to indemnify the Lender for such taxable amount to Lender the Debt will become immediately due and payable (without payment of a Prepayment Premium) on 180 days’ prior notice unless the tax must be paid within the 180-day period, in which case, the Debt will be due and payable (without payment of a Prepayment Premium) within the lesser period.  This Section 5.3 shall not apply to any taxes imposed on or with respect to Lender that are (a) imposed on or measured by net income (however denominated) or franchise taxes or (b) attributable to Lender’s failure to deliver to Borrower such documentation prescribed by applicable Law or reasonably requested by Borrower as would reduce or eliminate the amount of such taxes imposed on or with respect to Lender (to the extent Lender is legally entitled to deliver such documentation to Borrower).
ARTICLE VI
INSURANCE, CASUALTY, CONDEMNATION
AND RESTORATION
Section 6.1    Insurance Coverages.
(a)Borrower will maintain or cause to be maintained such insurance coverages and endorsements in form and substance as Lender may require in its reasonable discretion from time to time.  The insurance will be in an amount equal to 100% of the full replacement cost of the Improvements and Personal Property (without deduction for depreciation) and will include  fire and sprinkler leakage, extended coverage, vandalism, malicious mischief, boiler and machinery, terrorism coverage, windstorm, earthquake and flood insurance (if located in earthquake or flood zones), a minimum of 12 months of rent loss insurance, and such other kinds of insurance as may be required by Lender in its sole discretion provided that Lender provides prior written notice of such request to Borrower and such insurance is available at commercial reasonable rates, premiums prepaid, in amounts satisfactory to Lender, with a standard mortgagee endorsement in Lender’s favor for the property insurance, an additional insured endorsement in Lender’s favor for liability insurance and a waiver of subrogation endorsement, where applicable.
(b)The insurance, including renewals, required under this Section will be issued on valid and enforceable policies and endorsements satisfactory to Lender (the “Policies”).  Each Policy will contain a standard waiver of subrogation and a replacement cost endorsement and will provide that Lender will receive not less than 30 days’ prior written notice of any cancellation, termination or non-renewal of a Policy other than an increase in coverage and that Lender will be named under a standard mortgagee endorsement on the property insurance as mortgagee and loss payee.
(c)The insurance companies issuing the Policies (the “Insurers”) must be authorized to do business in the state or commonwealth where the Property is located, and must carry a rating of  “A-” or better by A.M. Best with a Financial Size Category (FSC) of “X” or higher. In the exercise of its commercially reasonable discretion, Lender may select an alternative credit rating agency and may impose different credit rating standards for the Insurers.  Notwithstanding Lender’s right to approve the Insurers and to establish credit rating standards for the Insurers, Lender will not be responsible for the solvency of any Insurer.

(d)Notwithstanding Lender’s rights under this Article, Lender will not be liable for any loss, damage or injury resulting from the inadequacy or lack of any insurance coverage.
(e)Borrower will comply with the provisions of the Policies and with the requirements, notices and demands imposed by the Insurers and applicable to Borrower or the Property.
(f)Borrower will pay the Insurance Premiums for each Policy and provide Lender with evidence of such payment promptly after receipt of the invoice and will provide evidence of renewal prior to expiration the Policy being replaced or renewed.  In the event Borrower is unable to deliver a certified copy 15 days prior to the expiration date, Borrower will provide evidence of the renewed coverage by delivering to Lender an Acord 27 (2004/04 or 1993/03) or Acord 28 (2003/10) or the current industry equivalent until a certified copy is available and delivered to Lender.  Certified copies required hereunder may be certified by Borrower’s insurance broker.
(g)Intentionally Omitted.  
(h)If Borrower elects to carry any of the insurance required under this Section on a blanket or umbrella policy, Borrower will deliver to Lender a certified copy of the blanket policy which will allocate to the Property the amount of coverage required under this Section and otherwise will provide the same coverage and protection as would a separate policy insuring only the Property.
(i)Borrower will give the Insurers and Lender prompt notice of any change in ownership or occupancy of the Property that may result in a change in the insurance requirements for the Property.  This subsection does not abrogate the prohibitions on transfers set forth in this Loan Agreement.
(j)To the extent the insurance requirements in this Section are satisfied using a stand-alone policy(ies) covering only the Property, then in the event of the foreclosure of the applicable Security Instrument or other transfer of the title to the Property, all right, title and interest of Borrower in and to such insurance policy(ies), or premiums or payments in satisfaction of claims or any other rights under such insurance policy(ies) shall pass to the transferee of the Property.  Notwithstanding the foregoing to the extent the insurance requirements in this Section are satisfied using a blanket policy then in the event of the foreclosure of the applicable Security Instrument or other transfer of the title to the Property, all right, title and interest of Lender in and to any premiums or payments in satisfaction of claims or any other rights under such insurance policy(ies) relating to the Property shall not pass to the transferee of the Property.

Section 6.2    Casualty and Condemnation.
(a)Borrower will give Lender notice of (i) any Casualty which causes at least $500,000 in damage to any Individual Property promptly after it occurs and (ii) any Condemnation Proceeding which shall result in a material adverse change to the Property or the  loss of access to, any parking serving or any portion of the Improvements on the Property promptly after Borrower receives notice of commencement or notice that such a Condemnation Proceeding will be commencing. Lender acknowledges that any Condemnation Proceeding for a road widening or utility is not considered material.  Borrower promptly will deliver to Lender copies of all documents Borrower delivers or receives relating to the Casualty or the Condemnation Proceeding, as the case may be.
(b)With respect to a Casualty resulting in Insurance Proceeds in excess of the five percent (5%) of the applicable Individual Property’s Allocated Loan Amount (but in no event more than $2,500,000.00 or less than $500,000.00) (as applicable, the “Proceeds Threshold”) Borrower authorizes Lender, at Lender’s option, to act on Borrower’s behalf to collect, adjust and compromise any claims for loss, damage or destruction under the Policies on such terms as Lender determines in Lender’s sole but reasonable discretion.  With respect to Condemnation Awards in excess of the Proceeds Threshold for an Individual Property, Borrower authorizes Lender to act, at Lender’s option, on Borrower’s behalf in connection with such Condemnation Proceeding, in Lender’s sole but reasonable discretion.  Borrower will execute and deliver to Lender all documents requested by Lender and all documents as may be required by Law to confirm such authorizations.  Nothing in this Section will be construed to limit or prevent Lender from joining with Borrower either as a co-defendant or as a co-plaintiff, at Lender’s expense, in any Condemnation Proceeding with respect to Condemnation Proceedings relating to Condemnation Awards in excess of the Proceeds Threshold.
(c)If Lender elects not to act on Borrower’s behalf (or is not authorized to act on Borrower’s behalf) as provided in this Section, then Borrower promptly will file and prosecute all claims (including Lender’s claims) relating to the Casualty and will prosecute or defend (including defense of Lender’s interest) any Condemnation Proceeding.  Borrower will have the authority to settle or compromise the claims or Condemnation Proceeding, as the case may be, provided that Lender shall have the right to approve in Lender’s sole discretion any compromise or settlement that exceeds the Proceeds Threshold for the applicable Individual Property.  Any check for Insurance Proceeds or Condemnation Awards, as the case may be (the “Proceeds”) will be made payable to Lender and Borrower.  Borrower will endorse the check to Lender immediately upon Lender presenting the check to Borrower for endorsement or if Borrower receives the check first, will endorse the check immediately upon receipt and forward it to Lender.  If any Proceeds are paid to Borrower, Borrower will promptly deposit the Proceeds with Lender, to be applied or disbursed in accordance with the provisions of this Loan Agreement.  Lender will be responsible for only the Proceeds actually received by Lender.

Section 6.3    Application of Proceeds.  After deducting the costs incurred by Lender in collecting the Proceeds, Lender shall subject to Section 6.4 and Section 6.5 below (i) apply the Proceeds to restore the Improvements, provided that Lender will not be obligated to see to the proper application of the Proceeds and provided further that any amounts released for Restoration will not be deemed a payment on the Debt; or (ii) deliver the Proceeds to Borrower. During the continuance of an Event of Default, Lender may, in its sole discretion, apply the Proceeds as a credit against any portion of the Debt selected by Lender.
Section 6.4    Conditions to Availability of Proceeds for Restoration.  Notwithstanding the preceding Section, but subject to Section 6.5, after a Casualty or a Condemnation (a “Destruction Event”), Lender will make the Proceeds (less any reasonable out-of-pocket third party costs incurred by Lender in collecting the Proceeds) available for Restoration in accordance with the conditions for disbursements set forth in the Section entitled “Restoration”, provided that the following conditions are met:
(i)Borrower as of the date hereof or the transferee under a Permitted Transfer, if any, continues to be Borrower  at the time of the Destruction Event and at all times thereafter until the Proceeds have been fully disbursed;
(ii)no Event of Default under the Loan Documents exists at the time of the Destruction Event;
(iii)with respect to the applicable Individual Property, all Leases with Major Tenants and with tenants under Leases aggregating sixty percent (60%) of the remaining square footage of such Individual Property in effect immediately prior to the Destruction Event and all Property Documents in effect immediately prior to the Destruction Event continue in full force and effect notwithstanding the Destruction Event, except as otherwise approved by Lender;
(iv)if the Destruction Event is a Condemnation, Borrower delivers to Lender evidence reasonably satisfactory to Lender that, with respect to the applicable Individual Property, the Improvements can be restored to an economically and architecturally viable unit;
(v)Borrower delivers to Lender evidence satisfactory to Lender that the Proceeds are sufficient to complete Restoration or if the Proceeds are insufficient to complete Restoration, Borrower either deposits with Lender funds (“Additional Funds”) or provides a letter of credit or guaranty from Guarantor in the amount of the Additional Funds that when added to the Proceeds will be sufficient to complete Restoration;
(vi)if the Destruction Event is a Casualty, Borrower delivers to Lender a coverage position letter from the Insurer under each affected Policy that such Insurer has not denied liability under the Policy as to Borrower or the insured under the Policy;
(vii)Lender is satisfied that the proceeds of any rent loss insurance in effect together with other available gross revenues from the applicable Individual Property are sufficient to achieve a Debt Service Coverage with respect to the applicable Individual Property of not less than 1.15x for the 12-month period from the date of the Destruction Event; and
(viii)Lender is satisfied that Restoration will be completed on or before the date (the “Restoration Completion Date”) that is the earliest of:  (A) 6 months prior to the Maturity Date; (B) 18 months after the Destruction Event; (C) the earliest date required for completion of Restoration under any Lease or any Property Document; or (D) any date required by Law. 

Section 6.5    Restoration.
(a)Notwithstanding Section 6.4, if the total Proceeds for any Destruction Event with respect to the applicable Individual Property are less than the Proceeds Threshold or Lender elects or is obligated by Law or under this Article to make the Proceeds available for Restoration, Lender will promptly disburse to Borrower the entire amount received by Lender and Borrower will commence Restoration promptly after the Destruction Event and complete Restoration not later than the Restoration Completion Date.
(b)If the Proceeds for any Destruction Event with respect to the applicable Individual Property  exceed the Proceeds Threshold and Lender elects or is obligated by Law or under this Article to make the Proceeds available for Restoration, Lender will disburse the Proceeds and any Additional Funds (the “Restoration Funds”) upon Borrower’s request as Restoration progresses, generally in accordance with commercially reasonable construction lending practices for disbursing funds for construction costs, provided that the following conditions are met:
(i)Borrower commences Restoration promptly after the Destruction Event and completes Restoration on or before the Restoration Completion Date;
(ii)if Lender requests, Borrower delivers to Lender prior to commencing Restoration, for Lender’s approval (not to be unreasonably withheld, delayed or conditioned), plans and specifications and a reasonably detailed budget for the Restoration;
(iii)Borrower delivers to Lender satisfactory evidence of the costs of Restoration incurred prior to the date of the request, and such other documents as Lender may request including mechanics’ lien waivers and title insurance endorsements;
(iv)Borrower pays all costs of Restoration whether or not the Restoration Funds are sufficient and, if at any time during Restoration, Lender determines that the undisbursed balance of the Restoration Funds is insufficient to complete Restoration, Borrower deposits with Lender, as part of the Restoration Funds, an amount equal to the deficiency within 30 days of receiving notice of the deficiency from Lender, or provides a letter of credit or a guaranty for such amount; and
(v)there is no Event of Default under the Loan Documents at the time Borrower requests funds or at the time Lender disburses funds.
(c)If an Event of Default occurs at any time after the Destruction Event, then Lender will have no further obligation to make any remaining Proceeds available for Restoration during the continuance of such Event of Default and may apply any remaining Proceeds as a credit against any portion of the Debt selected by Lender in its sole discretion.
(d)Lender may elect at any time prior to commencement of Restoration, if such Restoration is in excess of $2,500,000.00, to retain at Borrower’s expense an independent engineer or other environmental consultant to review the plans and specifications, to inspect the work as it progresses and to provide reports.  If any matter included in a report by the engineer or consultant is unsatisfactory to Lender in its reasonable discretion, Lender may suspend disbursement of the Restoration Funds until the unsatisfactory matters contained in the report are resolved to Lender’s reasonable satisfaction.
(e)If Borrower fails to commence and complete Restoration in accordance with the terms of this Article, then in addition to the Remedies, Lender may elect to restore the Improvements on Borrower’s

behalf and reimburse itself out of the Restoration Funds for out-of-pocket third party costs and expenses incurred by Lender in restoring the Improvements, or Lender may apply the Restoration Funds as a credit against any portion of the Debt selected by Lender in its sole discretion.
(f)Lender may commingle the Restoration Funds with its general assets and will not be liable to pay any interest or other return on the Restoration Funds unless otherwise required by Law.  Lender will not hold any Restoration Funds in trust.  Lender may elect to deposit the Restoration Funds with a depositary satisfactory to Lender under a disbursement and security agreement satisfactory to Lender.
(g)Borrower will pay all of Lender’s reasonable out-of-pocket third expenses incurred in connection with a Destruction Event or Restoration.  If Borrower fails to do so, then in addition to the Remedies, Lender may from time to time reimburse itself out of the Restoration Funds.
(h)If any excess Proceeds remain after Restoration, Lender shall deliver the excess to Borrower.

ARTICLE VII
COMPLIANCE WITH LAW AND AGREEMENTS
Borrower hereby confirms that, as of the date hereof, the representations and warranties contained in this Article VII are true, correct and complete and covenants that until the Debt has been repaid in full, it shall take the actions or refrain from taking the actions as required by this Article VII and shall cause any representations and warranties that are expressly prospective in nature to be true, correct and complete on every day that the Debt is outstanding:
Section 7.1    Compliance with Law.  Borrower, the Property and the use of the Property comply, and Borrower will do or cause to be done all things reasonably necessary to comply, with Law and with all agreements and conditions necessary to preserve and extend all rights, licenses, permits, privileges, franchises and concessions (including zoning variances, special exceptions and non-conforming uses) relating to the Property or Borrower, except where the failure to preserve and extend would not reasonably be expected to result in an adverse effect to the Property or to Borrower, including as a result of a change in the zoning laws.  Borrower will notify Lender of the commencement of any investigation or Proceeding relating to a possible material violation of Law affecting Borrower or the Property or the use thereof promptly after Borrower receives written notice thereof and will deliver promptly to Lender copies of all documents Borrower receives or delivers in connection with the investigation or Proceeding.
Section 7.2    Compliance with Agreements.  As of the date hereof, except as previously disclosed by Borrower to Lender in writing, Borrower has neither given nor received written notice alleging a default under any Property Document which has not been cured.  As of the date hereof, to Borrower’s knowledge, there are no defaults, events of defaults or events which, with the passage of time or the giving of notice, would constitute an event of default under the Property Documents which would reasonably be expected to result in an adverse effect to the Property or to Borrower.  Borrower will pay and perform in all material respects all of its obligations under the Property Documents as and when required by the Property Documents subject to Borrower’s right to contest any such payment.   Borrower will use commercially reasonable efforts to cause all other parties to the Property Documents to pay and perform in all material respects their obligations under the Property Documents as and when required by the Property Documents.  Borrower will not amend or waive any provisions of the Property Documents in a manner that would adversely affect the Property or Lender’s rights and interests under the Loan Documents; exercise any options under the Property Documents in a manner that would adversely affect the Property or Lender’s rights and interests under the Loan Documents; give any approval required or permitted under the Property Documents that would adversely affect the Property or Lender’s rights and interests under the Loan Documents; cancel or surrender any of the Property Documents in a manner that would adversely affect the Property or Lender’s rights and interests under the Loan Documents; or release or discharge or permit the release or discharge of any Person bound by any of the Property Documents in a manner that would adversely affect the Property or Lender’s rights and interests under the Loan Documents, without, in each instance, Lender’s prior approval, not to be unreasonably withheld, conditioned or delayed (excepting therefrom all service contracts or other agreements entered into in the normal course of business that are cancelable upon not more than 60 days’ notice).  Borrower promptly will deliver to Lender copies of any notices of default or of termination that Borrower receives or delivers relating to any Property Document.

Section 7.3    ERISA Compliance.
(a)Borrower is not and will not be an “employee benefit plan” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974 (“ERISA”) that is subject to Title I of ERISA or a “plan” as defined in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code, and Borrower’s assets are not and will not constitute “plan assets” of one or more such plans, within the meaning of Section 3(42) of ERISA, for purposes of Title I of ERISA or Section 4975 of the Code.
(b)Borrower is not and will continue not to be a “governmental plan” within the meaning of Section 3(32) of ERISA and transactions by or with Borrower are not and will not be subject to any Laws regulating investments of and fiduciary obligations with respect to governmental plans.
(c)Assuming that no portion of the Loan is funded or held with “plan assets” within the meaning of Section 3(42) of ERISA, Borrower will not engage in any transaction which would cause any obligation or any action under the Loan Documents, including Lender’s exercise of the Remedies, to be a non-exempt prohibited transaction under ERISA.
Section 7.4    Anti-Terrorism.
(a)None of (i) Borrower, Guarantor, Indemnitor nor (ii) to Borrower’s knowledge, any of their respective Affiliates is or will be during the term of the Loan in violation of any of the Anti-Terrorism Laws, including Executive Order No. 13224 on Terrorist Financing (effective September 24, 2001) (the “Executive Order”), the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56), and the Bank Secrecy Act, 31 U.S.C. §5311 et seq.    
(b)None of (i) Borrower, Guarantor, Indemnitor nor (ii)  to Borrower’s knowledge, any of their respective Affiliates, is or will be during the term of the Loan a Prohibited Person or is or will be during the term of the Loan in violation of any of the Laws relating to Prohibited Persons.  A “Prohibited Person” is (A) a person designated as a “specially designated national and blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website http://www.treasury.gov/ofac/downloads/t11sdn.pdf or at any replacement website or other replacement official publication of such list, or any Person owned or controlled by or acting for or on behalf of such a person; (B) an agency of the government of a country, or an organization controlled by a country, or a person resident in a country that is subject to trade restrictions or a sanctions program under any of the economic sanctions of the United States administered by the United States Department of the Treasury’s Office of Foreign Assets Control; or (C) a Person (including a country or government) with whom Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Laws.   
(c)The Loan proceeds will not be used for any illegal purposes and no portion of the Property or Borrower has been acquired with funds derived from illegal activities.
(d)Borrower covenants and agrees to deliver to Lender any certification or other evidence requested from time to time by Lender in its reasonable discretion, confirming Borrower’s compliance with this Section 7.4.  The representations and warranties set forth in said subsections shall be deemed repeated and reaffirmed by Borrower as of each date that Borrower makes a payment to Lender under the Loan Documents or receives any payment from Lender.

ARTICLE VIII
LEASING
Section 8.1    Representations, Warranties and Covenants with Respect to Leases.  Except as set forth in Borrower’s disclosures to Lender in the certification of Rent Roll substantially in the form attached as Exhibit D hereto executed by Borrower and delivered to Lender in connection with the closing of the Loan including the Rent Roll attached thereto:
(a)To Borrower’s knowledge, as of the date hereof, all of the Leases affecting the Property as of the date of this Loan Agreement (the “Existing Leases”) are in full force and effect, and are not subject to matters that with the passage of time or giving of notice would constitute a default which would reasonably be expected to result in a material adverse effect on the Borrower or Property.  Borrower has neither given nor received written notice alleging a default under any Existing Lease which has not been cured.  To Borrower’s knowledge, there are no existing defenses or offsets to the payment of Rent under the Existing Leases.  There are no agreements between the parties to the Existing Leases, other than as expressly set forth in each Existing Lease and all of the Existing Leases are enforceable in accordance with their terms.
(b)As of the date hereof, each of the Tenants under the Existing Leases is in occupancy, paying Rent, open and conducting business in its respective leased premises and, to Borrower’s knowledge is free from bankruptcy, reorganization or other Proceeding for the relief of debtors under any federal or state insolvency statute.
(c)Borrower has complied with all material obligations and satisfied all material conditions (including any co-tenancy requirements) under the Existing Leases which Borrower as landlord must have complied with or satisfied on or before the date of this Loan Agreement.
(d)Borrower has not collected Rents under the Leases, excluding security deposits, more than one month in advance.
(e)Borrower is the landlord under the Leases, has the authority to assign the Leases and the Rents and there is not and will not be any assignment, pledge or mortgage of the Assigned Property other than the Assignment and the Security Instrument, except with Lender’s prior consent, which may be withheld in Lender’s sole discretion.
(f)None of the tenants under the Existing Leases have an option to purchase the Property (including rights of first or last offer).
(g)As of the date hereof, Borrower has not materially discounted, compromised or discharged any of Tenants’ obligations under the Leases.
(h)Borrower as landlord does not have any obligations under the Leases with respect to off-site improvements.
(i)Except as disclosed in the Existing Leases, none of the Leases limits the type or identity of tenant to whom the landlord is permitted to lease or limits the use to which another tenant may put its leased premises, except for limitations on use generally affecting all Tenants.
(j)Except as disclosed in the Existing Leases, none of the Tenants has the right to receive or to direct the use of Insurance Proceeds, except for proceeds of the Tenant’s own insurance, or to receive or direct the use of Condemnation Awards, except for moving expenses and tenant fixtures costs.

(k)Borrower will perform the landlord’s obligations under the Leases in all material respects and will enforce the terms of the Leases to be performed by the Tenants in all material respects.
Section 8.2    Covenants Regarding Future Leasing.
(a)Borrower will lease the Property in its reasonable discretion and may enter into new Leases and may amend, renew or extend Leases without Lender’s prior consent if the following conditions are met:
(i)there is no Event of Default at the time the new Lease, amendment, renewal or extension is executed;
(ii)each new Lease, amendment, renewal, or extension is with a tenant that is not a Major Tenant or a tenant that provides daycare facilities or similar childcare services; and
(iii)Lender has not revoked Borrower’s privilege of entering into new leases and amending, renewing or extending Leases without Lender’s consent as provided in Section 8.2(b).
If the preceding conditions are not met, Borrower may not enter into any new Lease or any amendment, renewal or extension of a Lease without Lender’s prior consent, not to be unreasonably conditioned, withheld or delayed.
(b)After 60-days’ prior notice to Borrower, Lender may revoke Borrower’s privilege to enter into new leases and to amend, renew and extend Leases without Lender’s prior consent if the Debt Service Coverage for the Property is less than 1.15x.
(c)Borrower’s privilege to enter into new leases and to amend, renew or extend Leases without Lender’s prior consent automatically terminates during the continuance of an Event of Default.
(d)Borrower will deliver to Lender an original or certified copy of each new Lease, together with a reasonably detailed lease abstract, within (i) thirty (30) days of execution, with respect to a Lease with a Major Tenant, and (ii) fifteen (15) days after a request from Lender for any other Lease.
(e)With respect to any new Lease or modification of Lease requiring Lender’s consent, Borrower shall deliver to Lender a written request for approval containing a bold face, conspicuous legend in 25 point font or more at the top of the first page thereof to the effect, “PLEASE RESPOND TO THIS REQUEST FOR APPROVAL IN WRITING WITHIN TEN CALENDAR DAYS”. If Lender fails to respond to a request for Lender’s approval within ten (10) calendar days of Lender’s receipt of Borrower’s request and all information reasonably required by Lender in order to adequately review such request, Borrower may deliver to Lender a second request for such approval, provided that such second request contains a bold face, conspicuous legend in 25 point font or more at the top of the first page thereof to the effect that “IF YOU FAIL TO RESPOND TO THIS REQUEST FOR APPROVAL IN WRITING WITHIN FIVE (5) CALENDAR DAYS, YOUR APPROVAL SHALL BE DEEMED GIVEN,” and Lender fails to respond to such request for approval five (5) calendar days after Lender has received from Borrower such second request, Lender shall be deemed to have given such approval.

Section 8.3    Termination, Cancellation or Surrender of Leases.
(a)Borrower may terminate or cancel any Lease or accept surrender of any leased premises prior to the scheduled expiration date of the Lease in its reasonable discretion and without Lender’s prior consent, if the following conditions are met:
(i)there is no Event of Default at the time of termination, cancellation or surrender;
(ii)either (x) the term of the affected Lease will expire within six (6) months, (y) the tenant is in default under the affected Lease for more than sixty (60) days, or (z) Borrower has determined in Borrower’s reasonable business judgment that it is economically beneficial to the Property to terminate or cancel the affected Lease and relet the space taking into account the time and costs associated with reletting the space;
(iii)the affected Lease is not with a Major Tenant; 
(iv)Lender has not revoked Borrower’s privilege to terminate or cancel Leases and accept surrender of leased premises as provided in Section 8.3(b); and
(v)the projected Debt Service Coverage for the Property for the following twelve (12) months shall not be less than 1.05x.
If the preceding conditions are not met, Borrower will not terminate or cancel any Lease or accept surrender of any leased premises prior to the scheduled expiration date of the Lease without Lender’s prior consent, which consent shall not be unreasonably conditioned, withheld or delayed.
(b)Upon the occurrence of any of the following and after 60-days’ prior notice to Borrower, Lender may revoke Borrower’s privilege to terminate or cancel Leases and accept surrender of leased premises without Lender’s prior consent if the Debt Service Coverage for the Property is less than 1.15x.
(c)Borrower’s privilege to terminate or cancel Leases and accept surrender of leased premises without Lender’s prior consent automatically terminates during the continuance of an Event of Default.
(d)If any Lease with a Major Tenant is terminated or cancelled or the leased premises surrendered, Borrower will pay to Lender within two (2) business days of receipt by Borrower any termination, cancellation or surrender fee (as applicable, a “Termination Fee”) paid by the Tenant under such Major Lease to be held in an escrow account for up to twelve (12) months for the benefit of Borrower and controlled by Lender (the “Leasing Escrow”).  Upon written request by Borrower and compliance by Borrower with Lender’s customary disbursement conditions Lender shall disburse funds from the Leasing Escrow for expenses related to reletting or re-tenanting the space covered by such Lease, including, but not limited to, for tenant improvements and leasing commissions.  If the space has been relet by the date that is twelve (12) months following the date that Borrower delivers the escrowed funds to Lender, any amounts that remain on deposit after disbursements for all applicable leasing costs shall be delivered to Borrower after disbursement of the applicable costs.  At any time that there are funds in the Leasing Escrow, Borrower may instruct Lender to use such funds to repay the Loan, without any Prepayment Premium.  If on the date that is twelve (12) months following the date that Borrower delivers the escrowed funds to Lender the space has not been relet, Lender may, at Lender’s election, use such funds pay down the Loan, without any Prepayment Premium.

ARTICLE IX
ENVIRONMENTAL
Section 9.1    Environmental Representations and Warranties.  Except as disclosed in the Environmental Report and to Borrower’s knowledge as of the date of this Loan Agreement:
(a)no Environmental Activity has occurred or is occurring on the Property other than the use, storage, and disposal of Hazardous Materials which (i) is in the ordinary course of business consistent with the Permitted Use; (ii) is in compliance with all Environmental Laws and (iii) has not resulted in Material Environmental Contamination of the Property; and
(b)no Environmental Activity has occurred or is occurring on any property in the vicinity of the Property which has resulted in Material Environmental Contamination of the Property.
Section 9.2    Environmental Covenants.
(a)Borrower will not cause or knowingly permit any Material Environmental Contamination of the Property.
(b)Borrower will not cause (and shall use commercially reasonable efforts to ensure that no other party will cause) an Environmental Activity to occur on the Property other than the use, storage and disposal of Hazardous Materials which (i) is in the ordinary course of business consistent with the Permitted Use; (ii) is in compliance with all Environmental Laws; and (iii) does not create a risk of Material Environmental Contamination of the Property.
(c)Borrower will notify Lender promptly upon Borrower becoming aware of (i) any Material Environmental Contamination of the Property not disclosed in the Environmental Report or (ii) any Environmental Activity with respect to the Property that is not in accordance with the preceding subsection in all material respects (b)  and is not disclosed in the Environmental Report.  Borrower promptly will deliver to Lender copies of all documents delivered to or received by Borrower regarding the matters set forth in this subsection, including notices of Proceedings or investigations concerning any Material Environmental Contamination of the Property or Environmental Activity or concerning Borrower’s status as a potentially responsible party (as defined in the Environmental Laws).  Borrower’s notification of Lender in accordance with the provisions of this subsection will not be deemed to excuse any default under the Loan Documents resulting from the violation of Environmental Laws or the Material Environmental Contamination of the Property or Environmental Activity that is the subject of the notice.  If Borrower receives notice of a suspected violation of Environmental Laws in the vicinity of the Property that poses a risk of Material Environmental Contamination of the Property, Borrower will give Lender notice and copies of any documents received relating to such suspected violation.
(d)From time to time at Lender’s reasonable request,  Borrower will deliver to Lender any information known and documents reasonably available to Borrower relating to any Material Environmental Contamination or Environmental Activity.
(e)Lender may perform or engage an independent consultant to perform an assessment of the environmental condition of the Property and of Borrower’s compliance with this Section on an annual basis, or at any other time if Lender has reasonable cause to believe that there is an Environmental Activity at the Property and the applicable Individual Property is not in material compliance with Environmental Laws, or after an Event of Default.  In connection with the assessment:  (i) upon reasonable prior notice to Borrower (and subject to the rights of tenants under Leases) and during reasonable business hours, Lender

or its consultant may enter and inspect the Property and perform tests of the air, soil, ground water and building materials; (ii) Borrower will cooperate and use commercially reasonable efforts to cause tenants and other occupants of the Property to cooperate with Lender or its consultant, subject in all cases to the terms of such tenants’ Leases; (iii) Borrower will receive a copy of any final report prepared after the assessment, to be delivered to Borrower not more than ten (10) days after Borrower requests a copy and executes Lender’s standard confidentiality and waiver of liability letter; (iv) Borrower will accept custody of and arrange for lawful disposal of any Hazardous Materials required to be disposed of as a result of the tests; (v) Lender will not have liability to Borrower with respect to the results of the assessment; and (vi) Borrower will first look to the consultants to reimburse Borrower for any damage resulting from such assessment before making a claim against Lender.  Lender shall require its consultant to carry commercially insurance coverage with Borrower named as an additional insured on such policies. All access of Lender and its consultant shall be subject to the rights of Tenants under all applicable Leases. The consultant’s assessment and reports will be at Borrower’s expense (x) if the reports disclose any material adverse change in the environmental condition of the Property from that disclosed in the Environmental Report which was not previously reported to Lender; (y) if Lender engaged the consultant when Lender had reasonable cause to believe Borrower was not in compliance with the terms of this Article and, after written notice from Lender, Borrower failed to provide promptly reasonable evidence that Borrower is in compliance; or (z) if Lender engaged the consultant during the continuance of an Event of Default.
ARTICLE X
FINANCIAL REPORTING
Section 10.1    Financial Reporting.
(a)(i) On or prior to March 31st of each year Borrower shall submit to Lender a Property operating statement for the prior calendar year, (ii) after the expiration of any calendar quarter, upon written request of Lender or its servicer, within the later to occur of ten (10) days of such request or 30 days after such quarter end, Borrower shall submit to Lender a Property operating statement for the prior calendar quarter, which statements shall be certified as true and correct by Borrower (provided, however, if a monetary Event of Default occurred during the prior reporting period, audited Property operating statements may be required at Lender’s option), (iii) on or prior to March 31st of each year Borrower shall submit to Lender a current rent roll, (iv) after the expiration of any calendar quarter, upon written request of Lender or its servicer, within ten (10) days of such request, Borrower shall submit to Lender a current rent roll, which rent rolls shall be certified as true and correct by Borrower and a copy of the current aged accounts receivable report, (v) on or prior to March 31st of each year, Borrower shall submit to Lender annual financial statements for Borrower and Guarantor, and (vi) after the expiration of any calendar quarter, upon written request of Lender or its servicer, within the later to occur of ten (10) days of such request or 45 days after such quarter end, Borrower shall submit to Lender quarterly financial statements for Guarantor, which statements shall be certified as true and correct by Borrower or the individuals for whom the statements are prepared (provided, however, if a monetary Event of Default occurred during the prior reporting period, audited financial statements may be required at Lender’s option). 
(b)The annual certification of rent roll referenced above shall be executed by Borrower, or the Manager of the Property, as agent of Borrower, in the form attached hereto in Exhibit D, without any material deviation to such form unless otherwise approved by Lender (provided, however, the disclosure of any exception on Schedule B thereof shall constitute a violation of this Agreement only if the substance of the exception itself constitutes a violation by Borrower of the provisions of the Loan Documents).

