Document:

Exhibit 10.5

 

GUARANTY

 

THIS GUARANTY
(this “Agreement” or “Guaranty”), made as of April 1, 2008,
by GRAMERCY CAPITAL CORP., a Maryland
corporation, having an address at 420 Lexington Avenue, New York, New York
10170 (the “Guarantor”), to DEUTSCHE BANK AG, CAYMAN
ISLANDS BRANCH, a branch of a foreign banking institution, having an
address at 60 Wall Street, 10th Floor, New York, New York 10005 as agent and
initial lender (in such capacity together with its successors in such capacity,
the “Agent”).

 

W I T N E S S E T H:

 

WHEREAS,
pursuant to that certain Loan Agreement dated as of July 18, 2003 (the “Original
Closing Date”), by and among (i) First States Investors DB I, LLC (the
“Original Holding Company Borrower”), (ii) various of the
wholly-owned subsidiary entities of Original Holding Company Borrower which own
Property (individually or collectively, as applicable, the “Original
Property-Owning Borrower”,  and
together with the Original Holding Company Borrower, the “Original Borrower”),
the Agent on behalf of the lenders and LaSalle Bank National Association, as
collateral agent, as amended by that certain First Amendment to Loan Agreement,
dated August 9, 2004, that certain Second Amendment to Loan Agreement,
dated September 30, 2004, and that certain Third Amendment to Loan
Agreement, dated September 30, 2005 (together, the “Original Loan
Agreement”), the Original Holding Company Borrower and the Original
Property-Owning Borrower obtained a series of loan advances (collectively, the “Original
Loan”) from Agent to provide financing for portions of the acquisition cost
of certain properties that the Original Holding Company Borrower and various of
the Original Property-Owning Borrowers acquired;

 

WHEREAS, on
the Original Closing Date American Financial Realty Trust, a Maryland real
estate investment trust (“AFRT”) and First States Group, L.P., (“FSG”,
together with AFRT, the “Original Guarantor”), executed that certain
Guaranty of Non-Recourse Obligations (the “Original Guaranty”) for the
benefit of Agent;

 

WHEREAS,
Gramercy Capital Corp., a Maryland corporation, has entered into a definitive
merger agreement to acquire American Financial Realty Trust, which would result
in the loan under the Original Loan Agreement being due and payable;

 

WHEREAS,
Gramercy Capital Corp., a Maryland corporation, has requested that the Agent
amend and restate the Original Loan Agreement and those certain other loan
documents that evidence the Original Loan;

 

WHEREAS,
contemporaneously with the execution and delivery hereof (i) First States
Investors DB I, L.P., a Delaware limited partnership, and First States
Investors DB I B, L.P., a Delaware limited partnership (collectively, the “Holding
Company Borrower”), and each wholly-owned subsidiary entity of Holding
Company Borrower listed on Schedule I attached hereto (individually or
collectively, as applicable, a “Current Property-Owning Borrower” and,
together with the Holding Company Borrower, the “Maker”), has executed
and delivered to Agent, as payee, that certain Amended and Restated Promissory
Note, dated the date hereof (the  “Note”),
in the maximum principal face amount of One Hundred Million Dollars
($100,000,000)

 

 

(the “Loan Amount”) in
evidence of the loan being continued this day by Agent to Borrower (the “Loan”),
and (ii) Holding Company Borrower and Current Property-Owning Borrower
(collectively, with each wholly-owned subsidiary entity of Holding Company
Borrower that owns a Property and from time to time joins the Loan Agreement as
an additional Borrower after the date hereof, the “Borrower”); LaSalle
Bank National Association, as collateral agent; and Agent, as agent and initial
lender, have executed and delivered that certain Amended and Restated Loan
Agreement (as may be amended and restated after the date hereof, the “Loan
Agreement”), of even date herewith, pursuant to which the Loan is being
continued (capitalized terms used but not defined herein shall have the
meanings ascribed to them in the Loan Agreement);

 

WHEREAS, each
Current Property-Owning Borrower and Future Property-Owning Borrower shall,
pursuant to the Loan Agreement, grant to Agent a Mortgage/Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Fixture Filing
(collectively, the “Mortgages”), with respect to the Property in order
to secure the Note; and

 

WHEREAS,
Guarantor directly or indirectly owns a substantial interest in the Borrower
and shall derive a substantial economic benefit from the making of the Loan by
Agent to Borrower; and

 

WHEREAS, as a
condition precedent to the continuing of the Loan and making any future
advances in accordance with the Loan Agreement, Borrower has agreed to procure
and deliver to Agent this Agreement; and

 

WHEREAS, Agent
has declined to continue the Loan, and make any future advance in accordance with
the Loan Agreement, unless this Agreement is duly executed by Guarantor and
delivered to Agent.

 

NOW,
THEREFORE, in consideration for, and as an inducement to, Agent’s continuing
the Loan and agreeing to make future advances in accordance with the Loan Agreement,
and for other good and valuable consideration the legal sufficiency of which
and receipt thereof are hereby acknowledged, and notwithstanding any provision
to the contrary contained in the Loan Agreement, the Note, the Mortgages or any
of the other Loan Documents, including without limitation, any “non-recourse”
provision of any such documents, Agent and Guarantor do hereby agree as
follows:

 

1.             Guarantor on behalf of itself and its successor and
assigns, does hereby absolutely, unconditionally, irrevocably and personally:
(i) guaranty to Agent payment and performance of all of the obligations,
representations, covenants, warranties and liabilities of Borrower under the
Loan Agreement and Loan Documents, (ii) guaranty to Agent payment on each Payment
Date, commencing on the April, 2008, Payment Date through and including the
March, 2009, Payment Date, an amount, if any, equal to the positive difference
(not less than zero (0)) between (x) $541,666.67 and (y) the amount applied to
repay the outstanding Principal Indebtedness on such Payment Date pursuant to
the eighth (8th) clause of Section 3.12(b) of the Loan Agreement; and (iii)
agrees to reimburse Agent for, and hold Agent harmless from and against, any
and all losses, damages, claims, expenses, deficiencies, liabilities and costs
(including, without limitation, reasonable attorneys’ fees and disbursements)
incurred, suffered

 

2

 

or sustained by Agent and/or its successors and assigns as a result of
or arising out of, in connection with or resulting from, the enforcement of
this Agreement against Guarantor (the obligations of Guarantor under clauses “i”,
“ii” and “iii” above being referred to hereinafter, collectively, as “Guarantor’s
Obligation”).

 

2.             Guarantor shall not permit with respect to itself (and its
Subsidiaries on a combined basis) any of the following to be breached, as
determined quarterly on a combined basis in conformity with GAAP:

 

(a)      Minimum Tangible Net
Worth.  Tangible Net Worth shall not
be less than $400,000,000, plus
seventy-five percent (75%) of the net proceeds from equity offerings completed
after the date hereof;

 

(b)      Minimum Debt to Book
Equity.  The outstanding Indebtedness
shall not exceed 85% of the Total Asset Value;

 

(c)      Minimum Liquidity.
The sum of cash and Marketable Securities held shall not be less than
$15,000,000 in aggregate;

 

(e)      Minimum Fixed Charge
Coverage.  The Fixed Charge Coverage
Ratio shall not be less than 1.30:1.

 

For purposes of this Paragraph 2, the following terms shall have
the following respective meanings:

 

“Capital Lease”, as applied to any Person, means any lease of
any property (whether real, personal or mixed) by that Person or entity as
lessee that, in conformity with GAAP, is accounted for as a capital lease on
the balance sheet of that Person or entity.

 

 “Consolidated EBITDA”
means, for any Person for any period, an amount equal to: (a) Consolidated
Net Income for such period; plus (b) the
following to the extent deducted in calculating such Consolidated Net Income: (i) Consolidated
Interest Charges for such period; (ii) the provision for federal, state,
local and foreign income taxes payable by such Person and its Subsidiaries for
such period; (iii) depreciation and amortization expense deducted in
determining such Consolidated Net Income; and (iv) other non-recurring
expenses reducing such Consolidated Net Income which do not represent a cash
item in such period or any future period; minus (c) the
following to the extent included in calculating such Consolidated Net Income: (i) federal,
state, local and foreign income tax credits of such person and its Subsidiaries
for such period; and (ii) all non-cash items increasing Consolidate Net
Income for such period.

 

“Consolidated Interest Charges” means, for any Person for any
period, the sum of: (i) all interest, premium payments, debt discount,
fees, charges and related expenses of such Person in connection with borrowed
money (including capitalized interest) or in connection with the deferred
purchase price of assets, in each case to the extent treated as interest in
accordance  with GAAP, and (b) the
portion of rent expense of such Person with respect to such period under
Capital Leases that is treated as interest in accordance with GAAP.

 

3

 

“Consolidated Net Income” means, for any Person for any period,
consolidated net income of such Person (excluding gains and extraordinary
losses) for that period, as determined in accordance with GAAP.

 

 “Fixed Charge Coverage Ratio”
means for any Person for any period, the ratio of Consolidated EBITDA for such
Person to Fixed Charges for such period.

 

“Fixed Charges”
means, for any Person, for any period: (a) debt service for such Person
for such period excluding capitalized interest to the extent capitalized
interest is paid out of a dedicated interest reserve account sufficient to
cover such payments for such period; plus (b) restricted
payments with respect to preferred stock or other preferred equity interests
issued by such Person required to be paid regardless of available cash during
such period.

 

“GAAP” means with respect to the financial statements or other
financial information of any Person, generally accepted accounting principles
in the United States which are in effect from time to time.

 

“Indebtedness” means, for any Person: (a) obligations
created, issued or incurred by such Person for borrowed money (whether by loan,
the issuance and sale of debt securities or the sale of property to another Person
subject to an understanding or agreement, contingent or otherwise, to
repurchase such property from such Person); (b) obligations of such Person
to pay the deferred purchase or acquisition price of property or services,
other than trade accounts payable (other than for borrowed money) arising, and
accrued expenses incurred, in the ordinary course of business so long as such
trade accounts payable are payable within ninety (90) days of the date the
respective goods are delivered or the respective services are rendered; (c) indebtedness
of others secured by a Lien on the property of such Person, whether or not the
respective indebtedness so secured has been assumed by such Person; (d) obligations
of such Person in respect of letters of credit or similar instruments issued or
accepted by banks and other financial institutions for account of such person; (e) Capital
Leases of such Person; and (f) indebtedness of others guaranteed by such
Person.

 

“Lien” means any mortgage, lien, encumbrance, charge or other security
interest, whether arising under contract, by operation of law, judicial process
or otherwise.

 

“Marketable Securities” means any of the following:

 

98% of the market value
of negotiable debt obligations issued by the U.S. Treasury Department having a
remaining maturity of less than 1 year; or

 

95% of the market value
of negotiable debt obligations issued by the U.S. Treasury Department having a
remaining maturity of 1-10 years; or

 

90% of the market value
of negotiable debt obligations issued by the U.S. Treasury Department having a
remaining maturity of more than 10 years; or 

 

90% of the market value
of single-class mortgage participation certificates (“FHLMC Certificates”)
in book-entry form backed by single-family residential mortgage loans, the full
and

 

4

 

timely payment of
interest at the applicable certificate rate and the ultimate collection of
principal of which are guaranteed by the Federal Home Loan Mortgage Corporation
(excluding Real Estate Mortgage Investment Conduit (“REMIC “) or other
multi-class pass-through certificates, collateralized mortgage obligations,
pass-through certificates backed by adjustable rate mortgages, securities
paying interest or principal only and similar derivative securities); or

 

90% of the market value
of single-class mortgage pass-through certificates (“FNMA Certificates”)
in book-entry form backed by single-family residential mortgage loans, the full
and timely payment of interest at the applicable certificate rate and ultimate
collection of principal of which are guaranteed by the Federal National
Mortgage Association (excluding REMIC or other multi-class pass-through
certificates, pass-through certificates backed by adjustable rate mortgages
collateralized mortgage obligations, securities paying interest or principal
only and similar derivative securities); or

 

90% of the market value
of single-class fully modified pass-through certificates (“GNMA Certificates”
in book-entry form backed by single-family residential mortgage loans, the full
and timely payment of principal and interest of which is guaranteed by the
Government National Mortgage Association (excluding REMIC or other multi-class
pass-through certificates, collateralized mortgage obligations, pass-through
certificates backed by adjustable rate mortgages, securities paying interest or
principal only and similar derivatives securities); or

 

85% of all actively and
regularly traded investment-grade residential mortgage-backed securities; or

 

such other collateral as
Guarantor and Agent may agree, with such valuation percentage applied thereto
as Agent, in its sole but reasonable discretion acting in good faith shall deem
appropriate.

 

“Person” means an individual, partnership, corporation, joint
stock company, trust or unincorporated organization or a governmental agency or
political subdivision thereof.

 

“Subsidiary” means as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock or other
ownership interests having ordinary voting power (other than stock or such
other ownership interests having such power only by reason of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership, limited liability company or other entity are at the
time owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.

 

“Tangible Net Worth” means, as of a particular date, (i) all amounts that would be included under capital
on a balance sheet of Guarantor and its consolidated Subsidiaries at such date,
determined in accordance with GAAP, less  (ii)  the sum of (A) amounts owing to the Borrower from
affiliates and (B) intangible assets of the Guarantor and its consolidated
Subsidiaries.

 

“Total Asset Value”
means the total value of assets owned by the Guarantor.

 

5

 

3.             It
is agreed that the obligations of Guarantor hereunder shall be primary and this
Agreement shall be enforceable against Guarantor and its successors and assigns
without the necessity for any suit or proceeding of any kind or nature
whatsoever brought by Agent against Borrower or its respective successors or
assigns or any other party or against any security for the payment of the
Guarantor’s Obligation and without the necessity of any notice of non-payment
or non-observance or of any notice of acceptance of this Agreement or of any
notice of demand to which Guarantor might otherwise be entitled (including,
without limitation, diligence, presentment, notice of maturity, extension of
time, protest, notice of dishonor or default, change in nature or form of the
Guarantor’s Obligation, acceptance of further security, release of further security,
imposition or agreement arrived at as to the amount of or the terms of the
Guarantor’s Obligation, notice of adverse change in Borrower’s financial
condition and any other fact that might materially increase the risk to
Guarantor), all of which Guarantor hereby expressly waives. Guarantor hereby
expressly agrees that the validity of this Agreement and the obligations of
Guarantor hereunder shall in no way be terminated, affected, diminished,
modified or impaired by reason of the assertion of or the failure to assert by
Agent against Borrower, or its successors or assigns, any of the rights or
remedies reserved to Agent pursuant to the provisions of the Loan Agreement,
the Note, the Mortgages or any other Loan Documents.

 

4.             Guarantor
waives, and covenants and agrees that it will not at any time insist upon,
plead or in any manner whatsoever claim or take the benefit or advantage of,
any and all appraisal, valuation, stay, extension, marshaling-of-assets or
redemption laws, or right of homestead or exemption, whether now or at any time
hereafter in force, that may delay, prevent or otherwise affect the performance
by Guarantor of its obligations under, or the enforcement by Agent of, this
Agreement. Guarantor further covenants and agrees not to set up or claim any
defense, counterclaim, cross-claim, offset, set-off, right of recoupment, or
other objection of any kind to any action, suit or proceeding in law, equity or
otherwise, or to any demand or claim that may be instituted or made by Agent
hereunder other than the defense of the actual timely performance of Guarantor’s
Obligations hereunder. Guarantor represents, warrants and agrees that, as of
the date hereof, its obligations under this Agreement are not subject to any
counterclaims, cross-claims, rights of recoupment, offsets or affirmative or
other defenses of any kind against Agent.

 

5.             Guarantor
agrees that any notice or directive given at any time by Guarantor to Agent
that is inconsistent with any waiver contained in this Agreement shall be void and
may be ignored by Agent, and, in addition, may not be pleaded or introduced as
evidence in any litigation relating to this Agreement for the reason that such
pleading or introduction would be at variance with the written terms of this
Agreement, unless Agent has specifically agreed otherwise in a writing, signed
by a duly authorized officer. Guarantor specifically acknowledges and agrees
that the foregoing waivers are of the essence of the Loan transaction and that,
but for this Agreement and such waivers, Agent would not make the Loan to
Borrower.

 

6.             The
provisions of this Agreement are for the benefit of Agent and its successors
and assigns, and nothing herein contained shall impair, as between Borrower and
Agent, the obligations of Borrower under the Loan Agreement, the Note, the
Mortgages or any of the other Loan Documents.

 

6

 

 

7.                                       This Agreement
shall be a continuing guaranty and the liability of Guarantor hereunder shall
in no way be terminated, affected, modified, impaired or diminished (to the
extent permitted by law) by reason of the happening, from time to time, of any
of the following, although without notice or the further consent of Guarantor
or Guarantor’s successors and assigns:

 

(a)                                  any
assignment, amendment, modification or waiver of or change in any of the terms,
covenants, conditions or provisions of the Loan Agreement, the Note, the
Mortgages or any of the other Loan Documents or the invalidity or
unenforceability of any of the foregoing; or

 

(b)                                 any
extension of time that may be granted by Agent to Borrower or Guarantor; or

 

(c)                                  any
action that Agent or Borrower may take or fail to take under or in respect of
any of the Loan Documents or by reason of any waiver of, or failure to enforce
any of the rights, remedies, powers or privileges available to Agent under this
Agreement or available to Agent at law, equity or otherwise, or any action on
the part of Agent or Borrower granting indulgence or extension in any form
whatsoever; or

 

(d)                                 any
dealing, transaction, matter or thing occurring between Agent, Borrower or
Guarantor or Guarantor’s successors and assigns; or

 

(e)                                  any
sale, exchange, release, or other disposition of any property pledged,
mortgaged or conveyed, or any property in which Agent has been granted a lien
or security interest to secure any indebtedness of Borrower to Agent; or

 

(f)                                    any
release of any person or entity who may be liable in any manner for the payment
and collection of any amounts owed by Borrower to Agent; or

 

(g)                                 the
application of any sums by whomsoever paid or however realized to any amounts
owing by Borrower to Agent in such manner as Agent shall determine in its sole
discretion; or

 

(h)                                 any
Event of Default, whether or not Agent has exercised any of its rights and
remedies as set forth in the Loan Agreement or the Mortgages upon the happening
of any such Event of Default; or

 

(i)                                     Borrower’s
and/or Guarantor’s voluntary or involuntary liquidation, dissolution, sale of
all or substantially all of their respective assets and liabilities,
appointment of a trustee, receiver, liquidator, sequestrator or conservator for
all or any part of Borrower’s or Guarantor’s assets, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment, or the commencement of other similar proceedings
affecting Borrower or Guarantor or any of the assets of either of them,
including, without limitation, (A) the release or discharge of Borrower
from the payment and performance of its obligations under any of the Loan
Documents by operation of law, or (B) the impairment, limitation or
modification of the

 

7

 

liability of
Borrower, its partners or Guarantor in bankruptcy, or of any remedy for the
enforcement of the Guarantor’s Obligation, under any of the Loan Documents, or
Guarantor’s liability under this Agreement, resulting from the operation of any
present or future provisions of the Federal Bankruptcy Code or other present or
future federal, state or applicable statute of law or from the decision in any
court; or

 

(j)                                     any
change in or termination of the ownership interest of Guarantor in Borrower
(whether direct or indirect); or

 

(k)                                  any
conveyance of the Property, whether or not pursuant to a foreclosure sale, a
deed in lieu of foreclosure, a transfer through bankruptcy, or otherwise.

 

8.                                       Guarantor
acknowledges that this Guaranty and Guarantor’s Obligation are and shall at all
times continue to be absolute, unconditional and irrevocable in all respects,
and shall at all times be valid and enforceable irrespective of any other
agreement or circumstances of any nature whatsoever that might otherwise
constitute a defense to this Guaranty or the obligations of any other person or
party (including, without limitation, Borrower or any other guarantor) relating
to this Guaranty or the obligations of Guarantor hereunder.

 

9.                                       Guarantor agrees
that if at any time all or any part of any payment at any time received by
Agent from Borrower or Guarantor under or with respect to this Agreement is or
must be rescinded or returned by Agent for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy or reorganization of Borrower or
Guarantor), then Guarantor’s Obligation hereunder shall, to the extent of the
payment rescinded or returned, be deemed to have continued in existence
notwithstanding such previous receipt by Agent, and Guarantor’s Obligation
hereunder shall continue to be effective or reinstated, as the case may be, as
to such payment, as though such previous payment to Agent had never been made,

 

10.                                 Guarantor (a) shall
have no right of subrogation against Borrower by reason of any payments or acts
of performance by Guarantor in compliance with the obligations of Guarantor
hereunder; (b) hereby waives any right to enforce any remedy that
Guarantor now or hereafter shall have against Borrower by reason of any one or
more payments or acts of performance in compliance with the obligations of
Guarantor hereunder; (c) shall subordinate any liability or indebtedness
of Borrower now or hereafter held by Guarantor or any affiliate of Guarantor to
the obligations of Borrower under the Loan Documents; and (d) shall not
file, assert or receive payment on any claim whether now existing or hereafter
arising, against Borrower in the event of the commencement of a case by or
against Borrower under federal or state insolvency laws.

 

11.                               Guarantor
represents and warrants to Agent, with the knowledge that Agent is relying upon
the same, as follows:

 

(a)                                  Guarantor
is solvent and has the legal right to enter into this Agreement and to perform
its obligations under the terms hereof;

 

(b)                                 to
the best of Guarantor’s knowledge, there is no action, suit, proceeding or
investigation pending or threatened against or affecting Guarantor at law, in
equity, in

 

8

 

admiralty or
before any arbitrator or any governmental department, commission, board,
bureau, agency or instrumentality (domestic or foreign) that is likely to
result in any material adverse change in the property, assets or condition
(financial or otherwise) of Guarantor or that is likely to impair materially
the ability of Guarantor to perform its obligations under this Agreement;

 

(c)                                  Guarantor
(i) is a duly and solely organized and validly existing corporation in
good standing under the laws of the State of Maryland, (ii) has the
requisite power and authority to carry on its business as now being conducted,
and (iii) has the requisite power to execute and deliver, and perform its
obligations under, this Agreement and all of the other Loan Documents to which
it is a party;

 

(d)                                 the
execution and delivery by Guarantor of this Agreement, and all of the other
Loan Documents to which it is a party, Guarantor’s performance of its
obligations hereunder and thereunder (i) have been duly authorized by all
requisite action on the part of Guarantor, (ii) will not violate any
provision of any legal requirements, any order of any court or other
governmental authority, the organizational documents or any indenture or
agreement or other instrument to which Guarantor is a party or by which Guarantor
is bound, and (iii) other than those obtained or filed on or prior to the
date hereof, Guarantor is not required to obtain any consent, approval or
authorization from, or to file declaration or statement with, any governmental
authority or other agency in connection with or as a condition to the
execution, delivery or performance of this Agreement, and all of the other Loan
Documents to which it is a party.

 

(e)                                  This
Agreement, and all of the other Loan Documents executed by Guarantor in
connection with the Loan, (i) is the legal, valid and binding obligation
of Guarantor, enforceable against Guarantor in accordance with its terms,
subject to bankruptcy, insolvency, and other limitations on creditors’ rights
generally and to equitable principles, and 
(ii) are not subject to any right of rescission, set-off,
counterclaim or defense by Guarantor (including the defense of usury), and
Guarantor has not asserted any right of rescission, set-off, counterclaim or
defense with respect thereto; and

 

(f)                                    all
financial statements that have heretofore been furnished by Guarantor to Agent
in connection with this Agreement, and all such financial statements that
hereafter may be furnished to Agent by Guarantor have been and shall be
prepared by an independent certified public accountant approved by Agent in
accordance with the Loan Agreement, shall be consistent in form with prior
statements and shall be certified by Guarantor (provided no default shall have
occurred and be continuing under the Loan, in which event any such statements
shall be certified by such independent certified public accountant); are and
shall be true, correct and complete and do and shall fairly present the
financial condition of Guarantor, all as of the respective dates thereof.

 

12.                                 As long as this
Agreement shall be outstanding, Guarantor shall furnish to Agent, within ninety
(90) days after the end of each calendar year or other fiscal year of Guarantor
(or within five business days after filing, in the case of tax returns) and
within sixty-five (65) days after the end of each of the first three calendar
quarters, and within thirty (30) business days after

 

9

 

Agent’s request made at any time or from time
to time:  (a) complete and current
financial statements of Guarantor (audited for the annual financial statements
and unaudited for the financial statements of the first three calendar
quarters), in form and scope reasonably satisfactory to Agent; (b) copies
of Guarantor’s tax returns; and (c) such other financial information
relating to Guarantor as  may reasonably
request.

 

13.                                 Guarantor and Agent
acknowledge and agree that this Agreement is a guaranty of payment and
performance and not of collection and enforcement in respect of any of the Guarantor’s
Obligation. No exculpatory language contained in any of the other Loan
Documents shall in any event or under any circumstances modify, qualify or
affect the personal recourse obligations and liabilities of Guarantor
hereunder.

 

14.                                 Agent may freely
assign any or all of its rights under this Agreement, but any such assignment
shall be made only to the subsequent holder of the Note and no such assignment
shall increase Guarantor’s Obligation or diminish its rights hereunder. In the
event of any such assignment, Agent shall give Guarantor prompt notice of same,
but the consent of Guarantor shall not be required for any such assignment and
failure to give such notice shall not affect the validity or enforceability of
any such assignment or subject Agent to any liability and Guarantor shall
continue to remain bound by and obligated to perform under and with respect to
this Agreement. Guarantor shall not assign any of its obligations under this
Agreement without the prior consent of the Agent.

 

15.                                 The representations,
warranties and obligations of Guarantor set forth in this Agreement shall
survive until this Agreement shall terminate in accordance with the terms
hereof.

 

16.                                 This Agreement
contains the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements relating to such
subject matter and may not be modified, amended, supplemented or discharged
except by a written agreement signed by Guarantor and Agent. This Agreement
also may be discharged by full performance of the Guarantor’s Obligation in
accordance with the terms hereof, or as otherwise provided herein.

 

17.                                 If all or any portion
of any provision contained in this Agreement shall be determined to be invalid,
illegal or unenforceable in any respect for any reason, such provision or
portion thereof shall be deemed stricken and severed from this Agreement and
the remaining provision and portions thereof shall continue in full force and
effect.

 

18.                                 All notices, requests,
demands and other communications under or in connection with this Agreement
shall be in writing and shall be deemed to have been given or made for all
purposes when delivered in person to the addresses set forth below or three (3) business
days after same is sent by registered or certified mail, return receipt
requested, postage prepaid, to the following addresses.

 

10

 

	
  If to
  Guarantor:

  	
   

  	
  The address
  listed above to the attention of

  
	
   

  	
   

  	
  Marc
  Holliday and the Office of the General Counsel

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Clifford Chance US LLP

  
	
   

  	
   

  	
  31 West 52nd Street

  
	
   

  	
   

  	
  New York, New York 10019

  
	
   

  	
   

  	
  Attn: Tony Lopez, Esq.

  
	
   

  	
   

  	
   

  
	
  and

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  If to Agent:

  	
   

  	
  The address
  listed above

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Sidley Austin LLP

  
	
   

  	
   

  	
  787 Seventh Avenue

  
	
   

  	
   

  	
  New York, New York 10019

  
	
   

  	
   

  	
  Attn: Brian Krisberg, Esq.

  

 

The above addresses may be changed on written
notice given as hereinabove provided. Notices may be sent by a party hereto or
on its behalf by its attorney.

 

19.                                 This Agreement shall
be binding upon Guarantor and its successors and assigns and shall inure to the
benefit of Agent and its successors and assigns.

 

20.                                 The failure of Agent
to enforce any right or remedy hereunder, or promptly to enforce any such right
or remedy, shall not constitute a waiver thereof, nor give rise to any estoppel
against Agent, nor excuse Guarantor from its obligations hereunder. Any waiver
of any such right or remedy to be enforceable against Agent must be expressly
set forth in writing signed by Agent.

 

21.

 

(a)                                  Any
suit initiated by Agent against Guarantor or in connection with or arising,
directly or indirectly, out of or relating to, this Agreement (an “Action”)
may, at Agent’s option, be brought in any state or federal court in the State
of New York having jurisdiction over the subject matter hereof. Guarantor
hereby submits itself to the jurisdiction of any such court and agrees that
service of process against Guarantor in any such action may be effected by any
means permissible under federal law or under the laws of the state in which
such Action is brought. Guarantor hereby agrees that insofar as is permitted
under applicable law, this consent to personal jurisdiction shall be
self-operative and no further instrument or action, other than service of
process in one of the manners specified in this Guaranty, or as otherwise
permitted by law, shall be necessary in order to confer jurisdiction upon
Guarantor.

 

(b)                                 Guarantor
agrees that, provided that service of process is effected upon Guarantor in one
of the manners hereinafter specified or as otherwise permitted by law,
Guarantor irrevocably waives, to the fullest extent permitted by law, and
agrees not to assert, by way of motion, as a defense or otherwise, (i) any
objection that Guarantor may have or may hereafter have to the laying of the
venue of any Action brought in any court as provided for by this Agreement, (ii) any
claim that any Action brought in any such court has been brought in an
inconvenient forum, or (iii) any claim that Guarantor is not 

 

11

 

personally
subject to the jurisdiction of such court. Guarantor agrees that, provided that
service of process is effected upon Guarantor in one of the manners specified
in this Guaranty or as otherwise permitted by law, a final judgment from which
Guarantor has not appealed or may not appeal in any Action brought in any such
court shall be conclusive and binding upon Guarantor and may, so far as
permitted under applicable law, be enforced in the courts of any state or any
federal court or in any other courts to the jurisdiction of which it is
subject, by a suit upon such judgment and that Guarantor shall not assert any
defense, counterclaim or set-off in any such suit upon such judgment.

 

(c)                                  Guarantor
hereby irrevocably designates and appoints National Registered Agents Inc. at
875 Avenue of the Americas, Suite 501, New York, New York 10001 (the “Service
Agent”) as Guarantor’s authorized agent to accept and acknowledge on
Guarantor’s behalf service of any and all process that may be served in any
Action.

 

(d)                                 Guarantor
agrees to execute, deliver and file all such further instruments or documents
as may be necessary under the laws of the State of New York or the laws of the
United States in order to make effective (i) the appointment of Service
Agent as agent for service of process as provided above and (ii) Guarantor’s
consent to jurisdiction as provided for in this Guaranty.

 

(e)                                  Guarantor
hereby consents to process being served in any Action by the mailing of a copy
thereof by registered or certified mail, postage prepaid, return receipt
requested, to the notice address for Guarantor as set forth in this Guaranty or
to Service Agent at the address provided for herein. If Service Agent shall
desire to resign as agent for service of process, Guarantor shall substitute a
party having an office within the Borough of Manhattan and reasonably
acceptable to Agent to act as Service Agent (it being agreed that any such
resignation shall not be effective unless and until the replacement Agent
agrees in writing to act as Service Agent for service of process). Guarantor
hereby agrees that provided that service is made in accordance with this
paragraph or as otherwise permitted by law, Guarantor irrevocably waives, to
the fullest extent permitted by law, all claim of error in connection with any
such service and agrees that such service (i) shall be deemed in every
respect effective service of process upon it in any Action, and (ii) shall,
to the fullest extent permitted by law, be taken and held to be valid personal
service upon and personal delivery to Guarantor.

 

(f)                                    Nothing
in this Agreement shall limit Agent’s right to serve process in any manner
permitted by law or limit Agent’s right or the right of any of its successors
or assigns to bring proceedings against Guarantor in the courts of any
jurisdiction(s).

 

(g)                                 To
the extent that Guarantor has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service or
notice, attachment before judgment, attachment in aid of execution, execution
or otherwise) with respect to Guarantor or Guarantor’s property, Guarantor
hereby irrevocably waives such immunity in respect of its obligations under
this Agreement.

 

(h)                                 As
a further inducement to Agent’s making of the Loan to Borrower, and in
consideration thereof, Agent and Guarantor each covenant and agree that in any
action

 

12

 

or proceeding
brought on, under or by virtue of this Agreement, Agent and Guarantor each
shall and do hereby unconditionally and irrevocably waive trial by jury.

 

(i)                                     Guarantor
hereby further covenants and agrees to and with Agent that Guarantor may be
joined in any action against Borrower in connection with the Loan Agreement,
the Note, the Mortgages, or any of the other Loan Documents, solely with
respect to the subject matter of this Agreement.

 

(j)                                     Guarantor
covenants and agrees to indemnify and save Agent harmless of and from, and
defend it against, all losses, costs, liabilities, expenses, damages or claims
suffered by reason of Guarantor’s failure to perform its obligations hereunder.

 

22.                                 All of Agent’s rights
and remedies under the Loan Agreement, the Note, the Mortgages or any of the
other Loan Documents or under this Agreement are intended to be distinct,
separate and cumulative and no such right or remedy therein or herein mentioned
is intended to be in exclusion of or a waiver of any other right or remedy
available to Agent.

 

23.                                 Guarantor hereby
consents that from time to time, before or after any default by Borrower, with
or without further notice to or assent from Guarantor, any security at any time
held by or available to Agent for any obligation of Borrower, or any security
at any time held by or available to Agent for any obligation of any other
person or party secondarily or otherwise liable for all or any portion of the
Loan, may be exchanged, surrendered or released and any obligation of Borrower,
or of any such other person or party, may be changed, altered, renewed,
extended, continued, surrendered, compromised, waived or released in whole or
in part, or any default with respect thereto waived, and Agent may fail to set
off and may release, in whole or in part, any balance of any deposit account or
credit on its books in favor of Borrower, or of any such other person or party,
and may extend further credit in any manner whatsoever to Borrower, and
generally deal with Borrower or any such security or other person or party as
Agent may see fit; and Guarantor shall remain bound under this Agreement
notwithstanding any such exchange, surrender, release, change, alteration,
renewal, extension, continuance, compromise, waiver, action, inaction,
extension of further credit or other dealing. This Agreement is independent of,
and in addition to, all collateral granted, pledged or assigned under the Loan
Documents.

 

24.                                 The terms of this
Agreement have been negotiated, and this Agreement has been executed and
delivered in the State of New York, and it is the intention of the parties
hereto that this Agreement be construed and enforced in accordance with the
laws of such State.

 

25.                                 This Agreement may not
be changed orally, but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or discharge is
sought.

 

26.                                 Notwithstanding
anything to the contrary contained herein, no provision of this Guaranty shall
be deemed to limit, decrease or in any way diminish any rights of set-off Agent
may have with respect to any cash, cash equivalents, certificates of deposit or
the like which may now or hereafter be put on deposit with Agent by Borrower or
by Guarantor.  Upon the  occurrence and during the continuance of any
event of default, Agent is hereby authorized at any time and from time to time,
to the fullest extent permitted by law, to set off and apply any and all

 

13

 

deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by Agent to or for the credit or the account of Guarantor against any and all
of the obligations of Guarantor now or hereafter existing under this Guaranty
and the Loan Documents, irrespective of whether or not Agent shall have made any
demand under this Guaranty or the Loan Documents and although such obligations
may be contingent and unmatured.  Agent
agrees promptly to notify Guarantor after any set-off and application, provided
that the failure to give such notice shall not affect the validity of such
set-off and application or this Guaranty. 
The rights of Agent under this Paragraph 26 are in addition to other
rights and remedies (including, without limitation, other rights to set-off)
which Agent may have.

 

27.                                 Guarantor shall not wind
up, liquidate, or dissolve its affairs or enter into any transaction of merger
or consolidation (unless it is the surviving entity thereof), or sell, lease,
or otherwise dispose of (or agree to do any of the foregoing) all or
substantially all of its property or assets, without Agent’s prior written
consent.

 

28.                                 This Agreement may be
executed in counterparts, which together shall constitute the same instrument.

 

29.                                 TO THE
FULLEST EXTENT PERMITTED BY LAW GUARANTOR HEREBY IRREVOCABLY WAIVES TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING BROUGHT BY AGENT INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR IN CONNECTION
WITH THIS AGREEMENT.

 

30.                                 GUARANTOR
HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT
SITTING IN NEW YORK CITY FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS. GUARANTOR HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH
PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

NO FURTHER
TEXT ON THIS PAGE

 

14

 

IN WITNESS WHEREOF, Guarantor
has executed and delivered this Agreement as of the date and year first above
written.

 

	
   

  	
  GUARANTOR:

  
	
   

  	
   

  
	
   

  	
  GRAMERCY
  CAPITAL CORP.,

  
	
   

  	
  a Maryland
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Andrew
  Levine

  
	
   

  	
   

  	
  Name: 

  	
  Andrew
  Levine

  
	
   

  	
   

  	
  Title:

  	
  Corporate
  Secretary and Vice President

  
	
   

  	
   

  

 

15Exhibit 10.6

 

Execution Version

 

 

 

LOAN
AGREEMENT

Dated as of March 28,
2008

 

among

 

FIRST STATES INVESTORS HFS, L.P., FIRST STATES
INVESTORS FPC, L.P., and

FIRST STATES INVESTORS TRS, L.P.

as Borrowers

 

and

 

GRAMERCY INVESTMENT TRUST

as Lender

 

 

 

 

TABLE OF
CONTENTS

 

	
  1.

  	
  DEFINITIONS; PRINCIPLES OF
  CONSTRUCTION

  	
   

  	
  1

  
	
   

  	
  1.1

  	
  Specific Definitions

  	
   

  	
  1

  
	
   

  	
  1.2

  	
  Principles of Construction

  	
   

  	
  18

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  GENERAL LOAN TERMS

  	
   

  	
  18

  
	
   

  	
  2.1

  	
  The Loan

  	
   

  	
  18

  
	
   

  	
  2.2

  	
  Interest; Monthly Payments

  	
   

  	
  18

  
	
   

  	
   

  	
  2.2.1

  	
  Generally

  	
   

  	
  18

  
	
   

  	
   

  	
  2.2.2

  	
  Default Rate

  	
   

  	
  18

  
	
   

  	
   

  	
  2.2.3

  	
  Taxes

  	
   

  	
  18

  
	
   

  	
   

  	
  2.2.4

  	
  Breakage Indemnity

  	
   

  	
  19

  
	
   

  	
   

  	
  2.2.5

  	
  New Payment Date

  	
   

  	
  19

  
	
   

  	
  2.2.6

  	
  New Interest Period

  	
   

  	
  19

  
	
   

  	
  2.3

  	
  Loan Repayment

  	
   

  	
  19

  
	
   

  	
   

  	
  2.3.1

  	
  Repayment

  	
   

  	
  19

  
	
   

  	
   

  	
  2.3.2

  	
  Mandatory Prepayments

  	
   

  	
  20

  
	
   

  	
   

  	
  2.3.3

  	
  Optional Prepayments

  	
   

  	
  20

  
	
   

  	
  2.4

  	
  Release of Property

  	
   

  	
  20

  
	
   

  	
  2.4.3

  	
  Fees; Application of Release Prices and Excess Net Cash Proceeds

  	
   

  	
  22

  
	
   

  	
  2.5

  	
  Payments and Computations

  	
   

  	
  22

  
	
   

  	
   

  	
  2.5.1

  	
  Making of Payments

  	
   

  	
  22

  
	
   

  	
   

  	
  2.5.2

  	
  Computations

  	
   

  	
  22

  
	
   

  	
   

  	
  2.5.3

  	
  Late Payment Charge

  	
   

  	
  22

  
	
   

  	
  2.6

  	
  [reserved]

  	
   

  	
  22

  
	
   

  	
  2.7

  	
  Substitution of Collateral

  	
   

  	
  22

  
	
   

  	
  2.8

  	
  Extension Option

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  CASH MANAGEMENT AND RESERVES

  	
   

  	
  26

  
	
   

  	
  3.1

  	
  Cash Management Arrangements

  	
   

  	
  26

  
	
   

  	
  3.2

  	
  Cash Trap Reserve

  	
   

  	
  27

  
	
   

  	
  3.3

  	
  Casualty/Condemnation Subaccount

  	
   

  	
  30

  
	
   

  	
  3.4

  	
  Grant of Security Interest; Application of Funds

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  REPRESENTATIONS AND WARRANTIES

  	
   

  	
  31

  
	
   

  	
  4.1

  	
  Organization; Special Purpose

  	
   