(c)Borrower will keep full and accurate Financial Books and Records for each Fiscal Year.  Borrower will permit Lender or Lender’s accountants or auditors to inspect or audit the Financial Books and Records from time to time at reasonable times and upon prior written notice.  Borrower will maintain the Financial Books and Records for each Fiscal Year for not less than 3 years after the date Borrower delivers to Lender the financial certificates, statements and information to be delivered to Lender for the Fiscal Year.  Financial Books and Records will be maintained at Borrower’s address set forth in the section entitled “Notices”, at the Individual Property or at any other location as may be approved by Lender.
Section 10.2    Annual Budget.  Not less than 10 days prior to the end of each Fiscal Year, Borrower will deliver to Lender the following:
(a)An initial detailed budget (the “Budget”) for the Property for the upcoming Fiscal Year, to include a net operating income statement and a capital expenditures statement including projected capital and tenant improvement costs; and
(b)A lease rollover schedule, and applicable assumptions for the Property, which shall include any material information relating leasing commissions, tenant improvement costs and other capital costs in the Property.
Borrower waives any defense or right of offset to the Obligations, and any claim or counterclaim against Lender, arising out of any discussions between Borrower and Lender regarding any Budget or revised Budget delivered to Lender, including any defense, right of offset, claim or counterclaim alleging in substance, that by virtue of such delivery, discussions or resolution, Lender has interfered with, influenced or controlled Borrower or the operations at the Property.
Section 10.3    Material Non-Public Information.  Prior to delivering any information that may constitute material non-public information with respect to a company whose shares are publicly traded, Borrower shall endeavor to notify Lender in advance of any such proposed delivery, it being understood and agreed, however, that any breach of this provision by Borrower shall not constitute a default or Event of Default hereunder.

ARTICLE XI
EXPENSES AND DUTY TO DEFEND
Section 11.1    Payment of Expenses.
(a)Unless specifically stated to the contrary in the Loan Documents, Borrower is obligated to pay all reasonably-incurred, documented out-of-pocket fees and expenses (the “Expenses”) that are (i) incurred by Lender in respect of the Loan, any Loan Document, the Property or Borrower; (ii) charged by Lender in consideration of processing any request by or on behalf of Borrower for an action or consent of Lender under the Loan Documents as set forth herein (or if not set forth herein, then as determined by Lender in its reasonable discretion); or (iii) are otherwise payable in connection with the Loan, the Property or Borrower, including attorneys’ fees and expenses and any fees and expenses relating to (A) the preparation, execution, acknowledgment, delivery and recording or filing of the Loan Documents; (B) any Proceeding or other claim asserted against Lender or any Proceeding described in the Section entitled “Lender’s Right to Appear”; (C) any inspection, assessment, survey and test permitted under the Loan Documents; (D) any Destruction Event; (E) the preservation of Lender’s security and the exercise of any rights or remedies available at Law, in equity or otherwise, except if a court of competent jurisdiction determines in favor of Borrower in any Proceeding of Lender’s exercise of rights and remedies; (F) administration of the Loan in amounts set forth in the Loan Documents; (G) the Leases and the Property Documents; and (H) any Proceeding in or for bankruptcy, insolvency, reorganization or other debtor relief or similar Proceeding relating to Borrower, the Property or any person liable under any guarantee, indemnity or other credit enhancement delivered in connection with the Loan.
(b)Borrower will pay the Expenses within ten (10) days of written demand by Lender.  If Lender pays any of the Expenses, Borrower will reimburse Lender the amount paid by Lender within ten (10) days of written demand by Lender, together with interest on such amount at the Default Interest Rate from the date after payment of such Expenses is due through and including the date Borrower reimburses Lender.  The Expenses together with any applicable interest, premiums or penalties constitute a portion of the Debt secured by the Security Instrument.
Section 11.2    Duty to Defend.  If Lender or any of its trustees, officers, employees or Affiliates is a party in any Proceeding relating to the Property, Borrower or the Loan, Borrower will indemnify and hold harmless the party and will defend the party with attorneys and other professionals retained by Borrower and reasonably approved by Lender. During the continuance of an Event of Default Lender may elect to engage its own attorneys and other professionals, at Borrower’s expense, to defend or to assist in the defense of the party.  In all events, when Lender is a party in a Proceeding, with respect to the portion of the case applicable to Lender, case strategy will be determined by Lender if Lender so elects and no Proceeding relating to such portion of the Proceeding will be settled without Lender’s prior approval which approval will not be unreasonably withheld, conditioned or delayed, unless an Event of Default is continuing in which case such approval will be in Lender’s sole discretion. 

ARTICLE XII
TRANSFERS, LIENS AND ENCUMBRANCES
Section 12.1    Prohibitions on Transfers, Liens and Encumbrances.
(a)Borrower acknowledges that in making the Loan, Lender is relying to a material extent on the business expertise and net worth of Borrower and Borrower’s general partners, members or principals and on the continuing interest that each of them has, directly or indirectly, in the Property.  Accordingly, except as specifically set forth in this Loan Agreement, Borrower (i) will not, and will not permit its partners, members or principals to, effect a Transfer, other than Permitted Transfers, without Lender’s prior approval, which may be withheld in Lender’s sole discretion and (ii) will keep the Property free from all liens and encumbrances other than the lien of the Security Instrument and the Permitted Exceptions.  A “Transfer” is defined as any sale, grant, lease (other than bona fide third-party space leases with tenants entered into in accordance with the provisions hereof), conveyance, assignment or other transfer of, or any encumbrance or pledge against (excluding easements or similar grants of access to the Property made in the ordinary course and having no material adverse effect to the Property), the Property, any interest in the Property, any interest of Borrower’s partners, members or principals in the Property, or any change in Borrower’s composition or Change in Control of Borrower, in each instance whether voluntary or involuntary, direct or indirect, by operation of law or otherwise (including mergers affecting any constituent entity) and including the grant of an option or the execution of an agreement relating to any of the foregoing matters.
(b)Borrower represents, warrants and covenants that each Borrower Entity is a Delaware limited liability company and the respective direct and indirect owners and the percentage ownership interests set forth on Schedule 2 attached hereto are true and correct as of the date hereof.
Section 12.2    Permitted Transfers.  
(a)As used in this Section 12.2, the following shall constitute the “Transfer Conditions”:
(i)With respect to the Transfer of 20% or more of the interests in any Borrower Entity (other than the Transfers to be consummated pursuant to that certain Contribution Agreement dated May 18, 2017, entered into by Guarantor, Phillips Edison Limited Partnership and certain Affiliates, which are not subject to the terms and provisions of Article XII), Lender receives prior notice; 
(ii)There is no Event of Default under the Loan Documents and all of Borrower’s payment obligations to Lender are satisfied through the date of the Transfer;
(iii) Borrower pays Lender’s actual out-of-pocket third party costs (including reasonable legal fees and expenses);
(iv) The Transfer will not cause a violation of any of the covenants or representations contained in the Sections entitled “ERISA Compliance” or “Special Purpose Entity Representations, Warranties and Covenants”;
(v)The Manager of the Property is a Qualified Manager; 
(vi)With respect to the Transfer of 20% or more of the interests in any Borrower Entity, unless waived by Lender, the transferee (including any Affiliates of the transferee and any substitute guarantor or indemnitor) is domiciled in the United States and/or is a citizen of

the United States, is not a “specifically designated national and blocked person” on the OFAC List and otherwise is not in violation of any Anti-Terrorism Laws, and is free from bankruptcy or a similar insolvency proceeding; and
(vii)With respect to the Transfer of 20% or more of the interests in any Borrower Entity, unless waived by Lender prior to the Transfer, Lender shall have obtained (at Borrower’s cost) Uniform Commercial Code search report satisfactory to Lender relating to the transferee.
(b)The following Transfers of any interest in any Borrower Entity shall be permitted Transfers (collectively “Permitted Transfers”) without Lender’s consent, subject to the terms and conditions of this Section 12.2(b) and Section 12.2(c):
(i)The sole member of each Borrower Entity shall be permitted to make a sale, conveyance, transfer or other vesting of any direct or indirect interest in any Borrower Entity (other than a general partnership interest in the sole member of a Borrower Entity if the sole member of such Borrower Entity is a limited partnership) up to an aggregate of 49% of the total interests of any Borrower Entity without the prior consent of Lender, provided any such sale, conveyance, transfer or other vesting does not result in a Change of Control (as hereinafter defined) or management of any Borrower Entity. Copies of any and all documents evidencing any such sale, conveyance, transfer or other vesting must be provided to Lender within fifteen (15) days after the occurrence of said action including, without limitation, a statement detailing the action and a listing of reallocations and percentages of ownership interest in such Borrower Entity. Except as set forth in the first sentence of this Section (a) and below with respect to PECO Permitted Transfers (as hereinafter defined), no direct or indirect interests in (l) any Borrower Entity's interest in any Individual Property, or (2) any Borrower Entity, may be sold, transferred (either to third parties or to related entities) conveyed, or vested without the prior written consent of Lender (which Lender may withhold at its sole discretion) and subject in all events to the 49% aggregate limitation above; and the occurrence of any such event will constitute an Event of Default under the Loan Documents.
(ii)In addition to the above, and notwithstanding anything to the contrary contained in this Agreement, for so long as Phillips Edison Grocery Center Operating Partnership I, L.P., a Delaware limited partnership (the “Operating Partnership”), is the Indemnitor and each Borrower Entity hereunder collectively constitutes Borrower, the following Transfers (or series of Transfers) shall constitute Permitted Transfers (subject only to any conditions set forth below and the Transfer Conditions) and shall not require Lender's consent or the payment of a transfer fee in connection therewith (each, a “Permitted PECO Transfer”):
(A)    the listing of preferred and/or common stock (the “REIT Shares”) in Phillips Edison Grocery Center REIT I, Inc., a Maryland corporation (“REIT”), the sole member of, the General Partner, on the New York Stock Exchange or any other nationally recognized stock exchange (the “REIT Listing”), provided that (A) the REIT satisfies all of the listing requirements of the Securities and Exchange Commission at the time of and as a condition of the REIT Listing, including, but not limited to, the net worth requirements, and (B) the REIT Listing does not result in or cause a Change of Control;
(B)    without limiting subsection (iv) below, the issuance, redemption, sale, pledge, conveyance, transfer or other disposition (each, is “REIT Share Transfer”) of the REIT Shares so long as (A) at the time of the REIT Share Transfer, the REIT Shares are listed on the New York Stock Exchange or any other nationally recognized stock exchange, and (B) the REIT Share Transfer does not result in or cause a Change of Control; 

(C)    any issuance, redemption, sale, pledge, conveyance, transfer or other disposition of REIT Shares during the period prior to the REIT Listing (i.e., while the REIT is a public entity but a non-listed entity) which is made in accordance with the REIT's charter and other governing documents, including, but not limited to, the REIT's share repurchase program and/or dividend reinvestment program, provided that such activities, singularly or taken as a whole, do not result in or cause a Change of Control; and
(D)    The Borrower shall reimburse the Lender all reasonable out-of-pocket expenses (including reasonable attorneys’ fees) in conjunction with its review and processing of a proposed or completed Permitted Transfer (i.e., a Transfer in accordance with (a) and (b) above and (c) below), regardless of whether the Permitted Transfer is carried out. No transfer fee shall be payable in connection with a Permitted Transfer.
(iii)Any merger or consolidation of the REIT or Operating Partnership with any entity that is managed by, or is an affiliate of, the REIT so long as the REIT or the Operating Partnership is the surviving entity and such transaction does not result in or cause a Change of Control.
(iv)The Transfer of one hundred percent (100%) of the membership interests in Borrower to a wholly-owned subsidiary of Operating Partnership; provided that such transaction does not result in or cause a Change of Control.
(v)A one-time sale of the Property or of 100% of the direct or indirect membership interest in Borrower will be permitted, subject to the following conditions: (A) Lender’s approval of the transferee which, together with the parent company that directly or indirectly owns said transferee, must have a net worth of at least $150,000,000.00 and must be an Institutional Investor or developer with a reputation and experience comparable to Borrower as of the date hereof; (ii) the transferee’s express assumption of Borrower’s obligations under the Loan Documents and the Property Documents; (iii) Lender’s approval in its sole discretion of a substitute guarantor and substitute indemnitor, and delivery of substitute guaranty and indemnity instruments satisfactory to Lender; (iv) the Transfer Conditions are satisfied; (v) Lender’s receipt of satisfactory evidence that immediately prior to the Transfer and at least twelve (12) months subsequent to the Transfer (which forward-looking analysis will include any underwriting adjustments necessary in Lender’s discretion to properly reflect anticipated revenues and operating expenses for the subsequent period, including but not limited to estimated increases in real estate taxes resulting from any reassessment of the Property), the Property supports a loan to value ratio no greater that the loan to value ratio as of the date hereof, with value to be determined by the purchase price of the Property pursuant to an executed purchase and sale agreement with a bona fide unaffiliated third-party purchaser, and a Debt Service Coverage of not less than  3.55x; (vi) the Transfer will not violate Lender’s individual or related borrower limits as established by Lender from time to time in its sole discretion; (vii) payment of a transfer and assumption fee of 0.5% of the outstanding principal balance of the Loan; and (viii) if required by Lender in the exercise of its reasonable discretion, Lender’s receipt of a non-consolidation opinion in form and substance reasonably acceptable to Lender.
(c)    (i)    For purposes of this Section, a “Change of Control” shall occur when: (A) the Operating Partnership is no longer the sole member of Borrower and the limited partner and sole member of the general partner of Phillips Edison Institutional Joint Venture I, L.P., as applicable, (B) Phillips Edison Grocery Center OP GP I LLC (“Operating Partnership General Partner”) is no longer the sole general partner of the Operating Partnership, (C) REIT is no longer the sole member of Operating Partnership General

Partnership, and/or REIT's direct limited partnership interest in the Operating Partnership and/or its indirect beneficial interest in Borrower falls below 51%, or (D) any Transfer of interests or series of Transfers of interests in the REIT, which results in more than 49% of the ownership interests of the REIT being held by any single Person or affiliated group of people or entities. In addition, for the avoidance of doubt, any removal or replacement of the external REIT management advisor shall constitute a Permitted PECO Transfer and shall not constitute a Change of Control provided that (two (2) or more of Jeff Edison, Devin Murphy, Mark Addy, Bob Myers Joe Schlosser, Ryan Moore and John Caulfield (or, after reasonable prior notice to Lender, replacement executives having a similar level of experience and seniority to any replaced executive), shall continue to be executives of the REIT or the Operating Partnership. 
(ii)    Neither any REIT Share Transfer nor any Transfer of any interest in the Operating Partnership shall relieve Borrower, Guarantor or Indemnitor of any of its obligations and liabilities under this Agreement or any of the other Loan Documents, including the Environmental Indemnity.
(iii)    REIT shall register (and continue such registration) so that Lender automatically receives notifications whenever the REIT posts and files any documents with the U.S. Securities and Exchange Commission. Additionally, from time to time, upon written request of Lender, REIT shall furnish to Lender copies of (i) mailings by REIT to its shareholders, (ii) to the extent not confidential, reports furnished by REIT to rating agencies and relating to its outstanding commercial paper, and (iii) to the extent not confidential, information generally supplied by REIT in writing to security analysts.
(iv)    Notwithstanding anything to the contrary herein, for such time as the REIT is publicly registered, publicly listed or publicly traded, the transfer provisions set forth herein (including the Transfer Conditions) shall not apply to any issuance, redemption, sale, pledge, conveyance, transfer or other disposition of any direct or indirect beneficial or legal ownership interests in any entity that is a shareholder of the REIT (it being understood that Borrower has no control over the ownership structure of any such entities). Further, so long as no Change of Control is effectuated, for such time as the REIT is publicly registered, publicly listed, or publicly traded, the transfer provisions set forth herein (including the Transfer Conditions) shall not apply to any issuance, conversion, redemption, sale, pledge, conveyance, transfer or other disposition of any direct or indirect beneficial or legal ownership interests in owners of limited partner interests in Indemnitor.

Section 12.3    Right to Contest Liens.  Borrower, at its own expense, may contest the amount, validity or application, in whole or in part, of any mechanic’s, materialmen’s or environmental liens in which event Lender will refrain from exercising any of the Remedies and no Event of Default shall be deemed to have occurred, provided that the following conditions are met:
(i)Borrower delivers to Lender notice of the proposed contest not more than 30 days after the lien is filed;
(ii)the contest is by a Proceeding promptly initiated and conducted in good faith and with due diligence;
(iii)the Proceeding suspends enforcement or collection of the lien, imposition of criminal or civil penalties and sale or forfeiture of the Property and Lender will not be subject to any civil suit as a result of the contest (provided, the foregoing need not be satisfied if clause (vi) is satisfied); 
(iv)the Proceeding is permitted under and is conducted in accordance with the Leases and the Property Documents;
(v)Borrower sets aside reserves or furnishes a bond or other security satisfactory to Lender, in either case in an amount sufficient to pay the claim giving rise to the lien, together with all interest and penalties, or Borrower pays the contested lien under protest (provided, the foregoing need not be satisfied if clause (iii) is satisfied); and
(vi)with respect to an environmental lien, Borrower is using best efforts to mitigate or prevent any deterioration of the Property resulting from the alleged violation of any Environmental Laws or the alleged Environmental Activity.

Section 12.4    Release Rights.
(a)During the Term of the Loan, if Borrower proposes to sell any Individual Property (as applicable, a “Release Parcel”) to a bona fide unaffiliated third party purchaser (including, without limitation, pursuant to a right of first offer, a right of first refusal or similar right in favor of a Tenant), then as limited below, Borrower will be permitted to obtain a release (a “Release”) of the Release Parcel subject to the following conditions and limitations for each Release:
(i)The Release is solely for the purpose of a transfer of the Release Parcel to bona fide unaffiliated third party purchase;
(ii)Not less than 30 days prior to the date of the Release, Borrower delivers to Lender (i) a notice setting forth (A) the date of the Release; (B) the name of the proposed transferee; and (C) any other information Borrower determines is reasonably necessary for Lender to analyze the terms of the Release, (ii) a non-refundable fee of $15,000 for each Release; and (iii) the Valuation Report;
(iii)There is no Event of Default under the Loan Documents on either the notice date or the date of the Release;
(iv)Borrower pays all of Lender’s reasonable out of pocket fees and expenses relating to the Release, including third party reports, title costs and outside counsel fees, if applicable;
(v)Borrower delivers to Lender copies of the executed documents evidencing the transfer of the Release Parcel as provided in subsection (i) above and such other information relating to the transfer of the Release Parcel as is reasonably required by Lender;
(vi)The values of the remaining Individual Properties support an average loan to value ratio of not more than 5% in excess of the loan to value ratio of such remaining Individual Properties at Closing, as set forth on Schedule 1 attached hereto (“LTV Threshold”).  Borrower shall provide Lender a report (the “Valuation Report”) with respect to the value of each of the Individual Properties (other than the Release Parcel).  Lender shall be entitled to object to the values set forth in such Valuation Report within 10 business days after delivery thereof (“Lender Review Period”).  If Lender objects to the values of any Individual Property in the Valuation Report, then during the Lender Review Period, Lender shall determine its valuation of such Individual Property or Individual Properties by relying upon prior appraisals and its internal valuation metrics without obtaining new appraisals (with Net Operating Income used in such internal valuation to be calculated in accordance with Net Operating Income), provided that if Lender, after such internal valuation, determines that the remaining Individual Properties exceed the LTV Threshold, Lender shall immediately provide Borrower notice of its determination in reasonable detail prior to the expiration of the Lender Review Period. Upon delivery of such notice either Borrower or Lender may elect to engage an appraiser, at the Borrower’s expense, to make a final determination of the value. The parties shall endeavor to cause the appraisal to be completed not more than 10 Business Days from the expiration of the Lender Review Period. The Lender Review Period and the appraisal determination process, if needed, shall not be more than 30 days from the date the Valuation Report is initially delivered to Lender;
(vii)The aggregate Debt Service Coverage for the 12-month period following the Release based on projected Net Operating Income for the remaining Individual

Properties exclusive of the Release Parcel will be greater than 3.55x;  provided that Borrower shall have the right to prepay an additional portion of the Loan to meet the required Debt Service Coverage;
(viii)Lender receives (A) 110% of the outstanding principal amount allocated to the Release Parcel (the “Release Amount”) to be applied to the outstanding principal balance of the Loan; (B) accrued interest on the Release Amount and all other sums due on the Loan allocated to the Release Parcel; and (C) the Prepayment Premium (for purposes of determining such Prepayment Premium (I) the “Prepayment Date Principal” shall equal the principal amount being prepaid and (II) the “Note Payment” shall mean each of (x) the scheduled Debt Service Payments (determined as if the principal balance of the Loan was equal to the Release Amount) for the period from the date of the Release through the Maturity Date and (y) the Release Amount); in connection with such payment, the payment amount in excess of the applicable Allocated Loan Amount will be applied, pro-rata, to reduce the remaining Allocated Loan Amounts, Lender will reset the Debt Service Payments based thereon, and Lender will provide a new schedule of Allocated Loan Amounts (which shall be deemed to automatically replace Schedule 1 hereof, provided, however, that Borrower shall execute any amendment or other instrument reasonably requested by Lender to evidence the reduction in the remaining Allocated Loan Amounts as provided herein);
(ix)Borrower and, if applicable, any Indemnitor and Guarantor, shall reaffirm their obligations under the Loan Documents and shall deliver to Lender such other documents, instruments, opinions and certificates related to the Release as Lender shall deem necessary, in its reasonable discretion; and
(x)If the aggregate loan to value ratio of the Property is greater than 40%, then  Lender will not be required to release an Individual Property if Leases comprising more than 40% of the annual base rent of the Property exclusive of the Release Parcel would expire during any calendar year during the remainder of the Loan term. If the aggregate loan to value ratio of the Property is less than 40%, then this provision shall not apply.
(b)In connection with any Release, the following limitations will apply:
(i)No Release will be allowed during the first twelve (12) months of the Term;
(ii)The aggregate number of Releases allowed during the Term may not exceed eight (8). If  Borrower Releases eight (8) properties the remaining eight (8) shall not include the following three (3) Individual Properties: Lakewood Plaza, Dean Taylor Crossing and Richmond Plaza;
(iii)No Release will be permitted which would cause the aggregate of the Release Amounts to exceed $87,500,000.00; and
(iv)In any twelve (12) month period, there shall be no more than two (2) Releases.

Section 12.5    Substitution.
(a)During the Term of the Loan, if Borrower proposes to sell a an Individual Property (as applicable, the “Substituted Parcel”) to a bona fide unaffiliated third party purchaser, then as limited below, Borrower will be permitted to substitute (a “Substitution”) a parcel (the “Substitution New Parcel”)
and obtain a release from Lender’s lien for the Substituted Parcel subject to the satisfaction of the following conditions and limitations, satisfaction to be determined by Lender in its reasonable discretion except as otherwise expressly stated:
(i)Lender receives not less than 45 days’ prior written notice of the Substitution, such notice to include A) a full package of information concerning the Substitution New Parcel and B) the payment of a non-refundable fee of $20,000 for each Substitution
(ii)Borrower pays, within 10 days of notice by Lender, a deposit for the costs of any appraisal, engineering or environmental reports required in connection with the Substitution in an amount reasonably determined by Lender;
(iii)There is no Event of Default under the Loan Documents on either the notice date or the date of the Substitution;
(iv)Borrower pays all of Lender’s reasonable out of pocket fees and expenses relating to the Substitution, including third party reports, title costs and outside counsel fees, if applicable;
(v)Prior to release of the Substituted Parcel, Lender receives evidence satisfactory to Lender that the parcel is being sold to a bona fide unaffiliated third party purchaser;
(vi)The quality of the Substitution New Parcel is comparable to or better than the Substituted Parcel;
(vii)The appraised value of the Substitution New Parcel (as determined by an appraisal reasonably satisfactory to Lender, paid for by Borrower and prepared by an appraiser appointed by Lender) is greater than (i) the appraised value allocated to the Substituted Parcel as set forth on Schedule 1, and (ii) the purchase price of the Substituted Parcel at the time of the Substitution;
(viii)The Debt Service Coverage for the 12-month period following the Substitution based on projected Net Operating Income for the Property exclusive of the Substituted Parcel but inclusive of the Substitution New Parcel will be greater than  3.55x;
(ix)The Substitution New Parcel conforms in all respects to Lender’s underwriting standards and criteria as well as such other environmental, engineering, legal or title requirements, as Lender may determine in its reasonable discretion;
(x)Borrower, and if applicable, Indemnitor and Guarantor, will reaffirm their obligations under the Loan Documents and execute and deliver appropriate amendments to the Loan Documents satisfactory to Lender making the Substitution New Parcel part of the security for the Loan, Indemnitor executes an environmental indemnity (in form and substance substantially similar to the Environmental Indemnity) with respect to the Substitution New Parcel and Lender receives such title assurances and endorsements to its existing policies confirming the priority of

its lien on the Substitution New Parcel and extending the coverage of all insurance (including endorsements) offered under the existing policies to the Substitution New Parcel, consenting to the release of the Substituted Parcel, and otherwise confirming no adverse changes in title coverage or the amount thereof;
(xi)Borrower and the Substitution New Parcel satisfy in a timely fashion each of the closing conditions required at the time of the making of the Loan that would have been applicable if the Substitution New Parcel had been included in the original Property; and
(xii)Borrower satisfies such conditions as Lender may reasonably require to the Substitution including providing any consents or approvals which may be necessary pursuant to Laws or documents affecting the Substituted Parcel
(b)In connection with any Substitution, the following limitations will apply:
(i)No more than eight (8) Substitutions will be allowed during the Term;
(ii)After giving effect to the proposed Substitution, the aggregate amount of the appraised value of the Substituted Parcel and the appraised values of Substituted Parcels released in any prior Substitutions (based on the appraised value of such Substituted Parcels as of the date hereof) shall not exceed $87,500,000.00; and
(iii)In any twelve (12) month period, there shall be no more than two (2) Substitutions.

ARTICLE XIII
ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 13.1    Further Assurances.
(a)Borrower will execute, acknowledge and deliver to Lender (or any other entity Lender designates) any additional or replacement documents (other than replacement Notes) and perform any additional actions that Lender determines are reasonably necessary to evidence, perfect or protect Lender’s first lien on and prior security interest in the Property.
(b)During the continuance of an Event of Default, Borrower appoints Lender as Borrower’s attorney-in-fact to perform, at Lender’s election, any actions and to execute and record any of the additional or replacement documents (other than replacement Notes) referred to in this Section, in each instance only at Lender’s election and only to the extent Borrower has failed to comply with the terms of this Section.
Section 13.2
(a)  Within 10 Business Days of Lender’s request, Borrower will deliver to Lender, or to any entity Lender designates, a certificate certifying, to Borrower’s knowledge, (i) the original principal amount of the Note; (ii) the unpaid principal amount of the Note; (iii) the Fixed Interest Rate; (iv) the amount of the then current Debt Service Payments; (v) the Maturity Date; (vi) the date a Debt Service Payment was last made; (vii) that, except as may be disclosed in the statement, there are no defaults or events which, with the passage of time or the giving of notice, would constitute an Event of Default; and (viii) there are no offsets or defenses against any portion of the Obligations except as may be disclosed in the statement.  Except during the continuance of an Event of Default, Lender shall not request a certificate under this subsection (a) more than once every twelve (12) months.
(b)If Lender requests, Borrower promptly will use commercially reasonable efforts to deliver to Lender or to any entity Lender designates a certificate from each party to any Property Document, certifying that the Property Document is in full force and effect with no defaults or events which, with the passage of time or the giving of notice, would constitute an event of default under the Property Document and that there are no defenses or offsets against the performance of its obligations under the Property Document.  Notwithstanding the foregoing, Lender hereby acknowledges that any form or specific provision regarding estoppels in a Property Document or attached shall be satisfactory. Except during the continuance of an Event of Default, Lender shall not request a certificate under this subsection (b) more than once every twelve (12) months.
(c)If Lender requests, Borrower promptly will use commercially reasonable efforts to deliver to Lender, or to any entity Lender designates, a certificate from each tenant under a Lease then affecting the Property, certifying to any facts regarding the Lease as Lender may require, including that the Lease is in full force and effect with no defaults or events which, with the passage of time or the giving of notice, would constitute an event of default under the Lease by any party, that the rent has not been paid more than one month in advance and that the tenant claims no defense or offset against the performance of its obligations under the Lease.  Notwithstanding the foregoing, Lender hereby acknowledges that any form of estoppel certificate set forth in a Lease shall be satisfactory. Except during the continuance of an Event of Default, Lender shall not request a certificate under this subsection (c) more than once every twelve (12) months.