  	
  31

  
	
   

  	
  4.2

  	
  Proceedings; Enforceability

  	
   

  	
  31

  
	
   

  	
  4.3

  	
  No Conflicts

  	
   

  	
  32

  
	
   

  	
  4.4

  	
  Litigation

  	
   

  	
  32

  
	
   

  	
  4.5

  	
  Agreements

  	
   

  	
  32

  
	
   

  	
  4.6

  	
  Title

  	
   

  	
  32

  
	
   

  	
  4.7

  	
  No Bankruptcy Filing

  	
   

  	
  33

  
	
   

  	
  4.8

  	
  Full and Accurate Disclosure

  	
   

  	
  33

  

 

 

i

 

	
   

  	
  4.9

  	
  Tax Filings

  	
   

  	
  34

  
	
   

  	
  4.10

  	
  No Plan Assets

  	
   

  	
  34

  
	
   

  	
  4.11

  	
  Compliance

  	
   

  	
  34

  
	
   

  	
  4.12

  	
  Contracts

  	
   

  	
  35

  
	
   

  	
  4.13

  	
  Federal Reserve Regulations; Investment Company Act

  	
   

  	
  35

  
	
   

  	
  4.14

  	
  Easements; Utilities and Public Access

  	
   

  	
  35

  
	
   

  	
  4.15

  	
  Physical Condition

  	
   

  	
  35

  
	
   

  	
  4.16

  	
  Leases

  	
   

  	
  36

  
	
   

  	
  4.17

  	
  Fraudulent Transfer

  	
   

  	
  36

  
	
   

  	
  4.18

  	
  Ownership of Borrowers

  	
   

  	
  36

  
	
   

  	
  4.19

  	
  Purchase Options

  	
   

  	
  37

  
	
   

  	
  4.20

  	
  Management Agreement

  	
   

  	
  37

  
	
   

  	
  4.21

  	
  Hazardous Substances

  	
   

  	
  37

  
	
   

  	
  4.22

  	
  Name; Principal Place of Business

  	
   

  	
  38

  
	
   

  	
  4.23

  	
  Other Debt

  	
   

  	
  38

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  COVENANTS

  	
   

  	
  38

  
	
   

  	
  5.1

  	
  Existence

  	
   

  	
  38

  
	
   

  	
  5.2

  	
  Taxes and Other Charges

  	
   

  	
  38

  
	
   

  	
  5.3

  	
  Access to Property

  	
   

  	
  39

  
	
   

  	
  5.4

  	
  Repairs; Maintenance and Compliance; Alterations

  	
   

  	
  39

  
	
   

  	
   

  	
  5.4.1

  	
  Repairs; Maintenance and Compliance

  	
   

  	
  39

  
	
   

  	
   

  	
  5.4.2

  	
  Alterations

  	
   

  	
  39

  
	
   

  	
  5.5

  	
  Performance of Other Agreements

  	
   

  	
  40

  
	
   

  	
  5.6

  	
  Cooperate in Legal Proceedings

  	
   

  	
  40

  
	
   

  	
  5.7

  	
  Further Assurances

  	
   

  	
  40

  
	
   

  	
  5.8

  	
  Environmental Matters

  	
   

  	
  41

  
	
   

  	
   

  	
  5.8.1

  	
  Hazardous Substances

  	
   

  	
  41

  
	
   

  	
   

  	
  5.8.2

  	
  Environmental Monitoring

  	
   

  	
  41

  
	
   

  	
   

  	
  5.8.3

  	
  O & M Program

  	
   

  	
  43

  
	
   

  	
  5.9

  	
  Title to the Property

  	
   

  	
  43

  
	
   

  	
  5.10

  	
  Leases

  	
   

  	
  43

  
	
   

  	
   

  	
  5.10.1

  	
  Generally

  	
   

  	
  43

  
	
   

  	
   

  	
  5.10.2

  	
  Material Leases

  	
   

  	
  43

  
	
   

  	
   

  	
  5.10.4

  	
  Minor Leases

  	
   

  	
  45

  
	
   

  	
   

  	
  5.10.5

  	
  Additional Covenants with respect to Leases

  	
   

  	
  45

  
	
   

  	
  5.11

  	
  Estoppel Statements

  	
   

  	
  46

  
	
   

  	
  5.12

  	
  Property Management

  	
   

  	
  46

  
	
   

  	
   

  	
  5.12.1

  	
  Management Agreement

  	
   

  	
  46

  
	
   

  	
   

  	
  5.12.2

  	
  Termination of Manager

  	
   

  	
  47

  
	
   

  	
  5.13

  	
  Special Purpose Bankruptcy Remote Entity

  	
   

  	
  47

  
	
   

  	
  5.14

  	
  Assumption in Non-Consolidation Opinion

  	
   

  	
  48

  
	
   

  	
  5.15

  	
  Change in Business or Operation of Property

  	
   

  	
  48

  
	
   

  	
  5.16

  	
  Debt Cancellation

  	
   

  	
  48

  
	
   

  	
  5.17

  	
  Affiliate Transactions

  	
   

  	
  48

  

 

ii

 

	
   

  	
  5.18

  	
  Zoning

  	
   

  	
  48

  
	
   

  	
  5.19

  	
  No Joint Assessment

  	
   

  	
  48

  
	
   

  	
  5.20

  	
  Principal Place of Business

  	
   

  	
  48

  
	
   

  	
  5.21

  	
  Change of Name, Identity or Structure

  	
   

  	
  48

  
	
   

  	
  5.22

  	
  Indebtedness

  	
   

  	
  49

  
	
   

  	
  5.23

  	
  Licenses

  	
   

  	
  49

  
	
   

  	
  5.24

  	
  Compliance with Restrictive Covenants, Etc

  	
   

  	
  49

  
	
   

  	
  5.25

  	
  ERISA

  	
   

  	
  49

  
	
   

  	
  5.26

  	
  Prohibited Transfers

  	
   

  	
  50

  
	
   

  	
  5.27

  	
  Liens

  	
   

  	
  51

  
	
   

  	
  5.28

  	
  Dissolution

  	
   

  	
  51

  
	
   

  	
  5.29

  	
  Expenses

  	
   

  	
  51

  
	
   

  	
  5.30

  	
  Indemnity

  	
   

  	
  52

  
	
   

  	
  5.31

  	
  Patriot Act Compliance

  	
   

  	
  53

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  NOTICES AND REPORTING

  	
   

  	
  54

  
	
   

  	
  6.1

  	
  Notices

  	
   

  	
  54

  
	
   

  	
  6.2

  	
  Borrower Notices and Deliveries

  	
   

  	
  54

  
	
   

  	
  6.3

  	
  Financial Reporting

  	
   

  	
  54

  
	
   

  	
   

  	
  6.3.1

  	
  Bookkeeping

  	
   

  	
  54

  
	
   

  	
   

  	
  6.3.2

  	
  Annual Reports

  	
   

  	
  55

  
	
   

  	
   

  	
  6.3.3

  	
  Quarterly Reports

  	
   

  	
  55

  
	
   

  	
   

  	
  6.3.4

  	
  Other Reports

  	
   

  	
  55

  
	
   

  	
   

  	
  6.3.5

  	
  Annual Budget

  	
   

  	
  55

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  INSURANCE; CASUALTY; AND
  CONDEMNATION

  	
   

  	
  56

  
	
   

  	
  7.1

  	
  Insurance

  	
   

  	
  56

  
	
   

  	
   

  	
  7.1.1

  	
  Coverage

  	
   

  	
  56

  
	
   

  	
   

  	
  7.1.2

  	
  Policies

  	
   

  	
  60

  
	
   

  	
   

  	
  7.1.3

  	
  Miscellaneous Insurance Provisions

  	
   

  	
  61

  
	
   

  	
  7.2

  	
  Casualty

  	
   

  	
  62

  
	
   

  	
   

  	
  7.2.1

  	
  Notice; Restoration

  	
   

  	
  62

  
	
   

  	
   

  	
  7.2.2

  	
  Settlement of Proceeds

  	
   

  	
  62

  
	
   

  	
  7.3

  	
  Condemnation

  	
   

  	
  63

  
	
   

  	
   

  	
  7.3.1

  	
  Notice; Restoration

  	
   

  	
  63

  
	
   

  	
   

  	
  7.3.2

  	
  Collection of Award

  	
   

  	
  63

  
	
   

  	
  7.4

  	
  Application of Proceeds or Award

  	
   

  	
  64

  
	
   

  	
   

  	
  7.4.1

  	
  Application to Restoration

  	
   

  	
  64

  
	
   

  	
   

  	
  7.4.2

  	
  Application to Debt

  	
   

  	
  65

  
	
   

  	
   

  	
  7.4.3

  	
  Procedure for Application to Restoration

  	
   

  	
  65

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  DEFAULTS

  	
   

  	
  66

  
	
   

  	
  8.1

  	
  Events of Default

  	
   

  	
  66

  
	
   

  	
  8.2

  	
  Remedies

  	
   

  	
  67

  
	
   

  	
   

  	
  8.2.1

  	
  Acceleration

  	
   

  	
  67

  
							

 

iii

 

	
   

  	
   

  	
  8.2.2

  	
  Remedies Cumulative

  	
   

  	
  68

  
	
   

  	
   

  	
  8.2.3

  	
  Severance

  	
   

  	
  68

  
	
   

  	
   

  	
  8.2.4

  	
  Delay

  	
   

  	
  69

  
	
   

  	
   

  	
  8.2.5

  	
  Lender’s Right to Perform

  	
   

  	
  69

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  SPECIAL PROVISIONS

  	
   

  	
  70

  
	
   

  	
  9.1

  	
  Sale of Note and Secondary Market Transaction

  	
   

  	
  70

  
	
   

  	
   

  	
  9.1.1

  	
  General; Borrower Cooperation

  	
   

  	
  70

  
	
   

  	
   

  	
  9.1.2

  	
  Use of Information

  	
   

  	
  71

  
	
   

  	
   

  	
  9.1.3

  	
  Borrower Obligations Regarding Disclosure Documents

  	
   

  	
  71

  
	
   

  	
   

  	
  9.1.4

  	
  Borrower Indemnity Regarding Filings

  	
   

  	
  72

  
	
   

  	
   

  	
  9.1.5

  	
  Indemnification Procedure

  	
   

  	
  72

  
	
   

  	
   

  	
  9.1.6

  	
  Contribution

  	
   

  	
  73

  
	
   

  	
   

  	
  9.1.7

  	
  Rating Surveillance

  	
   

  	
  73

  
	
   

  	
   

  	
  9.1.8

  	
  Severance of Loan

  	
   

  	
  73

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  MISCELLANEOUS

  	
   

  	
  74

  
	
   

  	
  10.1

  	
  Exculpation

  	
   

  	
  74

  
	
   

  	
  10.2

  	
  Brokers and Financial Advisors

  	
   

  	
  75

  
	
   

  	
  10.3

  	
  Retention of Servicer

  	
   

  	
  76

  
	
   

  	
  10.4

  	
  Survival

  	
   

  	
  76

  
	
   

  	
  10.5

  	
  Lender’s Discretion

  	
   

  	
  76

  
	
   

  	
  10.6

  	
  Governing Law

  	
   

  	
  77

  
	
   

  	
  10.7

  	
  Modification, Waiver in Writing

  	
   

  	
  78

  
	
   

  	
  10.8

  	
  Trial by Jury

  	
   

  	
  78

  
	
   

  	
  10.9

  	
  Headings/Exhibits

  	
   

  	
  78

  
	
   

  	
  10.10

  	
  Severability

  	
   

  	
  79

  
	
   

  	
  10.11

  	
  Preferences

  	
   

  	
  79

  
	
   

  	
  10.12

  	
  Waiver of Notice

  	
   

  	
  79

  
	
   

  	
  10.13

  	
  Remedies of Borrower

  	
   

  	
  79

  
	
   

  	
  10.14

  	
  Prior Agreements

  	
   

  	
  79

  
	
   

  	
  10.15

  	
  Offsets, Counterclaims and Defenses

  	
   

  	
  79

  
	
   

  	
  10.16

  	
  Publicity

  	
   

  	
  80

  
	
   

  	
  10.17

  	
  No Usury

  	
   

  	
  80

  
	
   

  	
  10.18

  	
  Conflict; Construction of Documents

  	
   

  	
  81

  
	
   

  	
  10.19

  	
  No Third Party Beneficiaries

  	
   

  	
  81

  
	
   

  	
  10.20

  	
  [reserved]

  	
   

  	
  81

  
	
   

  	
  10.21

  	
  Assignment

  	
   

  	
  81

  
	
   

  	
  10.22

  	
  [reserved]

  	
   

  	
  81

  
	
   

  	
  10.23

  	
  [reserved]

  	
   

  	
  81

  
	
   

  	
  10.24

  	
  Set-Off

  	
   

  	
  81

  
	
   

  	
  10.25

  	
  Counterparts

  	
   

  	
  81

  
	
   

  	
   

  	
   

  	
   

  
	
  10.26

  	
  Cross Default; Cross
  Collateralization

  	
   

  	
  82

  

 

iv

 

	
  Schedule 1

  	
  -

  	
   

  	
  List of
  Properties

  
	
  Schedule 2

  	
  -

  	
   

  	
  Allocated Loan
  Amounts

  
	
  Schedule 3

  	
  -

  	
   

  	
  Exceptions to
  Representations and Warranties

  
	
  Schedule 4

  	
  -

  	
   

  	
  List of Leases

  
	
  Schedule 5

  	
  -

  	
   

  	
  Organization of
  Borrowers

  
	
  Schedule 6

  	
  -

  	
   

  	
  Definition of
  Special Purpose Bankruptcy Remote Entity

  
	
  Schedule 7

  	
  -

  	
   

  	
  List of Required
  Repairs

  
	
  Schedule 8

  	
  -

  	
   

  	
  Initial Budget

  
	
  Schedule 9

  	
  -

  	
   

  	
  List of
  Mezzanine Loan Borrowers

  
	
  Schedule 10

  	
  -

  	
   

  	
  List of
  Appraised Values

  

 

v

 

LOAN
AGREEMENT

 

LOAN AGREEMENT dated as of March 28,
2008 (as the same may be modified, supplemented, amended or otherwise changed,
this “Agreement”) among FIRST STATES
INVESTORS HFS, L.P., a Delaware limited partnership (together with its
permitted successors and assigns, “HFS”), FIRST STATES INVESTORS FPC,
L.P., a Delaware limited partnership (together with its permitted successors
and assigns, “FPC”), and FIRST STATES
INVESTORS TRS, L.P., a Delaware limited partnership (together with its
permitted successors and assigns, “TRS”; HFS, FPC and TRS are each a “Borrower” and collectively,
the “Borrowers”), and GRAMERCY INVESTMENT TRUST, a Maryland real
estate investment trust (together with its successors and assigns, “Lender”).

 

1.                                      DEFINITIONS; PRINCIPLES OF
CONSTRUCTION

 

1.1                               Specific Definitions.  The following terms have the meanings set forth below:

 

Acceptable
Security:  shall
mean as described in Section 7.4.1.

 

Affiliate:  as to any Person, any other Person that,
directly or indirectly, is in Control of, is Controlled by or is under common
Control with such Person or is a director or officer of such Person or of an
Affiliate of such Person.

 

Allocated
Loan Amount:  with
respect to each Property, the amount, if any, set forth on Schedule 2
next to the description of such Property.

 

Annual
Budget:  shall mean
as described in Section 6.3.5.

 

Applicable
Taxes:  shall mean
as described in Section 2.2.3.

 

Appraisal:  with respect to any Property, an appraisal
prepared by an Appraiser, which, to the extent required by Lender or its
counsel, complies with all of the provisions of the Financial Institutions
Reform, Recovery and Enforcement Act of 1989, as amended, the rules and
regulations adopted pursuant thereto, and all other requirements of law.

 

Appraised
Value:  with
respect to any Property, the value set forth for such Property on Schedule
10 or, if an Updated Appraisal is obtained, the value set forth in such
Updated Appraisal; each such Appraised Value is referred to herein with each
other Appraised Value as the “Appraised Values”.

 

Appraised
Values:  shall mean
as described in Section 1.1 (Definition of Appraised Value).

 

Appraiser:  an appraisal firm reasonably acceptable to
Lender that is duly qualified to provide an Appraisal confirming to the
requirements of this Agreement.

 

Approved
Annual Budget: 
shall mean as described in Section 6.3.5.

 

 

Approved
Capital Budget: 
shall mean as described in Section 6.3.5.

 

Approved
Capital Expenses: 
Capital Expenses incurred by any Borrower, which Capital Expenses shall
either be (i) included in the Initial Budget or the Approved Capital
Budget for the current calendar month or (ii) approved by Lender, which
approval shall not be unreasonably withheld, conditioned or delayed.

 

Approved
Mezzanine Lender: (i) any Mezzanine Lender or any
Affiliate thereof, (ii) a “Qualified Transferee” (as such term is defined
in the CMSA form of intercreditor agreement), (iii) a successor holder of
the Mezzanine Loan that (A) has been approved by Lender acting reasonably
and (B) after the occurrence of a Secondary Market Transaction, has
obtained a Rating Comfort Letter with respect to the transfer of the Mezzanine
Loan to such holder or (iv) the lender under any other Approved Mezzanine
Loan that has been approved by Lender acting reasonably and the applicable
Rating Agencies.

 

Approved
Mezzanine Loan:  (i) the
Mezzanine Loan and (ii) a loan from an Approved Mezzanine Lender secured
by pledges from the Mezzanine Loan Borrowers, the proceeds of which are used to
refinance the Mezzanine Loan, provided that: (a) such loan shall be
secured by substantially the same collateral as the Mezzanine Loan; (b) the
loan documents evidencing and securing such loan shall have been approved by
Lender in its reasonable discretion; (c) such loan shall be in an amount
and have an interest rate that does not exceed the original principal amount
and the interest rate of the Mezzanine Loan, and shall otherwise be on terms
and conditions that are not materially less favorable to the Mezzanine Loan
Borrower than the terms and conditions of the Mezzanine Loan; (d) the term
of such Approved Mezzanine Loan shall expire on or after the Stated Maturity
Date; (e) if requested by Lender, the Approved Mezzanine Lender shall
enter into an intercreditor agreement in form and content reasonably acceptable
to Lender; and (f) if such refinancing of the Mezzanine Loan occurs after
a Secondary Market Transaction, no such refinancing shall be permitted which
would result in a downgrade, qualification or withdrawal of any of the ratings
of any of the Securities issued in such Secondary Market Transaction.

 

Approved
Operating Budget: 
shall mean as described in Section 6.3.5.

 

Approved
Operating Expenses: operating expenses incurred by any
Borrower which (i) are included in the Initial Budget or the Approved
Operating Budget for the current calendar month, (ii) are for real estate
taxes, insurance premiums, electric, gas, oil, water, sewer or other utility
service to any Property or (iii) have been approved by Lender.

 

Assignment
of Leases:  shall
mean as described in Section 1.1 (Definition of Loan Documents).

 

Assignments
of Leases:  shall
mean as described in Section 1.1 (Definition of Loan Documents).

 

Available
Cash Flow: with respect to any Payment Date, the Rents
available to the Borrowers on such Payment Date.

 

2

 

Award:  shall mean as described in Section 7.3.2.

 

Bankruptcy
Proceeding:  shall
mean as described in Section 4.7.

 

Borrower’s
Recourse Liabilities: 
shall mean as described in Section 10.1.

 

Business
Day:  any day other
than a Saturday, Sunday or any day on which commercial banks in New York,
New York are authorized or required to close.

 

Capital
Expenses:  expenses
that are capital in nature or required under GAAP to be capitalized.

 

Cash
Management Accounts: 
shall mean as described in Section 3.4.

 

Cash
Trap Reserve Subaccount: 
shall mean as described in Section 3.2.

 

Casualty:
shall mean as described in Section 7.2.1.

 

Casualty/Condemnation
Prepayment:  shall
mean as described in Section 2.3.2.

 

Casualty/Condemnation
Subaccount:  shall
mean as described in Section 3.3.

 

Code:  the Internal Revenue Code of 1986, as amended
and as it may be further amended from time to time, any successor statutes
thereto, and applicable U.S. Department of Treasury regulations issued pursuant
thereto in temporary or final form.

 

Condemnation:  shall mean as described in Section 7.3.1.

 

Control:  with respect to any Person, either (i) ownership
directly or indirectly of 50% or more of all equity interests in such Person or
(ii) the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, through the
ownership of voting securities, by contract or otherwise.

 

Creditor:  shall mean as described in Section 10.26.

 

Debt:  the unpaid Principal, all interest accrued
and unpaid thereon, and all other sums due to Lender in respect of the Loan or
under any Loan Document.

 

Debtor:  shall mean as described in Section 10.26.

 

Debt
Service:  with
respect to any particular period, the greater of (i) scheduled Principal
and interest payments due under the Note in such period or (ii) the
product of (A) the outstanding principal as of the end of such period
multiplied by (B) the Interest Rate for such period.

 

Default:  the occurrence of any event under any Loan
Document which, with the giving of notice or passage of time, or both, would be
an Event of Default.

 

3

 

Default
Rate:  a rate per
annum equal to the lesser of (i) the maximum rate permitted by applicable
law, or (ii) 4% above the Interest Rate, compounded monthly.

 

Deposit
Account:  shall
mean as described in Section 3.1.

 

Deposit
Account Agreement: 
shall mean as described in Section 1.1 (Definition of Loan
Documents).

 

Deposit
Bank:  Wells Fargo
Bank, N.A., or such other bank or depository selected by Lender in its
discretion.

 

Determination
Date:  shall mean
as described in Section 1.1 (Definition of LIBOR).

 

Disclosure
Document:  shall
mean as described in Section 9.1.2.

 

Easements:  shall mean as described in Section 4.14.

 

Eligible
Account:  a
separate and identifiable account from all other funds held by the holding
institution that is either (i) an account or accounts (A) maintained
with a federal or state-chartered depository institution or trust company which
complies with the definition of Eligible Institution or (B) as to which
Lender has received a Rating Comfort Letter from each of the applicable Rating
Agencies with respect to holding funds in such account, or (ii) a
segregated trust account or accounts maintained with the corporate trust
department of a federal depository institution or state chartered depository
institution subject to regulations regarding fiduciary funds on deposit similar
to Title 12 of the Code of Federal Regulations §9.10(b), having in either case
corporate trust powers, acting in its fiduciary capacity, and a combined
capital and surplus of at least $50,000,000 and subject to supervision or examination
by federal and state authorities.  An
Eligible Account will not be evidenced by a certificate of deposit, passbook or
other instrument.

 

Eligible
Institution: a depository institution insured by the
Federal Deposit Insurance Corporation the short term unsecured debt obligations
or commercial paper of which are rated at least A-1 by S&P, P-1 by Moody’s
and F-1+ by Fitch. in the case of accounts in which funds are held for thirty
(30) days or less or, in the case of Letters of Credit or accounts in which
funds are held for more than thirty (30) days, the long term unsecured debt
obligations of which are rated at least “AA” by Fitch and S&P and “Aa2” by
Moody’s.

 

Environmental
Laws:  shall mean
as described in Section 4.21.

 

Environmental
Reports:  the environmental
reports and site assessments related to the Properties that have been delivered
to Lender in connection with the Loan.

 

Equipment:
shall mean as described in the Mortgages.

 

ERISA:  the Employment Retirement Income Security Act
of 1974, as amended from time to time, and the rules and regulations
promulgated thereunder.

 

4

 

ERISA
Affiliate:  all
members of a controlled group of corporations and all trades and business
(whether or not incorporated) under common control and all other entities
which, together with any Borrower, are treated as a single employer under any
or all of Section 414(b), (c), (m) or (o) of the Code.

 

Eurodollar
Business Day: 
shall mean as described in Section 1.1 (Definition of
LIBOR).

 

Event
of Default:  shall
mean as described in Section 8.1.

 

Excess
Net Cash Proceeds: 
with respect to the sale of an HFS/FPC Property only, the Net Cash
Proceeds received by the Borrowers in connection with such sale in excess of
the Allocated Loan Amount for such Property.

 

Exchange
Act:  shall mean as
described in Section 9.1.2.

 

Extended
Maturity Date: 
shall mean as described in Section 2.8.

 

Financing
Statement:  a
financing statement as such term is defined in the UCC.

 

Fitch:  shall mean as described in Section 1.1
(Definition of Rating Agency).

 

FPC
GP:  shall mean as
described in Section 1.1 (Definition of SPE Party).

 

FPC
Pledge:  shall mean
as described in Section 1.1 (Definition of Loan Documents).

 

GAAP:  generally accepted accounting principles in
the United States of America as of the date of the applicable financial report.

 

GKK
OP:  shall mean as
described in Section 5.26.

 

Governmental
Authority:  any
court, board, agency, commission, office or authority of any nature whatsoever
for any governmental unit (federal, state, county, district, municipal, city or
otherwise) now or hereafter in existence.

 

Government
Lists:  shall mean
as described in Section 5.31.

 

Gramercy:  Gramercy Investment Trust, a Maryland real
estate investment trust.

 

Gramercy
Group:  shall mean
as described in Section 9.1.3.

 

Ground
Lease:  Commercial
Ground Lease, dated as of February 21, 2002, between Baywood Association
and First Union National Bank as amended by that certain First Amendment to
Commercial Ground Lease, dated as of February 10, 2006, between Baywood
Homeowner’s Association (aka Baywood Association) and First States Investors
3300, LLC (as successor in interest to Wachovia Bank, N.A., successor in
interest to First Union National Bank)

 

5

 

and as
assigned to HFS on or prior to the date hereof and any other ground lease
entered into by any Borrower with respect to any Property.

 

Guarantor:
First States Group, L.P., a Delaware limited partnership.

 

Hazardous
Substances:  shall
mean as described in Section 4.21.

 

HFS
GP:  shall mean as
described in Section 1.1 (Definition of SPE Party).

 

HFS/FPC
Property: each parcel of real property listed on Schedule
1 attached hereto with the notation “HFS” or “FPC” under the column of Schedule
1 entitled “Bucket”.

 

Improvements:  shall mean as described in the Mortgages.

 

Indemnified
Liabilities:  shall
mean as described in Section 5.30.

 

Indemnified
Party:  shall mean
as described in Section 5.30.

 

Independent
Director:  shall
mean as described in Schedule 6.

 

Initial
Budget:  shall mean
as described in Section 6.3.5.

 

Insurance
Premiums:  shall
mean as described in Section 7.1.2.

 

Insured
Casualty:  shall
mean as described in Section 7.2.2.

 

Interest
Period:  (i) the
period from the date hereof through the first day thereafter that is the last
day of a calendar month and (ii) subject to the Borrowers’ option to
change the Interest Period pursuant to Section 2.2.6, each ninety (90) day
period thereaftter; except that the Interest Period, if any, that would
otherwise commence before and end after the Maturity Date shall end on the
Maturity Date.  Notwithstanding the
foregoing, if Lender exercises its right to change the Payment Date to a New
Payment Date in accordance with Section 2.2.5, then from and after
such election, each Interest Period shall be the period from the New Payment
Date in each calendar month through the day in the next succeeding calendar
month immediately preceding the New Payment Date in such calendar month.

 

Interest
Rate:  for any
Interest Period, the Spread plus the greater of LIBOR for such Interest Period
and 1.50% (or, when applicable pursuant to this Agreement or any other Loan
Document, the Default Rate).

 

Intra-Obligor
Loan:  shall mean
as described in Section 10.26.

 

Intra-Obligor
Loan Amount:  shall
mean as described in Section 10.26.

 

Intra-Obligor
Loans:  shall mean
as described in Section 10.26.

 

Issuer:  shall mean as described in Section 9.1.3.

 

6

 

Late
Payment Charge: 
shall mean as described in Section 2.5.3.

 

Leases:  all leases and other agreements or
arrangements heretofore or hereafter entered into affecting the use, enjoyment
or occupancy of, or the conduct of any activity upon or in, any Property or the
Improvements with respect to any Property, including any guarantees,
extensions, renewals, modifications or amendments thereof and all additional
remainders, reversions and other rights and estates appurtenant thereunder.

 

Legal
Requirements: statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions of Governmental Authorities
affecting any Borrower, any Loan Document or all or part of any Property or the
construction, ownership, use, alteration or operation thereof, whether now or
hereafter enacted and in force, and all permits, licenses and authorizations
and regulations relating thereto, and all covenants, agreements, restrictions
and encumbrances contained in any instrument, either of record or known to any
Borrower, at any time in force affecting all or part of any Property.

 

Lender’s
Consultant:  a
licensed hydrogeologist, licensed environmental engineer or other qualified
environmental consulting firm engaged by Lender.

 

Liabilities:
shall mean as described in Section 9.1.3.

 

LIBOR:  with
respect to any Interest Period, a floating interest rate per annum (rounded
upwards to the next 1/1000 of 1%) equal to the rate for U.S. dollar deposits
with one month or three month, as applicable, maturities which appears on
Reuters Screen Page LIBOR 01 (formerly known as Telerate Page 3750)
as of 11:00 am, London time on the related Determination Date; provided,
however, that if such rate does not appear on Reuters Screen Page LIBOR
01, “LIBOR” shall mean a rate per annum equal to the rate at which U.S. dollar
deposits in an amount approximately equal to the Loan, and with one month or
three month, as applicable, maturities, are offered in immediately available
funds in the London Interbank Market to the London office of National
Westminster Bank, Plc by leading banks in the Eurodollar market at 11:00 a.m.,
London time.  “Reuters Screen Page LIBOR 01”
means the display designated as “LIBOR 01” on the Reuters system (or such other
page as may replace Page LIBOR 01 on the Reuters system or such other
service as may be nominated by the British Bankers’ Association as the
information vendor for the purpose of displaying British Banker’s Association
interest settlement rates for U.S. Dollar deposits).  Any LIBOR determined on the basis of the rate
displayed on Reuters Screen Page LIBOR 01 in accordance with the
provisions hereof shall be subject to corrections, if any, made in such rate
and displayed by Reuters within one (1) hour of the time when such rate is
first displayed by such Service.  For
purposes hereof, (i) “Determination
Date” shall mean, with respect to any Interest Period, the date
which is two (2) Eurodollar Business Days prior to the commencement of
such Interest Period; and (ii) “Eurodollar Business Day” shall mean any day
other than a Saturday, Sunday or other day on which banks in the City of
London, England are closed for interbank or foreign exchange transactions.

 

Lien:
any mortgage, deed of trust, lien (statutory or otherwise), pledge,
hypothecation, easement, restrictive covenant, preference, assignment, security
interest or any other encumbrance, charge or transfer of, or any agreement to
enter into or create any of the

 

7

 

foregoing,
on or affecting all or any part of any Property or any interest therein, or any
direct or indirect interest in any Borrower or any SPE Party, including any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, the filing of
any financing statement, and mechanic’s, materialmen’s and other similar liens
and encumbrances.

 

Licenses:
shall mean as described in Section 4.11.

 

Loan:  shall mean as described in Section 2.1.

 

Loan
Documents:  this
Agreement and all other documents, agreements and instruments now or hereafter evidencing,
securing or delivered to Lender in connection with the Loan, including the
following, each of which is dated as of the date hereof:  (i) the Promissory Note or Promissory
Notes made by Borrowers to Lender in the aggregate principal amount equal to
the Loan (the “Note”), (ii) each
Mortgage, Assignment of Leases and Rents and Security Agreement made by one or
more Borrowers (or each Deed of Trust, Assignment of Leases and Rents and
Security Agreement made by one or more Borrowers to a trustee, as the case may
be) in favor of Lender which covers one or more Properties (each a “Mortgage” and collectively, the “Mortgages”), (iii) each
Assignment of Leases and Rents from one or more Borrowers to Lender (each an “Assignment of Leases” and
collectively, the “Assignments of Leases”), (iv) the
Assignment of Agreements, Licenses, Permits and Contracts from Borrowers to
Lender, (v) the Cash Management Agreement (the “Deposit
Account Agreement”) among Borrowers, Lender and the Deposit
Bank, (vi) the Guaranty of Recourse Obligations made by Guarantor, (vi) the
Limited Guaranty made by Guarantor, (vii) the Pledge and Security
Agreement made by FPC in favor of Lender (the “FPC
Pledge”), (viii) the Pledge and Security Agreement made by
TRS in favor of Lender (the “TRS Pledge”
and together with the FPC Pledge, the “Pledges”)
and (ix) each Consent and Subordination Agreement from a Manager in favor
of Lender; as each of the foregoing may be (and each of the foregoing defined
terms shall refer to such documents as they may be) amended, restated,
replaced, severed, split, supplemented or otherwise modified from time to time
(including pursuant to Section 9.1.8).

 

LTV
Ratio:  as of any
date, the ratio of (i) the total outstanding principal balance of the Loan
to (ii) the fair market value of the Properties, as determined by Lender
in its reasonable discretion; provided, however, if the Borrowers
are dissatisfied with Lender’s determination of the value of the Properties,
then Lender, at the Borrowers’ sole cost and expense, shall obtain independent
appraisals of the Properties for the purpose of calculating the LTV Ratio,
which appraisals shall be performed by Appraisers.

 

Management
Agreement:  each
management agreement between a Borrower and the Manager, pursuant to which the
Manager is to manage one or more Properties, as same may be amended, restated,
replaced, supplemented or otherwise modified from time to time in accordance
with Section 5.12; each such Management Agreement is referred to
herein with each other Management Agreement as the “Management
Agreements”.

 

Management
Agreements:  shall
mean as described in Section 1.1 (Definition of Management
Agreement).

 

8

 

Manager:  First States Management Corp., L.P., a
Delaware limited partnership, or any successor, assignee or replacement manager
appointed by Borrowers in accordance with Section 5.12.

 

Material
Adverse Change:   (i) a material and adverse change, taken
as a whole, in the business, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of the Borrowers, taken as a
whole, which has a material adverse effect on the marketability of the Loan considered
in the context of then prevailing market conditions relating to loans such as
the Loan, (ii) a material impairment of the ability of the Borrowers,
taken as a whole, to perform their obligations under the Loan Documents or of
Lender’s ability to enforce the Debt or realize upon the collateral securing
the Loan, (iii) an impairment of the enforceability or priority of Lender’s
Liens with respect to a material portion of the collateral securing the Loan
other than as a result of the actions or inactions of Lender, or (iv) a
material and adverse change in the business, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of the Guarantor.

 

Material
Alteration: any alteration affecting structural elements
of any Property the cost of which exceeds twenty percent (20%) of the Appraised
Value of such Property; provided, however, that in no event shall (i) any
Required Repairs, (ii) any tenant improvement work performed pursuant to
any Lease existing on the date hereof or entered into hereafter in accordance
with the provisions of this Agreement, or (iii) alterations performed as
part of a Restoration, constitute a Material Alteration.

 

Material
Lease:  (a) a
Lease that covers more than twenty (20) Properties or (b) all Leases which
individually or in the aggregate with respect to the same tenant and its
Affiliates cover greater than fifty percent (50%) of any Property.

 

Maturity
Date:  the date on
which the final payment of principal of the Note becomes due and payable as
therein provided, whether at the Stated Maturity Date, by declaration of
acceleration, or otherwise.

 

Merger:  the consummation of the transactions
contemplated by that certain Agreement and Plan of Merger, dated as of November 2,
2007, among Gramercy Capital Corp., GKK OP, GKK Stars Acquisition LLC, GKK
Stars Acquisition Corp., GKK Stars Acquisition LP, American Financial Realty
Trust and Guarantor pursuant to which GKK Stars Acquisition Corp. is to merge
with and into American Financial Realty Trust and GKK Stars Acquisition LP is
to merge with and into Guarantor.

 

Mezzanine
Lender: each of Goldman Sachs Commercial Mortgage
Capital, L.P., Citicorp North America, Inc. and SL Green Realty Corp.;
each such Mezzanine Lender is referred to herein with each other Mezzanine
Lender as the “Mezzanine Lenders”.

 

Mezzanine
Lenders: shall mean as described in Section 1.1
(Definition of Mezzanine Lender).

 

9

 

Mezzanine
Loan: that certain mezzanine loan in the principal amount
of $600,000,000 made by the Mezzanine Lenders to the Mezzanine Loan Borrowers,
and evidenced and secured by the Mezzanine Loan Documents.

 

Mezzanine
Loan Borrower: each of the entities listed on Schedule
9; each such Mezzanine Loan Borrower is referred to herein with each other
Mezzanine Loan Borrower as the “Mezzanine Loan Borrowers”.

 

Mezzanine
Borrowers: shall mean as described in Section 1.1
(Definition of Mezzanine Borrower).

 

Mezzanine
Loan Documents: (i) that certain Loan Agreement
between the Mezzanine Lenders and the Mezzanine Loan Borrowers, (ii) that
certain Promissory Note in the original principal amount of the Mezzanine Loan
made by the Mezzanine Loan Borrowers and payable to the Mezzanine Lenders (and
any successor holder of the Mezzanine Loan), (iii) that certain Pledge and
Security Agreement (Lower Tier) made by the Mezzanine Loan Borrowers (except
for GKK Stars Acquisition LLC) in favor of the Mezzanine Lenders, (iv) that
certain Pledge and Security Agreement made by GKK Stars Acquisition LLC in
favor of the Mezzanine Lenders, (v) that certain Cash Management Agreement
between the Mezzanine Loan Borrowers, LaSalle Bank National Association and the
Mezzanine Lenders, (vi) that certain Loan Cooperation Agreement between
the Mezzanine Loan Borrowers, Gramercy Capital Corp. (“GCC”)
and the Mezzanine Lenders, (vii) that certain Contribution Agreement
between the Mezzanine Loan Borrowers and the Mezzanine Lenders, (viii) that
certain Consent and Agreement of Manager and Subordination of Management
Agreement by First States Management Corp., L.P. in favor of the Mezzanine
Lenders, (ix) that certain Collateral Assignment of Interest Rate Cap
Agreement by the Mezzanine Loan Borrowers in favor of the Mezzanine Lenders, (x) each
UCC Financing Statement filed against each Mezzanine Loan Borrower in favor of
the Mezzanine Lenders in connection with any of the foregoing, (xi) any other “Loan
Document”, as defined in the Loan Agreement referred to in clause (i) above
and (xii) any other document, agreement or instrument evidencing, securing or
delivered to an Approved Mezzanine Lender in connection with the Mezzanine
Loan.  Without limiting the foregoing,
the term Mezzanine Loan Documents shall also include all documents, agreements
or instruments evidencing, securing or delivered to an Approved Mezzanine
Lender in connection with any Approved Mezzanine Loan.

 

Mezzanine
Loan Liens: (i) the Liens in favor of the holder of
the Mezzanine Loan created pursuant to the Mezzanine Loan Documents and (ii) the
Liens in favor of the holder of the Approved Mezzanine Loan created pursuant to
the Approved Mezzanine Loan Documents.

 

Minor
Lease: any Lease that is not a Material Lease.

 

Monthly
Additional Loan Payment: with respect to any Payment
Date, all payments due on the Loan on such Payment Date other than interest.

 

10

 

Monthly
Additional Loan Payment Shortfall: (i) the amount by
which the Available Cash Flow is exceeded by the sum of (x) the Monthly
Interest Payment and (y) the Monthly Additional Loan Payment less (ii) the
amount of the Monthly Interest Shortfall, if any.

 

Monthly
Interest Payment: with respect to any Payment Date, all
interest due on the Loan on such Payment Date.

 

Monthly
Interest Shortfall: the amount by which the Available
Cash Flow is exceeded by the Monthly Interest Payment.

 

Monthly
Operating Expenses: with respect to any Payment Date, the
Approved Operating Expenses (including Taxes and Insurance Premiums) for the
month in which such Payment Date falls.

 

Monthly
Operating Expense Shortfall: (i) the amount by which
the Available Cash Flow is exceeded by the sum of (x) the Monthly Interest
Payment, (y) the Monthly Additional Loan Payment and (z) Monthly
Operating Expenses less (ii) the amount of the Monthly Additional
Loan Payment Shortfall, if any.

 

Moody’s:
shall mean as described in Section 1.1 (Definition of Rating
Agency).

 

Mortgage
and Mortgages:
shall mean as described in Section 1.1 (Definition of Loan
Documents).