Section 13.3    Special Purpose Entity Representations, Warranties and Covenants.
Each Borrower Entity covenants and agrees for itself as follows (the use of the term “Property” herein shall refer to the applicable Individual Property, and the use of the term “Borrower” herein shall refer to the applicable Borrower Entity):
(a)is formed solely for the purpose of owning and operating the Property and is not engaged and will not engage, either directly or indirectly, in any business other than the ownership, management, leasing, financing, refinancing, development and operation of the Property, and in the case of Ardrey Kell Station, LLC to be the sole shareholder of Ardrey Kell Owner Association, Inc. (“AKOA”);
(b)other than AKOA, does not have and will not acquire or use any assets other than the Property and personal property incidental to the business of owning and operating the Property and activities incidental thereto; without limiting the foregoing, the Property shall be operated as a single property or project, generating substantially all of Borrower’s gross income, it being the intent that the Property shall constitute “single asset real estate” for purposes of Section 362(d)(3) of the Bankruptcy Code; 
(c)other than in connection with a Permitted Transfer, will not liquidate or dissolve (or suffer any liquidation or dissolution), or enter into any transaction of merger or consolidation, or acquire by purchase or otherwise all or substantially all the business or assets of, or any stock or other evidence of beneficial ownership of any entity;
(d)will not, nor will any partner, limited or general, member or shareholder thereof, as applicable, violate the material terms of its partnership certificate, partnership agreement, articles of incorporation, by-laws, operating agreement, articles of organization, or other formation agreement or document, as applicable; 
(e)will observe all limited liability company, limited partnership or general partnership formalities that relate to the Borrower’s separateness pursuant to its formation documents, operating agreement, bylaws or partnership agreement (as the case may be) or any other organizational filing or document governing the affairs of the Borrower; 
(f)other than in connection with the Loan, has not and will not guarantee, pledge its assets for the benefit of, or otherwise become obligated for the obligations of any other Person or hold out its credit or assets as being available to satisfy the obligations of any other Person except for obligations for indemnification and other obligations of the Borrower pursuant to its operating agreement, bylaws or partnership agreement, as applicable;
(g)has not incurred and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (i) the Loan, (ii) any existing loans relating to the Property that are discharged or repaid from the proceeds of the Loan, (iii) trade debt incurred in the ordinary course of business not evidenced by a note and paid in the ordinary course of Borrower’s business in connection with owning, operating and maintaining the Property, provided that such indebtedness is paid within ninety (90) days of when incurred, unless being validly contested, and (iv) any other indebtedness permitted by the Loan Documents;
(h)will be and will at all times hold itself out to the public as a legal entity separate and distinct from any other entity (including, without limitation, any affiliate, limited partner, general partner or member, as applicable, or any affiliate of any limited partner, general partner or member of Borrower, as applicable), will correct any known misunderstanding concerning its separate identity, and will not identify

any other entity (including, without limitation, any affiliate, limited partner, general partner or member, or any affiliate of any limited partner, general partner or member of Borrower, as applicable) as a division or part of Borrower; 
(i)will maintain and account for all assets related to the Property in such a manner that it will not be costly or difficult to segregate, ascertain or identify its assets from those of any other Person who is not obligated to repay the Loan, subject to the management and operation of the Property by the Manager from and after the date hereof using a comingled account for receipt of Rents and subsequent distribution to a central account used to pay Operating Expenses, hold reserves and otherwise conduct the business of Borrower and certain Affiliates, and starting on the date which is not later than 120 days from the date of this Agreement, using one or two accounts for the receipt of Rents (which account or accounts shall not include Rents or other funds from any other properties other than the Property), prior to the subsequent distributions to a central account used to pay Operating Expenses, hold reserves and otherwise conduct the business of Borrower and certain Affiliates;
(j)will maintain its own separate, complete and accurate accounts, books, records and financial statements complying with GAAP, provided that the Borrower’s assets may be included in consolidated financial statements of its Affiliates and Borrower may be part of a consolidated federal tax return to the extent required or permitted by applicable law, including as a result of Borrower being a “disregarded entity” so long as there is an appropriate notation indicating the separate existence of the Borrower and its assets and liabilities (for the avoidance of doubt, this Section 13.3(j) shall not require any Borrower to file its own separate tax return if such Borrower is not required under applicable law to file such tax return because it is treated as a disregarded entity under applicable law or otherwise);  
(k)except as permitted or required by the Loan Documents, will pay its obligations and expenses from its own funds and assets; in each case to the extent sufficient cash flow from the Property is available to Borrower;
(l)will maintain its books, records, resolutions and agreements separate and apart from those of any other person;
(m)will not have any paid manager or director for the entity and to the extent Borrower has any employees, except as permitted or required by the Loan Documents, Borrower will pay the salaries of its own employees from its own funds and in the absence of such paid employees, Borrower will obtain all necessary services through third parties or independent contractors; 
(n)will conduct and operate business in its own name or in the name of the Property, will allocate fairly and reasonably any overhead for shared office space and use separate stationery, invoices and checks; 
(o)other than the management agreement, and insurance obtained from Silver Rock Insurance Inc. (Guarantor’s captive insurance company) will not enter into or be a party to any transaction with any Affiliate, except in the ordinary course of business and upon terms and conditions that are intrinsically fair and no less favorable to the Borrower than those that would be available on an arms-length basis with third parties;
(p)will not make loans or advance credit to any person (including Affiliates) other than to tenants of the Property in the form of tenant allowances or tenant improvements or to co-borrowers in connection with the Loan; 

(q)will not take any action which, under the terms of any formation document or other applicable organizational documents, requires the unanimous consent of all directors, partners or members, as applicable, without such required vote; 
(r)will not engage in, seek or consent to any dissolution, winding up, liquidation, asset sale (other than as permitted by the Loan Documents), bankruptcy or insolvency filing, or material amendment to or modification (including without limitation to any amendments or modifications of Borrower’s separateness covenants) of its partnership agreement, articles of incorporation, by-laws, operating agreement, articles of organization, or other formation agreement or document, as applicable, without the required written consent of Lender; 
(s)will intend to operate its business with the goal of maintaining capital which is adequate for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations to the extent funds are available from the Property; provided that the foregoing shall not require any direct or indirect member, partner or shareholder of Borrower to make any additional capital contributions to Borrower; and
(t)will have, or if the Borrower is a partnership, the general partner of Borrower will have, organizational documents that provide that, regardless of the solvency of the Borrower, that Lender is an intended third-party beneficiary of such organizational documents.
Borrower agrees the SPE Covenants are and will continue to be defined within Borrower’s (and if Borrower is a partnership, within the general partner’s) organizational documents. Each Borrower Entity (a) is and shall be qualified to do business in the state or commonwealth where its applicable Individual Property is located and (b) to the extent same is a single member limited liability company, is and will continue to be duly organized and in good standing under the laws of Delaware and maintains and will continue to maintain a springing member.
ARTICLE XIV
DEFAULTS AND REMEDIES
Section 14.1    Events of Default.
(a)The term “Event of Default” means the occurrence of any of the following events:
(i)if Borrower fails to pay any amount due, as and when required, under any Loan Document and the failure continues for a period of three (3) Business Days after notice from Lender;
(ii)if Borrower makes a general assignment for the benefit of creditors or admits in writing in a Proceeding its inability to pay its debts as they become due; or if Borrower or any other party (other than Lender) commences any Proceeding (A) relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors, in each instance with respect to Borrower; (B) seeking to have an order for relief entered with respect to Borrower; (C) seeking attachment, distraint or execution of a judgment with respect to Borrower; (D) seeking to adjudicate Borrower as bankrupt or insolvent; (E) seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to Borrower or Borrower’s debts; or (F) seeking appointment of a Receiver, trustee, custodian, conservator or other similar

official for Borrower or for all or any substantial part of Borrower’s assets, provided that if the Proceeding is commenced by a party other than Borrower or any of Borrower’s general partners or members, Borrower will have 90 days to have the Proceeding dismissed or discharged before an Event of Default occurs;
(iii)if Borrower is in default beyond any applicable grace and cure period under any other mortgage, deed of trust, deed to secure debt or other security agreement encumbering the Property whether junior or senior to the lien of the Security Instrument;
(iv)if there is a default beyond any applicable grace and cure period under any indemnity or guaranty in favor of Lender delivered to Lender in connection with the Loan or in connection with any loan cross-collateralized with the Loan;
(v)if an Event of Default occurs under any other Loan Document; 
(vi)if a Transfer occurs except in accordance with the provisions of this Agreement; 
(vii)if there is a default in the performance of any other provision of any Loan Document or if there is any inaccuracy or falsehood in any representation or warranty contained in any Loan Document or any indemnity or guaranty in favor of Lender delivered to Lender in connection with the Loan or in connection with any loan cross-collateralized with the Loan, which is not remedied within 30 days after Borrower receives notice thereof, provided that if the default, inaccuracy or falsehood is of a nature that it cannot be cured within the 30-day period and during that period Borrower commences to cure, and thereafter diligently continues to cure, the default, inaccuracy or falsehood, then the 30-day period will be extended for a reasonable period not to exceed 120 days after the notice to Borrower or
(viii)if Borrower violates, in more than a de minimis respect, any covenant contained within Section 13.3 entitled “Special Purpose Entity Representations, Warranties and Covenants” and such violation is not cured within three (3) Business Days after receipt of notice from Lender.
Section 14.2    Acceleration.  If an Event of Default occurs and is continuing, Lender may declare all or any portion of the Debt immediately due and payable (“Acceleration”) and exercise any of the other Remedies.
Section 14.3    Remedies.  If an Event of Default occurs and is continuing, Lender or any Person designated by Lender may (but shall not be obligated to) take any action (separately, concurrently, cumulatively, and at any time and in any order) permitted under any Laws, without notice, demand, presentment, or protest (all of which are hereby waived), to protect and enforce Lender’s rights under any Loan Document or Laws including the actions set forth in Section 7.2 of the Security Instrument.  Without limitation of the foregoing, in no event shall New York State Real Property Actions and Proceedings Law §§1301 or 1371 (or any respective successor statute thereto) be interpreted (by the parties hereto or by any court in any jurisdiction, whether in the State of New York or elsewhere) to so restrict or prohibit any such actions by Lender.

ARTICLE XV
LIMITATION OF LIABILITY
Section 15.1    Limitation of Liability.
(a)Notwithstanding any provision in the Loan Documents to the contrary, except as set forth in subsections (b) and (c), if Lender seeks to enforce the collection of the Debt, Lender will foreclose the Security Instrument instead of instituting suit on the Note.  If a lesser sum is realized from a foreclosure of the Security Instrument and sale of the Property than the then outstanding Debt, Lender will not institute any Proceeding against Borrower for or on account of the deficiency, except as set forth in subsections (b) and (c).
(b)The limitation of liability in subsection (a) will not affect or impair (i) the lien of the mortgages and deed of trusts or Lender’s other rights and remedies under the Loan Documents, including Lender’s right as mortgagee or secured party to commence an action to foreclose any lien or security interest Lender has under the Loan Documents; (ii) the validity of the Loan Documents or the obligations of Borrower thereunder; (iii) Lender’s rights under any Loan Documents that are not expressly non-recourse; or (iv) Lender’s right to present and collect on any letter of credit or other credit enhancement document held by Lender in connection with the Obligations.
(c)The following are excluded and excepted from the limitation of liability in subsection (a) and Lender may recover personally against Borrower for the following:
(i)all losses actually suffered and liabilities and expenses actually incurred by Lender (but excluding any consequential, special, punitive or exemplary damages or diminution in value) relating to any fraud, intentional misrepresentation or omission by Borrower in connection with (A) the performance of any of the conditions to Lender making the Loan; (B) any inducements to Lender to make the Loan; (C) the execution and delivery of the Loan Documents; (D) any certificates, representations or warranties given in connection with the Loan; or (E) Borrower’s performance of the obligations under the Loan Documents;
(ii)distribution of Rents derived from the Property or amounts that are on deposit in one or more accounts used by or on behalf of Borrower relating to the operation of the Property to Borrower’s members after an Event of Default under the Loan Documents which Event of Default is a basis of a proceeding by Lender to enforce the collection of the Loan;
(iii)the cost of remediation of any Environmental Activity (as defined in the Loan Documents) affecting the Property and any other losses actually suffered and liabilities and expenses actually incurred by Lender (but excluding any consequential, special, punitive or exemplary damages or diminution in value of the Property that was not caused by the acts or omissions of Borrower) relating to a default under any Article entitled “Environmental” contained in the Loan Documents;
(iv)misapplication or misappropriation of any security deposits collected by Borrower or letter of credit or advance rents held by Borrower, to the extent of the amount misapplied or misappropriated;

(v)any Termination Fee received by Borrower in connection with the termination, cancellation or surrender of the leased premises by a Major Tenant after an Event of Default under the Loan Documents which Event of Default is a basis of a proceeding by Lender to enforce the collection of the Loan, which is not paid to Lender (or an escrow agent selected by Lender) in accordance with the terms and conditions of this Agreement, to the extent of the portion of such Termination Fee received and not paid over to Lender to be held in accordance with this Agreement;
(vi)the replacement cost of any Fixtures and Personal Property removed from the Property after an Event of Default occurs other than in the ordinary course of repair and maintenance and which are not replaced by items of similar value and function;
(vii)all losses actually suffered and liabilities and expenses actually incurred by Lender (but excluding any consequential, special, punitive or exemplary damages or diminution in value) relating to any waste by Borrower; provided the failure of  to restore, repair or maintain the Property shall not constitute waste if gross revenue, after payment of Debt Service on the Loan and all Operating Expenses, is not available to Borrower or is not sufficient to pay the same;
(viii)all mechanics’ or similar liens relating to work performed on or materials delivered to the Property prior to Lender exercising its Remedies but only to the extent Lender had advanced funds to Borrower pay for the work or materials;
(ix)all losses suffered and liabilities and expenses incurred by Lender relating to any default by Borrower under any of the provisions of the Loan Documents relating to ERISA;
(x)all losses suffered and liabilities and expenses incurred by Lender relating to any default under any of the provisions of the Loan Documents relating to Anti-Terrorism Laws or money laundering;
(xi)all losses suffered and liabilities and expenses incurred by Lender relating to any default by Borrower under any of the provisions of the Loan Documents requiring Borrower to provide prior notice to Lender of any change in the Borrower’s legal name, place of business or state of organization/formation;
(xii)misapplication or misappropriation of Proceeds to the extent of the amount misapplied or misappropriated;  
(xiii)all losses actually suffered and liabilities and expenses actually incurred by Lender (but excluding any consequential, special, punitive or exemplary damages or diminution in value) relating to the failure to maintain, or to pay the Insurance Premiums for, any insurance required to be maintained under the Loan Documents, but solely to the extent the Property generated sufficient net cash flow to pay such Insurance Premiums; provided, however, that notwithstanding anything contained in the Loan Documents to the contrary, Borrower shall not have any liability under this clause if the reserves held by the Lender contains sufficient funds to pay such Insurance Premiums but Lender failed to pay such Insurance Premiums;
(xiv)all losses actually incurred by Lender  (but excluding any consequential, special, punitive or exemplary damages or diminution in value) relating to Borrower

interference, disturbance contest, obstruction or hindrance Lender’s exercise of any of its rights or remedies under any of the Loan Documents upon an Event of Default in bad faith; 
(xv)all losses suffered and liabilities and expenses incurred by Lender relating to the Borrower’s failure to pay Taxes and Assessments in accordance with the Loan Documents, but solely to the extent the Property generated sufficient net cash flow to pay such Taxes and Assessments after payment of Debt Service; provided, however, that notwithstanding anything contained in the Loan Documents to the contrary, Borrower shall not have any liability under this clause if the reserves held by the Lender contains sufficient funds to pay such Taxes and Assessments but Lender failed to pay same; and
(xvi)all losses actually suffered and liabilities and expenses actually incurred by Lender as a result of third party claims arising out of (i) the use and occupancy of the property located at 237 Grand Heights Dr., Cary, NC, commonly known Harrison Pointe Center,  by Matthew Durand d/b/a Giggles Drop-In Childcare, its successors and assigns, as a daycare facility, and (ii) the use and occupancy of any other portion of the Property used as a daycare facility.
(d)Notwithstanding the foregoing, the limitation of liability subparagraph (a) above SHALL BECOME NULL AND VOID and shall be of no further force and effect and Lender may recover personally against Guarantor and Borrower, in the event of (i) a voluntary bankruptcy or insolvency proceeding of Borrower if such proceeding is not dismissed in accordance with the terms of the Loan Documents, (ii) an involuntary bankruptcy or insolvency proceeding of Borrower, in which Borrower colludes with creditors (other than Lender) in such bankruptcy or insolvency proceeding if such proceeding is not dismissed in accordance with the terms of the Loan Documents, (iii) a default by of any of the covenants or requirements contained in the Loan Agreement in the section entitled “Special Purpose Entity Representations, Warranties and Covenants” (the “SPE Covenants”), provided that liability for a breach  of an SPE Covenant under this clause (iii) shall be limited to any losses or liabilities actually suffered by Lender (but excluding any consequential, special, punitive or exemplary damages or diminution in value)  unless such breach is the basis in whole or in part for the substantive consolidation of Borrower in a  bankruptcy action, or (iv) a transfer of the Property that is not permitted under the section of the Loan Agreement entitled “Permitted Transfers”.
(e)Nothing under subparagraph (a) above will be deemed to be a waiver of any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the Bankruptcy Code or under any other Law relating to bankruptcy or insolvency to file a claim for the full amount of the Debt or to require that all collateral will continue to secure all of the Obligations in accordance with the Loan Documents.
(f)Notwithstanding anything to the contrary contained herein, no present or future, direct or indirect, shareholder, officer, director, employee, trustee, beneficiary, advisor, member, partner, principal, participant or agent of or in Borrower (“Constituent Member”), or of or in any Person that is or becomes a Constituent Member in Borrower (other than Guarantor under the Carveout Guaranty or Indemnitor under the Environmental Indemnity), shall have any personal liability, directly or indirectly, under or in connection with this Agreement, the Loan Documents, or any amendment or amendments to any of the foregoing made at any time or times, heretofore or hereafter, and each of the parties hereto, on behalf of itself and its successors and assigns, hereby waives any and all such personal liability.  For purposes hereof, to the extent applicable, neither the negative capital account of any Constituent Member in Borrower, nor any obligation of any Constituent Member in Borrower to restore a negative capital account or to contribute or loan capital to Borrower or to any other Constituent Member in Borrower shall at any time be deemed to be the property or an asset of Borrower (or any such other Constituent Member) and neither Lender nor any of its successors

or assigns shall have any right to collect, enforce or proceed against with respect to any such negative capital account or obligation to restore, contribute or loan.
ARTICLE XVI
WAIVERS
Section 16.1    INTENTIONALLY OMITTED.  
Section 16.2    WAIVER OF NOTICE.  BORROWER WAIVES THE RIGHT TO RECEIVE ANY NOTICE FROM LENDER WITH RESPECT TO THE LOAN DOCUMENTS EXCEPT FOR THOSE NOTICES THAT LENDER IS EXPRESSLY REQUIRED TO DELIVER PURSUANT TO THE LOAN DOCUMENTS.
Section 16.3    WAIVER OF MARSHALLING AND OTHER MATTERS.  TO THE EXTENT PERMITTED BY LAW, BORROWER WAIVES THE BENEFIT OF ANY RIGHTS OF MARSHALLING OR ANY OTHER RIGHT TO DIRECT THE ORDER IN WHICH ANY OF THE PROPERTY WILL BE (i) SOLD; OR (ii) MADE AVAILABLE TO ANY ENTITY IF THE PROPERTY IS SOLD BY POWER OF SALE OR PURSUANT TO A JUDGMENT OF FORECLOSURE AND SALE IN EACH CASE TO THE EXTENT PERMITTED BY LAW.  TO THE EXTENT PERMITTED BY LAW, BORROWER ALSO WAIVES THE BENEFIT OF ANY LAWS RELATING TO APPRAISEMENT, VALUATION, STAY, EXTENSION, REINSTATEMENT, MORATORIUM, HOMESTEAD AND EXEMPTION RIGHTS OR A SALE IN INVERSE ORDER OF ALIENATION.
Section 16.4    WAIVER OF TRIAL BY JURY.  EACH OF BORROWER AND LENDER WAIVES TRIAL BY JURY IN ANY PROCEEDING BROUGHT BY OR AGAINST, OR COUNTERCLAIM OR CROSS-COMPLAINT ASSERTED BY OR AGAINST, LENDER OR BORROWER, AS APPLICABLE, OR RELATING TO THE LOAN, THE PROPERTY DOCUMENTS OR THE LEASES.
Section 16.5    WAIVER OF COUNTERCLAIM.  BORROWER WAIVES THE RIGHT TO ASSERT A COUNTERCLAIM OR CROSS-COMPLAINT, OTHER THAN COMPULSORY OR MANDATORY COUNTERCLAIMS OR CROSS-COMPLAINTS OR COMPLAINTS BROUGHT IN GOOD FAITH, IN ANY PROCEEDING LENDER BRINGS AGAINST BORROWER RELATING TO THE LOAN, INCLUDING ANY PROCEEDING TO ENFORCE REMEDIES.
Section 16.6    WAIVER OF JUDICIAL NOTICE AND HEARING.  TO THE EXTENT PERMITTED BY LAW, BORROWER WAIVES ANY RIGHT BORROWER MAY HAVE UNDER LAW TO NOTICE OR TO A JUDICIAL HEARING PRIOR TO THE EXERCISE OF ANY RIGHT OR REMEDY PROVIDED BY THE LOAN DOCUMENTS TO LENDER AND BORROWER WAIVES THE RIGHTS, IF ANY, TO SET ASIDE OR INVALIDATE ANY SALE DULY CONSUMMATED IN ACCORDANCE WITH THE PROVISIONS OF THE LOAN DOCUMENTS ON THE GROUND (IF SUCH BE THE CASE) THAT THE SALE WAS CONSUMMATED WITHOUT A PRIOR JUDICIAL HEARING.
Section 16.7    WAIVER OF SUBROGATION.  BORROWER WAIVES ALL RIGHTS OF SUBROGATION TO LENDER’S RIGHTS OR CLAIMS RELATED TO OR AFFECTING THE PROPERTY OR ANY OTHER SECURITY FOR THE LOAN UNTIL THE LOAN IS PAID IN FULL AND ALL FUNDING OBLIGATIONS UNDER THE LOAN DOCUMENTS HAVE BEEN TERMINATED.

Section 16.8    GENERAL WAIVER.  BORROWER ACKNOWLEDGES THAT (A) BORROWER ENTITIES, ARE KNOWLEDGEABLE BORROWERS OF COMMERCIAL FUNDS AND EXPERIENCED REAL ESTATE DEVELOPERS OR INVESTORS WHO UNDERSTAND FULLY THE EFFECT OF THE ABOVE PROVISIONS; (B) LENDER WOULD NOT MAKE THE LOAN WITHOUT THE PROVISIONS OF THIS ARTICLE; (C) THE LOAN IS A COMMERCIAL OR BUSINESS LOAN UNDER THE LAWS OF THE STATE OR COMMONWEALTH WHERE THE PROPERTY IS LOCATED, NEGOTIATED BY LENDER AND BORROWER AND THEIR RESPECTIVE ATTORNEYS AT ARMS LENGTH; AND (D) ALL WAIVERS BY BORROWER IN THIS ARTICLE HAVE BEEN MADE VOLUNTARILY, INTELLIGENTLY AND KNOWINGLY, AFTER BORROWER FIRST HAS BEEN INFORMED BY COUNSEL OF BORROWER’S OWN CHOOSING AS TO POSSIBLE ALTERNATIVE RIGHTS, AND HAVE BEEN MADE AS AN INTENTIONAL RELINQUISHMENT AND ABANDONMENT OF A KNOWN RIGHT AND PRIVILEGE.  THE FOREGOING ACKNOWLEDGMENT IS MADE WITH THE INTENT THAT LENDER AND ANY SUBSEQUENT HOLDER OF THE NOTE OR OTHER LOAN DOCUMENTS WILL RELY ON THE ACKNOWLEDGMENT.
ARTICLE XVII
NOTICES
Section 17.1    Notices.  All acceptances, approvals, consents, demands, notices, requests, waivers and other communications (the “Notices”) required or permitted to be given under the Loan Documents must be in writing and (a) delivered personally by a process server providing a sworn declaration evidencing the date of service, the individual served, and the address where the service was made; (b) sent by certified mail, return receipt requested; or (c) delivered by nationally recognized overnight delivery service that provides evidence of the date of delivery (for next morning delivery if sent by overnight delivery service), in all cases with charges prepaid, addressed to the appropriate party at its address listed below:

	
		
	If to Lender
	Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, New York  10017
Attention:        Senior Director, Head of Loan Closing/
Asset Management 
Global Real Estate
TIAA Authorization #AAA-7887
Investment ID #0008464

	 
	 

	with a copy to:
	Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, New York  10017
Attention:        Associate General Counsel, Director 
Asset Management Law
TIAA Authorization #AAA-7887
Investment ID #0008464

	 
	 

	And
	Commercial Loan Services
929 Gessner, Suite 1740
Houston, Texas  77024
Attention: Chief Legal Officer

	 
	 

	And:
	Seyfarth Shaw LLP
620 Eighth Avenue
New York, New York  10018
Attn:  Eric Sidman, Esq.

	 
	 

	If to Borrower:
	c/o Phillips Edison
11501 Northlake Dr.
Cincinnati, Ohio 45249 
Attention: Todd Pleiman

	And:
	

c/o Phillips Edison
11501 Northlake Dr.
Cincinnati, Ohio 45249 
Attention: Chief Accounting Officer 

	And:
	

c/o Phillips Edison
11501 Northlake Dr.
Cincinnati, Ohio 45249 
Attention: General Counsel 

	with a copy to:
	Latham & Watkins LLP
330 N. Wabash Street, Suite 2800
Chicago, Illinois 60611
Attn: Robert Buday

Lender and Borrower each may change from time to time the address to which Notices must be sent, by notice given in accordance with the provisions of this Section.  All Notices given in accordance with the provisions of this Section will be deemed to have been received on the earliest of (i) actual receipt; (ii) Borrower’s rejection of delivery; or (iii) 3 Business Days after having been deposited in any mail depository regularly maintained by the United States postal service, if sent by certified mail, or 1 Business Day after having been deposited with a nationally recognized overnight delivery service, if sent by overnight delivery or on the date of personal service, if served by a process server.
Section 17.2    Change in Borrower’s Legal Name, Place of Business or State of Formation.  Borrower will notify Lender in writing prior to any change in Borrower’s legal name, place of business or state or commonwealth of organization, including as a result of, or in connection with, any Transfer, including any Permitted Transfer.
ARTICLE XVIII
MISCELLANEOUS
Section 18.1    Applicable Law.  THE LOAN AGREEMENT IS GOVERNED BY AND WILL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.   
ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS LOAN AGREEMENT, THE NOTE, THE SECURITY INSTRUMENT OR ANY OTHER LOAN DOCUMENTS MAY BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK COUNTY AND STATE OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW OR, AS TO THE NOTE, SECURITY INSTRUMENT OR ASSIGNMENT, IN THE APPLICABLE FEDERAL OR STATE COURT IN THE COUNTY AND STATE IN WHICH THE APPLICABLE INDIVIDUAL PROPERTY IS LOCATED, AND BORROWER AND LENDER WAIVE ANY OBJECTIONS WHICH THEY MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON-CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER AND LENDER HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.

Section 18.2    Usury Limitations.  Borrower and Lender intend to comply with all Laws with respect to the charging and receiving of interest.  Any amounts charged or received by Lender for the use or forbearance of the Principal to the extent permitted by Law, will be amortized and spread throughout the Term until payment in full so that the rate or amount of interest charged or received by Lender on account of the Principal does not exceed the Maximum Interest Rate.  If any amount charged or received under the Loan Documents that is deemed to be interest is determined to be in excess of the amount permitted to be charged or received at the Maximum Interest Rate, the excess will be deemed to be a prepayment of Principal when paid, without premium, and any portion of the excess not capable of being so applied will be refunded to Borrower.  If during the Term the Maximum Interest Rate, if any, is eliminated, then for the purposes of the Loan, there will be no Maximum Interest Rate.
Section 18.3    Lender’s Discretion.  Wherever under the Loan Documents any matter is required to be satisfactory to Lender, Lender has the right to approve or determine any matter or Lender has an election, Lender’s approval, determination or election will be made in Lender’s reasonable discretion unless expressly provided to the contrary.
Section 18.4    Unenforceable Provisions.  If any provision in the Loan Documents is found to be illegal or unenforceable or would operate to invalidate any of the Loan Documents, then the provision will be deemed expunged and the Loan Documents will be construed as though the provision was not contained in the Loan Documents and the remainder of the Loan Documents will remain in full force and effect.
Section 18.5    Survival of Borrower’s Obligations.  Borrower’s representations, warranties and covenants contained in the Loan Documents will survive (i) satisfaction of the Obligations; (ii) release of the lien of the Security Instrument; (iii) assignment or other transfer of all or any portion of Lender’s interest in the Loan Documents or the Property; (iv) Lender’s exercise of any of the Remedies or any of Lender’s other rights under the Loan Documents; (v) a Transfer; (vi) amendments to the Loan Documents; and (vii) any other act or omission that might otherwise be construed as a release or discharge of Borrower, to the extent such representations, warranties and covenants relate to the period prior to repayment of the Debt.
Section 18.6    Relationship Between Borrower and Lender; No Third Party Beneficiaries.
(a)Lender is not a partner of or joint venturer with Borrower or any other Person as a result of the Loan or Lender’s rights under the Loan Documents; the relationship between Lender and Borrower is strictly that of creditor and debtor.  Each Loan Document is an agreement between the parties to that Loan Document for the mutual benefit of the parties and no entities other than the parties to that Loan Document will be a third party beneficiary or will have any claim against Lender or Borrower by virtue of the Loan Document.  As between Lender and Borrower, any actions taken by Lender under the Loan Documents will be taken for Lender’s protection only, and Lender has not and will not be deemed to have assumed any responsibility to Borrower or to any other Person by virtue of Lender’s actions.
(b)All conditions to Lender’s performance of its obligations under the Loan Documents are imposed solely for the benefit of Lender.  No Person other than Lender will have standing to require satisfaction of the conditions in accordance with their provisions or will be entitled to assume that Lender will refuse to perform its obligations in the absence of strict compliance with any of the conditions.