 

Net
Cash Proceeds: 
with respect to any sale of any Property, the gross proceeds received by
the Borrower that owns such Property in connection with such sale after
deducting therefrom only (without duplication) the lesser of (i) ten
percent (10%) of the gross proceeds of such Transfer and (ii) the sum of
all customary costs and expenses payable by or on behalf of such Borrower in
connection with such sale, including, without limitation, (A) transfer
taxes, brokerage commissions, underwriting fees and discounts, legal fees,
finder fees and other similar fees and commissions and (B) the amount of
Taxes paid (or reserved) in connection with or as a result of such transaction,
in each case to the extent, but only to the extent, that the amounts so
deducted are promptly paid to (or reserved to be paid to) a Person that is not
an Affiliate of any Borrower or any SPE Party and are properly attributable to
such transaction.

 

Net
Operating Income: 
for any period, the actual net operating income of the Properties
determined on a cash basis of accounting, after deducting therefrom deposits to
(but not withdrawals from) any reserves required under this Agreement, and
without giving credit for non-recurring extraordinary items of income.

 

New
Payment Date: 
shall mean as described in Section 2.2.5.

 

Note:  shall mean as described in Section 1.1
(Definition of Loan Documents).

 

Notice:  shall mean as described in Section 6.1.

 

O&M
Program:  shall
mean as described in Section 5.8.3.

 

11

 

OFAC:  shall mean as described in Section 5.31.

 

Officer’s Certificate:  a certificate delivered to Lender by each
Borrower which is signed by a senior executive officer of the applicable SPE
Party.

 

Other
Charges:  all
ground rents, maintenance charges, impositions other than Taxes, and any other
charges, including vault charges and license fees for the use of vaults, chutes
and similar areas adjoining any Property, now or hereafter levied or assessed
or imposed against any Property or any part thereof.

 

Patriot
Act:  shall mean as
described in Section 5.31.

 

Patriot
Act Offense:  shall
mean as described in Section 5.31.

 

Payment
Date:  the 9th day
of each calendar month or, upon Lender’s exercise of its right to change the
Payment Date in accordance with Section 2.2.5, the New Payment Date
(in either case, if such day is not a Business Day, the Payment Date shall be
the first Business Day thereafter).  The
first Payment Date hereunder shall be May 9, 2008.

 

Permitted
Encumbrances: (i) the Liens created by the Loan
Documents, (ii) all Liens and other matters disclosed in the Title
Insurance Policies, (iii) any easements,
rights of way and similar rights granted by any Borrower in the ordinary course
of its business provided that any such easements, rights of way and similar
rights do not result in a Material Adverse Change, (iv) Liens, if
any, for Taxes or Other Charges not yet delinquent, (v) any workers’,
mechanics’ or other similar Liens on any Property provided that any such Lien
is bonded or discharged within 30 days after any Borrower first receives notice
of such Lien and (vi) such other title and survey exceptions as Lender
approves in writing in Lender’s discretion and (vii) the Mezzanine Loan
Liens.

 

Permitted
Indebtedness: 
shall mean as described in Section 5.22.

 

Permitted
Investments:  shall
mean as described in the Deposit Account Agreement.

 

Permitted
Transfers: (i) the Merger, (ii) a Lease entered
into in accordance with the Loan Documents, (iii) a Permitted Encumbrance,
(iv) provided that no Event of Default shall then exist, a Transfer of an
interest in any Borrower  other than the
partnership interest held by the applicable SPE Party, or a Transfer of an
interest in any SPE Party to any Person provided that such Transfer shall
not cause the transferee (other than an Approved Mezzanine Lender),
together with its Affiliates, to acquire Control of any Borrower or any SPE
Party or to increase its direct or indirect interest in any Borrower or in any
SPE Party to an amount which equals or exceeds forty-nine percent (49%), (v) provided
that no Event of Default shall then exist, any other transfer of any other
direct or indirect legal or beneficial ownership interest in any Borrower; provided
that (a) Lender shall have consented to such transfer, such consent not to
be unreasonably withheld, conditioned or delayed, and which approval shall be
based on (1) Lender’s reasonable determination as to the satisfactory
nature of the reputation and creditworthiness of such proposed transferee, as
evidenced by credit and background checks 

 

12

 

performed
by Lender and such other financial statements and other information reasonably
requested by Lender and (2) the reasonable determination of Lender that
the legal and financial structure of such Borrower and its members and the
single purpose nature and bankruptcy remoteness of such Borrower and its
members after such transfer satisfies Lender’s then current applicable underwriting
criteria and requirements, (b) after any Secondary Market Transaction, the
Borrowers shall deliver (or cause to be delivered) to Lender a Rating Comfort
Letter with respect to such transfer, (c) the Borrowers shall deliver to
Lender and the Rating Agencies customary opinion letters relating to such
transfer in form and substance reasonably satisfactory to Lender and the Rating
Agencies, and (d) the Borrowers pay all reasonable, out-of-pocket expenses
incurred by Lender in connection with such transfer; (vi) any transfer of
a direct or indirect legal or beneficial ownership interest in any Borrower
that occurs by devise or bequest or by operation of law upon the death of a
natural person that was the holder of such interest to a member of the immediate
family of such interest holder or a trust or family conservatorship established
for the benefit of such immediate family member; provided that (a) Manager
continues to be responsible for the management of the Properties, and such
transfer shall not result in a change of the day to day operations of the
Properties, (b) the Borrowers shall give Lender notice of such transfer
together with copies of all instruments effecting such transfer not less than
ten (10) Business Days after the date of such transfer, (c) the legal
and financial structure of such Borrower, and the single purpose nature and
bankruptcy remoteness of such Borrower after such transfer, shall satisfy
Lender’s then current applicable underwriting criteria and requirements, (d) if
such transfer would result in a change of control of such Borrower and occurs
before a Secondary Market Transaction, the Borrowers shall obtain Lender’s
consent to such transfer within thirty (30) days after such transfer, and (e) if
such transfer would result in a change of control of such Borrower and occurs
after a Secondary Market Transaction, the Borrowers, at the Borrowers’ sole
cost and expense, shall, within thirty (30) days after such transfer, (1) deliver
(or cause to be delivered) to Lender a Rating Comfort Letter with respect to
such transfer, and customary opinion letters relating to such transfer in form
and substance reasonably satisfactory to Lender and the Rating Agencies in
their discretion, respectively, (2) obtain the written consent of Lender to
such transfer and (3) reimburse Lender for all reasonable, out-of-pocket
expenses incurred by Lender in connection with such transfer, including,
without limitation, Lender’s reasonable attorney’s fees; and (vii) each of
(a) the pledge by Mezzanine Loan Borrowers to the Mezzanine Lender in
connection with the Mezzanine Loan and (b) the transfer of the pledged
collateral to the Approved Mezzanine Lender in connection with the exercise of
the Approved Mezzanine Lender’s rights under the Mezzanine Loan Documents; provided
that such transfer is made in accordance with the applicable terms and
conditions of the intercreditor agreement between Mezzanine Lender and Lender,
if any.

 

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

 

Physical
Condition Reports: 
the physical condition reports for the Properties received by Lender in
connection with the closing of the Loan.

 

13

 

Plan:  (i) an employee benefit or other plan
established or maintained by any Borrower or any ERISA Affiliate or to which
any Borrower or any ERISA Affiliate makes or is obligated to make contributions
and (ii) which is subject to Title IV of ERISA or Section 302 of
ERISA or Section 412 of the Code.

 

Pledges:  shall mean as described in Section 1.1
(Definition of Loan Documents).

 

Policies:  shall mean as described in Section 7.1.2.

 

Principal:  shall mean as described in Section 2.1.

 

Proceeds:  shall mean as described in Section 7.2.2.

 

Properties:  shall mean as described in Section 1.1
(Definition of Loan Documents).

 

Property:
each parcel of real property listed on Schedule 1 attached hereto and
the Improvements on such Property owned by a Borrower and encumbered by a
Mortgage; together with all rights pertaining to such real property and such
Improvements, and all other collateral for the Loan pertaining to such real
property and such Improvements as more particularly described in the Granting
Clauses of the Mortgage applicable to such real property and such Improvements
and referred to therein as the either the Mortgaged Property or the Trust
Property;  each such Property is referred
to herein with each other Property as the “Properties”.

 

Proposed
Ground Lease: 
shall mean as described in Section 5.10.3.

 

Proposed
Material Lease: 
shall mean as described in Section 5.10.2.

 

Provided
Information:  shall
mean as described in Section 9.1.1.

 

Qualified
Carrier:  shall
mean as described in Section7.1.1.

 

Qualified
Manager: a property manager which (i) is a reputable
management company having at least five (5) years’ experience in the
management of properties similar in size and type to the Properties it will be
engaged to manage, (ii) has, for at least five (5) years prior to its
engagement as property manager, managed at least five (5) properties of
the same property type as the Properties it will be engaged to manage and (iii) is
not the subject of a bankruptcy or similar insolvency proceeding.

 

Rating
Agency:  each of
Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.
(“S&P”), Moody’s Investors Service, Inc.
(“Moody’s”), and Fitch, Inc., a
division of Fitch Ratings Ltd. (“Fitch”) or
any other nationally-recognized statistical rating organization to the extent
any of the foregoing have been engaged by Lender or its designee in connection
with or in anticipation of any Secondary Market Transaction.

 

Rating
Comfort Letter:  a
letter issued by each of the applicable Rating Agencies which confirms that the
taking of the action referenced to therein will not result in any 

 

14

 

qualification,
withdrawal or downgrading of any existing ratings of Securities created in a
Secondary Market Transaction.

 

Registration
Statement:  shall
mean as described in Section 9.1.3.

 

Release
Price:  subject to Section 2.4.2(c),
with respect to a Property, the lesser of the (x) Allocated Loan Amount
for such Property and (y) Net Cash Proceeds received by the Borrowers in
connection with the sale of such Property; each such Release Price is referred
to herein with each other Release Price as the “Release
Prices”.

 

Release
Prices:  shall mean
as described in Section 1.1 (Definition of Release Price).

 

Remedial
Work:  shall mean
as described in Section 5.8.2.

 

Remediation
Costs: shall mean as described in Section 3.2.2.

 

Rents:  all rents, rent equivalents, moneys payable
as damages (including payments by reason of the rejection of a Lease in a
Bankruptcy Proceeding) or in lieu of rent or rent equivalents, royalties
(including all oil and gas or other mineral royalties and bonuses), income,
fees, receivables, receipts, revenues, deposits (including security, utility
and other deposits), accounts, cash, issues, profits, charges for services
rendered, and other payment and consideration of whatever form or nature
received by or paid to or for the account of or benefit of any Borrower, any
Manager or any of their agents or employees from any and all sources arising
from or attributable to any Property and the Improvements with respect to any Property,
including all receivables, customer obligations, installment payment
obligations and other obligations now existing or hereafter arising or created
out of the sale, lease, sublease, license, concession or other grant of the
right of the use and occupancy of any Property or rendering of services by any
Borrower, any Manager or any of their agents or employees and proceeds, if any,
from business interruption or other loss of income insurance.

 

Required
Records:  the
financial statements, certificates, reports and other information the Borrowers
are required to provide pursuant to Section 6.3.

 

Required
Repairs:  the items
of repair and environmental remedial work at the Properties described on Schedule
7.

 

Restoration:  shall mean as described in Section 7.4.1.

 

S&P:  shall mean as described in Section 1.1
(Definition of Rating Agency).

 

Secondary
Market Transaction: 
shall mean as described in Section 9.1.1.

 

Securities:  shall mean as described in Section 9.1.1.

 

Securities
Act:  shall mean as
described in Section 9.1.2.

 

15

 

Servicer:  a servicer selected by Lender to service the
Loan, including any “master servicer” or “special servicer” appointed under the
terms of any pooling and servicing agreement or similar agreement entered into
as a result of a Secondary Market Transaction.

 

Significant
Casualty:  shall
mean as described in Section 7.2.2.

 

SPE
Party:  (a) First
States Investors HFS GP, LLC, a Delaware limited liability company (“HFS GP”), with respect to HFS, (b) First
States Investors FPC GP, LLC, a Delaware limited liability company (“FPC GP”), with respect to FPC and (c) First
States Investors TRS GP, LLC, a Delaware limited liability company (“TRS GP”), with respect to TRS.

 

Spread:  3.50%.

 

Special
Purpose Bankruptcy Remote Entity:  shall mean as described in Section 5.13.

 

Springing
Recourse Event: 
shall mean as described in Section 10.1.

 

State:  each state in which a Property is located.

 

Stated
Maturity Date: April 9, 2010, as the same may be
extended pursuant to Section 2.8, and as such date may be changed
in accordance with Section 2.2.5.

 

Subaccounts:  shall mean as described in Section 3.1.

 

Substitute
Property and Substitute Properties:  shall mean as described in Section 2.7.

 

Substituted
Property and Substituted Properties:  shall mean as described in Section 2.7.

 

Surveys:  shall mean as described in Section 4.6.

 

Taxes:  all real estate and personal property taxes,
assessments, water rates or sewer rents, maintenance charges, impositions,
vault charges and license fees, now or hereafter levied or assessed or imposed
against all or part of any Property by a Governmental Authority.

 

Term:  the entire term of this Agreement, which
shall expire upon repayment in full of the Debt and full performance of each
and every obligation to be performed by the Borrowers pursuant to the Loan
Documents other than those obligations which survive the termination of this
Agreement.

 

Terrorism Insurance Cap:  shall mean as described in Section 7.1.1.

 

TI/LC
Costs: shall mean as described in Section 3.2.1.

 

Title
Insurance Policy: 
each ALTA or similar form mortgagee title insurance policy in the form
acceptable to Lender issued by a title insurance company reasonably 

 

16

 

acceptable
to Lender with respect to one or more Properties and insuring the Lien of the
related Mortgage(s); collectively, each such Title Insurance Policy is referred
to herein as the “Title Insurance Policies”.

 

Toxic Mold:  shall mean as described in Section 4.21.

 

Transfer:
(i) any sale, conveyance, transfer, lease or assignment, or the entry into
any agreement to sell, convey, transfer, lease or assign, whether by law or
otherwise, of, on, in or affecting (x) all or part of any Property
(including any legal or beneficial direct or indirect interest therein), (y) any
direct or indirect interest in any Borrower (including any profit interest), or
(z) any direct or indirect interest in any SPE Party or (ii) any
change of Control of any Borrower or any SPE Party.  For purposes hereof, (i) a Transfer of
an interest in any Borrower or any SPE Party shall be deemed to include (A) if
any Borrower or any SPE Party or controlling shareholder of any Borrower or any
SPE Party is a corporation, the voluntary or involuntary sale, conveyance or
transfer of such corporation’s stock (or the stock of any corporation directly
or indirectly controlling such corporation by operation of law or otherwise) or
the creation or issuance of new stock in one or a series of transactions by
which an aggregate of more than 10% of such corporation’s stock shall be vested
in a party or parties who are not now stockholders or any change in the control
of such corporation and (B) if any Borrower, any SPE Party or controlling
shareholder of any Borrower or any SPE Party is a limited or general
partnership, joint venture or limited liability company, the change, removal,
resignation or addition of a general partner, managing partner, limited
partner, joint venturer or member or the transfer of the partnership interest
of any general partner, managing partner or limited partner or the transfer of
the interest of any joint venturer or member and (ii) a change of Control
of any Borrower or any SPE Party shall be deemed to have occurred if (A) there
is any change in the identity of any individual or entity or any group of
individuals or entities who have the right, by virtue of any partnership
agreement, articles of incorporation, by-laws, articles of organization,
operating agreement or any other agreement, with or without taking any
formative action, to cause any Borrower (or any SPE Party) to take some action
or to prevent, restrict or impede any Borrower (or any SPE Party) from taking
some action which, in either case, any Borrower (or any  SPE
Party) could take or could refrain from taking were it not for the rights of
such individuals or (B) the individual or entity or group of individuals
or entities that Control any Borrower (and any SPE Party) as described in
clause (A) ever cease to own at least fifty-one percent (51%) of all
equity interests (direct or indirect) in such Borrower (and any SPE Party).

 

TRIPRA:  shall mean as described in Section 7.1.1.

 

TRS
GP:  shall mean as
described in Section 1.1 (Definition of SPE Party).

 

TRS
Pledge:  shall mean
as described in Section 1.1 (Definition of Loan Documents).

 

UCC:  the
Uniform Commercial Code as in effect in any applicable jurisdiction.

 

Underwriter
Group:  shall mean
as described in Section 9.1.3.

 

Underwriters:  shall mean as described in Section 9.1.3.

 

17

 

Updated Appraisal: shall mean as
described in Section 2.4.2(c).

 

Updated Appraisals: shall mean as
described in Section 2.4.2(c).

 

Welfare
Plan:  an employee
welfare benefit plan, as defined in Section 3(1) of ERISA.

 

1.2                               Principles
of Construction.  Unless
otherwise specified, (i) all references to sections and schedules are to
those in this Agreement, (ii) the words “hereof,” “herein” and “hereunder”
and words of similar import refer to this Agreement as a whole and not to any
particular provision, (iii) all definitions are equally applicable to the
singular and plural forms of the terms defined, (iv) the word “including”
means “including but not limited to,” and (v) accounting terms not
specifically defined herein shall be construed in accordance with GAAP.

 

2.                                      GENERAL
LOAN TERMS

 

2.1                               The
Loan.  Lender is making a loan
(the “Loan”) to the Borrowers on
the date hereof, in the original principal amount (the “Principal”)
of $75,000,000, which shall mature on the Stated Maturity Date.  The Borrowers acknowledge receipt of the
Loan, the proceeds of which shall be used to (i) finance the operation of
the Properties, (ii) fund certain of the Subaccounts, and (iii) pay
transaction costs.  No amount repaid in
respect of the Loan may be reborrowed.

 

2.2                               Interest;
Monthly Payments.

 

2.2.1                     Generally.  From and after the date hereof, interest
on the unpaid Principal shall accrue at the Interest Rate and be payable as
hereinafter provided.  On the date
hereof, the Borrowers shall pay interest on the unpaid Principal from the date
hereof through and including April 8, 2008.  On May 9, 2008 and each Payment Date
thereafter through and including the Maturity Date, the Borrowers shall pay
interest on the unpaid Principal which has accrued through the last day of the
Interest Period immediately preceding such Payment Date.  All accrued and unpaid interest shall be due
and payable on the Maturity Date.

 

2.2.2                     Default Rate.  After the occurrence and during the
continuance of an Event of Default, the entire unpaid Debt shall bear interest
at the Default Rate, and shall be payable upon demand from time to time, to the
extent permitted by applicable law.

 

2.2.3                     Taxes. 
Any and all payments by the Borrowers hereunder and under the other
Loan Documents shall be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on Lender’s income, and franchise taxes imposed on Lender by the law or
regulation of any Governmental Authority (all such non-excluded taxes, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to in this Section 2.2.3 as “Applicable Taxes”).  If any Borrower shall be required by law to
deduct any Applicable Taxes from or in respect of any sum payable hereunder to
Lender, the following shall apply:  (i) the
sum payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 2.2.3), Lender receives an amount equal to the sum it
would have received had no such 

 

18

 

deductions been made, (ii) such Borrower shall
make such deductions and (iii) such Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law.  Payments pursuant
to this Section 2.2.3 shall be made within thirty (30) days after the date
Lender makes written demand therefor.

 

2.2.4                     Breakage Indemnity.  The Borrowers shall indemnify Lender
against any out-of-pocket loss or expense which Lender may actually sustain or
incur in liquidating or redeploying deposits from third parties acquired to
effect or maintain the Loan or any part thereof as a consequence of (i) any
payment or prepayment of the Loan or any portion thereof made on a date other
than a Payment Date and (ii) any default in payment or prepayment of the
Principal or any part thereof or interest accrued thereon, as and when due and
payable (at the date thereof or otherwise, and whether by acceleration or
otherwise).  Lender shall deliver to the
Borrowers a statement for any such sums which it is entitled to receive
pursuant to this Section 2.2.4, which statement shall be binding and
conclusive absent manifest error.