Section 18.7    Partial Releases; Extensions; Waivers.  Lender may: (i) release any part of the Property; provided such Property is still included in the definition of Operating Income or any Person obligated for any of the Obligations; (ii) extend the time for payment or performance of any of the Obligations or otherwise amend the provisions for payment or performance by agreement with any Person that is obligated for the Obligations or that has an interest in the Property; (iii) accept additional security for the payment and performance of the Obligations; and (iv) waive any Person’s performance of an Obligation, release any Person now or in the future liable for the performance of the Obligation or waive the exercise of any Remedy or option.  Lender may exercise any of the foregoing rights without notice, without regard to the amount of any consideration given, without affecting the priority of the Loan Documents, without releasing any Person not specifically released from its obligations under the Loan Documents, without releasing any guarantor(s) or surety(ies) of any of the Obligations, without effecting a novation of the Loan Documents and, with respect to a waiver, without waiving future performance of the Obligation or exercise of the Remedy waived.
Section 18.8    Service of Process.  Borrower irrevocably consents to service of process by registered or certified mail, postage prepaid, return receipt requested, to Borrower at its address set forth in the Article entitled “Notices”.
Section 18.9    Entire Agreement.  Oral agreements or commitments between Borrower and Lender to lend money, to extend credit or to forbear from enforcing repayment of a debt, including promises to extend or renew the debt, are not enforceable.  Any agreements between Borrower and Lender relating to the Loan are contained in the Loan Documents, which contain the complete and exclusive statement of the agreements between Borrower and Lender, except as Borrower and Lender may later agree in writing to amend the Loan Documents.  The language of each Loan Document will be construed as a whole according to its fair meaning and will not be construed against the party by or for whom it was drafted.
Section 18.10    No Oral Amendment.  The Loan Documents may not be amended, waived or terminated orally or by any act or omission made individually by Borrower or Lender but may be amended, waived or terminated only by a written document signed by the party against which enforcement of the amendment, waiver or termination is sought.
Section 18.11    Lost or Destroyed Note.  If the Note is lost, mutilated, destroyed or stolen, Borrower will deliver to Lender a new, substitute note containing the same provisions as the Note, provided that Borrower is furnished with reasonably satisfactory evidence of the loss, mutilation, destruction or theft of the Note and a customary lost note indemnity from Lender.
Section 18.12    Time of the Essence.  Time is of the essence with respect to Borrower’s payment and performance of the Obligations and Lender’s obligations under this Loan Agreement.
Section 18.13    Subrogation.  If the Principal or any other amount advanced by Lender is used directly or indirectly to pay off, discharge or satisfy all or any part of an encumbrance affecting the Property, then Lender is subrogated to the encumbrance and to any security held by the holder of the encumbrance, all of which will continue in full force and effect in favor of Lender as additional security for the Obligations.
Section 18.14    Joint and Several Liability.  If Borrower consists of more than one Person, the obligations and liabilities of each such Person under this Loan Agreement are joint and several.
Section 18.15    Successors and Assigns.  The Loan Documents bind the parties to the Loan Documents and their respective successors, assigns, heirs, administrators, executors, agents and representatives and inure

to the benefit of Lender and its successors, assigns, heirs, administrators, executors, agents and representatives; provided that Lender shall not transfer, assign or otherwise convey the Loan or sell any participations in the Loan to any Person who directly or through its Affiliates has its primary business as an owner/operator of retail shopping centers; provided that any Institutional Investor who originates mortgage loans who also has an Affiliate that is an owner/operator of retail shopping centers shall not be prohibited from being a transferee of the Loan.
Section 18.16    Duplicates and Counterparts.  Duplicate counterparts of any of the Loan Documents, other than the Note, may be executed and together will constitute a single original document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURES ON FOLLOWING PAGE]

IN WITNESS WHEREOF, Borrower and Lender have executed and delivered this Loan Agreement as of the date first set forth above.

BORROWER:

ARDREY KELL STATION LLC
a Delaware limited liability company

By:    Phillips Edison Grocery Center Operating Partnership I, L.P.
a Delaware limited partnership, its sole member

By:    Phillips Edison Grocery Center OP GP I LLC, 
a Delaware limited liability company,
Its General Partner

By: /s/ Robert Myers                             
Name: Robert Myers
Title:  Vice President

CUSHING STATION LLC
a Delaware limited liability company

By:    Phillips Edison Grocery Center Operating Partnership I, L.P.
a Delaware limited partnership, its sole member

By:    Phillips Edison Grocery Center OP GP I LLC, 
a Delaware limited liability company,
Its General Partner

By: /s/ Robert Myers                        
Name: Robert Myers    
Title: Vice President

DEAN TAYLOR STATION LLC
a Delaware limited liability company

By:    Phillips Edison Grocery Center Operating Partnership I, L.P.
a Delaware limited partnership, its sole member

By:    Phillips Edison Grocery Center OP GP I LLC, 
a Delaware limited liability company,
Its General Partner

By: /s/ Robert Myers                            
Name: Robert Myers
Title: Vice President

DEERWOOD LAKE STATION LLC
a Delaware limited liability company

By:    Phillips Edison Grocery Center Operating Partnership I, L.P.
a Delaware limited partnership, its sole member

By:    Phillips Edison Grocery Center OP GP I LLC, 
a Delaware limited liability company,
Its General Partner

By: /s/ Robert Myers                            
Name: Robert Myers
Title: Vice President

GOOLSBY POINTE STATION LLC
a Delaware limited liability company

By:    Phillips Edison Grocery Center Operating Partnership I, L.P.
a Delaware limited partnership, its sole member

By:    Phillips Edison Grocery Center OP GP I LLC, 
a Delaware limited liability company,
Its General Partner

By: /s/ Robert Myers                            
Name: Robert Myers
Title: Vice President

HAMILTON VILLAGE STATION LLC
a Delaware limited liability company

By:    Phillips Edison Grocery Center Operating Partnership I, L.P.
a Delaware limited partnership, its sole member

By:    Phillips Edison Grocery Center OP GP I LLC, 
a Delaware limited liability company,
Its General Partner

By: /s/ Robert Myers                                 
Name: Robert Myers
Title: Vice President

HARRISON POINTE STATION LLC
a Delaware limited liability company

By:    Phillips Edison Grocery Center Operating Partnership I, L.P.
a Delaware limited partnership, its sole member

By:    Phillips Edison Grocery Center OP GP I LLC, 
a Delaware limited liability company,
Its General Partner

By: /s/ Robert Myers                            
Name: Robert Myers
Title: Vice President

LAKEWOOD STATION LLC
a Delaware limited liability company

By:    Phillips Edison Grocery Center Operating Partnership I, L.P.
a Delaware limited partnership, its sole member

By:    Phillips Edison Grocery Center OP GP I LLC, 
a Delaware limited liability company,
Its General Partner

By: /s/ Robert Myers                            
Name: Robert Myers
Title: Vice President

NORTHRIDGE STATION LLC
a Delaware limited liability company

By:    Phillips Edison Institutional REIT LLC, a Delaware limited liability company
Its Sole Member

By:    Phillips Edison Institutional Joint Venture I, L.P., a Delaware limited partnership
Its:    Managing Member

By:    PAI GP LLC, a Delaware limited liability company
Its:    General Partner

By:    Phillips Edison Grocery Center Operating Partnership I, L.P., a Delaware limited     partnership
Its:    Sole Member

By:    Phillips Edison Grocery Center OP GP I LLC, a Delaware limited liability company
Its:    General Partner

By: /s/ Robert Myers                            
Name: Robert Myers
Title: Vice President

NORTHTOWNE STATION LLC
a Delaware limited liability company

By:    Phillips Edison Institutional REIT LLC, a Delaware limited liability company
Its Sole Member

By:    Phillips Edison Institutional Joint Venture I, L.P., a Delaware limited partnership
Its:    Managing Member

By:    PAI GP LLC, a Delaware limited liability company
Its:    General Partner

By:    Phillips Edison Grocery Center Operating Partnership I, L.P., a Delaware limited     partnership
Its:    Sole Member

By:    Phillips Edison Grocery Center OP GP I LLC, a Delaware limited liability company
Its:    General Partner
By: /s/ Robert Myers                                
Name: Robert Myers
Title: Vice President

RED MAPLE STATION LLC
a Delaware limited liability company

By:    Phillips Edison Grocery Center Operating Partnership I, L.P.
a Delaware limited partnership, its sole member

By:    Phillips Edison Grocery Center OP GP I LLC, 
a Delaware limited liability company,
Its General Partner

By: /s/ Robert Myers                            
Name: Robert Myers
Title: Vice President

RICHMOND STATION LLC
a Delaware limited liability company

By:    Phillips Edison Institutional REIT LLC, a Delaware limited liability company
Its Sole Member

By:    Phillips Edison Institutional Joint Venture I, L.P., a Delaware limited partnership
Its:    Managing Member

By:    PAI GP LLC, a Delaware limited liability company
Its:    General Partner

By:    Phillips Edison Grocery Center Operating Partnership I, L.P., a Delaware limited     partnership
Its:    Sole Member

By:    Phillips Edison Grocery Center OP GP I LLC, a Delaware limited liability company
Its:    General Partner

By: /s/ Robert Myers                             
Name: Robert Myers
Title: Vice President

SAVAGE STATION LLC
a Delaware limited liability company

By:    Phillips Edison Grocery Center Operating Partnership I, L.P.
a Delaware limited partnership, its sole member

By:    Phillips Edison Grocery Center OP GP I LLC, 
a Delaware limited liability company,
Its General Partner

By: /s/ Robert Myers                            
Name: Robert Myers
Title: Vice President

STERLING POINT STATION LLC
a Delaware limited liability company

By:    Phillips Edison Grocery Center Operating Partnership I, L.P.
a Delaware limited partnership, its sole member

By:    Phillips Edison Grocery Center OP GP I LLC, 
a Delaware limited liability company,
Its General Partner

By: /s/ Robert Myers                            
Name: Robert Myers
Title: Vice President

STOCKBRIDGE STATION LLC
a Delaware limited liability company

By:    Phillips Edison Grocery Center Operating Partnership I, L.P.
a Delaware limited partnership, its sole member

By:    Phillips Edison Grocery Center OP GP I LLC, 
a Delaware limited liability company,
Its General Partner

By: /s/ Robert Myers                            
Name: Robert Myers
Title: Vice President

STOCKBRIDGE STATION OUTPARCEL LLC
a Delaware limited liability company

By:    Phillips Edison Grocery Center Operating Partnership I, L.P.
a Delaware limited partnership, its sole member

By:    Phillips Edison Grocery Center OP GP I LLC, 
a Delaware limited liability company,
Its General Partner

By: /s/ Robert Myers                        
Name: Robert Myers
Title: Vice President

WEST CREEK STATION LLC
a Delaware limited liability company

By:    Phillips Edison Grocery Center Operating Partnership I, L.P.
a Delaware limited partnership, its sole member

By:    Phillips Edison Grocery Center OP GP I LLC, 
a Delaware limited liability company,
Its General Partner

By: /s/ Robert Myers                        
Name: Robert Myers
Title: Vice President

LENDER:

TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA,
a New York corporation
By: /s/ Diedre M. Davis
Name:    Diedre M. Davis                
Title: DirectorExhibit

FORM OF

DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING

by

[_____________________________], as Grantor,

to

FIRST AMERICAN TITLE INSURANCE CO., as Trustee,

for the benefit of 

THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, as Beneficiary

Location: [___________]

TABLE OF CONTENTS
	
				
	ARTICLE I - GRANTING PROVISIONS
	1
	

	Section 1.01
	Grant
	1
	

	ARTICLE II - Assignment of Rents and Leases; Security Agreement
	3
	

	Section 2.01
	Assignment of Rents and Leases
	3
	

	Section 2.02
	Security Agreement
	3
	

	ARTICLE III - REPRESENTATIONS AND WARRANTIES
	4
	

	Section 3.01
	Title
	4
	

	Section 3.02
	Legal Status and Authority
	4
	

	Section 3.03
	Consents; No Contravention
	4
	

	Section 3.04
	Proceedings
	4
	

	Section 3.05
	Status of Property
	4
	

	Section 3.06
	Tax Status of Borrower
	5
	

	Section 3.07
	Bankruptcy and Equivalent Value
	6
	

	Section 3.08
	Disclosure
	6
	

	Section 3.09
	Illegal Activities and Criminal Proceedings
	6
	

	Section 3.10
	Anti-Terrorism Laws
	6
	

	Section 3.11
	ERISA
	6
	

	Section 3.12
	Ground Leases
	7
	

	ARTICLE IV - COVENANTS AND AGREEMENTS
	7
	

	Section 4.01
	Payment of Obligations
	7
	

	Section 4.02
	Continuation of Existence
	7
	

	Section 4.03
	Assessments
	7
	

	Section 4.04
	Defense of Title, Proceedings and Rights under Loan Documents
	8
	

	Section 4.05
	Compliance With Laws and Operation and Maintenance of Property
	8
	

	Section 4.06
	Insurance
	10
	

	Section 4.07
	Damage and Destruction of Property
	14
	

	Section 4.08
	Condemnation
	18
	

	Section 4.09
	Certain Liens and Liabilities
	19
	

	Section 4.10
	Tax and Insurance Deposits
	20
	

	Section 4.11
	ERISA
	21
	

	Section 4.12
	Environmental Indemnity
	21
	

	Section 4.13
	Intentionally Omitted
	21
	

	Section 4.14
	Inspection
	21
	

	Section 4.15
	Records, Reports, and Audits
	22
	

	Section 4.16
	Borrower’s Certificates
	23
	

	Section 4.17
	Criminal Proceedings
	23
	

	Section 4.18
	Additional Security
	23
	

	Section 4.19
	Further Acts
	23
	

	Section 4.20
	Compliance With Anti-Terrorism Laws
	24
	

	Section 4.21
	Expenses and Advances
	24
	

	Section 4.22
	Subrogation
	25
	

	Section 4.23
	Permits
	25
	

	Section 4.24
	Parking
	26
	

	Section 4.25
	Property Management and Leasing
	26
	

	ARTICLE V - SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY; LEASES OF THE PROPERTY
	27
	

	Section 5.01
	Due-on-Sale or Encumbrance
	27
	

	Section 5.02
	Permitted Transfers
	28
	

	Section 5.03
	Principals
	31
	

	
				
	Section 5.04
	Leases
	32
	

	ARTICLE VI - DEFAULTS AND REMEDIES
	34
	

	Section 6.01
	Events of Default
	34
	

	Section 6.02
	Remedies
	36
	

	Section 6.03
	Expenses
	38
	

	Section 6.04
	Rights Pertaining to Sales
	38
	

	Section 6.05
	Application of Proceeds
	38
	

	Section 6.06
	Additional Provisions as to Remedies
	39
	

	Section 6.07
	Waiver of Rights and Defenses
	39
	

	ARTICLE VII - LIMITATION ON PERSONAL LIABILITY
	40
	

	Section 7.01
	Limited Recourse Liability
	40
	

	ARTICLE VIII - INDEMNIFICATION
	42
	

	Section 8.01
	General Indemnity
	42
	

	Section 8.02
	Duty to Defend, Costs and Expenses
	42
	

	Section 8.03
	Recourse Obligation and Survival
	42
	

	ARTICLE IX - ADDITIONAL PROVISIONS
	43
	

	Section 9.01
	Usury Savings Clause
	43
	

	Section 9.02
	Notices
	43
	

	Section 9.03
	Sole Discretion of Lender
	44
	

	Section 9.04
	Applicable Law; Submission and Consent to Jurisdiction; Service of Process
	45
	

	Section 9.05
	Transfer of Loan
	45
	

	Section 9.06
	Concerning the Trustee
	46
	

	Section 9.07
	Waiver of Right to Trial by Jury; Waiver of Statute of Limitations
	46
	

	Section 9.08
	State Specific Provisions
	47
	

	Section 9.09
	Miscellaneous
	47
	

	ARTICLE X - Release AND SUBSTITUTION of Cross Defaulted Properties
	49
	

	Section 10.01
	Release
	49
	

	Section 10.02
	Substitution of Other Properties for Cross Defaulted Properties
	50
	

EXHIBITS
Exhibit A- Legal Description of Land

ANNEXES

Annex A – Definitions
Annex B – State Specific Provisions

[__________] Deed of Trust

THIS DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING (as amended, modified, extended, renewed, restated or supplemented from time to time, this “Instrument”) is dated the ___ day of ___________, 2017, to be effective on the ____ day of October, 2017, by [______________], a [_________] limited liability company, having its chief executive office and place of business at 11501 Northlake Drive, Cincinnati, Ohio 45249, as grantor (“Borrower”), to FIRST AMERICAN TITLE INSURANCE CO., having an address at 200 SW Market Street, Suite 250, Portland, OR 97201, as trustee, for the benefit of THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, a New York corporation, having an office at 7 Hanover Square, New York, New York 10004, its successors and assigns, as beneficiary (“Lender”).
RECITALS
A.    Lender has made a loan to Borrower in the original principal amount of [____________] Dollars ($[___________]) (the “Loan”), which Loan is evidenced by a Promissory Note dated the date hereof made by Borrower and payable to Lender in the principal amount of the Loan (as amended, modified, extended, renewed, restated or supplemented from time to time, the “Note”).
B.    Borrower has entered into this Instrument to secure the payment of the Note and the payment and performance of all of the other Obligations (as defined in Annex A hereto).
C.    For purposes of this Instrument, capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in Annex A hereto, and the rules of construction set forth in Annex A shall govern the interpretation of this Instrument.
ARTICLE I - GRANTING PROVISIONS
Section 1.01    Grant.  In consideration of the principal sum of the Note, and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, Borrower hereby grants, bargains, sells, assigns, transfers, pledges, mortgages, warrants, and conveys to Trustee, for the benefit of Lender, all right, title, and interest of Borrower in, to, and under the following to the extent assignable (collectively, the “Property”):
(a)the Land;
(b)the Improvements;
(c)all easements, estates, and interests including hereditaments, servitudes, appurtenances, tenements, mineral and oil/gas rights, water rights, air rights, development power or rights, options, reversion and remainder rights, all land lying within the rights-of-way, roads, or streets, open or proposed, adjoining the Land to the center line thereof, and all sidewalks, alleys, and strips and gores of land adjacent to or used in connection with the Property, and any other rights owned by Borrower and relating to or usable in connection with or for access to the Property;
(d)all plans, specifications, surveys, studies, reports, Permits, agreements, contracts, instruments, books of account, insurance policies, and any other documents in each case relating to the ownership, use, development, construction, occupancy, leasing, maintenance, marketing, sale or operation of the Property;

(e)all of the fixtures and tangible Personal Property and substitutions and replacements thereof, but excluding all Personal Property owned by any Tenant;
(f)all proceeds (including conversion to cash or liquidation claims) of (i) insurance for or relating to the Property (whether or not such insurance is required hereunder), including any Rent Loss Insurance; and (ii) all Awards;
(g)all tax refunds, including interest thereon, tax rebates, tax credits, and tax abatements, and the right to receive the same, which may be payable or available with respect to the Property (except, in each case, for income taxes and franchise taxes); 
(h)all Leases, including all guaranties thereof;
(i)all Rents and all proceeds from the cancellation, termination, surrender, sale, transfer or other disposition of the Leases; 
(j)all names under or by which the Property may at any time be operated or known, and all rights to carry on business under any such names or any variant thereof, and all trademarks, trade names, patents pending and goodwill associated with the Property, other than any names, trademarks, trade names, patents containing “Phillips Edison” or any derivation thereof; 
(k)all permits, licenses, franchises, authorizations, warranties, guaranties, and indemnities (including, without limitation, those for construction, workmanship, materials, and performance) that exist, or may hereafter exist, from, by, or against any contractor, subcontractor, manufacturer, supplier, laborer, or other service provider relating to the Property; and
(l)all of Borrower’s other rights and privileges heretofore or hereafter otherwise arising in connection with or pertaining to the Property, including (i) all water and/or sewer capacity, all water, sewer and/or other utility deposits or prepaid fees, and/or all water and/or sewer and/or other utility tap rights or other utility rights; (ii) all advance payments of insurance premiums made by Borrower with respect to the Property; (iii) the right, in the name and on behalf of Borrower, to appear in and defend any Proceeding brought with respect to the Property and to commence any Proceeding to protect the interest of Borrower in the Property; (iv) any right or privilege of Borrower under any loan commitment, lease, contract, declaration of covenants, restrictions and easements or like instrument, developer’s agreement, or other agreement with any third party pertaining to the ownership, use, development, construction, occupancy, leasing, maintenance, marketing, sale or operation of the Property; and (v) to the extent not otherwise described above in this granting clause, all accounts, documents, inventory, equipment, fixtures, general intangibles (including, without limitation, all trade names and contract rights), as-extracted collateral, timber to be cut, chattel paper, commercial tort claims, deposit accounts, instruments, letter of credit rights and investment property (as such terms are defined in the UCC) related to the Property, and all proceeds thereof.
TO HAVE AND TO HOLD the Property unto Trustee, and its successors and assigns forever, subject to the provisions, terms and conditions of this Instrument, IN TRUST, WITH POWER OF SALE, to secure payment and performance of the Obligations in the time and manner set forth in the Loan Documents.

PROVIDED, HOWEVER, if Borrower shall (i) pay the Debt as provided for in the Loan Documents and the Cross Defaulted Borrowers shall have paid the debt as provided for in the Cross Defaulted Loan Documents, (ii) comply with the conditions precedent to a Release (as described in Section 10.01 hereof), or (iii) if a Substitution occurs (in accordance with Section 10.02 hereof) in which the Property is the Outgoing Property, then in each case the obligations of Borrower hereunder and the Property hereby granted shall cease, terminate and be void and this Instrument shall terminate and be of no further force and effect (except as specifically stated in the Loan Documents to survive) and Lender will record or provide such other instruments evidencing termination of all liens on the Property in customary form in the Property State.
ARTICLE II - ASSIGNMENT OF RENTS AND LEASES; 
SECURITY AGREEMENT
Section 2.01    Assignment of Rents and Leases.  Borrower hereby assigns to Lender all of Borrower's right, title and interest in and to the Leases and the Rents.  Borrower agrees to execute and deliver to Lender such additional instruments, in form and substance satis-factory to Lender in its reasonable discretion, as may hereafter be necessary from time to time to further evidence and confirm such assignment.  The assignment made in this Section 2.01 constitutes an absolute, present and irrevocable assignment and shall be fully operative in accordance with its terms without any further action by the parties hereto.  It is expressly understood, however, that Borrower may collect the Rents until the occurrence of an Event of Default under this Instrument.  Upon the occurrence and during the continuance of an Event of Default, Lender may collect the Rents and exercise any and all of its other rights and remedies as specified in the Assignment of Leases.  In the event of any conflict or inconsistency between the provisions of the Assignment of Leases and the provisions of this Section 2.01, the provisions of the Assignment of Leases shall control.
Section 2.02    Security Agreement.  Borrower hereby grants to Lender a security interest in, to and under all of Borrower’s right, title and interest in, to and under each and every item of the Personal Property, whether now owned or hereafter acquired or arising, and all proceeds and products thereof, to secure the Obligations, and this Instrument shall constitute a security agreement between Borrower and Lender with respect to the Personal Property.  Borrower agrees to file (or pay for the costs of Lender to file) in the appropriate offices in the jurisdictions as Lender may require, financing or continuation statements meeting the requirements of the UCC, to perfect the security interests hereby granted including, without limitation, a financing statement naming Borrower as debtor and Lender as secured party that describes the collateral covered thereby as “all assets of Borrower, whether now owned or existing, or hereafter acquired or arising and all proceeds and products thereof”.  Upon the occurrence of an Event of Default, the remedies of Lender as secured party shall be, at the option of Lender, (a) those hereinafter set forth in this Instrument, it being the understanding of the parties that upon the occurrence of an Event of Default, Lender may proceed as to both real property and Personal Property in accordance with the rights and remedies granted herein with respect to real property; (b) those contained in the UCC; (c) those prescribed by other Laws; or (d) any combination of the foregoing.  All substitutions for, replacements of, and additions to the Personal Property, and the proceeds thereof, shall immediately be subject to the security interest hereinabove granted, and Borrower agrees to maintain the Personal Property free and clear of all liens, charges, encumbrances and security interests, other than Permitted Encumbrances.  This Instrument constitutes a financing statement filed as a fixture filing, and for such purpose (i) the name of the debtor is the name of Borrower; (ii) the name of the secured party is the name of Lender; and (iii) the collateral covered hereby includes goods that are or are to become fixtures related to the Land described in Exhibit A attached hereto.  This Instrument is to be filed for record in the real estate records of the city or county where the Land is located and Borrower is the record owner of the Land.

ARTICLE III - REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender as follows:
Section 3.01    Title.  Borrower owns the Land and Improvements in fee simple and has good and marketable title to the Property, free and clear of all liens, charges, encumbrances and security interests, except the Permitted Encumbrances. 
Section 3.02    Legal Status and Authority.  Borrower (a) is duly organized, validly existing, and in good standing under the Laws of the Organization State and, if the Property State is not the Organization State, is qualified to transact business and is in good standing under the Laws of the Property State; and (b) has all necessary approvals, governmental and otherwise, and full power and authority to own the Property and carry on its business. 
Section 3.03    Consents; No Contravention.  The execution, delivery and performance of the Loan Documents and the borrowing evidenced by the Note (a) have received all necessary approvals and consents; (b) will not violate, conflict with, breach, or constitute (with notice or lapse of time, or both) a default under (i) any Law; (ii) the governing instrument of Borrower; or (iii) any indenture, agreement, or other instrument to which Borrower is a party or by which it or any of the Property is bound or affected; (c) will not result in the creation or imposition of any lien, charge, or encumbrance upon the Property except the liens granted in this Instrument and the other Loan Documents; and (d) will not require any consent, authorization or license from, or any filing with, any Governmental Authority (except for the recordation of this Instrument, the Assignment of Leases, the Cross Collateralizing Security Documents and UCC filings).
Section 3.04    Proceedings.  As of the date hereof there is no Proceeding pending or, to the knowledge of Borrower, threatened or contemplated against, or affecting, Borrower or the Property.
Section 3.05    Status of Property.
(a)Flood Hazard Area.  Except as disclosed on the survey of the Property certified to the Lender, the Land and Improvements are not located in a Special Flood Hazards Area or, if located within any such area, as of the date hereof Borrower has and will maintain the insurance prescribed in Section 4.06 below.
(b)Permits; Compliance with Laws.  Borrower has all necessary Permits including those required for the Permitted Use and for the lawful operation of the Property as currently operated and as contemplated herein and for the lawful conduct of its business, all of which Permits are currently in full force and effect, are not subject to ongoing Proceedings for revocation, suspension, forfeiture, or modification, and, to Borrower’s knowledge, are not subject to revocation, suspension, forfeiture, or modification.  Except as disclosed in the property condition report, the zoning report, and the environmental report delivered to or received by Lender, to Borrower’s knowledge, the Property and its use and occupancy are in compliance with all Laws, and Borrower has received no notice of any violation or potential violation of the Laws which has not been remedied or satisfied.
(c)Utilities.  The Property is served by all utilities (including water and sewer) required for the Permitted Use.
(d)Roads and Streets.  Public roads and streets necessary to serve the Property for the Permitted Use have been completed, are serviceable, are open, and to Borrower’s knowledge have been dedicated to and accepted by the appropriate Governmental Authorities.  As of the date hereof, Borrower and all other occupants of the Property have access to such public roads and streets.

(e)Damage.  As of the date hereof, except as disclosed in the property condition report obtained by Lender, the Property is free from any Damage, other than de minimis Damage. 
(f)Payment for Improvements.  As of the date hereof, all costs and expenses for labor, materials, supplies, and equipment used in the construction of the Improvements which are due and owing have been paid in full and there are no liens on the Property with respect thereto except for the Permitted Encumbrances.
(g)Furniture, Fixtures and Equipment.  Borrower owns or leases and as of the date hereof has paid in full all amounts due and owing for all furnishings, fixtures, and equipment (other than Tenants’ property) used in connection with the operation of the Property, free of all security interests, liens, or encumbrances except the Permitted Encumbrances.
(h)Separate Tax Lot.  The Property is assessed for real estate tax purposes as one or more wholly independent tax lot(s), separate from any adjoining land or improvements, and no other land or improvements are assessed and taxed together with the Property, and no other land or improvements are necessary for the operation of the Property.
Section 3.06    Tax Status of Borrower.   Borrower is not a Foreign Person for U.S. federal income tax purposes.  If Borrower is a Disregarded Entity, the owner of Borrower (which owner is not a Disregarded Entity) is not a Foreign Person for U.S. federal income tax purposes.
Section 3.07    Bankruptcy and Equivalent Value.    As of the date hereof, no Bankruptcy Proceeding has been instituted by or against any Borrower Party.  Borrower has received reasonably equivalent value for granting this Instrument.
Section 3.08    Disclosure.   As of the date hereof, Borrower has not failed to disclose any fact known to Borrower that could cause any representation or warranty made herein to be materially misleading.  To Borrower’s knowledge, as of the date hereof, there has been no adverse change in any condition, fact, circumstance, or event that would make any such information materially inaccurate, incomplete or otherwise misleading.

Section 3.09    Illegal Activities and Criminal Proceedings.
(a)Illegal Activities.  No portion of the Property has been or will be purchased, improved, fixtured, equipped or furnished with proceeds of any illegal activity and, to Borrower’s knowledge, there are no illegal activities at, on or under the Property.
(b)Criminal Proceedings.  To Borrower’s knowledge, no Borrower Party has been charged, indicted or convicted in any Proceeding, or is currently under threat of charge, indictment or conviction in any Proceeding, for any felony or crime punishable by imprisonment, including but not limited to the Racketeer Influenced and Corruption Organizations Act, 18 U.S.C. §§ 1961-1968 (“RICO”).  
Section 3.10    Anti-Terrorism Laws.
(a)OFAC Lists.  
(i)Borrower is not, and to Borrower’s knowledge, each other Borrower Party is not a Prohibited Person; and
(ii)Borrower does not knowingly conduct any business with or engage in any transaction or dealing with any Prohibited Person.
(b)Other Anti-Terrorism Laws.  Borrower, and to the knowledge of Borrower, each other Borrower Party, is in compliance with all Anti-Terrorism Laws.  To the extent (if any) that Borrower is required to do so, it has established policies and procedures reasonably designed to prevent and detect money laundering and to prevent other violations of the Anti-Terrorism Laws. 
Section 3.11    ERISA.  Borrower represents and warrants to Lender that (a) Borrower is not (i) a Plan, (ii) a Governmental Plan, or (iii) an entity the assets of which constitute “plan assets” of any Plan within the meaning of 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA; (b) neither Borrower nor any of its ERISA Affiliates maintains a Plan subject to Title IV of ERISA or the minimum funding requirements of Section 303 of ERISA or contributes to, or has any obligation to contribute to, or liability under, any active or terminated Plan subject to Title IV of ERISA or the minimum funding requirements of Section 303 of ERISA; and (c) Borrower is not subject to state Laws regulating investments and fiduciary obligations with respect to Governmental Plans. 
Section 3.12    Ground Leases.  The Ground Leases are the only ground leases affecting the Property.  
ARTICLE IV - COVENANTS AND AGREEMENTS
Borrower covenants and agrees with Lender as follows:
Section 4.01    Payment of Obligations.  Subject to the provisions, terms and conditions set forth in the Loan Documents, including, without limitation all notice and cure periods, Borrower shall timely pay and cause to be performed the Obligations.