 

2.2.5                     New Payment Date.  Lender shall have the right, to be exercised not more than once during
the term of the Loan, to change the Payment Date to a date other than the ninth
day of each month but not earlier than the fifth day of each month (a “New Payment Date”), on thirty (30)
days’ written notice to the Borrowers; provided, however, that
any such change in the Payment Date: (i) shall not modify the amount of
regularly scheduled monthly interest payments, except that if such New Payment
Date is later in the month than the then current Payment Date, the first
payment of interest payable on the New Payment Date shall be accompanied by
interest at the interest rate herein provided for the period from the Payment
Date in the month in which the New Payment Date first occurs to the New Payment
Date, and (ii) shall conform the Stated Maturity Date to the New Payment
Date occurring in the month set forth in the definition of Stated Maturity
Date.

 

2.2.6                     New
Interest Period.

 

The Borrowers shall have the
right, to be exercised not more than once during the term of the Loan, to
change the Interest Period from ninety (90) days to thirty (30) days, on ten (10) days’
prior written notice to Lender.  Such
change shall not be effective until the end of the Interest Period in which
such notice is received by Lender.

 

2.3                               Loan
Repayment.

 

2.3.1                     Repayment.  The
Borrowers shall repay the entire outstanding principal balance of the Note in
full on the Maturity Date, together with interest thereon to (but excluding)
the date of repayment and any other amounts due and owing under the Loan
Documents.  Except during the continuance
of an Event of Default, all proceeds of any repayment, including any
prepayments of the Loan, shall be applied by Lender as follows in the following
order of priority:  First,
accrued and unpaid interest at the Interest Rate; Second,
to Principal; and Third, to any other amounts then
due and owing under the Loan Documents. 
During the continuance of an Event of Default, all proceeds of
repayment, including any payment or recovery on any Property (whether through
foreclosure, deed-in-lieu of foreclosure, or otherwise) shall, unless

 

19

 

otherwise provided in the Loan Documents, be applied
in such order and in such manner as Lender shall elect in Lender’s discretion.

 

2.3.2                     Mandatory Prepayments.  The Loan is subject to mandatory
prepayment in certain instances of Insured Casualty or Condemnation (each a “Casualty/Condemnation Prepayment”),
in the manner and to the extent set forth in Section 7.4.2.  Each Casualty/Condemnation Prepayment, after
deducting Lender’s reasonable out-of-pocket costs and expenses (including
reasonable attorneys’ fees and expenses) actually incurred in connection with
the settlement or collection of the Proceeds or Award (if Lender shall have the
right, pursuant to the terms of this Agreement, to participate in the
settlement or collection of such Proceeds or Award), shall be applied in the
same manner as repayments under Section 2.3.1.  Notwithstanding anything to the contrary
contained herein, each Casualty/Condemnation Prepayment shall be applied in
inverse order of maturity and shall not extend or postpone the due dates of the
monthly installments due under the Note or this Agreement, or change the
amounts of such installments.

 

2.3.3                     Optional Prepayments.  Provided no Event of Default has occurred
and is continuing, the Borrowers shall have the right to prepay all or any
portion of the Principal on any Payment Date provided that the Borrowers give
Lender at least ten (10) days prior written notice thereof.

 

2.4                               Release
of Property.

 

2.4.1                     Release
Upon Payment in Full of Debt. 
Lender shall, upon the written request, upon payment in full of the Debt
in accordance herewith, release or, if requested by the Borrowers, assign to
the Borrowers’ designee (without any representation or warranty by and without
any recourse against Lender whatsoever other than representations from Lender (i) as
to the outstanding principal balance of the Loan, (ii) that Lender is the
then current holder of the Loan and (iii) Lender has all power and
authority to assign the Loan and such assignment is the legal, valid and
binding obligation of Lender) the Lien of the Loan Documents if not theretofore
released.  The Borrowers shall pay Lender’s
reasonable out-of-pocket costs and expenses in connection with any release or
assignment of the Lien of the Loan Documents pursuant to this Section within
five (5) Business Days after such release or such assignment.

 

2.4.2                     Partial
Release of the Property.  Lender
shall, from time to time, release any Property from the Liens created by the
Loan Documents upon the satisfaction of the following conditions by delivering
to the applicable Borrower a duly executed and acknowledged partial release of
the Lien of the relevant Mortgage in recordable form, a release of security
interest pursuant to the relevant Financing Statement and any other
documentation required to effectuate such release:

 

(a)                                  Lender
shall have received not less than ten (10) days’ prior written notice of
the proposed release,

 

(b)                                 contemporaneously
with such release, there shall be a sale of such Property, and

 

(c)                                  immediately
after giving effect to such release and the application of the Release Price
with respect to such release pursuant to Section 2.4.3, the LTV
Ratio shall

 

20

 

not be greater than sixty
percent (60%) or, in the event that immediately after giving effect to such
release and the application of the Release Price with respect to such release
pursuant to Section 2.4.3, the LTV Ratio would be greater than sixty
percent (60%), Lender shall have received, as the Release Price to be paid
pursuant to Section 2.4.2(d)(2), an amount equal to the Allocated
Loan Amount for the Property being released; provided that at any time
during the second year of the Term, the Borrowers may, at their sole cost and
expense, obtain updates to the Appraisals for the Properties (the “Updated Appraisals” and
individually, an “Updated Appraisal”) which
Updated Appraisals shall be used in calculating the LTV Ratio pursuant to this Section only;
provided  further that after the first year of the Term and until
such time as the Borrowers have elected to obtain Updated Appraisals, Lender
shall have received in connection with the release of any Property, as the
Release Price to be paid pursuant to Section 2.4.2(d)(2), an amount
equal to the Allocated Loan Amount for the Property being released and there
shall be no obligation to satisfy a LTV Ratio in connection with any release;
for purposes of this Section 2.4.2(c) only, “LTV Ratio” shall mean,
as of any date, the ratio of (i) the total outstanding principal balance
of the Loan to (ii) the sum of the Appraised Values of the Properties,

 

(d)                                 Lender
shall have received all of the following with respect to such Property to be
released:

 

(1)                                  the
sales contract, which shall have been entered into on arms length terms, and
certified by the applicable Borrower to be a true and complete copy of such
contract;

 

(2)                                  the
Release Price for such Property (subject to Section 2.4.2(c)) and
until such time as a total of $4,500,000 has been deposited into the Cash Trap
Reserve Subaccount (including the $2,000,000 deposited on the date hereof),
Excess Net Cash Proceeds, if any;

 

(3)                                  such
other documents, certificates, opinions or assurances as Lender may reasonably
request, including, without limitation, a continuation letter from the
applicable title insurance company stating that (x) the Liens insured by
the applicable Title Insurance Policy are not impaired by the release of such
Property from the relevant Mortgage and (y) the amount of coverage
afforded by the applicable Title Insurance Policy is reduced by not more than
the proceeds being provided to Lender pursuant to clause (2) above; provided
that the cost to the Borrowers of any such document, certificate, opinion or
assurance requested by Lender pursuant to this clause (3) is immaterial;

 

(4)                                  a
copy of the closing statement with respect to such Property; and

 

(5)                                  the
Borrowers shall pay Lender’s reasonable out-of-pocket costs and expenses in
connection with such release.

 

Upon
the release of any Property pursuant to this Section 2.4.2, the
Properties shall no longer be deemed to include such released Property.

 

21

 

2.4.3                     Fees; Application of Release Prices and Excess Net
Cash Proceeds.

 

Lender shall not charge the Borrowers any fee in
connection with the release of any Property except for Lender’s reasonable
out-of-pocket costs and expenses (including reasonable attorneys’ fees).  Release Prices and Excess Net Cash Proceeds
received by Lender pursuant to Section 2.4.2(d)(2) shall be
applied as follows:

 

(a)                                  Release Prices shall be applied in the
same manner as repayments under Section 2.3.1; and

 

(b)                                 Subject to Section 2.4.2(d)(2),
Excess Net Cash Proceeds, if any, shall be deposited into the Cash Trap Reserve
Subaccount;

 

For avoidance of doubt, it is agreed that once an
aggregate of $4,500,000 shall have been deposited in the Cash Trap Reserve
Subaccount, there shall be no further obligation on the part of the Borrowers
to make deposits therein, notwithstanding that funds shall have been disbursed
therefrom.

 

2.5                               Payments
and Computations.

 

2.5.1                     Making of
Payments.  Each payment by the
Borrowers shall be made in funds settled through the New York Clearing House
Interbank Payments System or other funds immediately available to Lender by
2:00 p.m., New York City time, on the date such payment is due, to Lender
by deposit to such account as Lender may designate by written notice to the
Borrowers.  Whenever any such payment
shall be stated to be due on a day that is not a Business Day, such payment
shall be made on the first Business Day thereafter.  All such payments shall be made irrespective
of, and without any deduction, set-off or counterclaim whatsoever and are
payable without relief from valuation and appraisement laws and with all costs
and charges incurred in the collection or enforcement thereof, including
attorneys’ fees and court costs.

 

2.5.2                     Computations.  Interest payable under the Loan Documents
shall be computed on the basis of the actual number of days elapsed over a
360-day year.

 

2.5.3                     Late Payment Charge.  If any Principal, interest or other sum
due under any Loan Document is not paid by the Borrowers within five (5) days
of the date on which it is due, the Borrowers shall pay to Lender upon demand
an amount equal to the lesser of 5% of such unpaid sum or the maximum amount
permitted by applicable law (the “Late Payment Charge”),
in order to defray the expense incurred by Lender in handling and processing
such delinquent payment and to compensate Lender for the loss of the use of
such delinquent payment; provided that the Late Payment Charge shall not be
assessed on any Principal, interest or other sum due under any Loan Document on
the Maturity Date.  Such amount shall be
secured by the Loan Documents.

 

2.6                               [reserved]

 

2.7          Substitution of Collateral.

 

Subject to the terms and conditions set forth in this Section 2.7,
the Borrowers may obtain a release of the Lien of a Mortgage and the related
Loan Documents encumbering any Property (each, a “Substituted
Property” and collectively, the “Substituted
Properties”) by substituting therefor one or more other office
or retail properties currently owned, or 

 

22

 

subsequently
acquired, by the Borrowers (each, a “Substitute Property”
and collectively, the “Substitute Properties”),
provided that the following conditions precedent are satisfied:

 

(a)                                  Simultaneously with the substitution, the
Borrower owning each Substituted Property shall convey fee simple title to such
Substituted Property to a Person other than any Borrower or any Affiliate of
any Borrower.

 

(b)                                 Lender shall have received an Appraisal
of each Substitute Property dated no more than one hundred and twenty (120)
days prior to the substitution.

 

(c)                                  Immediately after giving effect to the
substitution of Properties, the LTV Ratio shall not be greater than sixty
percent (60%).

 

(d)                                 After a Secondary Market Transaction, if
Lender determines such a confirmation is reasonably necessary, Lender shall
have received confirmation in writing from the Rating Agencies to the effect
that such substitution will not result in a withdrawal, qualification or
downgrade of the respective ratings in effect immediately prior to such
substitution for the Securities issued in connection with such Secondary Market
Transaction that are then outstanding.

 

(e)                                  No Event of Default shall have occurred
and be continuing.

 

(f)                                    With respect to each Substitute Property,
the appropriate Borrower shall have executed, acknowledged and delivered to
Lender a mortgage or deed of trust, as applicable, in form and substance
substantially similar to the Mortgage previously delivered for each Property
that is located in the same state as such Substitute Property; provided
that if no Property is located in the same state as a Substitute Property, the
mortgage or deed of trust, as applicable, for such Substitute Property shall be
in form and substance substantially similar to the Mortgages previously
delivered to Lender in connection with the Properties and such mortgage or deed
of trust shall reflect only those changes as required to make such mortgage or
deed of trust enforceable under the law of the state in which such Substitute
Property is located.  Additionally, with
respect to each Substitute Property, but only if customary in the jurisdiction
where such Substitute Property is located or if required to create and perfect
a lien on the Leases and Rents in favor of Lender, the appropriate Borrower
shall have executed, acknowledged and delivered to Lender an assignment of
leases and rents in form and substance substantially similar to the Assignment
of Leases previously delivered for each Property that is located in the same
state as such Substitute Property; provided that if no Property is
located in the same state as a Substitute Property, the assignment of leases
and rents for such Substitute Property shall be in form and substance
substantially similar to the Assignments of Leases previously delivered to
Lender in connection with the Properties and such assignment of leases and
rents shall reflect only those changes as required to make such assignment of
leases and rents enforceable under the law of the state in which such
Substitute Property is located.

 

(g)                                 With respect to each mortgage, deed of
trust and assignment of leases and rents delivered pursuant to clause (f) of
Section 2.7, Lender shall have received an opinion, or opinions, of
counsel admitted to practice under the laws of the state in which each such
document is to be recorded in form and substance reasonably satisfactory to
Lender and covering those matters that have been opined upon in opinions of
counsel 

 

23

 

previously
delivered to Lender in connection with the Mortgages and the Assignments of
Leases (including those matters unrelated to the enforceability of a Mortgage
or an Assignment of Leases); provided that if Lender has previously
received such an opinion in connection with a Mortgage that has been recorded
in the same state as the new mortgage or deed of trust is to be recorded, then
there shall be no requirement for Lender to have received the opinion described
in the first clause of this Section 2.7(g).

 

(h)                                 Lender shall have received a current
title survey for each Substitute Property, certified to the title company and
Lender and their successors and assigns, in the same form and having the same
content as the certification of the Survey of the Substituted Property prepared
by a professional land surveyor licensed in the state in which the Substitute
Property is located in accordance with the 2005 Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys.

 

(i)                                     Lender shall have received valid
certificates of insurance indicating that the requirements for the policies of
insurance required for a Property hereunder have been satisfied with respect to
each Substitute Property and evidence of the payment of all premiums payable
for the existing policy period.

 

(j)                                     Lender shall have received a Phase I
environmental report and, if recommended under the Phase I environmental
report, a Phase II environmental report, which conclude that the Substitute
Property is not in violation of any Legal Requirement pertaining to any
Hazardous Substance and is not subject to any risk of contamination from any
off-site Hazardous Substance.

 

(k)                                  Lender shall have received a property
zoning report with respect to each Substitute Property in form and substance
reasonably satisfactory to Lender.

 

(l)                                     Lender shall have received a property
condition report with respect to each Substitute Property in form and substance
reasonably satisfactory to Lender.

 

(m)                               All currently due Taxes (including any in
arrears) relating to each Substitute Property and currently due Other Charges
relating to each Substitute Property shall have been paid.

 

(n)                                 Lender shall have received annual
operating statements and occupancy statements for each Substitute Property for the
most current  completed fiscal year and a
current operating statement for each Substituted Property, each certified to
Lender as being true and correct and a certificate from the Borrowers
certifying that there has been no adverse change in the financial condition of
each Substitute Property since the date of such operating statements.

 

(o)                                 If requested, Lender shall have received
copies of all tenant leases and any ground leases affecting each Substitute
Property.  Lender shall have received a
current rent roll of each Substitute Property.

 

(p)                                 At Lender’s reasonable request, the
Borrowers shall have delivered to Lender, and its successors and assigns,
estoppel certificates and subordination, nondisturbance and attornment
agreements, in form and substance reasonably satisfactory to Lender, with
respect to each lease affecting each Substitute Property that will be deemed a
Material Lease pursuant to the terms and conditions of this Agreement.

 

24

 

(q)                                 Lender shall have either received (i) an
endorsement to the applicable Title Insurance Policy or (ii) a new Title
Insurance Policy, in each case, in form and substance reasonably satisfactory
to Lender, insuring the Lien of the Mortgage(s) encumbering each Substitute
Property.

 

(r)                                    Lender shall have received a copy of an
amendment to each Management Agreement with respect to each Substituted
Property reflecting the deletion of such Substituted Property and the addition
of each Substitute Property as a property managed pursuant thereto.

 

(s)                                  Lender shall have received copies of all
leases and other material agreements affecting each Substitute Property.

 

(t)                                    Lender shall have received such other and
further approvals, opinions, documents and information in connection with the
substitution as Lender reasonably requests consistent with the deliveries
required in connection with the origination of the Loan.

 

(u)                                 Employing Lender’s reasonable discretion,
Lender shall establish the Allocated Loan Amount for each Substitute Property.

 

(v)                                 The Borrowers shall submit to Lender, not
less than five (5) days prior to the date of the substitution, a release
of Lien (and related Loan Documents) for each Substituted Property for
execution by Lender.  Such release shall
be in a form appropriate for the jurisdiction in which each Substituted
Property is located and reasonably satisfactory to Lender.  After a Secondary Market Transaction, the
Borrowers shall deliver an Officer’s Certificate certifying that the
requirements set forth in this Section 2.7 have been satisfied.

 

(w)                               The Borrowers shall have paid or
reimbursed Lender for all out-of-pocket costs and expenses incurred by Lender
(including, without limitation, reasonable attorneys fees and disbursements) in
connection with the substitution and the Borrowers shall have paid all
recording charges, filing fees, taxes or other expenses (including, without
limitation, mortgage and intangibles taxes and documentary stamp taxes) payable
in connection with the substitution.  The
Borrowers shall have paid all costs and expenses of the Rating Agencies
incurred in connection with the substitution.

 

Upon the satisfaction of the foregoing conditions
precedent, Lender shall release its Lien from each Substituted Property to be
released and each Substitute Property shall be deemed to be a Property for
purposes of this Agreement.

 

25

 

2.8                               Extension
Option.                                 The
Borrowers shall have the right, at their option, to extend the Term until April 9,
2011 (the “Extended Maturity Date”) by
giving notice of such extension to Lender at least fifteen (15) days prior to
the originally scheduled Stated Maturity Date. 
Upon receipt of such request to extend the Term until the Extended
Maturity Date, Lender will promptly confirm to the Borrowers in writing whether
or not the Stated Maturity Date will be so extended, which extension will be
granted upon the satisfaction of the following conditions:

 

(a)          no Default or Event of Default exists at the time such
request is made and on the originally scheduled Stated Maturity Date;

 

(b)         on the originally scheduled Stated Maturity Date, the
LTV Ratio shall not be greater than sixty percent (60%); and

 

(c)          if the option to extend the Term until the Extended
Maturity Date is exercised, the Borrowers pay to Lender on the first day of the
extension term, an extension fee in an amount equal to 0.15% of the
then-outstanding Principal.

 

If the Borrowers are unable to satisfy all of the
foregoing conditions within the applicable time frames for each, Lender shall
have no obligation to extend the Stated Maturity Date hereunder.

 

3.                                      CASH MANAGEMENT AND
RESERVES

 

3.1                               Cash
Management Arrangements.  

 

On or prior to the date
hereof, the Borrowers shall open an Eligible Account at the Deposit Bank (the “Deposit Account”) into which funds
shall be deposited pursuant to Sections 3.2, 3.3 and 3.4.  Funds in the Deposit Account shall be
invested at Lender’s discretion only in Permitted Investments; provided
that if no Event of Default has occurred and is continuing, funds in the
Deposit Account shall be invested at the Borrowers’ discretion only in
Permitted Investments.  Lender will
establish subaccounts of the Deposit Account which shall at all times be
Eligible Accounts (and may be ledger or book entry accounts and not actual
accounts) (such subaccounts are referred to herein as “Subaccounts”).  The Deposit Account and any Subaccount will
be under the sole control and dominion of Lender, and the Borrowers shall have
no right of withdrawal therefrom.  The
Borrowers shall pay for all expenses of opening and maintaining the Deposit
Account and Subaccounts.

 

26

 

3.2                               Cash
Trap Reserve.

 

3.2.1                     Deposits
in Cash Trap Reserve Subaccount. 
On the date hereof, Lender shall fund $2,000,000 of the Loan proceeds
into a Subaccount (the “Cash Trap Reserve
Subaccount”).  Thereafter,
upon receipt of the Release Price in connection with any release of any HFS/FPC
Property from the lien of the relevant Mortgage pursuant to Section 2.4,
Lender shall promptly deposit a portion of such Release Price into the Cash
Trap Reserve Subaccount as and to the extent required pursuant to Section 2.4.3
until an additional $2,500,000 has been deposited into the Cash Trap Reserve
Subaccount.  Other than as set forth in
this Section and Section 2.4, the Borrower shall have
no obligation to make deposits into the Cash Trap Reserve Subaccount.  Notwithstanding anything to the contrary
contained in this Agreement, in the event that more than twenty (20) Properties
are simultaneously released within thirty (30) days of the date hereof and in
connection therewith the outstanding principal balance of the Loan is paid down
by $20,000,000, Lender shall reduce the amount of funds the Borrowers are obligated
to deposit into the Cash Trap Reserve Subaccount by an amount determined by
Lender in its reasonable discretion.