Section 4.02    Continuation of Existence.  Borrower shall not (a) dissolve, terminate, or otherwise dispose of, directly, indirectly or by operation of Law, all or substantially all of its assets, except in connection with a Permitted Transfer; (b) reorganize or change its legal structure without Lender’s prior written consent, except as otherwise expressly permitted in this Instrument in connection with a Permitted Transfer or otherwise; (c) change its name, address, or the name under which Borrower conducts its business without promptly notifying Lender; or (d) do anything to cause the representations in Section 3.02 to become untrue.
Section 4.03    Assessments.
(a)Obligation to Pay Assessments.  Borrower shall pay when due all Assessments and in all events prior to the date any fine, penalty, interest or charge for nonpayment may be imposed.  Unless Borrower is making Deposits in accordance with Section 4.10, Borrower shall provide Lender with receipts evidencing such payments (except for ground rents, maintenance charges, and utility charges) within thirty (30) days after their due date.
(b)Right to Contest.  Borrower may, prior to delinquency and at its sole expense, contest any Assessment, but this shall not change or extend Borrower’s obligation to pay the Assessment as required above unless (i) Borrower gives Lender prior written notice of its contest of an Assessment; (ii) Borrower demonstrates to Lender’s reasonable satisfaction that (1) the Property will not be sold to satisfy the Assessment prior to the final determination of the Proceeding; (2) Borrower has taken any action that is required or permitted to accomplish a stay of any such sale; and (3) if Borrower is not required to pay the contested amount at part of the contest, then if requested by Lender Borrower has either at its election (x) furnished a bond or surety (satisfactory to Lender in form and amount) sufficient to prevent a sale of the Property; or (y) deposited one hundred fifty percent (150%) of the full amount necessary to pay any unpaid portion of the Assessments with Lender; and (iii) such Proceeding shall be permitted under any other instrument to which Borrower or the Property is subject (whether superior or inferior to this Instrument).
(c)Transaction Taxes.  Borrower shall pay all Transaction Taxes when assessed.  If Borrower fails to pay the Transaction Taxes after demand by Lender, Lender may (but is not obligated to) pay such Transaction Taxes and Borrower shall reimburse Lender within five (5) Business Days after written notice for any amount so paid with interest at the Default Rate.
(d)Taxes on Loan Documents, Etc.  If any change effective after the date hereof in a Law requires (i) the deduction from the value of real property for the purpose of taxation of any lien or encumbrance thereon; (ii) the imposition of taxes on mortgages or deeds of trust, or debts secured by mortgages or deeds of trust, for federal, state or local purposes or changes the manner of the collection of any such existing taxes; and/or (iii) the imposition of a tax, either directly or indirectly, on any of the Loan Documents or the Obligations, Borrower shall, if permitted by Law, pay the additional tax, if any, resulting from such change in Law within the statutory period or within twenty (20) days after demand by Lender, whichever is less; provided, however, that if, in the opinion of Lender, Borrower is not permitted by Law to pay such taxes, Lender shall have the option to declare the Obligations immediately due and payable (without any Prepayment Premium) upon one hundred twenty (120) days’ notice to Borrower.  This Section 4.03(d) shall not apply to any taxes imposed on or with respect to Lender that are (A) imposed on or measured by net income (however denominated) or franchise taxes or (B) attributable to Lender’s failure to deliver to Borrower such documentation prescribed by applicable Law or reasonably requested by Borrower as would reduce or eliminate the amount of such taxes imposed on or with respect to Lender (to the extent Lender is legally entitled to deliver such documentation to Borrower).

Section 4.04    Defense of Title, Proceedings and Rights under Loan Documents.  Borrower shall forever warrant, defend and preserve Borrower’s title to the Property, the validity, enforceability and priority of this Instrument and the lien or security interest created hereby, and any rights of Lender and/or Trustee under the Loan Documents against the claims of all Persons, and shall promptly notify Lender and Trustee of any such claims.  Lender and/or Trustee (whether or not named as a party to such Proceedings) is authorized and empowered (but shall not be obligated) to take such additional steps as it may deem necessary or proper for the defense of any such Proceeding or the protection of the lien, security interest, validity, enforceability, or priority of this Instrument, title to the Property, or any rights of Lender and/or Trustee under the Loan Documents, including the employment of counsel, the prosecution and/or defense of such Proceedings, the compromise, release, or discharge of such adverse claims, the purchase of any tax title, the removal of any such liens and security interests, and any other actions Lender and/or Trustee deems necessary to protect its or their interests.  During the continuance of an Event of Default, Borrower authorizes Lender and/or Trustee to take any actions required to be taken by Borrower, or permitted to be taken by Lender and/or Trustee, in the Loan Documents in the name and on behalf of Borrower.  Borrower shall reimburse Lender and Trustee within five (5) Business Days after written notice for all payments and expenses (including Attorneys’ Fees) made or incurred by Lender and/or Trustee in connection with the foregoing and Lender’s or Trustee’s exercise of its or their rights under the Loan Documents.  All such payments and expenses of Lender and/or Trustee, until reimbursed by Borrower, shall be part of the Obligations, bear interest from the date on which due at the Default Rate, and shall be secured by this Instrument. 
Section 4.05    Compliance With Laws and Operation and Maintenance of Property.
(a)Maintenance, Use, of Property.  Subject to ordinary wear and tear and the rights and obligations of Tenants under Leases, (i) Borrower will operate and maintain the Property in good order, repair, and operating condition, and (ii) Borrower will promptly make all necessary repairs, replacements, additions, and improvements necessary to maintain the Property in substantially the same condition as of the date hereof. Borrower will not abandon the Property.  Borrower is currently using, and will continue to use, the Property for the Permitted Use, and will not use the Property or permit the Property to be used for any other use.
(b)Alterations.  Except as otherwise permitted in this Section 4.05(b), Borrower shall not, without first obtaining Lender’s approval, commence, nor allow to be commenced, any construction, alteration or modification of the Improvements or any new construction on the Land.
(i)Notwithstanding the foregoing Lender shall not unreasonably withhold, delay or condition its consent to any non-structural construction on or non-structural alterations to, the Property, which in the aggregate do not exceed $700,000 in any calendar year (prorated for any partial year during the term of the Loan). 
(ii)Lender’s approval shall not be required for (A) any non-structural construction on, or non-structural alterations to, the Property aggregating less than $700,000 per calendar year (prorated for any partial year during the term of the Loan); and (B) ordinary and customary maintenance and repair of the Property, including, without limitation, alterations to the Property that require capital expenditures such as repairs and maintenance to the parking lot or roof of the buildings on the Property and updating of the façade of the buildings on the Property, that do not reduce the net rentable area or value of the Property more than a de minimis amount and that do not render the Property in violation of any requirement of the Loan Documents; and (C) alterations or tenant improvements made pursuant to the provisions of any Lease existing on the date hereof that has been approved by Lender or any new Lease or amendment

to Lease approved by Lender or which does not, by the terms of the Loan Documents, require Lender’s prior written consent.
(iii)If Lender’s approval is required for any new construction on, or alteration to, the Property during the term of the Loan, Borrower requests Lender’s approval in writing, and such written request is neither approved nor denied within ten (10) Business Days following Lender’s receipt of such request (together with plans and specifications, the budget for the work, the construction contract, and such other documentation as Lender may reasonably request), Lender’s approval shall be deemed given; provided that Borrower’s request for Lender’s approval bore the following legend typed in bold, capital letters at the top: “IF LENDER SHALL FAIL TO EITHER APPROVE OR DENY BORROWER’S REQUEST FOR LENDER’S APPROVAL OF NEW CONSTRUCTION ON, OR ALTERATION TO, THE PROPERTY AND THE DOCUMENTATION THEREFOR WITHIN TEN (10) BUSINESS DAYS AFTER LENDER’S RECEIPT THEREOF, LENDER SHALL BE DEEMED TO HAVE APPROVED SUCH NEW CONSTRUCTION ON, OR ALTERATION TO, THE PROPERTY”; and provided, further that, the deemed approval provision in this sentence shall not apply in the event the documentation for the new construction on, or alteration to, the Property, or the request therefore does not comply with the provisions of this paragraph.
(c)Personal Property.  Borrower will keep the Property fully equipped and will replace all worn out or obsolete Personal Property in a commercially reasonable manner with comparable fixtures or Personal Property, unless such Personal Property is no longer necessary for the operation of the Property.  Unless such Personal Property is no longer necessary for the operation of the Property, Borrower will not, without Lender’s prior written consent, remove any Personal Property covered by this Instrument unless the same is replaced by Borrower in a commercially reasonable manner with a comparable article (i) owned by Borrower free and clear of any lien or security interest (other than the Permitted Encumbrances); or (ii) leased by Borrower if the replaced Personal Property was leased at the time of execution of this Instrument (or if otherwise consented to in writing by Lender).
(d)Compliance with Laws.  Borrower shall comply with and shall cause the Property to be maintained, used, and operated in compliance with all (i) Laws; (ii) orders, rules, and regulations of any regulatory, licensing, accrediting, insurance underwriting or rating organization, or other body exercising similar functions; (iii) duties or obligations of any kind imposed under any Permitted Encumbrance or by covenant, condition, agreement, or easement, public or private; and (iv) policies of insurance at any time in force with respect to the Property.  If Proceedings are initiated or Borrower receives notice that Borrower or the Property is not in compliance with any of the foregoing, Borrower will promptly send Lender notice and a copy of notice of such Proceedings or violation.  
(e)Rezonings, Encumbrances Etc.  Borrower shall not, without Lender’s prior written consent: (i) initiate or actively support any zoning reclassification of the Property or variance under existing zoning ordinances; (ii) modify or supplement any of the Permitted Encumbrances; (iii) impose any restrictive covenants or encumbrances upon the Property other than Permitted Encumbrances; (iv) execute or file any subdivision plat affecting the Property; (v) consent to the annexation of the Property to any municipality; and (vi) permit the Property to be used by the public or by any Person in a way that might make a claim of adverse possession or any implied dedication or easement possible. With respect to Lender’s approval for utility easements under subsection (ii) above, if Borrower requests Lender’s approval in writing, and such written request is neither approved nor denied within five (5) Business Days following Lender’s receipt (together with the a copy of such utility easement), Lender’s approval shall be deemed given; provided that Borrower’s request for Lender’s approval shall bear the following legend typed in bold, capital letters at the top: “IF LENDER SHALL FAIL TO EITHER APPROVE OR DENY BORROWER’S REQUEST FOR LENDER’S APPROVAL OF THE ENCLOSED UTILITY

EASEMENT WITHIN FIVE (5) BUSINESS DAYS AFTER LENDER’S RECEIPT THEREOF, LENDER SHALL BE DEEMED TO HAVE APPROVED SUCH UTILITY EASEMENT”.

Section 4.06    Insurance.
(a)Property Insurance.  Borrower shall keep the Property insured for the benefit of Borrower and Lender (with Lender named as mortgagee/loss payee) by (i) an “all risk” property insurance policy with an agreed amount endorsement for Full Replacement Cost without any coinsurance provisions or penalties, or the broadest form of coverage available, in an amount sufficient to prevent Lender from ever becoming a coinsurer under the policy or Laws, and with a deductible not to exceed One Hundred Thousand Dollars ($100,000.00); (ii) a policy or endorsement insuring against both alien and domestic acts of terrorism in accordance with Terrorism Risk Insurance Act, without co-insurance for damage to the Property, or loss of Rents, caused by acts of terrorism; (iii) a policy or endorsement insuring against claims applicable to the presence of Mold, if required by Lender; (iv) a policy or endorsement providing Rent Loss Insurance covering a period of not less than twelve (12) months of gross rent following the date of the Damage; (v) a policy or endorsement insuring against damage by flood if the Property is located in a Special Flood Hazard Area in an amount equal to the amount of the full replacement costs of the Improvements without depreciation; (vi) a policy or endorsement covering against Damage from (1) sprinkler system leakage and (2) boilers, boiler tanks, HVAC and other building systems and equipment, pressure vessels, auxiliary piping, and similar apparatus, in an amount required by Lender; and (vii) during the period of any construction, repair, restoration, or replacement of the Property, a standard builder’s risk policy with extended coverage in an amount at least equal to the Full Replacement Cost, and worker’s compensation, in statutory amounts.  Full Replacement Cost will be determined, at Borrower’s expense, periodically upon policy expiration or renewal by the insurance company or an appraiser, engineer, architect, or contractor approved by said company and Lender.

(b)Liability Insurance.  Borrower shall maintain commercial general liability insurance with per occurrence limits of $1,000,000, a products/completed operations limit of $2,000,000, and a general aggregate limit of $2,000,000, with an excess/umbrella liability policy of not less than $5,000,000 per occurrence and annual aggregate covering Borrower, with Lender named as an additional insured, against claims for bodily injury or death or property damage occurring in, upon, or about the Property or any street, drive, sidewalk, curb, or passageway adjacent thereto.  In addition to any other requirements, such commercial general liability and excess/umbrella liability insurance shall provide insurance against acts of terrorism and against claims applicable to the presence of Mold, or such coverages shall be provided by separate policies or endorsements.  The insurance policies shall also include operations and blanket contractual liability coverage which insures contractual liability under the indemnification set forth in Section 8.01 below (but such coverage or the amount thereof shall in no way limit such indemnification).
(c)Additional or Changed Insurance Requirements.  Upon not less than sixty (60) days’ advance notice to Borrower, Lender shall have the right to require that Borrower carry such additional or different types, amounts or limits of insurance as Lender may reasonably require to the extent that: (i) that such coverage is then available, (ii) owners and/or operators of retail properties of comparable quality to the Property and located in the market in which the Property is located are generally obtaining such coverage; (iii) lenders financing such retail properties are generally requiring such coverage, whether as a condition to new financing or pursuant to documents governing existing loans; or (iv) Borrower or Principal is obtaining such coverage on any other properties owned or operated by Borrower or Principal in the market in which the Property is located.
(d)Policy Requirements.  All insurance required under this Section 4.06 shall be fully paid for, nonassessable, and the policies shall contain such provisions, endorsements, and expiration dates as Lender shall reasonably require.  The policies shall be issued by insurance companies authorized to do business in the Property State and must be rated “A” or better by A.M. Best (or if a rating by A.M. Best is no longer available, a similar rating from a similar or successor service) and have a Financial Size Category of “X” or higher.  Companies with A.M. Best ratings of “B” or “C” with reinsurance endorsements are not acceptable.  In addition, all policies shall (i) in the case of insurance required by Section 4.06(a), include a standard mortgagee clause, without contribution, in the name of Lender (and that of its subsidiaries’, Affiliates’, successors’ and assigns’), (ii) provide that they shall not be canceled, amended, or materially altered (including reduction in the scope or limits of coverage) without at least thirty (30) days’ prior written notice to Lender except in the event of cancellation for non-payment of premium, in which case only ten (10) days’ prior written notice will be given to Lender, and (iii) include a waiver of subrogation clause substantially equivalent to the following: “The Company may require from the Insured an assignment of all rights of recovery against any party for loss to the extent that payment therefor is made by the Company, but the Company shall not acquire any rights of recovery which the Insured has expressly waived prior to loss, nor shall such waiver affect the Insured’s rights under this policy”.  
(e)Evidence of Insurance.  Borrower shall deliver to Lender (i) original (upon request) or certified copies of all policies (and renewals) required under this Section 4.06; and (ii) receipts evidencing payment of all premiums on such policies at least fifteen (15) days prior to their expiration.  If original and renewal policies are unavailable or if coverage is under a blanket policy, Borrower shall deliver duplicate originals (upon request), or, if unavailable, original ACORD 27 and ACORD 25-S certificates (or equivalent certificates) evidencing that such policies are in full force and effect together with certified copies of the original policies.  If coverage is under a blanket policy, such policy shall make specific reference to the Property and list all locations and insurable values of the properties included in the blanket policy.  In the event that such policies of insurance and evidence of the payment of the premiums therefor are not delivered to Lender, confirming that there will be no gaps in coverage or underinsurance as required by this Instrument, Borrower hereby expressly authorizes Lender to obtain, without notice to, or demand

upon, Borrower and without releasing Borrower from any of Borrower’s obligations hereunder, replacement insurance policies in such amounts, on such terms, and from such insurance agencies or companies as are suitable to Lender in Lender’s sole discretion, which replacement insurance, in Lender’s sole discretion, may protect only Lender’s interest in the Property and may, but need not, protect Borrower’s interest in the Property.  If Lender obtains such replacement insurance policies, Lender shall invoice Borrower for the amount of all fees, costs, and expenses related thereto, including any premiums paid by Lender, and Borrower shall remit payment to Lender for such amount within five (5) Business Days of receiving such invoice.  Nothing contained herein shall in any way obligate Lender to obtain or maintain such replacement insurance policies, and Lender shall not incur any liability for obtaining, maintaining, failing to obtain, or failing to maintain any such replacement insurance policies, nor shall Lender incur any liability for any of the contents, form, or legal sufficiency of any such policies, the solvency of any agencies or companies issuing such policies, or the payment or defense of any Proceedings related thereto.  Except to the extent prohibited by Law, Lender may furnish to any insurance agency or company any information concerning the Loan or Borrower, and any information contained in, or extracted from, any policy of insurance delivered to Lender hereunder. 
(f)Waiver of Subrogation.  A waiver of subrogation required by Section 4.06(d) hereof shall be obtained by Borrower from its insurers and, consequently, Borrower for itself, and on behalf of its insurers, hereby waives and releases any and all right to claim or recover against Lender, its officers, employees, agents and representatives, for any Damage to Borrower, other Persons, the Property, Borrower’s property or the property of other Persons from any cause required to be insured against by the provisions of this Instrument or otherwise insured against by Borrower.
(g)Additional Insurance Requirements.  Borrower shall not carry separate or additional insurance concurrent in form or contributing in the event of loss with that required under this Section 4.06 unless endorsed in favor of Lender in accordance with this Section 4.06 and approved by Lender in all respects.  In the event of foreclosure of this Instrument or other transfer of title or assignment of the Property in extinguishment, in whole or in part, of the Obligations, all right, title, and interest of Borrower in and to all policies of insurance then in force regarding the Property and all proceeds payable thereunder and unearned premiums thereon shall immediately vest in the purchaser or other transferee of the Property.  No approval by Lender of any insurer shall be construed to be a representation, certification, or warranty of its solvency.  No approval by Lender as to the amount, type, or form of any insurance shall be construed to be a representation, certification, or warranty of its sufficiency.  Borrower shall comply with all insurance requirements and shall not cause or permit any condition to exist which would be prohibited by any insurance requirement or would invalidate the insurance coverage on the Property.

(h)Payment of Lender’s Costs and Expenses.  Borrower shall pay all costs and expenses, including Attorneys’ Fees, incurred by Lender in connection with Lender’s review and approval of Borrower’s insurance and of the insurance to be provided by each Ground Lessee as provided below (regardless of whether such insurance is ultimately purchased by Ground Lessee, Tenant, Borrower or Lender).
(i)Ground Lessee Insurance Obligations. In addition to the foregoing, and notwithstanding anything herein to the contrary (including Section 4.06(g) hereof) Borrower shall cause each Ground Lessee to maintain the insurance required to be maintained by such Ground Lessee pursuant to its Ground Lease.  Notwithstanding the foregoing, in the event that any Ground Lessee fails to maintain the insurance that it is required to carry under its Ground Lease, or fails to name Lender as a loss payee thereunder, or undertakes to self-insure, Borrower shall provide notice to such Ground Lessee of such failure.  If such Ground Lessee shall fail to obtain such insurance or name Lender as loss payee prior to the lapse of existing insurance which complies with the provisions of this Section 4.06(i), then Borrower shall acquire and maintain insurance covering the demised premises under such Ground Lease that is substantially equivalent to the insurance that such Ground Lessee is required to carry under its Ground Lease and which names Lender as loss payee. Borrower shall promptly provide Lender with notice of any Ground Lessee’s failure to carry appropriate insurance and shall provide evidence, reasonably satisfactory to Lender, that Borrower has acquired sufficient, substitute insurance which names Lender as a loss payee. Borrower shall carry such insurance until Lender is provided with evidence, reasonably satisfactory to Lender, that such Ground Lessee has obtained the insurance required to be maintained under its Ground Lease.  In the event that such policies of insurance and evidence of the payment of the premiums therefor are not delivered to Lender, confirming that there will be no gaps in coverage or underinsurance to what is required by this Instrument, Borrower hereby expressly authorizes Lender to obtain, without notice to, or demand upon, Borrower and without releasing Borrower from any of Borrower’s obligations hereunder, replacement insurance policies in such amounts, on such terms, and from such insurance agencies or companies as are suitable to Lender in Lender’s sole discretion, which replacement insurance, in Lender’s sole discretion, may protect only Lender’s interest in the Property and may, but need not, protect Borrower’s interest in the Property.  If Lender obtains such replacement insurance policies, Lender shall invoice Borrower for the amount of all fees, costs, and expenses related thereto, including any premiums paid by Lender, and Borrower shall remit payment to Lender for such amount within five (5) Business Days of receiving such invoice.  Nothing contained herein shall in any way obligate Lender to obtain or maintain such replacement insurance policies, and Lender shall not incur any liability for obtaining, maintaining, failing to obtain, or failing to maintain any such replacement insurance policies, nor shall Lender incur any liability for any of the contents, form, or legal sufficiency of any such policies, the solvency of any agencies or companies issuing such policies, or the payment or defense of any Proceedings related thereto.  Except to the extent prohibited by Law, Lender may furnish to any insurance agency or company any information concerning the Loan or Borrower, and any information contained in, or extracted from, any policy of insurance delivered to Lender hereunder.

Section 4.07    Damage and Destruction of Property.
(a)Notification of Lender, Etc.  In the event of any Damage other than de minimus Damage, (i) Borrower shall promptly notify Lender, generally describing the extent of the Damage, and shall take all necessary steps to preserve any undamaged part of the Property; and (ii) Borrower shall comply with other reasonable requirements established by Lender to preserve the security under this Instrument.  Borrower expressly assumes all risk of loss from any Damage, whether or not insurable or insured against.
(b)Proof of Loss and Settlement of Claims.  If any Damage occurs and some or all of it is covered by insurance, then Lender may, but is not obligated to, make proof of loss if not made by Borrower within fifteen (15) days after the date of the Damage, and Lender is authorized and empowered by Borrower to settle, adjust, or compromise any claims for the Damage.  Notwithstanding the foregoing, Borrower shall have the right to settle, adjust or compromise any claim for Damage if the total amount of such claim is less than Two Hundred Fifty Thousand Dollars ($250,000) (the “Damage Threshold”); provided that Borrower promptly uses the full amount of such insurance proceeds for Restoration of the Damage and provides evidence thereof to Lender in a manner acceptable to Lender.
(c)Lender to Hold Insurance Proceeds.  Except as expressly provided in Section 4.07(b) above, all insurance proceeds payable on account of any Damage in excess of the Damage Threshold shall be delivered to and held by Lender, to be applied in accordance with this Section 4.07, and each insurance company is authorized and directed to make payment directly to Lender. Except as expressly provided in Section 4.07(b) above, Borrower shall have no right to such proceeds or to direct the use of the same.  If Borrower receives any insurance proceeds for the Damage in excess of the Damage Threshold, Borrower shall promptly deliver the proceeds to Lender, except as expressly provided in Section 4.07(b) above.  Any insurance proceeds held by Lender shall be held without the payment of interest thereon.  Notwithstanding anything in this Instrument or at Law or in equity to the contrary, none of the insurance proceeds paid to Lender shall be deemed trust funds, and Lender may dispose of these proceeds as provided in this Section 4.07.  
(d)Obligation to Undertake Restoration.  Upon the occurrence of any Damage, Borrower shall diligently repair or restore the damaged Improvements in accordance with this Section 4.07, regardless of the amount of Net Proceeds made available to pay for such Restoration and regardless of whether Borrower was required by this Instrument to insure against such Damage.  If Borrower was required to maintain insurance by this Instrument and failed to do so, such failure shall not relieve Borrower of its obligation to undertake Restoration necessitated by any Damage that would have been covered by such insurance.
(e)Lender’s Right to Condition Use of Proceeds.  In the event the insurance casualty proceeds are less than the Damage Threshold, all insurance proceeds shall be delivered to Borrower and Borrower shall commence to restore the Property to the same or better condition as that existing prior to such Damage and shall diligently prosecute such Restoration to completion.  In the event the insurance casualty proceeds equal or exceed the Damage Threshold, all insurance proceeds shall be delivered to, and held and disbursed towards Restoration by Lender subject to the following terms and conditions being satisfied at the time of the Damage and at all applicable times during the Restoration: 
(i)    no Events of Default have occurred and be continuing; 
(ii)    Lender shall have made a reasonable determination that the time needed to complete the Restoration will (A) not result in its completion occurring during the last three hundred sixty-

five (365) days of the term of the Loan, and (b) not exceed twelve (12)  months from the date of the damage or destruction;
(iii)    Lender has determined in its reasonable discretion that the LTV will not exceed fifty-five percent (55%) upon completion of the Restoration; provided, however, that if the LTV exceeds fifty-five percent (55%) upon completion of the Restoration as determined by Lender in its reasonable discretion, then rather than having the casualty insurance proceeds applied to reduce the Debt, Borrower may elect in its sole discretion to (x) cause a Release of the Property pursuant to the terms and conditions of Section 10.01 (without prepayment penalty or premium) with the casualty insurance proceeds applied to the amounts due with respect to such Release, (y) cause a Substitution of the Property pursuant to the terms and conditions of Section 10.02 (without prepayment penalty or premium) with the casualty insurance proceeds applied to the amounts due with respect to such Substitution (if required) with any excess distributed to Borrower, or (z) repay a portion of the Loan (without prepayment penalty or premium) in the amount necessary for the LTV not to exceed fifty-five percent (55%) upon completion of the Restoration as determined by Lender in its reasonable discretion, provided that Borrower shall not be obligated to make such election (in which case the condition in this clause (iii) to the use of casualty insurance proceeds shall be deemed not satisfied);
(iv)     the DSCR based on Leases which are not terminable by reason of the casualty is at least 2.00 to 1.00 as reasonably determined by Lender; provided that if the DSCR is less than 2.00 to 1.00, then rather than having the casualty insurance proceeds applied to reduce the Debt, Borrower may elect in its sole discretion to (x) cause a Release of the Property pursuant to the terms and conditions of Section 10.01 (without prepayment penalty or premium) with the casualty insurance proceeds applied to the amounts due with respect to such Release, (y) cause a Substitution of the Property pursuant to the terms and conditions of Section 10.02 (without prepayment penalty or premium) with the casualty insurance proceeds applied to the amounts due with respect to such Substitution (if required) with any excess distributed to Borrower, or (z) repay a portion of the Loan (without prepayment penalty or premium) in the amount necessary for the DSCR of the Property to be at least 2.00 to 1.00 upon completion of the Restoration, provided that Borrower shall not be obligated to make such election (in which case the condition in this clause (iv) to the use of casualty insurance proceeds shall be deemed not satisfied);
(v)    the insurance proceeds received, and being held by Lender, plus such other funds which Borrower deposits with Lender, are sufficient, in Lender’s reasonable opinion, to restore the Property in accordance with plans and specifications approved by Lender; and if at any time Lender determines in its good faith judgment that an upward revision of the total remaining cost of Restoration, and as a result Lender does not have available a sufficient amount of remaining insurance proceeds to pay the remaining cost of Restoration, Borrower shall pay to Lender such additional amounts as are necessary to cover the amount by which such upward revision exceeds the remaining proceeds; 
(vi)     disbursement of the insurance proceeds shall be in accordance with typical construction loan disbursement procedures established by Lender, as Lender shall, in its sole opinion, deem necessary, appropriate or desirable;
(vii)    Borrower shall have in place and provide to Lender a policy or policies of builder’s risk insurance in an amount not less than the full insurable value of the Property insuring against

such risks (including without limitation fire and extended coverage, collapse of the improvements on the Property and earthquake coverage, if applicable, to agreed limits) as Lender may request, and any other insurance as Lender may reasonably request, in form and substance and from companies reasonably acceptable to Lender;
(viii)    the work shall be performed under the supervision of an architect or engineer approved in writing by Lender (such architect or engineer being referred to hereinafter as the “Architect”) and, before Borrower commences any work other than temporary work to protect property or prevent interference with business, Lender shall have approved in writing the construction contract and plans and specifications for such work; provided that if Borrower requests Lender’s approval in writing, and such written request is neither approved nor denied within fifteen (15) Business Days following Lender’s receipt (together with the a copy of such plans and specifications), Lender’s approval shall be deemed given; provided that Borrower’s request for Lender’s approval shall bear the following legend typed in bold, capital letters at the top: “IF LENDER SHALL FAIL TO EITHER APPROVE OR DENY BORROWER’S REQUEST FOR LENDER’S APPROVAL OF THE ENCLOSED PLANS AND SPECIFICATION WITHIN FIFTEEN (15) BUSINESS DAYS AFTER LENDER’S RECEIPT THEREOF, LENDER SHALL BE DEEMED TO HAVE APPROVED SUCH UTILITY EASEMENT”.
(ix)    Lender receives each request for payment on seven (7) days’ prior written notice accompanied by a certificate signed by the Architect stating that: (1) the work completed to date has been performed in compliance with the approved plans and specifications; (2) the sum requested is necessary to reimburse Borrower for payments by Borrower to, or is due to, the contractor, subcontractors, materialmen, laborers, engineers, architects or other persons rendering services or materials for the work (giving a brief description of such services, materials and related costs and to whom same is payable) and, when added to all sums previously disbursed by Lender, does not exceed the value of the work performed to the date of such certificate; and (3) the amount of the remaining proceeds held by Lender (in addition to any amounts paid by Borrower pursuant to this Section 4.07) shall be sufficient to pay for the work in full upon completion of the same (giving in such reasonable detail as Lender may require an estimate of the cost of such completion);
(x)    each request for disbursement by Lender shall be accompanied by a lien waiver satisfactory to Lender covering that part of the work for which payment or reimbursement was requested in the immediately preceding request for payment and, if required by Lender and available at commercially reasonable rates, an endorsement to Lender’s title policy insuring or a title commitment  showing that no liens have been filed in connection with the work performed to date;
(xi)    Lender receives, at Lender’s option, a satisfactory completion bond covering the work;
(xii)    the Restoration work is performed in accordance with, and the Property is at all times in compliance with all Laws affecting the Property and/or such work; 
(xiii)    Borrower commences Restoration within sixty (60) days of the occurrence of the Damage, as such period may be extended for so long as Borrower is diligently pursuing the issuance of any Permits necessary to complete such Restoration, and diligently pursues the completion of the Restoration of the Property subject to typical force majeure events, up to in all events a maximum of ninety (90) days after the occurrence of the Damage; 

(xiv)    Lender receives the final request for payment after completion of the work accompanied by a final lien waiver or waivers and a copy of any such certificate or certificates as shall be required by law to render occupancy of the improvements legal; and
(xvi)    Lender shall have the right to hire its own consultants (e.g., architect and/or engineer or other), to act on its behalf, in any capacity, and Borrower shall pay such consultants’ fees.
(f)    Lender’s Discretion. In the event that at any time any of the terms and conditions set forth in subparagraph (e) above are not satisfied and remain unsatisfied for a period of thirty (30) days following written notice thereof to Borrower, then Lender shall have the option, in its sole discretion, of paying or applying all or any part of the insurance proceeds: (i) to any indebtedness secured by the Loan Documents and in such order as Lender may determine; or (ii) to the Restoration. 
(g)    Administrative Fee.  Lender shall receive an administrative fee equal to Two Hundred Fifty and 00/100 Dollars ($250.00) for each disbursement of insurance proceeds made by it and Borrower shall reimburse Lender for all costs incurred by Lender in connection with the foregoing including, but not limited to, consultants’ fees, attorney’s fees, and the fees and expenses of any construction loan administrator or servicer retained by Lender to administer the disbursement of insurance proceeds under this Section 4.07.
(h)    Intentionally Omitted. 
(i)      Additional Security.  Borrower shall execute, deliver, file and/or record, at its expense, such instruments as Lender requires to confirm and/or perfect Lender’s security interest in insurance proceeds and other rights granted pursuant to Section 1.01(f) hereof.  Upon the occurrence and during the continuance of an Event of Default, Lender may exercise all of its rights and remedies as a secured party under the UCC with respect to such Net Proceeds, Rent Loss Proceeds and other rights described above.

Section 4.08     Condemnation.
(a)Notification of Lender, Etc.  Borrower will promptly notify Lender of any Taking.  Borrower shall, at its expense, (i) diligently prosecute all Proceedings in connection with such Taking, (ii) deliver to Lender copies of all papers served in connection therewith; and (iii) consult and cooperate with Lender in the handling of such Proceedings.  No settlement of such Proceedings shall be made by Borrower without Lender’s prior written consent.  Lender may (but shall not be obligated to do so) commence, appear in and prosecute in its own name any Proceeding or make any compromise or settlement in connection with any Taking, and Borrower will sign and deliver all instruments requested by Lender to permit this participation.
(b)Payment of Award to Lender.  Any Award is hereby assigned, and shall be paid, to Lender.  Borrower authorizes Lender to collect and receive all Awards, to give receipts for them, to accept them in the amount received without question or appeal, and/or to appeal any judgment, decree or order with respect to an Award.  Borrower will sign and deliver all instruments requested by Lender to permit these actions.
(c)Application of Award.  Lender may apply any Award in any order it determines (i) to reimburse Lender for all costs related to collection of the Award; and (ii) at Lender’s option, to (1) payment (without any Prepayment Premium) of all or part of the Obligations, whether or not then due and payable, in the order determined by Lender (provided that if any Obligations remain outstanding after this payment, the unpaid Obligations shall continue in full force and effect and Borrower shall not be excused in the payment thereof); or (2) the Restoration.  If all or any portion of the Award is applied to the Obligations, unless Lender agrees otherwise, all regular installments of principal and interest payable under the Note shall continue to be due and payable as provided therein until the Obligations have been paid in full.  If Borrower receives any Award, Borrower shall promptly deliver such Award to Lender.  Notwithstanding anything in this Instrument or at Law or in equity to the contrary, none of the Award paid to Lender shall be deemed trust funds and Lender may dispose of these proceeds as provided in this Section 4.08.
(d)Payment of Obligations.  Notwithstanding any Taking, Borrower shall continue to pay and perform the Obligations as provided in the Loan Documents.  Any reduction in the Obligations due to application of the Award shall take effect only upon Lender’s actual receipt and application of the Award to the Obligations.  If the Property shall have been foreclosed, sold pursuant to any power of sale granted hereunder, or transferred by deed-in-lieu of foreclosure prior to Lender’s actual receipt of the Award, Lender may apply the Award received to the extent of any deficiency upon such sale and the incurrence of costs by Lender in connection with such sale.
(e)Material Condemnation. If more than twenty-five percent (25%) of the income producing square footage of the Property is taken as a result of a Proceeding for a Taking or a Taking results in a decrease by twenty-five percent (25%) or more of the Net Operating Income of the Property, then Lender upon written notice to Borrower may require Borrower to cause a Release of the Property pursuant to the terms and conditions of Section 10.01 or a Substitution of the Property pursuant to the terms and conditions of Section 10.02, within ninety (90) days after receipt of such notice with Borrower making the determination of whether to effectuate a Release or Substitution and with the condemnation proceeds applied to the amounts due with respect to the Release or if required the Substitution, in each case with any prepayment made not being subject to any prepayment penalty or premium and any unused condemnation proceeds being distributed to Borrower.  Borrower’s failure to cause such Release or Substitution within such ninety (90) day period shall constitute an Event of Default. 

Section 4.09    Certain Liens and Liabilities.  Borrower shall pay, bond, or otherwise discharge all liens, security interests, encumbrances and charges (a) of mechanics, material men, laborers and other Persons for all materials supplied and work performed in respect of the Property; (b) of judgment creditors; and (c) created as a result of Borrower’s consensual acts and not otherwise provided in clauses (a) - (b), which in each case, if unpaid, might result in, or permit the creation of, a lien, security interest, encumbrance or charge on the Property other than the Permitted Encumbrances, subject to the same right to contest the same as provided in Section 4.03(b) for Assessments.  Borrower shall, at its sole expense, do everything necessary to preserve the lien and security interest created by this Instrument and its priority.  Nothing in the Loan Documents shall be deemed or construed as constituting the consent or request by Lender or Trustee, express or implied, to any contractor, subcontractor, laborer, mechanic or materialman for the performance of any labor or the furnishing of any material for any improvement, construction, alteration, or repair of the Property.  Borrower further agrees that neither Lender nor Trustee stands in any fiduciary relationship to Borrower.  Any contributions made, directly or indirectly, to Borrower by or on behalf of any of its partners, members, principals or any party related to such parties shall be subordinate and inferior to the rights of Lender under the Loan Documents.
Section 4.10    Tax and Insurance Deposits. Borrower shall deliver to Lender all tax bills, bond and assessment statements, statements of insurance premiums, and statements for any other Impositions after receipt by Borrower.  Borrower shall promptly notify Lender of any changes to the amounts, schedules and instructions for payment of the Impositions.  Borrower shall make monthly Deposits to Lender in an amount sufficient to pay the Impositions at least thirty (30) days before they are due.  Lender shall estimate the amount of the Deposits until ascertainable.  If Lender determines that the Deposits are insufficient, Borrower shall promptly deposit any deficiency determined by Lender within five (5) Business Days after notice from Lender.  Borrower authorizes Lender or its agent to obtain the bills for Assessments directly from the appropriate Governmental Authority.  All Deposits are pledged to Lender and shall constitute additional security for the Obligations.  The Deposits shall be held by Lender without interest (except to the extent required by Law) and may be commingled with other funds.  If (a) Event of Default shall have occurred and be continuing at the time of payment, (b) Borrower has delivered bills or invoices to Lender for the Impositions in sufficient time to pay them when due; and (c) the Deposits are sufficient to pay the Impositions or Borrower has deposited the necessary additional amount, then Lender shall pay the Impositions prior to their due date.  Any Deposits remaining after payment of the Impositions shall, at Lender’s option, be credited against the Deposits required for the following year or paid to Borrower.  If an Event of Default occurs, the Deposits may, at Lender’s option, be applied to the Obligations in any order of priority, without relieving Borrower of its obligation to pay the Impositions when they become due.  Any application to principal shall be deemed a prepayment subject to the applicable Prepayment Premium.  Borrower shall not claim any credit against the principal and interest due under the Note for the Deposits.  Upon an assignment or other transfer of this Instrument pursuant to Section 9.05 of this Instrument, Lender shall pay over the Deposits in its possession to the assignee or transferee and then it shall be completely released from all liability with respect to the Deposits, other than as a result of Lender gross negligence or willful misconduct with respect to the Deposits.  Borrower shall look solely to the assignee or transferee with respect thereto.  This provision shall apply to every transfer of the Deposits to a new assignee or transferee.  Subject to Article V, a transfer of title to the Land shall automatically transfer to the new owner the beneficial interest in the Deposits.  Upon full payment of the Debt, or, at Lender’s option, at any prior time, the balance of the Deposits in Lender’s possession shall be paid over to the record owner of the Land and no other party shall have any right or claim to the Deposits.  Lender may transfer all its rights and duties under this Section 4.10 to such servicer or financial institution as Lender may periodically designate pursuant to Section 9.05 of this Instrument and Borrower agrees to make the Deposits to such servicer or institution.

Section 4.11    ERISA. 
(a)Borrower understands and acknowledges that, as of the date hereof, the source of funds from which Lender is extending the Loan will include one or more of the following accounts: (i) an “insurance company general account,” as that term is defined in Prohibited Transaction Class Exemption 95-60 (60 Fed. Reg. 35925 (Jul. 12, 1995)), as to which Lender meets the conditions for relief in Sections I and IV thereof; (ii) pooled and single client insurance company separate accounts, which are subject to the provisions of ERISA; and (iii) one or more insurance company separate accounts maintained solely in connection with fixed contractual obligations of the insurance company, under which the amounts payable or credited to the plan are not affected in any manner by the investment performance of the separate account.
(b)Borrower covenants and agrees that it shall not engage in any transaction which would cause any obligation or action, taken or to be taken, to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA and which would result in a material liability to Borrower.  
(c)Borrower shall deliver to Lender such certifications and/or other evidence periodically requested by Lender, in its reasonable discretion, to verify the representations and warranties in Section 3.11 and the covenants in Section 4.11(b) above.  Notwithstanding anything in the Loan Documents to the contrary, no sale, assignment, or transfer of any direct or indirect right, title, or interest in Borrower or the Property (including creation of a junior lien, encumbrance or leasehold interest) shall be permitted which would, in Lender’s opinion, cause an ERISA Violation.  At least fifteen (15) days before consummation of any of the foregoing, Borrower shall obtain from the proposed transferee or lienholder (i) a certification to Lender that the representations and warranties of Section 3.11 will be true after consummation; and (ii) an agreement to comply with this Section 4.11.
(d)The obligations of Borrower under this Section 4.11 shall survive repayment and performance of the other Obligations and any transfer of title to the Property or any portion thereof by foreclosure sale hereunder or by deed in lieu of such foreclosure.

Section 4.12    Environmental Indemnity.  Subject to the provisions, terms and conditions set forth therein, Borrower shall comply with all of the terms, covenants and conditions of the Environmental Indemnity, and as of the date hereof hereby re-makes all covenants, representations and warranties made by it in the Environmental Indemnity, which are incorporated in this Instrument by reference as if fully set forth herein.  Certain obligations of Borrower under the Environmental Indemnity shall survive repayment and performance of the Debt and any transfer of title to the Property or any portion thereof by foreclosure sale hereunder or by deed in lieu of such foreclosure.
Section 4.13    Intentionally Omitted.
Section 4.14    Inspection.  Upon prior written notice, and subject in all respects to the rights of Tenants under the Leases, Borrower shall allow Lender and any Person who is not a Specified Prohibited Transferee, designated by Lender to enter upon the Property and conduct tests or inspect the Property at all reasonable times.  Borrower shall reasonably assist Lender and such Person in effecting said inspection.
Section 4.15    Records, Reports, and Audits.  
(a)Maintenance of Books and Records; Required Reports.  Borrower shall maintain complete and accurate books and records with respect to all operations of, or transactions involving, the Property.  Annually, on or prior to March 31st of each calendar year, Borrower shall furnish to Lender (i) financial statements, prepared in accordance with generally accepted accounting principles, consistently applied, for the immediately preceding calendar year for Borrower and each of the Principals (including a schedule of all related obligations and contingent liabilities for the Principals), financial statements to include a net operating income statement and a capital expenditures statement; (ii) unless Borrower is making Deposits in accordance with Section 4.10, copies of paid tax receipts for the Property; (iii) a net operating income budget showing projected income and expense and capital expenditures for the next twelve (12) month fiscal budget period; and (iv) subject to any applicable confidentiality restrictions contained in the applicable Leases, any sales figures reported to Borrower by all retail Tenants of the Property for the prior calendar year.  On or prior to March 31st of each calendar year and within ten (10) days after request from Lender for any other calendar quarter thereafter, Borrower shall furnish to Lender a current rent roll for the Property.
(b)Intentionally Omitted.
(c)Delivery of Reports.  All of the reports, statements, and items required under this Section 4.15 (i) shall be certified as being true, correct, and accurate by the delivering party; (ii) if an Event of Default occurred during the calendar year to which such reports pertain, at Lender’s option, the operating statement and financing statements shall be audited by a certified public accountant acceptable to Lender at Borrower’s expense; and (iii) shall be on substantially the same form as previously delivered to Lender; and (iv) shall be delivered on or before the due date thereof.  If any report, statement, or item is not received by Lender on its due date, Borrower shall pay to Lender, to compensate Lender for the administrative expense likely to be incurred by Lender as a result of such delinquent report, statement or item, a late fee of Five Hundred and No/100 Dollars ($500.00) for each such delinquent report, statement or item for each month or partial month beyond the due date thereof that Lender has not received same; provided that no such fee shall apply to the first month of delinquency for the first report delivered later than the applicable due date.  Borrower hereby acknowledges that such late fee is applicable to each reporting document that is delinquent and is not a single charge for all reporting documents that are delinquent at the same time.  Borrower shall (i) provide Lender with such additional financial, management, or other information regarding Borrower, the Principals, or the Property as Lender may reasonably request; and (ii) deliver all

items required by this Section 4.15 in an electronic format (i.e. on CD-ROM or external hard drive) or by electronic transmission.
(d)Right to Examine Records.  Upon written notice, Borrower shall allow Lender or any Person designated by Lender to examine, audit, and make copies of all such books and records and all supporting data at the place where these items are located at all reasonable times after reasonable advance notice; provided that no notice shall be required after any Event of Default.  Borrower shall reasonably assist Lender in effecting such examination.  Upon five (5) days’ prior notice, Lender may inspect and make copies of the income tax returns of Borrower, its general partner(s) (if Borrower is a partnership) or its manager or member (if Borrower is a limited liability company) for the purpose of verifying any items referenced in this Section 4.15.
Section 4.16    Borrower’s Certificates.  Within ten (10) Business Days after Lender’s request, Borrower shall furnish a written certification to Lender and any Investor as to (a) the amount of the Debt outstanding; (b) the interest rate, terms of payment, and maturity date of the Note; (c) the date to which payments have been paid under the Note; (d) whether any offsets or defenses exist against the Obligations and a detailed description of any listed; (e) whether all Leases are in full force and effect and have not been modified (or if modified, setting forth all modifications); (f) the date to which the Rents have been paid; (g) whether, to the knowledge of Borrower, any defaults exist under any of the Leases with Major Tenants; (h) the security deposit held by Borrower under each Lease and that such amount is the amount required under such Lease; (i) whether there are any Events of Default and a detailed description of any listed events; (j) whether the Loan Documents are in full force and effect; and (k) any other matters reasonably requested by Lender related to the Leases, the Obligations, the Property, or the Loan Documents.  In addition, concurrently with delivery of such written certification to Lender, Borrower shall deliver to Lender an aged account receivable report showing any monetary defaults by Tenants under the Leases certified by Borrower as true and accurate in all material respects.  Except during the continuance of an Event of Default, Lender shall not request a certificate under this Section 4.16 more than once every twelve (12) months. 
Section 4.17    Criminal Proceedings. Borrower shall deliver to Lender such certifications and/or other evidence periodically requested by Lender, in its reasonable discretion, to verify the representations and warranties in Section 3.09(b).

Section 4.18    Additional Security.  The taking of additional security, execution of partial releases, or extension of the time for the payment obligations of Borrower shall not diminish the effect and lien of this Instrument and shall not affect the liability or obligations of any maker or guarantor.  During the continuance of an Event of Default, Lender and/or Trustee may enforce the Loan Documents or any other security in such order and manner as Lender may determine in its discretion.
Section 4.19    Further Acts.  Borrower shall take all necessary actions to keep valid and effective the lien and rights of Lender and Trustee under the Loan Documents.  Promptly upon request by Lender or Trustee, and at Borrower’s expense, Borrower shall execute additional instruments and take such actions as Lender and/or Trustee reasonably believes are necessary to (a) maintain or grant Lender and Trustee a first-priority, perfected lien on the Property; (b) grant to Lender and Trustee, to the fullest extent permitted by Law, the right to foreclose on, or transfer title to, the Property non-judicially; and (c) correct any error in the Loan Documents.
Section 4.20    Compliance With Anti-Terrorism Laws.
(a)Conducting Business with Certain Persons.  Borrower hereby covenants and agrees that it will not knowingly conduct business with or engage in any transaction or dealing with any Prohibited Person.  
(b)Compliance with Anti-Terrorism Laws.  Borrower hereby covenants and agrees that it, as well as the Principals, will comply at all times with the requirements of the Anti-Terrorism Laws.  Borrower hereby covenants and agrees that, to the extent (if any) required to do so, it, as well as the Principals, will maintain established policies and procedures reasonably designed to prevent and detect money laundering and to prevent other violations of the Anti-Terrorism Laws, including those relating to not knowingly conducting any business or engaging in any transaction or dealing with any Prohibited Person.  
(c)Notice of OFAC Violation.  Borrower hereby covenants and agrees that, in the event of an OFAC Violation, Borrower will promptly (i) give notice to Lender of such OFAC Violation; and (ii) comply with all Laws applicable to such OFAC Violation (regardless of whether the Prohibited Person is located within the jurisdiction of the United States of America), including the Anti-Terrorism Laws, and Borrower hereby authorizes and consents to Lender’s taking any and all steps Lender deems necessary, in its sole discretion, to comply with all Laws applicable to any such OFAC Violation, including the requirements of the Anti-Terrorism Laws (including the “freezing” and/or “blocking” of assets).
(d)Confirmation of OFAC Information.  Upon Lender’s request in its reasonable discretion from time to time during the term of the Loan, Borrower agrees to deliver a certification confirming that the representations and warranties set forth in Section 3.10 above remain true and correct as of the date of such certificate and confirming Borrower’s and the Principals’ compliance with this Section 4.20.

Section 4.21    Expenses and Advances.  
(a)In addition to any payments specified in the Loan Documents, Borrower shall pay, on demand, all fees, charges, costs, expenses, and disbursements incurred by Lender, Borrower and/or Trustee in connection with the following:
(i)any amendment to, or consent, approval or waiver required or requested by Borrower under this Instrument or any of the other Loan Documents (whether or not any such amendment, consent, approval or waiver is entered into or granted); 
(ii)defending or participating in any Proceeding arising from actions by third parties and brought against or involving Lender with respect to:  (1) the Property; (2) any event, act, condition, or circumstance in connection with the Property; or (3) the relationship between or among, Lender, Trustee, Borrower and Principals in connection with this Instrument or any of the other Loan Documents or any of the transactions contemplated by this Instrument or any of the other Loan Documents; 
(iii)the administration or enforcement of, or preservation of rights or remedies under this Instrument or any of the other Loan Documents, including or in connection with any sale, Transfer, lease, or other encumbrance of the Property or any interest therein, any transfer of any of the Obligations, Proceedings, and/or the foreclosure, sale or transfer by deed-in-lieu of foreclosure of the Property pursuant to this Instrument or any of the other Loan Documents; and 
(iv)the occurrence of an Insolvency Event or if any Bankruptcy Proceeding is instituted by or against Borrower, any of the Principals, Principal General Partner, REIT or any other REIT Subsidiary (other than by Lender), provided, however, that in the case of any other REIT Subsidiary, the Insolvency Event or Bankruptcy Proceedings with respect to such REIT Subsidiary results in a substantive consolidation with Borrower.
(b)During the continuance of an Event of Default, or at such other time that Lender determines that there exists an imminent threat of injury to persons or property or Lender’s security, if Borrower fails to pay any amounts or perform any actions required under the Loan Documents, then Lender or Trustee may (but shall not be obligated to) advance sums to pay such amounts or perform such actions.  During the continuance of an Event of Default, or at such other time that Lender determines that there exists an imminent threat of injury to persons or property or Lender’s security, Lender and Trustee shall have the right to enter upon and take possession of the Property to prevent or remedy any such failure and the right to take such actions in Borrower’s name.  No advance or performance by Lender shall be deemed to have cured a Default.  All (i) sums advanced by or payable to Lender or Trustee pursuant to this Section 4.21 or under Laws; or (ii) except as expressly provided in the Loan Documents, payments due under the Loan Documents which are not paid in full when due, shall: (1) be deemed demand obligations; (2) bear interest from the due date at the Default Rate until paid if not paid within five (5) Business Days after written notice; (3) be part of, together with such interest, the Obligations; and (4) be secured by the Loan Documents.  Lender or Trustee, upon making any such advance, shall also be subrogated to the rights of the Person receiving such advance.

Section 4.22    Subrogation.  If any proceeds of the Note were used to extinguish, extend or renew any indebtedness on the Property, then, to the extent of the funds so used, (a) Lender and Trustee shall be subrogated to all rights, claims, liens, titles and interests existing on the Property held by the holder of such indebtedness; and (b) these rights, claims, liens, titles and interests are not waived but rather (i) shall continue in full force and effect in favor of Lender and Trustee; and (ii) are merged with the lien and security interest created by the Loan Documents as cumulative security for the payment and performance of the Obligations.
Section 4.23    Permits.  Borrower shall obtain and at all times shall keep in full force and effect and shall use commercially reasonable efforts to cause all occupants of the Property to keep in full force and effect all Permits necessary or desirable for the lawful use, occupancy and operation of the Property for the Permitted Use and the conduct of Borrower’s business and the businesses of all occupants of the Property.  From and after the date hereof, Borrower shall use commercially reasonable efforts to obtain and deliver to Lender copies the certificates of occupancy with respect to the premises leased by all Major Tenants.  Borrower shall comply at all times with all of the terms and conditions of the Permits applicable to the Property or Borrower and shall promptly notify Lender of any violation of or noncompliance with any such Permit of which Borrower may become aware.  Upon the occurrence and during the continuance of an Event of Default, Lender may exercise all of its rights and remedies as a secured party under the UCC with respect to such Permits.
Section 4.24    Parking.  At all times Borrower will maintain or cause to be maintained sufficient paved, on-site parking spaces to comply with the terms of all Leases and all applicable zoning regulations.
Section 4.25    Property Management and Leasing.  
(a)At all times Borrower will cause the Property to be managed (i) in accordance with all Laws; (ii) by a property management company reasonably satisfactory to Lender, it being understood that Phillips Edison Property Manager, Principal, REIT and any REIT Subsidiary are each satisfactory to Lender, so long as they are Affiliates of Borrower; and (c) pursuant to a written property management agreement approved by Lender in writing (such approval not to be unreasonably withheld, conditioned or delayed), which may include the Leasing Agreement (as approved, the “Property Management Agreement”).  The Property Management Agreement shall be terminable at will by Borrower upon thirty (30) days prior written notice and shall be subject and subordinate to the lien and terms of this Instrument and the other Loan Documents by execution of a subordination of management agreement on Lender’s then standard form with such changes as agreed between Lender and Borrower.  In no event shall the property manager be removed or replaced (other than in connection with a Property Management Transfer) or the terms of the Property Management Agreement be modified or amended without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed.  Upon the occurrence of an Event of Default, Lender shall have the right to direct Borrower to terminate (and Borrower shall so terminate or cause to be terminated) the Property Management Agreement upon thirty (30) days’ notice.  In the event that the property manager provides cause for termination as the result of gross negligence, willful misconduct, fraud, breach of fiduciary duty, bankruptcy, criminal liability or civil liability, Lender shall have the right to direct Borrower to immediately terminate (and Borrower shall so immediately terminate or cause to be immediately terminated) such Property Management Agreement.

(b)At all times during the term of the Loan, the Property shall be leased (i) in accordance with all Laws; (ii) by Phillips Edison Property Manager, Principal, REIT, any REIT Subsidiary or a leasing agent reasonably satisfactory to Lender; and (iii) pursuant to a written leasing agreement that is either (x) approved by Lender, such approval not to be unreasonably withheld, conditioned or delayed, or (y) included as part of the Property Management Agreement approved by Lender in accordance with Section 4.25(a) above (as approved, the “Leasing Agreement”). The Leasing Agreement shall be subject and subordinate to the lien and terms of this Instrument and the other Loan Documents by execution of a subordination of leasing agreement on Lender’s then standard form with such changes as agreed between Borrower and Lender. In no event shall the leasing agent be removed or replaced or the terms of the Leasing Agreement be modified or amended without the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed. Upon the occurrence of an Event of Default, Lender shall have the right to direct Borrower to terminate (and Borrower shall so terminate or cause to be terminated) the Leasing Agreement upon thirty (30) days’ notice. In the event that the leasing agent provides cause for termination as the result of gross negligence, willful misconduct, fraud, breach of fiduciary duty, bankruptcy, criminal liability or civil liability, Lender shall have the right to direct Borrower to immediately terminate (and Borrower shall so immediately terminate or cause to be immediately terminated) such Leasing Agreement.
ARTICLE V - SALE, TRANSFER, OR ENCUMBRANCE OF THE PROPERTY;
LEASES OF THE PROPERTY
Section 5.01    Due-on-Sale or Encumbrance.  Except as otherwise provided in this Article V, Lender may accelerate the Obligations and the entire Obligations (including a Prepayment Premium calculated by using the Alternate Prepayment Premium) shall become immediately due and payable, if any of the following shall occur, whether occurring in a single transaction or in a series of transactions (each and collectively, a “Prohibited Transfer”):
(a)a direct or indirect sale, conveyance, assignment, transfer or disposal of, divesting of title to, mortgage, pledge or encumbrance of or grant of a security interest or other lien on, or grant of any easement or right-of-way (each and collectively, a “Transfer”) with respect to all or any portion of the Property or any interest in the Property, in any manner whatsoever, whether voluntary or involuntary, except (i) for Permitted Encumbrances, (ii) any Transfer as a result of any Taking of the Property or any portion thereof,  (iii) liens, security interests, encumbrances and charges that Borrower pays, bonds or otherwise discharges, or is contesting, in accordance with the Loan Documents, and (ii) as otherwise permitted by this Section 5.01; 
(b)any merger or consolidation of, or any Transfer or dissolution involving all or substantially all of the assets of, (i) Borrower; (ii) any Principal; or (iii) REIT, where Borrower, Principal or REIT is not the surviving company or acquirer of such assets; 
(c)if Borrower is a corporation, any Transfer of more than forty-nine percent (49%) of the voting shares in such corporation; 
(d)if Borrower is a partnership, any Transfer of a general partnership interest or of more than forty-nine percent (49%) of voting limited partnership interests in Borrower or the conversion of any Person holding any general partnership interest in Borrower to a corporation, limited partnership interest, limited liability company or any other type of entity with limited liability; 

(e)if Borrower is a limited liability company, any Transfer of the membership interest of any managing member of Borrower or of the sole member of Borrower, if any, or of more than forty-nine percent (49%) of the non-managing membership interests of Borrower to any Person that is not wholly-owned by Principal; 
(f)if Borrower is a trust, any resignation, removal or substitution of the trustee or any Transfer of more than forty-nine percent (49%) of the beneficial interests of Borrower;
(g)any other Transfer of more than forty-nine percent (49%) of the voting interests in Borrower; or 
(h)any other event resulting in a Change of Control of Borrower or any Principal.
Except as otherwise permitted by Section 5.02 direct or indirect interests or management Control in (i) the Property, (ii) Borrower, (iii) any member of Borrower, and/or (iv) any Person that has Control of Borrower, may be not Transferred without Lender’s approval and the occurrence of any such event will constitute an Event of Default.  
Notwithstanding the foregoing, any Transfers under the Loan Documents or under the Cross Defaulted Loan Documents that would result in more borrowers under the Loan or the Cross Defaulted Loans than originally contemplated during the term of the Loan and the Cross Defaulted Loans shall be strictly prohibited.  
Notwithstanding the foregoing if the death of or the removal from Control of Borrower of any natural person who has a direct or indirect ownership, beneficial or voting interest in Borrower or who is a general partner, managing member, sole member, manager or trustee of Borrower or is otherwise in Control of Borrower would cause a Prohibited Transfer, then the provisions of this Section 5.01 shall not apply to such Transfer; provided, however, that if such natural person is a general partner, managing member, sole member, manager or trustee of Borrower or is otherwise in Control of Borrower, then any successor to such natural person must be reasonably satisfactory to Lender.  
Section 5.02    Permitted Transfers.  
(a)Permitted Transfers.  For so long as Phillips Edison Grocery Center Operating Partnership I, L.P. is the Principal under the Loan and [_________] LLC is Borrower under the Loan, the following shall not constitute Prohibited Transfers (and by virtue thereof shall be permitted hereunder without Lender’s approval):  
(i)the listing of REIT Shares on an Exchange (the "REIT Listing"); provided that (A) REIT satisfies all of the listing requirements of the SEC at the time of and as a condition of the REIT Listing, including, but not limited to, the net worth requirements, and (B) the REIT Listing does not result in or cause a Change of Control;
(ii)without limiting subparagraph (iii) of this Section 5.02(a), Transfers, issuances or redemptions of any REIT Shares (each, a "REIT Share Transfer"); provided that (A) at the time of such REIT Share Transfer, the REIT Shares are listed on an Exchange, and (B) the REIT Share Transfer does not result in or cause a Change of Control;
(iii)any REIT Share Transfers, issuances or redemptions during the period prior to the REIT Listing (i.e., while REIT is a public entity but a non-listed entity) that are made in accordance with REIT's charter and other governing documents, including, but not limited to, REIT's share repurchase

program and/or dividend reinvestment program; provided that (A) such activities, singularly or taken as a whole, do not result in or cause a Change of Control; and (B) prior to such REIT Share Transfers, issuances or redemptions, Borrower shall have delivered to Lender a copy of REIT’s charter and governing documents;
(iv)Transfers, issuances, conversions or redemptions of interests in Principal to limited partners in Principal; provided that such Transfers do not result in or cause a Change of Control;
(v)Transfers of indirect interests in Principal and REIT; provided that such Transfers do not result in or cause a Change of Control;
(vi)any merger or consolidation of REIT or Principal with any Person that is an Affiliate of REIT; provided that (A) REIT or Principal is the surviving entity; (B) such transaction does not result in or cause a Change of Control; and (C) the General Transfer Requirements are satisfied;
(vii)any Transfer of interests in Phillips Edison Property Manager to REIT (the “Property Management Transfer”); provided that (A) Phillips Edison Property Manager is Controlled by REIT, a REIT Subsidiary or Principal; (B) such transaction does not result in or cause a Change of Control; and (C) the General Transfer Requirements are satisfied;
(viii)any replacement of Phillips Edison Property Manager with Principal or an entity Controlled by Principal; provided that, at the time of the Transfer, there shall not exist an Event of Default;
(ix)any removal or replacement of REIT Manager; provided that (A) (1) Jeffrey S. Edison, or (2) two (2) or more of Devin Murphy, Mark Addy, Robert F. Myers, Joseph Schlosser, Ryan Moore and John Caulfield (or replacement executives having a similar level of experience and seniority to any replaced executive as determined by Lender in its reasonable discretion), shall continue to be executives of REIT or Principal; and (3) the General Transfer Requirements are satisfied;
(x)any Transfer, issuance or redemption of any direct or indirect beneficial or legal ownership interests in any Public REIT Shareholder (it being understood that Borrower has no control over the ownership structure of any Public REIT Shareholder); and
(xi)the Transfer of one hundred percent (100%) of the membership interests in Borrower to a wholly-owned subsidiary of Principal; provided that (A) such transaction does not result in or cause a Change of Control; and (B) the General Transfer Requirements are satisfied.