 

3.2.2                     Disbursements from Cash
Trap Reserve Subaccount.  Funds in the Cash Trap Reserve Subaccount
shall only be disbursed for the payment of (i) Taxes and Insurance
Premiums required to be made by the Borrowers pursuant to Sections 5.2
and 7.1, (ii) leasing commissions and/or tenant improvement
allowances in connection with Leases entered into on or after the date hereof (“TI/LC Costs”), (iii) Monthly
Operating Expense Shortfalls, (iv) Monthly Interest Shortfalls, (v) Monthly
Additional Loan Payment Shortfalls, (vi) costs of Approved Capital
Expenses, (vii) costs of Required Repairs and (viii) costs of
completing Remedial Work in connection with any Property (“Remediation
Costs”). Subject to Section 3.2.3, provided no Event
of Default shall have occurred and is continuing, Lender shall disburse funds
held in the Cash Trap Reserve Subaccount to the Borrowers (except in the case
of disbursements for a Monthly Interest Shortfall and a Monthly Additional Loan
Payment Shortfall which disbursements shall be applied pursuant to clause (b) and
clause (c) respectively of this Section 3.2.2) within
three (3) days after the later of (x) the delivery by the Borrowers
to Lender of a request therefor and (y) the completion of the following
conditions which are applicable to the type of disbursement (e.g. disbursement
for TI/LC Costs, disbursement for Required Repairs, etc.) requested, it being
understood that the Borrowers may simultaneously request multiple types of
disbursements and in such instance, subject to Section 3.2.3,
Lender shall disburse funds as the conditions for each type of disbursement are
met and need not wait until all conditions are met for all of the then
outstanding types of disbursements:

 

(a)                                  In the case of the requested disbursement
of funds from the Cash Trap Reserve Subaccount for the payment of Taxes and
Insurance Premiums required to be made by the Borrowers pursuant to Sections
5.2 and 7.1, the Borrowers shall deliver to Lender (i) an
Officer’s Certificate certifying (A) that such funds will be used to pay,
or reimburse one or more Borrowers for, Taxes and Insurance Premiums, (B)  that
the same has not been the subject of a previous disbursement from the Cash Trap
Reserve Subaccount and (C) that all previous disbursements from the Cash
Trap Reserve Subaccount for the payment of Taxes and Insurance Premiums have
been used to pay the previously identified Taxes and Insurance Premiums and (ii) any
bill, statement or estimate procured from the appropriate public office (with
respect to Taxes) or insurer or 

 

27

 

agent (with
respect to Insurance Premiums) setting forth the Taxes and Insurance Premiums
for which such disbursement is requested.

 

(b)                                 In the case of the requested disbursement
from the Cash Trap Reserve Subaccount for the payment of a Monthly Interest
Shortfall, the Borrowers shall deliver to Lender an Officer’s Certificate (i) certifying
the expected amount of the Available Cash Flow on the Payment Date for which
such disbursement is requested, (ii) certifying the amount of such Monthly
Interest Shortfall that is anticipated to occur on the Payment Date for which
such disbursement is requested and the calculation thereof and (iii) directing
Lender to apply such disbursement on such Payment Date to the Monthly Interest
Payment.

 

(c)                                  In the case of the requested disbursement
from the Cash Trap Reserve Subaccount for the payment of a Monthly Additional
Loan Payment Shortfall, the Borrowers shall deliver to Lender an Officer’s
Certificate (i) certifying the expected amount of the Available Cash Flow
on the Payment Date for which such disbursement is requested, (ii) certifying
the amount of such Monthly Additional Loan Payment Shortfall that is
anticipated to occur on the Payment Date for which such disbursement is
requested and the calculation thereof and (iii) directing Lender to apply
such disbursement on such Payment Date to the Monthly Additional Loan Payment.

 

(d)                                 In the case of the requested disbursement
from the Cash Trap Reserve Subaccount for the payment of a Monthly Operating
Expense Shortfall, the Borrowers shall deliver to Lender (i) an Officer’s
Certificate certifying (A) the expected amount of the Available Cash Flow
on the Payment Date during the month when such disbursement is requested, (B) the
amount of such Monthly Operating Expense Shortfall that is anticipated to occur
on the Payment Date during the month when such disbursement is requested and
the calculation thereof, (C) that such funds will be used to pay such
Monthly Operating Expense Shortfall, (D) that all outstanding trade
payables (other than those to be paid from the requested disbursement or those
constituting Permitted Indebtedness) have been paid in full, (E) that the
same has not been the subject of a previous disbursement from the Cash Trap
Reserve Subaccount and (F) that all previous disbursements from the Cash
Trap Reserve Subaccount for the payment of Monthly Operating Expense Shortfalls
have been used to pay the previously identified Monthly Operating Expense
Shortfalls and (ii) reasonably detailed documentation satisfactory to
Lender as to the amount, necessity and purpose therefor.

 

(e)                                  In the case of the requested disbursement
from the Cash Trap Reserve Subaccount for the payment of Remediation Costs, the
Borrowers shall deliver to Lender (i) an Officer’s Certificate certifying (A) that
such funds will be used to pay, or reimburse one or more Borrowers, for
Remediation Costs and a description thereof, (B) that the same has not
been the subject of a previous disbursement from the Cash Trap Reserve
Subaccount and (C) that all previous disbursements from the Cash Trap
Reserve Subaccount for the payment of Remediation Costs have been used to pay
the previously identified Remediation Costs, (ii) evidence of payment
reasonably satisfactory to Lender 

 

28

 

and (iii) such
other evidence as Lender shall reasonably request that the Remediation Costs to
be funded by the requested disbursement have been completed.

 

(f)                                    In the case of the requested disbursement
of funds from the Cash Trap Reserve Subaccount for TI/LC Costs, (i) Lender
shall have (if it desires) verified (by an inspection conducted at the
Borrowers’ expense) performance of the tenant improvement work associated with
such tenant improvement allowance but only if the cost of such work exceeded (x) $100,000
with respect to work relating to only one Property and (y) $250,000 with
respect to work relating to multiple Properties and (ii) the Borrowers
shall deliver to Lender (A) an Officer’s Certificate certifying (1) that
such funds will be used to pay, or reimburse one or more Borrowers, for TI/LC
Costs and a description thereof, (2) that the same has not been the
subject of a previous disbursement from the Cash Trap Reserve Subaccount and (3) that
all previous disbursements from the Cash Trap Reserve Subaccount for the
payment of TI/LC costs have been used to pay the previously identified TI/LC
Costs, (B)  such other evidence as Lender shall reasonably request that
the tenant improvements associated with the tenant improvement allowances to be
funded by the requested disbursement have been completed and are paid for or
will be paid upon such disbursement to the Borrowers and (C) such other
evidence as Lender shall reasonably request that the leasing commissions to be
funded by the requested disbursement have been earned.

 

(g)                                 In the case of the requested disbursement
of funds from the Cash Trap Reserve Subaccount for the payment of Approved
Capital Expenses, (i) Lender shall have (if it desires) verified (by an
inspection conducted at the Borrowers’ expense) performance of the work
associated with such Approved Capital Expense but only if the cost of such work
exceeded (x) $100,000 with respect to work relating to only one Property
and (y) $250,000 with respect to work relating to multiple Properties and (ii) the
Borrowers shall deliver to Lender (A) an Officer’s Certificate certifying (1) that
such funds will be used to pay, or reimburse one or more Borrowers, for
Approved Capital Expenses and a description thereof, (2) that the same has
not been the subject of a previous disbursement from the Cash Trap Reserve Subaccount
and (3) that all previous disbursements from the Cash Trap Reserve
Subaccount for the payment of Approved Capital Expenses have been used to pay
the previously identified Approved Capital Expenses, (B) lien waivers
(which may be conditioned upon payment) or, if applicable, other evidence of
payment reasonably satisfactory to Lender, (C) at Lender’s option, in the
event the cost of the work associated with such Approved Capital Expenses
exceeded (x) $100,000 with respect to work relating to only one Property
and (y) $250,000 with respect to work relating to multiple Properties, a
title search for each Property that will benefit from the Approved Capital
Expense indicating that such Property is free from all Liens, claims and other
encumbrances not previously approved by Lender other than Liens with respect to
which a lien waiver has been delivered and (D) such other evidence as
Lender shall reasonably request that the Approved Capital Expenses to be funded
by the requested disbursement have been completed.

 

(h)                                 In the case of the requested disbursement
from the Cash Trap Reserve Subaccount for the payment of the costs of Required
Repairs, the Borrowers shall deliver 

 

29

 

to Lender (i) an
Officer’s Certificate certifying that (A) the Required Repairs or any
portion thereof which are the subject of the requested disbursement have been
completed in a good and workmanlike manner and in accordance with all
applicable Legal Requirements, (B) identifying each Person that supplied
materials or labor in connection with such Required Repairs or any portion
thereof costing in excess of (x) $100,000 with respect to work relating to
only one Property and (y) $250,000 with respect to work relating to
multiple Properties and (C) stating that each such Person has been or,
upon receipt of the requested disbursement, will be paid in full with respect
to the portion of the Required Repairs which is the subject of the requested
disbursement; (ii) copies of appropriate lien waivers (which may be
conditioned upon payment) or, if applicable, other evidence of payment
reasonably satisfactory to Lender; (iii) at Lender’s option, and in the
event the cost of the work associated with such Required Repairs exceeded  (x) $100,000 with respect to work
relating to only one Property and (y) $250,000 with respect to work
relating to multiple Properties, a title search for the Property that will
benefit from the Required Repair indicating that such Property is free from all
Liens not previously approved by Lender; and (iv) such other evidence as
Lender shall reasonably request that the Required Repairs which are to be
funded by the requested disbursement have been completed.

 

Notwithstanding anything
to the contrary contained in this Agreement, no disbursement from the Cash Trap
Reserve Subaccount for the payment of Taxes and Insurance Premiums shall be
made pursuant to Section 3.2.2(d).

 

3.2.3                     Priority of Disbursements
from Cash Trap Reserve Subaccount.  In the event that at any given time the
Borrowers have more than one request for disbursement of funds from the Cash
Trap Reserve Subaccount outstanding and there are insufficient funds in the
Cash Trap Reserve Subaccount to fulfill each such request, Lender shall
disburse funds in the Cash Trap Reserve Subaccount in the following order of
priority:

 

(a)                                  First,
to the payment of Taxes and Insurance;

 

(b)                                 Second,
to the payment of Monthly Interest Shortfalls;

 

(c)                                  Third,
to the payment of Monthly Additional Loan Payment Shortfalls;

 

(d)                                 Fourth,
to the payment of Monthly Operating Expense Shortfalls;

 

(e)                                  Fifth,
to the payment of Remediation Costs;

 

(f)                                    Sixth, to the payment of TI/LC Costs;

 

(g)                                 Seventh, to the payment of Approved
Capital Expenses; and

 

(h)                                 Eighth, to the payment of the cost of Required
Repairs.

 

3.3                               Casualty/Condemnation
Subaccount.  The Borrowers shall
pay, or cause to be paid, to Lender all Proceeds or Awards due to any Casualty
or Condemnation to be transferred to 

 

30

 

a Subaccount (the “Casualty/Condemnation
Subaccount”) in accordance with the provisions of Section 7.  All amounts in the Casualty/Condemnation
Subaccount shall be disbursed in accordance with the provisions of Section 7.

 

3.4                               Grant
of Security Interest; Application of Funds. 
As security for payment of the Debt and the performance by the
Borrowers of all other terms, conditions and provisions of the Loan Documents,
each Borrower hereby pledges and assigns to Lender, and grants to Lender a
security interest in, all such Borrower’s right, title and interest in and to
all payments to or monies held in the Deposit Account and all Subaccounts
created pursuant to this Agreement (collectively, the “Cash
Management Accounts”). 
Each Borrower shall not, without obtaining the prior written consent of
Lender, further pledge, assign or grant any security interest in any Cash
Management Account, or permit any Lien to attach thereto, or any levy to be
made thereon, or any UCC Financing Statements, except those naming Lender as the
secured party, to be filed with respect thereto.  This Agreement is, among other things,
intended by the parties to be a security agreement for purposes of the
UCC.  Upon the occurrence and during the
continuance of an Event of Default, Lender may apply any sums in any Cash
Management Account in any order and in any manner as Lender shall elect in
Lender’s discretion without seeking the appointment of a receiver and without
adversely affecting the rights of Lender to foreclose the Lien of any Mortgage
or exercise its other rights under the Loan Documents.  The Cash Management Accounts shall not
constitute trust funds and may be commingled with other monies held by
Lender.  All interest which accrues on
the funds in any Cash Management Account shall accrue for the benefit of the
Borrowers and shall be taxable to the Borrowers and shall be added to and
disbursed in the same manner and under the same conditions as the principal sum
on which said interest accrued.  Upon repayment
in full of the Debt, all remaining funds in the Cash Trap Reserve Subaccount,
if any, shall be promptly disbursed to, or as directed by, the Borrowers or if
the Borrowers shall notify Lender not less than five (5) Business Days
prior to the date on which the Debt is repaid in full, any amounts remaining on
deposit in the Cash Trap Reserve Subaccount shall be applied by Lender to the
amounts payable by the Borrowers in respect of the Debt.

 

4.                                      REPRESENTATIONS AND
WARRANTIES

 

Each Borrower represents
and warrants to Lender as of the date hereof that, except to the extent (if
any) disclosed on Schedule 3 with reference to a specific Section of this Article 4:

 

4.1                               Organization;
Special Purpose. Each Borrower and each SPE Party has been duly
organized and is validly existing and in good standing under the laws of the
state of its formation, with requisite power and authority, and all rights,
licenses, permits and authorizations, governmental or otherwise, necessary to
own its properties and to transact the business in which it is now engaged.  Each Borrower and each SPE Party is duly
qualified to do business and is in good standing in each jurisdiction where it
is required to be so qualified in connection with its properties, business and
operations.  Each Borrower and each SPE
Party is a Special Purpose Bankruptcy Remote Entity.

 

4.2                               Proceedings;
Enforceability.  Each Borrower
has taken all necessary action to authorize the execution, delivery and
performance of the Loan Documents to which it is a party.  

 

31

 

The Loan Documents have been duly executed and
delivered by each Borrower that is a party thereto and constitute legal, valid
and binding obligations of each Borrower that is a party thereto enforceable
against such Borrower in accordance with their respective terms, subject to
applicable bankruptcy, insolvency and similar laws affecting rights of
creditors generally, and general principles of equity.  The Loan Documents are not subject to, and no
Borrower has asserted, any right of rescission, set-off, counterclaim or
defense, including the defense of usury. 
No exercise of any of the terms of the Loan Documents, or any right
thereunder, will render any Loan Document unenforceable.

 

4.3                               No
Conflicts.  The execution,
delivery and performance of the Loan Documents by each Borrower that is a party
thereto and the transactions contemplated hereby will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any Lien (other than
pursuant to the Loan Documents) upon any of the property of any Borrower
pursuant to the terms of, any agreement or instrument to which such Borrower is
a party or by which its property is subject, nor will such action result in any
violation of the provisions of any statute or any order, rule or
regulation of any Governmental Authority having jurisdiction over such Borrower
or any of its properties.  No Borrower’s
rights under the Licenses and the Management Agreements will be adversely
affected by the execution and delivery of the Loan Documents, any Borrower’s
performance thereunder, the recordation of the Mortgages, or the exercise of
any remedies by Lender.  Any consent,
approval, authorization, order, registration or qualification of or with any
Governmental Authority required for the execution, delivery and performance by
any Borrower of the Loan Documents has been obtained and is in full force and
effect.

 

4.4                               Litigation.  There are no actions, suits or other
proceedings at law or in equity by or before any Governmental Authority now
pending or, to any Borrower’s knowledge, threatened in writing against or
affecting any Borrower, any SPE Party, any Manager or any Property, which, if
adversely determined, might materially adversely affect the condition
(financial or otherwise) or business of any Borrower (including the ability of
such Borrower to carry out its obligations under the Loan Documents), any SPE
Party, any Manager or the use, value, condition or ownership of any Property.

 

4.5                               Agreements.  No Borrower is a party to any agreement
or instrument or subject to any restriction which might adversely affect such
Borrower or any Property, or such Borrower’s business, properties, operations
or financial condition.  No Borrower is
in default in any material respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
Permitted Encumbrance or any other agreement or instrument to which it is a
party or by which it or any Property is bound.

 

4.6                               Title.  Each Borrower has good, marketable and
indefeasible title in fee to the applicable real property which it purports to
own and good title to the balance of the applicable Property it purports to
own, free and clear of all Liens except the Permitted Encumbrances.  To each Borrower’s knowledge, all transfer
taxes, deed stamps, intangible taxes or other amounts in the nature of transfer
taxes required to be paid by any Person under applicable Legal Requirements in
connection with the transfer of any portion of any Property to any Borrower
have been paid.  The Mortgages when
properly recorded in the appropriate records, together with 

 

32

 

any Financing Statements required to be filed in
connection therewith, will create (i) a valid, perfected first priority
lien on each Borrower’s interest in the Properties which it owns and (ii) valid
and perfected first priority security interests in and to, and perfected
collateral assignments of, all personalty (including the Leases), all in
accordance with the terms thereof, in each case subject only to any applicable
Permitted Encumbrances.  All mortgage,
recording, stamp, intangible or other similar taxes required to be paid by any
Person under applicable Legal Requirements in connection with the execution,
delivery, recordation, filing, registration, perfection or enforcement of any
of the Loan Documents have been paid. 
The Permitted Encumbrances do not materially adversely affect the value,
operation or use of any Property, or the Borrowers’ ability to repay the
Loan.  No Condemnation or other
proceeding has been commenced or, to any Borrower’s actual knowledge, has been
threatened in writing with respect to all or part of any Property or for the
relocation of roadways providing access to any Property.  To each Borrower’s knowledge, there are no
claims for payment for work, labor or materials affecting any Property which
are or may become a Lien prior to, or of equal priority with, the Liens created
by the Loan Documents.  To each Borrower’s
knowledge, except as disclosed in the Title Insurance Policies, the surveys for
the Properties delivered to Lender (collectively, the “Surveys”)
do not fail to reflect any material matter affecting the Properties or the
title thereto.  To each Borrower’s
knowledge, except as shown on the Surveys or as disclosed in the Title
Insurance Policies, all of the Improvements with respect to any Property
included in determining the appraised value of such Property lie wholly within
the boundaries and building restriction lines of such Property, and no
improvement on an adjoining property encroaches upon such Property, and no
easement or other encumbrance upon such Property encroaches upon any of such
Improvements, except those insured against by the Title Insurance Policy.  To each Borrower’s knowledge, except as shown
on the Surveys or as disclosed in the Title Insurance Policies, each parcel
comprising any Property is a separate tax lot and is not a portion of any other
tax lot that is not a part of such Property. 
To each Borrower’s knowledge, except as disclosed in the Title Insurance
Policies, there are no pending or proposed special or other assessments for
public improvements or otherwise affecting any Property, or any contemplated
improvements to any Property that may result in such special or other
assessments.

 

4.7                               No
Bankruptcy Filing.  No Borrower
is contemplating either the filing of a petition by it under any state or
federal bankruptcy or insolvency law or the liquidation of all or a major
portion of its property (a “Bankruptcy Proceeding”),
and no Borrower has actual knowledge of any Person contemplating the filing of
any such petition against it.  In
addition, neither any Borrower nor any SPE Party  has
been a party to, or the subject of, a Bankruptcy Proceeding for the past ten (10) years.