(b)No Release; Information. 
(i)Neither any REIT Share Transfer nor any Transfer of interests of any of the limited partners in Principal shall relieve Borrower or Principal of any of its respective obligations and liabilities under any of the Loan Documents, including the Limited Guaranty or the Environmental Indemnity; and
(ii)Borrower shall cause REIT to cause Lender to automatically receive notifications whenever REIT posts and files any documents with the SEC.  Additionally, from time to time, upon written request of Lender, Borrower shall cause REIT to furnish to Lender copies of (A) mailings by REIT to its shareholders, (B) to the extent not confidential, reports furnished by REIT to rating agencies and relating to its outstanding commercial paper, and (C) to the extent not confidential, information generally supplied by REIT in writing to security analysts.
(c)One-Time Right to Transfer Property. Notwithstanding the above, (1) Borrower shall have a one- time right to sell its entire interest in the Property and assign all of its rights and obligations under the Loan Documents and the Cross Collateralizing Security Documents encumbering the Property to a third party; or (2) all of the membership interests in Borrower may be transferred directly or indirectly to a third party (such third party described in clauses (1) or (2) being the “Transferee” and any such sale, assignment or transfer described in clauses (1) or (2) being the “One- Time Right to Transfer”); provided that: 
(i)at the time of the One-Time Right to Transfer, there shall not exist an Event of Default;
(ii)the closing of the One-Time Right to Transfer will not occur unless and until the satisfaction of the conditions to the closing of (A) the sales of the other Cross Defaulted Properties and the assignments of all of the other Cross Defaulted Borrowers’ rights and obligations under the Cross Defaulted Loan Documents to a third party or its affiliates; or (B) the transfers directly or indirectly of all of the membership interests in the other Cross Defaulted Borrowers to a third party, in either case, pursuant to provisions in such loan documents substantially similar to this Section 5.02(c).  For avoidance of doubt, the One-Time Right to Transfer may not be exercised unless and until the one-time right to transfer provision included in each of the Cross Defaulted Loan Documents is also exercised;  
(iii)Transferee and the principal(s) of Transferee (“Transferee’s Principal(s)”) expressly assume all of the obligations of Borrower and Principal(s) under and pursuant to the Note, this Instrument, the Environmental Indemnity, the Limited Guaranty and all other Loan Documents on such terms and conditions and pursuant to such documentation as is acceptable to Lender, in its sole discretion, including, without limitation, the representations, warranties and covenants set forth therein and any amendments deemed necessary by Lender in its reasonable discretion as a result of the structure of the Transferee;
(iv)Lender shall have given its approval to Transferee’s and Transferee’s Principal(s)’ credit history, reputation, legal organization, financial strength and experience in the ownership, operation and management of grocery anchored retail properties similar to the Property and other Cross Defaulted Properties in the areas where the Property and other Cross Defaulted Properties are located;
(v)Lender, at its option, receives a then current phase I environmental report with respect to the Property in form and substance satisfactory to Lender from a consultant approved by Lender; 

(vi)Lender shall have received a transfer premium equal to six-tenths of one percent (0.6%) of the principal amount outstanding under the Note as of the date of the One-Time Right to Transfer;
(vii)Borrower shall pay all costs incurred by Lender in connection with the One-Time Right to Transfer, including, without limitation, Attorneys’ Fees, and the cost of an endorsement to Lender’s title insurance policy, insuring the continuing first priority of Lender’s lien;
(viii)Lender receives a legal opinion reasonably acceptable to it from counsel for Transferee and Transferee’s Principal(s) addressing (A) the due organization and authorization of Transferee and Transferee’s Principal(s); (B) the continued enforceability of the Loan Documents and any ancillary transaction documents against them; and (C) such other matters reasonably required by Lender given the context of the transaction;
(ix)the DSCR for all Cross Defaulted Properties shall be no less than 2.00 to 1.00;
(x)the Debt Yield for all Cross Defaulted Properties shall be equal to or greater than twelve percent (12.0%); 
(xi)at the time of the closing of the One-Time Right to Transfer, the LTV shall be no greater than fifty-five percent (55%); and 
(xii)within five (5) Business Days of Lender’s request therefor Borrower shall provide Lender with Borrower’s proposed calculation of Net Operating Income, certified by an appropriate authorized officer or authorized signatory of Borrower, together with all relevant supporting detail reasonably required to determine the same. Lender shall then perform Lender’s own independent calculation of Net Operating Income, which shall be the definitive determination of Net Operating Income absent manifest error.
Section 5.03    Principals.  
(a) If any Principal is a natural person and dies or is removed from Control while the Note is outstanding then, not later than five (5) months following the death or removal of such Principal, Borrower shall provide to Lender for its approval (which approval shall not be unreasonably withheld or delayed, it being understood and agreed that the estate of such deceased Principal is not acceptable to Lender), a substitute Principal or Principals and documentation to verify that such substitute Principal or Principals are in Control of Borrower.  If approved by Lender, the substitute Principal or Principals shall execute and deliver to Lender, within thirty (30) days after Lender approves in writing the substitute Principal or Principals, a limited guaranty and an environmental indemnity agreement identical (except as to the name of the obligor thereunder and similar conforming changes) in form and substance to the Limited Guaranty and the Environmental Indemnity, respectively, executed by the Principal who died or was removed from Control.

(b)    Borrower shall pay all costs and expenses, including Attorneys’ Fees, incurred by Lender in connection with any approval by Lender under this Section 5.03 and the preparation and execution of any documentation required under this Section 5.03.
Section 5.04    Leases.  
(a)Subordination of Leases.  Unless otherwise approved in writing by Lender, all Leases entered into after the date hereof shall be absolutely subordinate to the lien of this Instrument, but may contain a provision reasonably satisfactory to Lender that, in the event of the exercise of the private power of sale or a judicial foreclosure hereunder, such Lease, at the sole and exclusive option of the purchaser at such sale, shall not be terminated and the Tenant thereunder shall attorn to such purchaser and, if requested to do so, shall enter into a new Lease for the balance of the term then remaining upon the same terms and conditions.  
(b)Obligations of Borrower as to Leases.  Borrower: (i) shall observe and perform all the obligations imposed upon the lessor under the Leases in all material respects; (ii) shall enforce all of the terms, covenants and conditions contained in the Leases upon the part of lessee thereunder to be observed or performed in all material respects; (iii) shall not collect any of the Rents more than one (1) month in advance; (iv) shall not execute any other assignment of lessor’s interest in the Leases or the Rents; (v) subject to the rights set forth in Section 5.04(c) below, shall not, without the prior written consent of Lender, surrender or terminate or consent to the cancellation, surrender or termination of any Lease or any part thereof, now existing or hereafter made, or consent to the release of any party thereto, except in the ordinary course of operating the Property; (vi) shall not convey or transfer or suffer or permit a conveyance or transfer of the Property or of any interest therein so as to effect a merger of the estates and rights of, or a termination or material diminution of the obligations of, any lessee thereunder; (vii) shall not consent to any assignment of or subletting under the Leases not in accordance with their terms or in the ordinary course of operating the Property; (viii) shall execute and deliver at the request of Lender all such further assurances, confirmations and assignments as Lender shall from time to time reasonably require in order to maintain or grant Lender and Trustee a first-priority assignment of all Leases and Rents; and (ix) shall notify Lender of any event of default of any Major Tenant or Borrower for which notice is given or any circumstance or other event arising under a Lease that would entitle or permit Borrower or any Major Tenant to cancel the Lease, abate any rent payable thereunder, or pursue any “self-help” remedy thereunder.
(c)New Leases, Amendment, Modification, Etc., of Leases.  
(i)Except as otherwise expressly set forth in this Section 5.04, Borrower shall not enter into any Lease for any portion of the Property without the prior written consent of Lender, which shall not be unreasonably withheld or delayed.  As a condition to granting such consent, Lender may require an estoppel certificate from the Tenant, and if such Lease does not include subordination, non-disturbance and attornment language acceptable to Lender, a subordination, non-disturbance and attornment agreement (“SNDA”) among Lender, Borrower, and the Tenant, which SNDA shall subject and subordinate such Lease to the lien and terms of this Instrument, the other Loan Documents and any Cross Collateralizing Security Documents encumbering the Property and shall further subordinate the Tenant’s rights to casualty and condemnation proceeds.  Such tenant estoppel certificate and such SNDA shall be based on the forms attached to such Tenant’s Lease, or if no forms are attached to such Tenant’s Lease, then on Lender’s then standard forms or such Tenant’s standard forms with such changes as Lender shall reasonably request.  Without limiting the generality of the foregoing, each Lease entered into after

the date hereof shall contain a provision, where applicable, stating that (i) the Tenant uses, generates, stores and disposes of no Hazardous Materials, except those customarily and currently used in Tenant’s normal business operations, and that in any event all such Hazardous Materials will only be used in the leased premises in compliance with all Environmental Requirements; and (ii) Lender and Lender’s environmental consultant may conduct periodic inspections at the expense of Borrower to verify that such use, storage, generation, treatment, disposal or release is in compliance with all Environmental Requirements.
(ii)Borrower shall not, without Lender’s prior written approval (not to be unreasonably withheld or delayed), amend, modify, extend, renew or supplement any Lease or consent to any sublease except for: (A) subleases, amendments or modifications memorializing options or rights contained in Leases previously approved by Lender or (B) Leases not requiring Lender’s approval.  A Lease shall require Lender’s approval for purposes of clause (B) if either the initial Lease so required Lender approval hereunder, or such Lease as so amended, modified, extended, renewed or supplemented would have required Lender’s approval hereunder as a new Lease.  
(iii) Notwithstanding the foregoing, Lender’s approval shall not be required for any new Lease or amendment or modification of an existing Lease provided (i) no Event of Default has occurred and is continuing, and (ii) the Lease or Lease as amended or modified (A) is not with a Major Tenant, (B) is on market terms, (C) represents a bona-fide arm’s length transaction with a third party not Affiliated with Borrower, (D) does not contain tenant purchase options, above-market tenant improvement allowances, above-market concessions or offsets, (E) is for a term not longer than twenty (20) years (including any renewal options), and (F) is either (1) written on Borrower’s standard form Lease which has been approved by Lender with changes negotiated in good faith by Borrower that are customary market changes made by similar owners in the ordinary course of business or (2) written on the Tenant’s form Lease but containing provisions for limitations on landlord’s liability and subordination and attornment of the Lease in favor of Lender.  As used herein, the term “Major Tenant” means any Tenant of the Property and their Affiliates then leasing or subleasing space pursuant to one or more Leases at the Property aggregating more than 15,000 rentable square feet of the Property’s net rentable area.
(iv)Borrower shall provide Lender with a copy of any new Leases, amendments and modifications for Leases with a Tenant within thirty (30) days of execution, and within fifteen (15) days after a request from Lender for any other Lease or amendment.  If Lender’s approval is required for any new Lease or any amendment or modification of an existing Lease and Borrower requests Lender’s approval in writing, and such written request is neither approved nor denied within ten (10) Business Days following Lender’s receipt (together with the Lease and/or the amendment or modification of an existing Lease (as applicable), a comparison of the proposed, unexecuted new Lease to Borrower’s standard form Lease previously approved by Lender (as applicable), Tenant financials, if appropriate, and such other documentation which Lender may reasonably request), Lender’s approval shall be deemed given; provided that Borrower’s request for Lender’s approval shall bear the following legend typed in bold, capital letters at the top: “IF LENDER SHALL FAIL TO EITHER APPROVE OR DENY BORROWER’S REQUEST FOR LENDER’S APPROVAL OF THE ENCLOSED NEW LEASE OR AMENDMENT OR MODIFICATION OF A LEASE WITHIN TEN (10) BUSINESS DAYS AFTER LENDER’S RECEIPT THEREOF, LENDER SHALL BE DEEMED TO HAVE APPROVED SUCH NEW LEASE OR AMENDMENT OR MODIFICATION”; and provided, further that, the deemed approval provision in this sentence shall not apply in the event the new Lease or the amendment or modification of an existing Lease, or the request for such new Lease or amendment or modification of an existing Lease does not comply with the provisions of this subparagraph.

ARTICLE VI - DEFAULTS AND REMEDIES
Section 6.01    Events of Default.  Each of the following shall be an “Event of Default”:
(a)if Borrower fails to make any payment of principal or interest when due under the Note (excluding the payment due on the Maturity Date) or fails to make any Deposits if and when required under the Loan Documents, and such failure continues uncured for ten (10) days after the applicable due date, without any requirement for notice thereof from Lender; 
(b)if Borrower fails to make any payment of principal or interest when due under the Note on the Maturity Date or fails to make any other payment when due on the Maturity Date under the Note, this Instrument or the other Loan Documents; 
(c)if Borrower fails to make any other payment when due under the Note, this Instrument or the other Loan Documents (except as specified in Section 6.01(a) or Section 6.01(b)), and such failure continues for ten (10) days after written notice thereof from Lender;
(d)if any representation or warranty made in connection with the Loan or the Obligations in the Loan Documents shall be false or misleading in any material respect at the time when made, provided, however, that if (A) such misrepresentation was not intentional, and (B) the condition causing the representation or warranty to be false is susceptible of being cured, the same shall be an Event of Default hereunder only if the same is not cured within thirty (30) days after written notice to Borrower from Lender;
(e)if Borrower shall, without Lender’s prior written consent, take any action that, in accordance with the terms of the Loan Documents, expressly requires Lender’s consent, including, without limitation, in connection with the provisions of Article V, without first obtaining Lender’s prior written consent (or deemed consent);
(f)if a Prohibited Transfer occurs;
(g)if an “Event of Default” described in any other provision of this Instrument occurs;
(h)if Borrower fails to comply with the provisions of Section 5.03;
(i)if an Insolvency Event occurs; 
(j)if any Bankruptcy Proceeding is instituted by (other than by Lender) or against Borrower, any of the Principals, Principal General Partner, REIT or any other REIT Subsidiary, and, if instituted against such Person, is allowed, consented to, or not dismissed within the earlier to occur of (i) ninety (90) days after such institution; or (ii) the filing of an order for relief, provided that in the case of any other REIT Subsidiary, the bankruptcy of such REIT Subsidiary results in a substantive consolidation with Borrower;
(k)[Intentionally Omitted];
(l)if Borrower shall fail at any time to obtain, maintain, renew, or keep in force the insurance policies required by Section 4.06 hereof or any of the other Loan Documents;
(m)if an event of default, subject to all notice and cure rights, by Borrower under any other mortgage, deed of trust, or security agreement covering any part of the Property, whether it be superior 

or junior in lien to this Instrument or under any other loan or indebtedness has occurred and is continuing, whether secured or unsecured, or if an event of default shall occur under any loan secured by a pledge of a direct or indirect ownership interest in Borrower other than a pledge of (y) direct or indirect ownership interests by limited partners in Principal or (z) direct or indirect interests by Public REIT Shareholders in REIT;
(n)if any claim of priority (except based upon a Permitted Encumbrance) to the Loan Documents by title, lien, or otherwise shall be upheld by any court of competent jurisdiction or shall be consented to by Borrower;
(o)the occurrence of any RICO Violation;
(p)the occurrence of any ERISA Violation;
(q)the occurrence of any OFAC Violation;
(r)if any report, statement or item required under Section 4.15 is not received by Lender after the expiration of (i) thirty (30) days after written notice from Lender (the “First Notice”); and (ii) ten (10) days after delivery of a second written notice from Lender (the “Second Notice”), which Second Notice shall not be delivered before the date that is thirty (30) days after delivery of the First Notice;
(s)the occurrence of any event or circumstance identified as an “Event of Default” under any Loan Document other than this Instrument, under any Cross Collateralizing Security Document, or under any of the other Cross Defaulted Loan Documents; and
(t)except for the occurrence of the events listed in the other clauses of this Section 6.01, if Borrower fails to perform or comply with any other provision contained in this Instrument or in any of the other Loan Documents and such failure is not cured within thirty (30) days after written notice thereof by Lender (the “Grace Period”); provided, however, that the Grace Period may be extended for up to an additional sixty (60) days (for a total of ninety (90) days from the date of Default) if (i) Borrower promptly commences and diligently pursues the cure of such Default and delivers (within the Grace Period) to Lender a written request for more time; and (ii) Lender determines in good faith that (1) such Default cannot be cured within the Grace Period but can be cured within ninety (90) days after the Default; (2) no lien or security interest created by the Loan Documents will be impaired prior to completion of such cure; and (3) Lender’s immediate exercise of any remedies provided hereunder or by Law is not necessary for the protection or preservation of the Property or Lender’s or Trustee’s security interest.  

Section 6.02    Remedies.  If an Event of Default occurs and is continuing, Lender, or any Person designated by Lender or Lender acting by or through Trustee, may (but shall not be obligated to) take any action (separately, concurrently, cumulatively, and at any time and in any order) permitted under any Laws, without notice, demand, presentment, or protest (all of which are hereby waived), to protect and enforce Lender’s or Trustee’s rights under the Loan Documents or Laws including the following actions:
(a)accelerate and declare the entire unpaid Obligations immediately due and payable, except for Events of Defaults under Section 6.01(i) or (j) which shall automatically make the Obligations immediately due and payable;
(b)judicially or otherwise, (i) completely foreclose this Instrument; or (ii) partially foreclose this Instrument for any portion of the Obligations due and the lien and security interest created by this Instrument shall continue unimpaired and without loss of priority as to the remaining Obligations not yet due;
(c)sell for cash or upon credit the Property and all right, title and interest of Borrower therein and rights of redemption thereof, pursuant to power of sale, to the extent permitted by Law, Borrower hereby waiving all such rights of redemption upon the occurrence of an Event of Default;
(d)subject to the limitations in Article VII, recover judgment on the Note either before, during or after any Proceedings for the enforcement of the Loan Documents and without any requirement of any action being taken to (i) realize on the Property; or (ii) otherwise enforce the Loan Documents;
(e)seek specific performance of any provisions in the Loan Documents;
(f)apply for the appointment of a receiver, custodian, trustee, liquidator, or conservator of the Property without (i) notice to any Person; (ii) regard for (1) the adequacy of the security for the Obligations; or (2) the solvency of Borrower or any Person liable for the payment of the Obligations; and Borrower and any Person so liable waives or shall be deemed to have waived the foregoing and any other objections to the fullest extent permitted by Law and consents or shall be deemed to have consented to such appointment;
(g)with or without entering upon the Property, (i) exclude Borrower and any Person from the Property without liability to Borrower for trespass, damages, or otherwise; (ii) take possession of, and Borrower shall surrender within five (5) Business Days after written notice, all books, records, and accounts relating to the Property; (iii) give notice to Tenants or any Person, make demand for, collect, receive, sue for, and recover in its own name all Rents and cash collateral derived from the Property; (iv) use, operate, manage, preserve, control, and otherwise deal with every aspect of the Property, including (1) conducting its business; (2) insuring it; (3) making all repairs, renewals, replacements, alterations, additions, and improvements to or on it; (4) completing the construction of any Improvements in manner and form as Lender deems advisable; and (5) executing, modifying, enforcing, and terminating new and existing Leases on such terms as Lender deems advisable and evicting any Tenants in default; (v) apply the receipts from the Property to payment of the Obligations, in any order or priority determined by Lender, after first deducting all costs, expenses, and liabilities incurred by Lender or Trustee in connection with the foregoing operations and all amounts needed to pay the Impositions and other expenses of the Property, as well as just and reasonable compensation for the services of Lender, Trustee, and their attorneys, agents, and employees; and/or (vi) in every case in connection with the foregoing, exercise all rights and powers of Borrower, Lender, or Trustee with respect to the Property, either in Borrower’s name or otherwise;
(h)release any portion of the Property for such consideration, if any, as Lender may require without, as to the remainder of the Property, impairing or affecting the lien or priority of this Instrument

or improving the position of any subordinate lienholder with respect thereto, except to the extent that the Obligations shall have been actually reduced, and Lender may accept by assignment, pledge, or otherwise any other property in place thereof as Lender may require without being accountable for so doing to any other lienholder;
(i)apply any Deposits to the following items in any order and in Lender’s sole discretion: (i) the Obligations; (ii) costs incurred by Lender in administering or enforcing its rights under this Instrument; (iii) advances made by Lender under the Loan Documents; or (iv) the Impositions; or
(j)take all actions permitted under the UCC of the Property State including (i) the right to take possession of Personal Property and take such actions as Lender or Trustee deems advisable for the care, protection and preservation of the Personal Property; and (ii) request Borrower at its expense to assemble the Personal Property and make it available to Lender or Trustee at a convenient place acceptable to Lender or Trustee.  Any notice of sale, disposition or other intended action by Lender or Trustee with respect to the Personal Property sent to Borrower at least ten (10) Business Days prior to such action shall constitute commercially reasonable notice to Borrower.
If Lender or Trustee exercises any of its rights under Section 6.02(g), Lender and Trustee shall not (1) be deemed to have entered upon or taken possession of the Property except upon the exercise of its option to do so and physically taking possession of the Property; (2) be deemed a beneficiary or mortgagee in possession by reason of such entry or taking possession; or (3) be liable (x) to account for any action taken pursuant to such exercise other than for Rents actually received by Lender or Trustee except for Losses caused by Lender’s or Trustee’s willful misconduct or gross negligence and not covered by Borrower’s insurance; (y) for any Loss sustained by Borrower resulting from any failure to lease the Property; or (z) any other act or omission of Lender or Trustee except for Losses caused by Lender’s or Trustee’s willful misconduct or gross negligence and not covered by Borrower’s insurance.  During the continuance of an Event of Default, Borrower hereby consents to, ratifies, and confirms the exercise by Lender and Trustee of its or their rights under this Instrument and appoints Lender and Trustee as its attorney-in-fact for such purposes.

Section 6.03    Expenses.  All costs, expenses, or other amounts paid or incurred by Lender or Trustee in the exercise of its or their rights under the Loan Documents, including, without limitation, Attorneys’ Fees (together with interest thereon at the applicable interest rate specified in the Note, which shall be the Default Rate unless prohibited by Law, in the event such cost, expense or other amount incurred by Lender or Trustee is not paid within five (5) days of written demand therefor) shall be (a) part of the Obligations; (b) secured by this Instrument; and (c) allowed and included as part of the Obligations in any foreclosure, decree for sale, power of sale, or other judgment or decree enforcing Lender’s and/or Trustee’s rights under the Loan Documents.
Section 6.04    Rights Pertaining to Sales.  To the extent permitted under (and in accordance with) any Laws, the following provisions shall, as Lender or Trustee may determine in its or their sole discretion, apply to any sales of the Property under this Article VI, whether by judicial Proceeding, judgment, decree, power of sale, foreclosure or otherwise: (a) Lender or Trustee may conduct a single sale of the Property or multiple sales of any part of the Property in separate tracts or in any other manner as Lender deems in its best interest and Borrower waives any right to require otherwise; (b) if Lender elects more than one sale of the Property, Lender may at its option cause the same to be conducted simultaneously or successively, on the same day or on such different days or times and in such order as Lender may deem to be in its best interest, no such sale shall terminate or otherwise affect the lien of this Instrument on any part of the Property not then sold, and Borrower shall pay the costs and expenses of each such sale; (c) any sale may be postponed or adjourned by public announcement at the time and place appointed for such sale or for such postponed or adjourned sale without further notice or such sale may occur, without further notice, at the time fixed by the last postponement or a new notice of sale may be given; and (d) Lender may acquire the Property and, in lieu of paying cash, may pay by crediting against the Obligations the amount of its bid, after deducting therefrom any sums which Lender or Trustee is authorized to deduct under the provisions of the Loan Documents.  After any such sale, Trustee shall deliver to the purchaser at such sale the trustee’s deed conveying the property so sold, but without any covenant or warranty, express or implied in customary form.  Any Person, including Borrower or Lender, may purchase at such sale.
Section 6.05    Application of Proceeds.  Any proceeds received from any sale or disposition under this Article VI or otherwise, together with any other sums held by Lender or Trustee, shall, except as expressly provided by Law or this Instrument, be applied in the order determined by Lender to: (a) payment of all costs and expenses of any enforcement Proceeding, or foreclosure sale, transfer of title by power of sale (including the expenses of the Trustee), or otherwise (including interest thereon at the applicable interest rate specified in the Note, which shall be the Default Rate unless prohibited by Law, in the event such cost or expense incurred by Lender or Trustee is not paid within five (5) days of written demand therefor); (b) all Assessments, unless the Property was sold subject to such Assessments; (c) payment of the Obligations in such order as Lender may elect; (d) payment of any other sums secured or required to be paid by Borrower; and (e) payment of the surplus, if any, to Borrower.  Borrower and Lender intend and agree that during any period of time between any foreclosure judgment that may be obtained and the actual foreclosure sale that the foreclosure judgment will not extinguish the Loan Documents or any rights contained therein including the obligation of Borrower to pay all costs and to pay interest at the applicable interest rate specified in the Note, which shall be the Default Rate unless prohibited by Law.

Section 6.06    Additional Provisions as to Remedies.  No failure, refusal, waiver, or delay by Lender or Trustee to exercise any rights under the Loan Documents upon any Event of Default shall impair Lender’s or Trustee’s rights or be construed as a waiver of, or acquiescence to, such or any subsequent Default or Event of Default.  No recovery of any judgment by Lender or Trustee and no levy of an execution upon the Property or any other property of Borrower shall affect the lien and security interest created by this Instrument and such liens, rights, powers, and remedies shall continue unimpaired as before until this Instrument is terminated in accordance with Section 1.01.  Lender or Trustee may resort to any security given by this Instrument or any other security now given or hereafter existing to secure the Obligations, in whole or in part, in such portions and in such order as Lender or Trustee may deem advisable, and no such action shall be construed as a waiver of any of the liens, rights, or benefits granted hereunder.  Acceptance of any payment after any Event of Default shall not be deemed a waiver or a cure of such Event of Default and such acceptance shall be deemed an acceptance on account only.  If Lender or Trustee has started enforcement of any right by foreclosure, sale, entry, or otherwise and such Proceeding shall be discontinued, abandoned, or determined adversely for any reason, then Borrower, Lender and Trustee shall be restored to their former positions and rights under the Loan Documents with respect to the Property, subject to the lien and security interest hereof.
Section 6.07    Waiver of Rights and Defenses.  To the fullest extent Borrower may do so by Law, Borrower (a) will not at any time insist on, plead, claim, or take the benefit of any Law now or later enacted providing for any appraisement, valuation, stay, extension, moratorium, redemption, or any statute of limitations; (b) for itself, its successors and assigns, and for any Person ever claiming an interest in the Property (other than Lender), to the extent permitted by Law, waives and releases all rights of redemption, reinstatement, valuation, appraisement, notice of intention to mature or declare due the whole of the Obligations, all rights to a marshaling of the assets of Borrower, including the Property, or to a sale in inverse order of alienation, in the event of foreclosure (or extinguishment by transfer of title by power of sale) of the liens and security interests created under the Loan Documents; and (c) shall not be relieved of its obligation to pay the Obligations as required in the Loan Documents nor shall the lien or priority of the Loan Documents be impaired by any agreement renewing, extending, or modifying the time of payment or the provisions of the Loan Documents (including a modification of any interest rate), unless expressly released, discharged, or modified by such agreement.  Regardless of consideration and without any notice to or consent by the holder of any subordinate lien, security interest, encumbrance, right, title, or interest in or to the Property, (i) Lender may release any Person liable for payment of the Obligations or any portion thereof or any part of the security held for the Obligations; or (ii) Lender and Borrower may modify any of the provisions of the Loan Documents without impairing or affecting the Loan Documents or the lien, security interest, or the priority of the modified Loan Documents as security for the Obligations over any such subordinate lien, security interest, encumbrance, right, title, or interest.

ARTICLE VII - LIMITATION ON PERSONAL LIABILITY
Section 7.01    Limited Recourse Liability.  Lender will not hold Borrower personally liable for repayment of the Obligations or any other sums due under the Loan Documents, or for any deficiency established after judicial foreclosure or a trustee’s sale, except to the extent of Borrower’s interest in the Property and all other collateral given as security for the Loan; provided, however, that:
(a)the foregoing limitation of liability shall not affect Borrower’s liability under the Environmental Indemnity;
(b)Borrower shall be subject to full personal liability to the extent of any and all actual Losses of any kind whatsoever (but excluding consequential, special, punitive or exemplary damages and diminution of the value of the Property that was not caused by the acts or omissions of any Borrower Party, except to the extent that such consequential, special, punitive or exemplary damages are required to be paid by Lender to a third party), incurred or suffered by Lender and its successors and assigns as a result of any of the following:
(i)    Borrower’s misapplication or misappropriation of Tenant security deposits, Rents paid more than thirty (30) days in advance, insurance proceeds, Awards or other sums received in connection with the Property (to the extent of the amount misapplied or misappropriated); 
(ii)    Borrower’s failure to apply Rents to the Obligations or to the normal operating expenses of the Property in violation of the Loan Documents or Law, to the extent of rents wrongfully applied; provided that, prior to the occurrence of an Event of Default of which Borrower has knowledge, Borrower shall be entitled to make distributions to its partners, shareholders, members or other owners in the ordinary course of business until such Rents are applied in violation of the Loan Documents or Law; 
(iii)    Borrower’s failure to deliver to Lender or its assignee(s), at its or their request and following foreclosure of the Property, any tangible Personal Property, including Leases, books, records and files relating to the leasing, use, enjoyment, occupancy, operation or maintenance of the Property in Borrower’s possession that are not confidential or proprietary, or any Personal Property taken from the Property by or on behalf of Borrower and not replaced with Personal Property of substantially the same utility and of the same or greater value;
(iv)    any willful misconduct, material misrepresentation or theft by any Borrower Party in connection with the Loan or the Property;
(v)    Borrower’s failure to pay when due any Impositions with respect to the Property, or to maintain terrorism insurance with respect to the Property if required, in each case to the extent the cash flow of the Property is sufficient to pay such Impositions and other premiums; provided, however, Borrower shall not have any liability under this clause (v) if the Deposits held by Lender contain sufficient funds to pay such Impositions and other premiums; 
(vi)    the costs and expenses (including, without limitation, Attorneys’ Fees) incurred by Lender in enforcing its rights and remedies under this Article VII; 
(vii) any act of intentional waste committed by any Borrower Party; provided the failure to restore, repair, or maintain the Property shall not constitute intentional waste if the cash flow of the Property is insufficient to pay the same; 

(viii)    Borrower or any Borrower Party contests, delays or otherwise hinders any action taken by Lender in connection with the appointment of a receiver for the Property or the foreclosure of the liens, mortgages or other security interests created by the Loan Documents or the Cross Collateralizing Security Documents encumbering the Property; and
(ix) if Borrower is a single member limited liability company, the bankruptcy or insolvency of the sole member of Borrower which causes Borrower to cease to exist.
(c)the foregoing limitation of liability shall not apply and the Loan will be fully recourse to Borrower in the event:
(i)of any fraud or act of arson by any Borrower Party related to the Property or the Loan;
(ii)of a Prohibited Transfer;
(iii)that Borrower, Principal, Principal General Partner, REIT or any other REIT Subsidiary commences a voluntary Bankruptcy Proceeding; provided, however, that in the case of any other REIT Subsidiary, the bankruptcy of such REIT Subsidiary results in a substantive consolidation with Borrower;
(iv)that (1) any Affiliate of Borrower or of any Principal (except any Public REIT Shareholders) becomes a creditor of Borrower or of any Principal in any involuntary Bankruptcy Proceeding; or (2) an involuntary Bankruptcy Proceeding is commenced against Borrower, Principal, Principal General Partner, REIT, or, if the bankruptcy of such REIT Subsidiary results in a substantive consolidation with Borrower, any other REIT Subsidiary by an Affiliate of Borrower or of any Principal (except any Public REIT Shareholders), and in any event such Bankruptcy Proceeding is not dismissed within ninety (90) days of filing; or
that the Property or any part thereof becomes an asset in a voluntary Bankruptcy Proceeding that is not dismissed within ninety (90) days of filing.
Notwithstanding anything to the contrary contained herein, no present or future, direct or indirect, shareholder, officer, director, employee, trustee, beneficiary, advisor, member, partner, principal, participant or agent of or in Borrower (“Constituent Member”), or of or in any Person that is or becomes a Constituent Member in Borrower (other than Principal and Principal General Partner under the Limited Guaranty and Environmental Indemnity), shall have any personal liability, directly or indirectly, under or in connection with this Instrument, the Loan Documents, and each of the parties hereto, on behalf of itself and its successors and assigns, hereby waives any and all such personal liability, provided, however, that the foregoing shall not release any individual from any tort claims actually committed by such individual.  For purposes hereof, to the extent applicable, neither the negative capital account of any Constituent Member in Borrower, nor any obligation of any Constituent Member in Borrower to restore a negative capital account or to contribute or loan capital to Borrower or to any other Constituent Member in Borrower shall at any time be deemed to be the property or an asset of Borrower (or any such other Constituent Member) and neither Lender nor any of its successors or assigns shall have any right to collect, enforce or proceed against with respect to any such negative capital account or obligation to restore, contribute or loan.

ARTICLE VIII - INDEMNIFICATION
Section 8.01    General Indemnity.  Borrower agrees that while Lender has no liability to any Person in tort or otherwise as lender and that Lender is not an owner or operator of the Property, Borrower shall, at its sole expense, Indemnify the Indemnified Parties from any actual Losses imposed on, incurred by, or asserted against any of the Indemnified Parties, directly or indirectly, arising out of or in connection with (a) the ownership or operation of the Property; provided, however, that the foregoing indemnity shall not apply to any Losses caused by the gross negligence or willful misconduct of the Indemnified Parties not covered by Borrower’s insurance; and (b) the Transaction Taxes.
Section 8.02    Duty to Defend, Costs and Expenses.  Upon request, whether Borrower’s obligation to Indemnify Lender arises under this Article VIII or in the other Loan Documents, Borrower shall defend at its cost the Indemnified Parties (in Borrower’s or the Indemnified Parties’ names) by attorneys and other professionals approved by the Indemnified Parties.  Notwithstanding the foregoing, during the continuance of an Event of Default, the Indemnified Parties may, in their sole discretion, engage their own attorneys and professionals at Borrower’s cost to defend or assist them and, at their option, their attorneys shall control the resolution of any claims or Proceedings.  Within five (5) Business Days after written notice, Borrower shall pay or, in the sole discretion of the Indemnified Parties, reimburse and/or Indemnify the Indemnified Parties for all actual Losses imposed on, incurred by, or asserted against the Indemnified Parties by reason of any items set forth in this Article VIII and/or the enforcement or preservation of the Indemnified Parties’ rights under the Loan Documents.  Any amount payable to the Indemnified Parties under this Section 8.02 shall (a) be deemed a demand obligation; (b) be part of the Obligations; (c) bear interest from the date of demand at the Default Rate until paid if not paid within five (5) Business Days after written notice; and (d) be secured by this Instrument.
Section 8.03    Recourse Obligation and Survival.  Notwithstanding anything to the contrary in the Loan Documents, the obligations of Borrower under this Article VIII shall survive (a) repayment of the other Obligations; (b) any termination, satisfaction, transfer of title by power of sale, assignment or foreclosure of this Instrument; (c) the acceptance by Lender (or any nominee) of a deed in lieu of foreclosure; (d) a plan of reorganization filed under the Bankruptcy Code; and (e) the exercise by Lender of any rights in the Loan Documents.  Borrower’s obligations under this Article VIII shall not be affected by the absence or unavailability of insurance covering the same or by the failure or refusal by any insurance carrier to perform any obligation under any applicable insurance policy, solely to the extent that such event which gave rise to the Indemnification obligation arose prior to the events set forth in this Section 8.03.

ARTICLE IX - ADDITIONAL PROVISIONS
Section 9.01    Usury Savings Clause.  All agreements in the Loan Documents are expressly limited so that in no event whatsoever shall the amount paid or agreed to be paid under the Loan Documents for the use, forbearance, or detention of money exceed the highest lawful rate permitted by Law.  If, at the time of performance, fulfillment of any provision of the Loan Documents results in exceeding the limit of validity prescribed by Law, then, ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity.  If Lender shall ever receive as interest an amount which would exceed the highest lawful rate, the receipt of such excess shall be deemed a mistake and (a) shall be canceled automatically; or (b) if paid, such excess shall be, in Lender’s discretion, either (i) credited against the principal amount of the Obligations to the extent permitted by Law without regard to any Prepayment Premium; or (ii) rebated to Borrower if it cannot be so credited under Laws.  Furthermore, all sums paid or agreed to be paid under the Loan Documents for the use, forbearance, or detention of money shall to the extent permitted by Law be amortized, prorated, allocated, and spread throughout the full stated term of the Note until payment in full so that the rate or amount of interest on account of the Obligations does not exceed the maximum lawful rate of interest from time to time in effect and applicable to the Obligations for so long as the Obligations are outstanding.
Section 9.02    Notices.  Except to the extent expressly allowed to be given by Lender orally under the Loan Documents, any notice, request, demand, consent, approval, direction, agreement, or other communication required or permitted under the Loan Documents shall be in writing and shall be validly given if (a) sent by a nationally-recognized courier that obtains receipts; (b) delivered personally by a courier that obtains receipts; or (c) mailed by United States certified mail (with return receipt requested and postage prepaid); in each case (under (a), (b), or (c) above) addressed to the applicable Person as follows:

If to Lender:    With a copy of notices sent to Lender to:

The Guardian Life Insurance Company     The Guardian Life Insurance Company
of America                    of America
7 Hanover Square, Floor 20-C        7 Hanover Square, Floor 23-B
New York, New York 10004            New York, New York 10004
Attn:    Manager, Mortgage Servicing        Attn:    Vice President, Investment and 
Real Estate Counsel, Law Department

	
		
	If to Borrower:

[___________] LLC
11501 Northlake Drive
Cincinnati, Ohio 45249
Attn:  General Counsel 
	With copies of notices sent to Borrower to: 

Latham & Watkins LLP
330 N. Wabash Street, Suite 2800
Chicago, Illinois  60611
Attn:  Robert Buday 

	and 
	 

	[____________] LLC
11501 Northlake Drive
Cincinnati, Ohio 45249
Attn:  Chief Accounting Officer 
	 

	If to any Party identified as a
“Guarantor” under the Limited
Guaranty:

Phillips Edison Grocery Center Operating Partnership I, L.P. 
11501 Northlake Drive
Cincinnati, Ohio 45249
	With copies of notices to such Guarantor(s) to:

Latham & Watkins LLP
330 N. Wabash Street, Suite 2800
Chicago, Illinois  60611
Attn:  Robert Buday

	If to any party identified as an
“Indemnitor” under the Environmental
Indemnity:

Phillips Edison Grocery Center Operating Partnership I, L.P.
11501 Northlake Drive
Cincinnati, Ohio 45249
	With a copy of notices sent to such Indemnitor(s):

Latham & Watkins LLP
330 N. Wabash Street, Suite 2800
Chicago, Illinois  60611
Attn:  Robert Buday

	 
	 

	If to Trustee:

[___________________]
[___________________]
[___________________]
	 

Each notice shall be effective upon being so sent, delivered, or mailed, but the time period for response or action shall run from the date of receipt as shown on the delivery receipt.  Refusal to accept delivery or the inability to deliver because of a changed address for which no notice was given shall be deemed receipt.  Any party may periodically change its address for notice and specify up to two (2) additional addresses for copies by giving the other party at least ten (10) days’ prior notice.
Section 9.03    Sole Discretion of Lender.  Except as otherwise expressly stated, whenever Lender’s judgment, consent, or approval is required or Lender shall have an option or election under the

Loan Documents, such judgment, the decision as to whether or not to consent to or approve the same, or the exercise of such option or election shall be in the sole and absolute discretion of Lender.
Section 9.04    Applicable Law; Submission and Consent to Jurisdiction; Service of Process.  
(a)This Instrument and the other Loan Documents shall be governed by and construed in accordance with the Laws of the Property State without regard to any principles of conflicts of law requiring the application of the laws of another state and the applicable Laws of the United States of America.  Without limiting Lender’s right to bring any Proceeding in the courts of any other jurisdiction in which a Cross Defaulted Property is located, Borrower and Lender by its acceptance of this Instrument, irrevocably (i) submit to the jurisdiction of any state or federal court in the Property State; (ii) agree that any Proceeding may be heard and determined in such court; (iii) waive, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of any Proceeding in such jurisdiction; (iv) waive any claim that any such courts lack personal jurisdiction over Borrower; and (v) agree not to plead or claim, in any Proceeding with respect to this Instrument and the other Loan Documents brought in any of the aforementioned courts, that such courts lack personal jurisdiction over Borrower or Lender.  
(b)Borrower further irrevocably consents to the service of process out of any of the aforementioned courts in any such Proceeding, in addition to such other methods as are permitted under Laws, by the mailing of copies thereof by registered or certified mail, postage prepaid, to Borrower at its address for notice purposes pursuant to Section 9.02 hereof, such service to become effective thirty (30) days after such mailing.  Borrower hereby irrevocably waives any objection to such service of process and further irrevocably waives and agrees not to plead or claim in any Proceeding commenced hereunder that service of process was in any way invalid or ineffective.  Nothing herein shall affect the right of Lender to serve process in any other manner permitted by Law or to commence Proceedings or otherwise proceed against guarantor in any other jurisdiction. 
Section 9.05    Transfer of Loan.
(a)Lender’s Right to Transfer Loan, Etc.  Lender may, at any time, (i) sell, transfer or assign the Loan in whole or in part and the Loan Documents and any servicing rights with respect thereto; and/or (ii) grant participations therein, provided that if no Event of Default shall then exist, Lender may not sell, transfer or assign the Loan, the Loan Documents, or the servicing rights with respect to the Loan or grant participations in the Loan to Specified Prohibited Transferees.  Lender may forward to any actual or prospective Investor all documents and information which Lender now has or may later acquire relating to the Obligations, Borrower, the Principals, the Leases, and the Property, whether furnished by Borrower, any of the Principals or otherwise, as Lender determines advisable.  Following any such sale, transfer, assignment or participation, Lender shall provide notice thereof to Borrower. Notwithstanding anything to the contrary contained herein or in any other Loan Document, Borrower shall not be required to make payment to any transferee of the Loan until Borrower has received notice of such transfer and the identity of the transferee thereunder.  Borrower and the Principals agree to cooperate with Lender in connection with any transfer or participation made pursuant to this Section 9.05, including the delivery of a written certification in accordance with Section 4.16 and such other documents as may be reasonably requested by Lender.  Without limiting the generality of the foregoing, if requested by Lender, Borrower shall execute one or more replacement promissory notes in favor of Lender or any such Investor; provided that the aggregate principal amounts of all replacement notes shall equal the then outstanding principal amount of the Loan and the aggregate interest rates of such notes shall equal the interest rate provided in the Note, and none of the foregoing shall increase or expand Borrower’s or Principal’s obligations under the Loan Documents or limit or impair Borrower’s or Principal’s rights under the Loan Documents.  Borrower shall also use commercially reasonable efforts obtain the written consent of any Person in order to permit Lender

to furnish any such Investor with any and all information concerning the Property, the Leases, the financial condition of Borrower and the Principals, as may be reasonably requested by Lender or any such Investor and which may be complied with without undue expense.
(b)Release of Lender.  Borrower agrees that upon any assignment or transfer of the Loan Documents by Lender to any third party, Lender shall have no obligations or liabilities under the Loan Documents for events occurring after such assignment or transfer, such third party shall be substituted as the lender under the Loan Documents for all purposes and Borrower shall look solely to such third party for the performance of any of Lender’s obligations under the Loan Documents or with respect to the Loan.
Section 9.06    Concerning the Trustee.  By recording a written substitution in the county or city where the Property is located or by any other means permitted by Law, Lender may (a) remove Trustee or any successor Trustee at any time (or times) without notice or cause; and (b) replace any Trustee who dies or resigns or is removed.  To the extent permitted by Law, Trustee waives any statutory fee for its services and agrees to accept reasonable compensation in lieu thereof.  Trustee may resign upon thirty (30) days’ notice to Lender and Borrower.  If more than one Person is appointed Trustee, all rights granted to Trustee under this Instrument may be exercised by any of them, without the others, with the same effect as if exercised by all of them jointly.  In addition to exercising all rights set forth in this Instrument, Trustee may exercise all rights under Law.
Section 9.07    Waiver of Right to Trial by Jury; Waiver of Statute of Limitations
(a)EACH OF BORROWER AND LENDER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY PROCEEDING FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THIS INSTRUMENT AND THE OTHER LOAN DOCUMENTS), ANY ALLEGED ACTS OR OMISSIONS OF BORROWER OR LENDER IN CONNECTION THEREWITH, OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS INSTRUMENT AND THE OTHER LOAN DOCUMENTS.  BORROWER AND LENDER EACH ACKNOWLEDGES THAT THIS IS A WAIVER OF A LEGAL RIGHT AND REPRESENTS TO THE OTHER THAT THIS WAIVER IS MADE KNOWINGLY AND VOLUNTARILY.  BORROWER AND LENDER EACH AGREES THAT ALL SUCH PROCEEDINGS SHALL BE TRIED BEFORE A JUDGE OF A COURT OF COMPETENT JURISDICTION, WITHOUT A JURY.  BORROWER AND LENDER EACH AGREES THAT THIS SECTION 9.07 CONSTITUTES WRITTEN CONSENT THAT TRIAL BY JURY SHALL BE WAIVED IN ANY SUCH PROCEEDINGS AND AGREE THAT BORROWER AND LENDER EACH SHALL HAVE THE RIGHT AT ANY TIME TO FILE ANY OR ALL OF THE LOAN DOCUMENTS WITH THE CLERK OR JUDGE OF ANY COURT IN WHICH ANY SUCH PROCEEDINGS MAY BE PENDING AS STATUTORY WRITTEN CONSENT TO WAIVER OF TRIAL BY JURY.  
(b)BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO PLEAD ANY AND ALL STATUTES OF LIMITATION AS A DEFENSE TO THE PAYMENT OF THE DEBT.

Section 9.08    State Specific Provisions.  Notwithstanding anything contained in this Instrument to the contrary, the provisions set forth in Annex B hereto are incorporated into this Instrument, and, in the event of any conflict or inconsistency between the provisions set forth in Annex B and other provisions of this Instrument, the provisions of Annex B shall govern.
Section 9.09    Miscellaneous.
(a)Severability.  If any provision of the Loan Documents shall be held to be invalid, illegal, or unenforceable in any respect, this shall not affect any other provisions of the Loan Documents and such provision shall be limited and construed as if it were not in the Loan Documents.
(b)Vesting of Title in Another Person.  If title to the Property becomes vested in any Person other than Borrower, Lender and Trustee may, without notice to Borrower, deal with such Person regarding the Loan Documents or the Obligations in the same manner as with Borrower without in any way vitiating or discharging Borrower’s liability under the Loan Documents or being deemed to have consented to the vesting.
(c)Merger of Estates.  If both the lessor’s and lessee’s interest under any Lease ever becomes vested in any one Person, this Instrument and the lien and security interest created hereby shall not be destroyed or terminated by the application of the doctrine of merger and Lender and Trustee shall continue to have and enjoy all its rights and privileges as to each separate estate.  Upon foreclosure (or transfer of title by power of sale) of this Instrument, none of the Leases shall be destroyed or terminated as a result of such foreclosure (or sale), by application of the doctrine of merger or as a matter of Law, unless Lender or Trustee takes all actions required by Law to terminate the Leases as a result of foreclosure or sale.
(d)Covenants Running with the Land; Time of the Essence.  All of the Borrower’s covenants and agreements under the Loan Documents shall run with the land until such time as the Debt is repaid in full and the other conditions precedent set forth in this Instrument to the termination of this Instrument shall have been satisfied, and time shall be of the essence with respect to the performance of the covenants and agreements under the Loan Documents by Borrower and Lender.
(e)Lender as Attorney-In-Fact.  During the continuance of an Event of Default, Borrower appoints Lender as its attorney-in-fact with respect to the execution, acknowledgment, delivery, filing or recording for and in the name of Borrower of any of the documents which Borrower is required to execute, acknowledge, deliver, file or record under this Instrument or any of the other Loan Documents.  Whenever this Instrument or any of the other Loan Documents provides for the appointment of Lender as attorney-in-fact for Borrower, whether pursuant to the immediately preceding sentence or otherwise, each such appointment shall be deemed to be coupled with an interest and irrevocable.
(f)Amendments, Etc. in Writing.  The Loan Documents cannot be amended, terminated, or discharged except in a writing signed by the party against whom enforcement is sought.  No waiver, release, or other forbearance by Lender will be effective unless it is in a writing signed by Lender and then only to the extent expressly stated.
(g)Successors and Assigns.  The provisions of this Instrument and the other Loan Documents shall be binding upon Borrower, Trustee and Lender and their heirs, devisees, representatives, successors, and assigns including successors in interest to the Property and shall inure to the benefit of Borrower, Lender and Trustee and its or their heirs, successors, substitutes, and assigns.

(h)Joint and Several Obligations.  Where two or more Persons have executed any Loan Document, the obligations of such Persons shall be joint and several with respect to the Obligations in that Loan Document, except to the extent the context clearly indicates otherwise. 
(i)Counterparts.  The Loan Documents may be executed in any number of counterparts with the same effect as if all parties had executed the same document.  All such counterparts shall be construed together and shall constitute one instrument, but in making proof hereof it shall only be necessary to produce one such counterpart.
(j)Loss of Loan Document.  Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of any Loan Document which is not of public record, and, in the case of any mutilation, upon surrender and cancellation of the Loan Document, Borrower will issue, in lieu thereof, a replacement Loan Document, dated the date of the lost, stolen, destroyed or mutilated Loan Document containing the same provisions; provided that Borrower shall not be obligated to issue a new Note until Lender provides Borrower a customary lost note indemnity. 
(k)No Liability for Reports, Etc.  Any reviews, inspections, reports, approvals or similar items conducted, made or produced by or on behalf of Lender with respect to Borrower, the Property or the Loan are for loan underwriting and servicing purposes only, and shall not constitute an acknowledgment, representation or warranty of the accuracy thereof, or an assumption of liability with respect to Borrower, Borrower’s contractors, architects, engineers, employees, agents or invitees, present or future Tenants or owners of the Property, or any other party.
(l)Entire Agreement.  The Loan Documents constitute the entire understanding and agreement between Borrower, Lender and Trustee with respect to the Loan and supersede all prior written or oral understandings and agreements with respect to the Loan including the Loan Commitment and Borrower is not relying on any representations or warranties of Lender except as expressly set forth in the Loan Documents.
(m)Incorporation of Recitals and Exhibits.  The recitals set forth in this Instrument, Annex A hereto, Annex B hereto, and all exhibits to this Instrument are incorporated herein and shall be deemed an integral part of this Instrument. 
(n)Correction of Loan Documents.  If Lender determines that the Note, this Instrument or any of the other Loan Documents contains any provision with regard to the amount of the Loan, the interest rate or the payment of principal or interest that erroneously does not conform to the terms and conditions of the Loan Commitment, Borrower agrees to execute and deliver to Lender upon request any and all amendments, restated Loan Documents or other instruments, in form and substance reasonably acceptable to Borrower and Lender, correcting such erroneous provision.
(o)Acceptance of Cure After an Event of Default.  Lender shall not be under any obligation to accept any proffered cure from Borrower subsequent to the occurrence of an Event of Default nor shall Lender be obligated in any way to discontinue any exercise of remedies which Lender may have initiated subsequent to the occurrence of an Event of Default upon any such proffer by Borrower.  An Event of Default shall be continuing until such time as Lender have waived such Event of Default or expressly accepted a cure thereof. 

ARTICLE X - RELEASE AND SUBSTITUTION OF CROSS DEFAULTED PROPERTIES. 
Section 10.01    Release.  At any time after the expiration of the Lock-Out Period, Borrower shall have the right to request in writing Lender’s consent to the release (the “Release”) of one or more of the Cross Defaulted Properties (such released property or properties, each a “Released Property” and, collectively, the “Released Properties”) from the lien of the applicable Cross Collateralizing Security Documents, or any other security instrument pertaining to the Loan and/or the Cross Defaulted Loans encumbering the Released Properties upon and subject to the following provisions, terms and conditions (it being understood that Lender shall endeavor to effect any such Release on the date specified in Borrower’s written request, but no earlier than fifteen (15) Business Days after receipt of Borrower’s written request):
(a)At both the time of Borrower’s written notice and at the effective date of the Release, there shall not exist an Event of Default;
(b)The Release shall not violate any applicable Laws;
(c)Lender shall have received copies of any purchase and sale agreement regarding the Transfer of the Released Property;
(d)Borrower shall provide Lender with updated title searches with respect to any Remaining Properties and, if an endorsement to Lender’s mortgagee title insurance policy(ies) for any Remaining Properties is available in any state in which any Remaining Property is located at a commercially reasonable rate to the effect that the priority of Lender’s lien on such Remaining Properties is not affected by the Release and insuring the continued first priority of the lien of the security instruments encumbering the applicable Remaining Properties, then Borrower shall provide Lender with such endorsements;
(e)The DSCR for the Remaining Properties shall be no less than a DSCR equal to 2.0 to 1.0; provided that Borrower shall have the right to prepay the portion of the outstanding principal necessary for the Remaining Properties to satisfy the DSCR requirement of this subparagraph;
(f)The Debt Yield for the Remaining Properties shall be equal to or greater than a Debt Yield of twelve percent (12.0%); provided that Borrower shall have the right to prepay the portion of the outstanding principal necessary for the Remaining Properties to satisfy the Debt Yield requirement of this subparagraph;
(g)Borrower shall pay Lender an amount (the “Principal Payment”) equal to the sum of (A) a prepayment equal to one hundred ten percent (110%) of the Allocable Loan Amount; (B) an amount, if any, necessary to satisfy the conditions set forth in clauses (e) and (f) above; (C) an amount equal to Exercised Prepayment Premium with respect to the Allocable Loan Amount and any prepayment necessary to satisfy the conditions set forth in clauses (e) and (f) above; (D) an administrative fee of $15,000; and (E) all of Lender’s actual out-of-pocket costs and expenses incurred in connection with the Release, including without limitation, Attorneys’ Fees, and title fees and charges (any amounts received by Lender over and above the amount necessary to repay the Debt shall be allocated by Lender to the repayment of the other Cross Defaulted Loans as determined by Lender in its sole and absolute discretion); 
(h)Borrower shall deliver to Lender any other document that Lender shall reasonably request; and

(i)Within five (5) Business Days of Lender’s request therefor Borrower shall provide Lender with Borrower’s proposed calculation of Net Operating Income, certified by an appropriate authorized officer or authorized signatory of Borrower, together with all relevant supporting detail reasonably required to determine the same. Lender shall then perform Lender’s own independent calculation of Net Operating Income, which shall be the definitive determination of Net Operating Income absent manifest error.
Section 10.02    Substitution of Other Properties for Cross Defaulted Properties.  Not more than six (6) times during the term of the Loan, Borrower shall have the right to request in writing Lender’s consent to the substitution (the “Substitution”) of a grocery anchored retail property or properties acceptable to Lender in its sole discretion for one or more of the Cross Defaulted Properties (such Cross Defaulted Property or Properties being released, each an “Outgoing Property” and, collectively, the “Outgoing Properties”, and such property or properties becoming subject to the Loan Documents and Cross Collateralizing Security Documents, each an “Incoming Property” and, collectively, the “Incoming Properties”) as collateral encumbered by the Cross Collateralizing Security Documents or any other security instrument encumbering the Outgoing Properties upon and subject to the following provisions, terms and conditions (it being understood that Lender shall endeavor to effect any such Substitution on the date specified in Borrower’s written request, but no earlier than forty-five (45) days after receipt of Borrower’s written request):
(a)At both the time of Borrower’s written notice and at the effective date of the Substitution, there shall not exist an Event of Default;
(b)All representations and warranties of Borrower shall remain true and correct as of the date of the Substitution, except to the extent any such representation or warranty is no longer true or correct due to (i) the mere passage of time, (ii) events contemplated by Lender and Borrower to have occurred in the ordinary course since the date hereof, or (iii) the occurrence of one or more events that are permitted to occur under the Loan Documents, and Borrower shall certify to Lender to such effect;
(c)The Substitution shall not violate any applicable Laws;
(d)Lender shall have received copies of any purchase and sale agreement regarding the Transfer of the Outgoing Properties being substituted by the Incoming Properties;
(e)Borrower shall provide Lender with: (i) a mortgagee title insurance policy(ies) for the newly added Cross Defaulted Properties with an aggregate liability limit of not less than the aggregate principal amount of the Loan and/or Cross Defaulted Loan(s) corresponding to the applicable Release Property(ies) issued by the title insurance company which issued the mortgagee title insurance policy for the Loan and the other Cross Defaulted Loans and with such endorsements as included the title insurance policies for the Cross Defaulted Properties to the extent available in the state where the newly added Cross Defaulted Property is located, (ii) updated title searches with respect to any Remaining Properties and, (iii) if an endorsement to Lender’s mortgagee title insurance policy(ies) for any Remaining Properties is available in any state in which any Remaining Property is located at a commercially reasonable rate to the effect that the priority of Lender’s lien on such Remaining Properties is not affected by the Substitution and insuring the continued first priority of the lien of the security instruments encumbering the applicable Remaining Properties, such endorsements;
(f)The DSCR for the Remaining Properties shall be no less than 2.0 to 1.0; provided that Borrower shall have the right to repay the portion of the outstanding principal (which prepayment shall

be subject to the Exercised Prepayment Premium) necessary for the Remaining Properties to satisfy the DSCR requirement of this subparagraph; 
(g)The Debt Yield for the Remaining Properties shall be equal to or greater than twelve percent (12.0%) (and Borrower shall have provided to Lender the information required for the calculation thereof); provided that Borrower shall have the right to prepay the portion of the outstanding principal (which prepayment shall be subject to the Exercised Prepayment Premium) necessary for the Remaining Properties to satisfy the Debt Yield requirement of this subparagraph;
(h)Borrower shall pay Lender an administrative fee of $15,000 and all of Lender’s actual out-of-pocket costs and expenses incurred in connection with the Substitution, including without limitation, Attorneys’ Fees, and title fees and charges; 
(i)Borrower shall deliver to Lender any other document that Lender shall reasonably request; and 
(j)Within five (5) Business Days of Lender’s request therefor Borrower shall provide Lender with Borrower’s proposed calculation of Net Operating Income, certified by an appropriate authorized officer or authorized signatory of Borrower, together with all relevant supporting detail reasonably required to determine the same. Lender shall then perform Lender’s own independent calculation of Net Operating Income, which shall be the definitive determination of Net Operating Income absent manifest error.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURES ON FOLLOWING PAGE]

IN WITNESS WHEREOF, the undersigned has executed this Instrument under seal as of the day first set forth above.  
BORROWER:

            
[_____________] LLC,
a Delaware limited liability company
            
By:    Phillips Edison Grocery Center Operating Partnership I, L.P.,
a Delaware limited partnership, its sole member

By:     Phillips Edison Grocery Center OP GP I LLC, 
a Delaware limited liability company,
Its     General Partner

By: ________________________________________                            
Name:
Title: 

STATE OF OHIO          )
                                   : SS:
COUNTY OF ____________)

The foregoing instrument was acknowledged before me this       day of ________________, 2017 by _______________, the ________________ of Phillips Edison Grocery Center OP GP I LLC, a Delaware limited liability company, the General Partner of Phillips Edison Grocery Center Operating Partnership I, L.P., a Delaware limited partnership, the sole member of [______________], a Delaware limited liability company, on behalf of said company.
_______________________________                                    Notary Public - State of Ohio

[SEAL]

My commission expires :    
____________________

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