 

4.8                               Full
and Accurate Disclosure.  No
statement of fact made by any Borrower in any Loan Document to which it is
party contains any untrue statement of a material fact or, to each Borrower’s
knowledge, omits to state any material fact necessary to make statements
contained therein not misleading.  There
is no material fact presently known to any Borrower that has not been disclosed
to Lender which adversely affects any Property or the business, operations or
condition (financial or otherwise) of any Borrower.  All financial data, including the statements
of cash flow and income and operating expense, that have been delivered by the
Borrowers to Lender in respect of the Borrowers and the Properties (i) are
true, complete and correct in all material respects, (ii) accurately
represent the financial condition of the Borrowers

 

33

 

and the Properties as of the date of such reports, and
(iii) to the extent prepared by an independent certified public accounting
firm, have been prepared in accordance with GAAP consistently applied
throughout the periods covered, except as disclosed therein.  No Borrower has contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments, unrealized or
anticipated losses from any unfavorable commitments or any liabilities or
obligations not permitted by this Agreement. 
Since the date of such financial statements, there has been no materially
adverse change in the financial condition, operations or business of any
Borrower or any Property from that set forth in said financial statements.

 

4.9                               Tax
Filings.  To the extent required,
each Borrower has filed (or has obtained effective extensions for filing) all
federal, state and local tax returns required to be filed and have paid or made
adequate provision for the payment of all federal, state and local taxes,
charges and assessments payable by such Borrower.  Each Borrower believes that its tax returns
(if any) properly reflect the income and taxes of such Borrower for the periods
covered thereby, subject only to reasonable adjustments required by the
Internal Revenue Service or other applicable tax authority upon audit.

 

4.10                        No Plan
Assets.  As of the date hereof
and throughout the Term (i) no Borrower is, and no Borrower will be, an “employee
benefit plan,” as defined in Section 3(3) of ERISA, (ii) none of
the assets of any Borrower constitutes or will constitute “plan assets” of one
or more such plans within the meaning of 29 C.F.R. Section 2510.3-101, (iii) no
Borrower is, and no Borrower will be a “governmental plan” within the meaning
of Section 3(32) of ERISA, and (iv) transactions by or with any
Borrower are not and will not be subject to state statutes regulating
investment of, and fiduciary obligations with respect to, governmental
plans.  As of the date hereof, neither
any Borrower, nor any member of a “controlled group of corporations” (within
the meaning of Section 414 of the Code) maintains, sponsors or contributes
to a “defined benefit plan” (within the meaning of Section 3(35) of ERISA)
or a “multiemployer pension plan” (within the meaning of Section 3(37)(A) of
ERISA).

 

4.11                        Compliance.  To each Borrower’s knowledge, each Borrower and each Property and the use
thereof comply in all material respects with all applicable Legal Requirements
(including with respect to parking and applicable zoning and land use laws,
regulations and ordinances).  No Borrower
has received written notice that it is in default or violation of any order,
writ, injunction, decree or demand of any Governmental Authority.  The Properties are used exclusively for
office, branch banking, and/or retail space and other appurtenant and related
uses.  To each Borrower’s
knowledge, no legal proceedings are
pending or have been threatened in writing with respect to the zoning of any
Property.  To each Borrower’s knowledge,
neither the zoning nor any other right to construct, use or operate any
Property is in any way dependent upon or related to any property other than
such Property, except for easements and rights of way shown on the Surveys or
as disclosed in the Title Insurance Policies. 
All certifications, permits, licenses and approvals, including
certificates of completion and occupancy permits required for the legal use,
occupancy and operation of the Properties (collectively, the “Licenses”), have been obtained and
are in full force and effect.  To each
Borrower’s knowledge, the use being made of each Property is in conformity with
the certificates of occupancy issued for such Property and all other
restrictions, covenants and conditions affecting such Property.

 

34

 

4.12                        Contracts.  To
each Borrower’s knowledge, there are no service, maintenance or repair
contracts affecting any Property that are not terminable on three (3) month’s
notice or less without cause and without penalty or premium in excess of
$100,000.

 

4.13                        Federal
Reserve Regulations; Investment Company Act.  No part of the proceeds of the Loan will
be used for the purpose of purchasing or acquiring any “margin stock” within
the meaning of Regulation U of the Board of Governors of the Federal Reserve
System or for any other purpose that would be inconsistent with such Regulation
U or any other regulation of such Board of Governors, or for any purpose
prohibited by Legal Requirements or any Loan Document.  No Borrower is (i) an “investment
company” or a company “controlled” by an “investment company,” within the
meaning of the Investment Company Act of 1940, as amended; (ii) a “holding
company” or a “subsidiary company” of a “holding company” or an “affiliate” of
either a “holding company” or a “subsidiary company” within the meaning of the
Public Utility Holding Company Act of 1935, as amended; or (iii) subject
to any other federal or state law or regulation which purports to restrict or
regulate its ability to borrow money.

 

4.14                        Easements;
Utilities and Public Access.  To
each Borrower’s knowledge, except as identified on the Surveys or as disclosed
in the Title Insurance Policies, all easements, cross easements, licenses, air
rights and rights-of-way or other similar property interests (collectively, “Easements”), if any, necessary for
the practical utilization of the Improvements with respect to each Property for
their current purposes have been obtained and are in full force and
effect.  To each Borrower’s knowledge,
except as shown on the Surveys or as disclosed in the Title Insurance Policies,
each Property has rights of access to public ways and is served by water,
sewer, sanitary sewer and storm drain facilities adequate to service it for its
intended uses.  Except as shown on the
Surveys or as disclosed in the Title Insurance Policies, all public utilities
necessary or convenient to the full use and enjoyment of each Property are
located in the public right-of-way abutting such Property, and all such
utilities are connected so as to serve such Property without passing over other
property absent a valid easement.  Except
as shown on the Surveys or as disclosed in the Title Insurance Policies, all
roads necessary for the use of each Property for its current purpose have been
completed and dedicated to public use and accepted by all Governmental
Authorities.

 

4.15                        Physical
Condition.  To each Borrower’s
knowledge, except as disclosed in the Physical Condition Reports, each
Property, including all Improvements with respect to such Property, parking
facilities, systems, Equipment with respect to such Property, are in good
condition, order and repair in all material respects. To each Borrower’s
knowledge, except as disclosed in the Physical Condition Reports, there exists
no structural or other material defect or damages to any Property, whether
latent or otherwise.  No Borrower has
received written notice from any insurance company or bonding company of any
material defect or inadequacy in any Property, or any part thereof, which would
adversely affect its insurability or cause the imposition of extraordinary
premiums or charges thereon or any termination of any policy of insurance or
bond.  Except as shown on the Surveys or
as disclosed in the Title Insurance Policies or Physical Condition Reports, no
portion of any Property is located in an area as identified by the Federal
Emergency Management Agency as an area having special flood hazards.  The Improvements with respect to each
Property have suffered no material casualty or damage which has not been fully
repaired and the cost thereof fully paid.

 

35

 

4.16                        Leases.  The list of Leases attached hereto as Schedule
4 is true, complete and correct and no Property is subject to any Leases
other than the Leases described on Schedule 4.  Except as set forth on Schedule 4: (i) each
Material Lease is in full force and effect; (ii) the tenants under the
Material Leases have accepted possession of their respective demised premises,
have commenced the payment of rent under the Material Leases (subject to any “free
rent” or rent abatements provided for therein); (iii) no tenant under any
Material Lease has asserted, in writing, any offsets, claims or defenses to the
enforcement of such Material Lease; (iv) all rents due and payable under
the Material Leases have been paid and, except with respect to those Material
Leases which provide for the quarterly or annual payment of rent, no portion
thereof has been paid for any period more than thirty (30) days in advance; (v) no
Borrower has received written notice from any tenant under a Material Lease
asserting that it is entitled to an adjustment to rent; (vi) no Borrower
has received written notice from any tenant under a Material Lease asserting a
material claim against the landlord under any Material Lease which remains
outstanding; (vii) no Borrower has received written notice from any tenant
under a Material Lease asserting any material defaults on the part of the
landlord under any Material Lease; (viii) to each Borrower’s knowledge, no
event has occurred which, with the giving of notice or passage of time, or
both, would constitute such a material default; (ix) to each Borrower’s
knowledge, there is no present material default by the tenant under any
Material Lease; (x) with respect to each Material Lease, the Borrower
which is a party thereto is the sole owner of the entire lessor’s interest in
such Material Lease; (xi) each Material Lease is the valid, binding and
enforceable obligation of the Borrower which is a party thereto; and
(xii) no Person has any possessory interest in, or right to occupy, any
Property subject to any Material Lease except under the terms of such Material
Lease or pursuant to any Leases entered into by the tenants under the Material
Leases.  Neither the Material Leases nor
the Rents have been assigned or pledged except to Lender, and no other Person
has any interest therein except the tenants thereunder.

 

4.17                        Fraudulent
Transfer.  No Borrower has
entered into the Loan or any Loan Document with the actual intent to hinder,
delay, or defraud any creditor, and each Borrower has received reasonably
equivalent value in exchange for its obligations under the Loan Documents.  To each Borrower’s knowledge, giving effect
to the transactions contemplated by the Loan Documents, the fair saleable value
of each Borrower’s assets exceeds and will, immediately following the execution
and delivery of the Loan Documents, exceed such Borrower’s total probable
liabilities, including subordinated, unliquidated, disputed or contingent
liabilities, including the maximum amount of its contingent liabilities or its
debts as such debts become absolute and matured.  To each Borrower’s knowledge, no Borrower’s
assets constitute, and immediately following the execution and delivery of the
Loan Documents no Borrower’s assets will constitute, unreasonably small capital
to carry out its business as conducted or as proposed to be conducted.  No Borrower intends to incur debts and
liabilities (including contingent liabilities and other commitments) beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts to be payable on or in respect of obligations of such Borrower).

 

4.18                        Ownership
of Borrowers.

 

4.18.1              Ownership of HFS.  The sole general partner of HFS is HFS
GP.  First States Investors Asset Group
A, L.P., a Delaware limited partnership, is the owner of all of the issued and
outstanding membership interests of HFS GP. 
The only other 

 

36

 

partner of HFS is First States Investors Asset Group
A, L.P., a Delaware limited partnership. 
The membership interests of HFS GP and the partnership interests in HFS
are owned free and clear of all Liens, warrants, options and rights to
purchase.  HFS has no obligation to any
Person to purchase, repurchase or issue any ownership interest in it.

 

4.18.2              Ownership of FPC.  The sole general partner of FPC is FPC
GP.  First States Investors Asset Group
A, L.P., a Delaware limited partnership, is the owner of all of the issued and
outstanding membership interests of FPC GP. 
The only other partner of FPC is First States Investors Asset Group A,
L.P., a Delaware limited partnership. 
The membership interests of FPC GP and the partnership interests in FPC
are owned free and clear of all Liens, warrants, options and rights to
purchase.  FPC has no obligation to any
Person to purchase, repurchase or issue any ownership interest in it.

 

4.18.3              Ownership of TRS.  The sole general partner of TRS is TRS
GP.  American Financial TRS, Inc., a
Delaware corporation, is the owner of all of the issued and outstanding
membership interests of TRS GP.  The only
other partner of TRS is American Financial TRS, Inc., a Delaware
corporation.  The membership interests of
TRS GP and the partnership interests in TRS are owned free and clear of all
Liens, warrants, options and rights to purchase.  TRS has no obligation to any Person to
purchase, repurchase or issue any ownership interest in it.

 

4.18.4              Organizational
Chart.  The organizational chart
attached hereto as Schedule 5 is complete and accurate.

 

4.19                        Purchase
Options.  Except as set forth in
the Leases in effect on the date hereof, neither any Property nor any part
thereof is subject to any purchase options, rights of first refusal, rights of
first offer or other similar rights in favor of third parties granted in
writing by any Borrower.  Neither the
transactions contemplated by the Loan Documents nor the Merger give rise to
circumstances that entitle any Person to exercise any purchase option, right of
first refusal, right of first offer or other similar right affecting any
Property or any portion thereof.

 

4.20                        Management
Agreement.  The Management
Agreements are in full force and effect. 
There is no material default, breach or violation existing under any
Management Agreement, and, to each Borrower’s actual knowledge, no event has
occurred (other than payments due but not yet delinquent) that, with the
passage of time or the giving of notice, or both, would constitute a material
default, breach or violation thereunder, by either party thereto.

 

4.21                        Hazardous
Substances.  Except as disclosed
in the Environmental Reports, (i) to each Borrower’s knowledge, no
Property is in violation of any Legal Requirement pertaining to or imposing
liability or standards of conduct concerning environmental regulation,
contamination or clean-up, including the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Emergency Planning and Community Right-to-Know Act of 1986, the Hazardous
Substances Transportation Act, the Solid Waste Disposal Act, the Clean Water
Act, the Clean Air Act, the Toxic Substance Control Act, the Safe Drinking
Water Act, the Occupational Safety and Health Act, any state super-lien and
environmental clean-up statutes (including with respect to Toxic Mold), any
local law requiring related permits and licenses and all amendments to and
regulations in respect of 

 

37

 

the foregoing laws (collectively, “Environmental Laws”); (ii) to
each Borrower’s knowledge, no Property is subject to any private or
governmental Lien or judicial or administrative notice or action or inquiry,
investigation or claim relating to hazardous, toxic and/or dangerous
substances, toxic mold or fungus of a type that may pose a risk to human health
or the environment or would negatively impact the value of such Property (“Toxic Mold”) or any other
substances or materials which are included under or regulated by Environmental
Laws (collectively, “Hazardous Substances”);
(iii) to each Borrower’s knowledge, no Hazardous Substances are or have
been (including the period prior to any Borrower’s acquisition of any
Property), discharged, generated, treated, disposed of or stored on,
incorporated in, or removed or transported from such Property other than in
compliance with all Environmental Laws; (iv) to each Borrower’s knowledge,
no Toxic Mold is on or about any Property which requires remediation; and (v) no
underground storage tanks exist on any Property and, to each Borrower’s
knowledge, no Property has ever been used as a landfill.

 

4.22                        Name;
Principal Place of Business.  No
Borrower uses, and no Borrower will use, any trade name and no Borrower has
done, and no Borrower will do, business under any name other than its actual
name set forth herein.  The principal
place of business of each Borrower is its primary address for notices as set
forth in Section 6.1, and such Borrower has no other place of business.

 

4.23                        Other
Debt.  There is no indebtedness
with respect to any Property or any excess cash flow or any residual interest
therein, whether secured or unsecured, other than Permitted Encumbrances and
Permitted Indebtedness.

 

All of the representations and warranties in this Article 4
and elsewhere in the Loan Documents (i) shall survive for so long as any
portion of the Debt remains owing to Lender and (ii) shall be deemed to
have been relied upon by Lender notwithstanding any investigation heretofore or
hereafter made by Lender or on its behalf, provided, however, that the
representations, warranties and covenants set forth in Section 4.21
shall survive in perpetuity.

 

5.                                      COVENANTS

 

Until the end of the
Term, each Borrower hereby covenants and agrees with Lender that:

 

5.1                               Existence.  Each Borrower and each SPE Party shall (i) do
or cause to be done all things necessary to preserve, renew and keep in full
force and effect its existence, rights, and franchises, (ii) continue to
engage in the business presently conducted by it, (iii) obtain and
maintain all Licenses, and (iv) qualify to do business and remain in good
standing under the laws of each jurisdiction, in each case as and to the extent
required for the ownership, maintenance, management and operation of each Property.

 

5.2                               Taxes
and Other Charges.  The Borrowers
shall pay all Taxes and Other Charges as the same become due and payable,
subject to the Borrowers’ right to contest the same, and, upon Lender’s
request, the Borrowers shall deliver to Lender receipts for payment or other
evidence satisfactory to Lender that the Taxes and Other Charges have been so
paid no later than thirty (30) days before they would be delinquent if not paid
(provided, however, that the Borrowers need not pay such Taxes nor furnish such
receipts for payment of Taxes paid by 

 

38

 

Lender pursuant to Section 3.2).  The Borrowers shall not suffer and shall
promptly cause to be paid and discharged any Lien against any Property, and
shall promptly pay for all utility services provided to any Property.  The Borrowers, at their own expense, may
contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the amount or validity or application of any
Taxes or Other Charges, provided that (i) no Event of Default has occurred
and is continuing, (ii) such proceeding shall suspend the collection of
the Taxes or such Other Charges, (iii) such proceeding shall be permitted
under and be conducted in all material respects in accordance with the
provisions of any other instrument to which any Borrower is subject and shall
not constitute a default thereunder, (iv) no part of or interest in any
Property will be in danger of being sold, forfeited, terminated, canceled or
lost, (v) the Borrowers shall have furnished such security as may be
required in the proceeding, or as may be requested by Lender, to insure the
payment of any such Taxes or Other Charges, together with all interest and
penalties thereon, which shall not be less than one hundred and five percent
(105%) of the Taxes and Other Charges being contested, and (vi) the
Borrowers shall promptly upon final determination thereof pay the amount of
such Taxes or Other Charges, together with all costs, interest and
penalties.  The Borrowers shall provide
written notice to Lender within five (5) Business Days after the
commencement of any legal proceeding to contest the amount or validity or
application of any Taxes or Other Charges.

 

5.3                               Access
to Property.  Each Borrower
shall, subject to the rights of tenants and other occupants of the Properties,
permit agents, representatives, consultants and employees of Lender to inspect
any Property or any part thereof at reasonable hours upon reasonable advance
written notice to the Borrowers and Manager provided that such notice shall
identify the agent, representative, consultant and/or employee as an agent,
representative, consultant or employee of Lender.

 

5.4                               Repairs;
Maintenance and Compliance; Alterations.

 

5.4.1                     Repairs;
Maintenance and Compliance.  The
Borrowers shall at all times maintain, preserve and protect all franchises and
trade names, and the Borrowers shall cause each Property to be maintained in a
good and safe condition and repair and shall not remove, demolish or alter the
Improvements with respect to such Property or Equipment with respect to such
Property (except for alterations performed in accordance with Section 5.4.2
and normal replacement of Equipment with Equipment of equivalent value and
functionality).  The Borrowers shall
comply with all Legal Requirements and promptly cure any violation of a Legal
Requirement.  The Borrowers shall notify
Lender in writing within ten (10) Business Days after any Borrower first
receives written notice of any such non-compliance.  Subject to Sections 7.2.1 and 7.3.1,
the Borrowers shall promptly repair, replace or rebuild any part of any
Property that becomes damaged, worn or dilapidated and shall complete and pay
for any Improvements with respect to any Property at any time in the process of
construction or repair.

 

5.4.2                     Alterations.  The Borrowers shall perform and complete
the Required Repairs set forth on Schedule 7 within twelve (12) months
of the date hereof.  Each Borrower may,
without Lender’s consent, perform other alterations to the Improvements with
respect to any Property and Equipment with respect to any Property which (i) do
not constitute a Material Alteration, (ii) do not adversely affect such
Borrower’s financial condition or the value or Net Operating Income of such
Property and (iii) are in the ordinary course of such Borrower’s 

 

39

 

business.  No
Borrower shall perform any Material Alteration without Lender’s prior written
consent, which consent shall not be unreasonably withheld or delayed.  Provided no Event of Default has occurred and
is continuing, if any
Borrower provides Lender with a written request for approval for any action
requiring Lender’s consent or approval under this Section 5.4.2 (which
written request shall specifically refer to this Section 5.4.2 and
shall state that failure by Lender to approve or disapprove such request within
ten (10) days will constitute a deemed approval and shall be accompanied
by a reasonably detailed description of the request) and Lender fails to reject
the request in writing delivered to the applicable Borrower within ten (10) days
after receipt by Lender of the request (which rejection shall set forth the
reasons for such rejection), the action which is the subject of such request
shall be deemed approved.  Lender
may, in its reasonable discretion, as a condition to giving its consent to a
Material Alteration costing in excess of $1,000,000, require that the Borrowers
deliver to Lender security for payment of the cost of such Material Alteration
in an amount equal to one hundred and five percent (105%) of the cost of the
Material Alteration as estimated by Lender, which security may be in the form
of cash, a letter of credit in form and substance reasonably acceptable to
Lender from an institution reasonably acceptable to Lender, a completion bond
in form and substance reasonably acceptable to Lender from an issuer reasonably
acceptable to Lender, a guaranty in form and substance reasonably acceptable to
Lender from an entity reasonably acceptable to Lender or such other form as is
reasonably acceptable to Lender.  Upon
substantial completion of the Material Alteration, the Borrowers shall provide
evidence reasonably satisfactory to Lender that (i) the Material
Alteration was constructed in accordance with applicable Legal Requirements and
substantially in accordance with plans and specifications approved by Lender
(which approval shall not be unreasonably withheld or delayed), (ii) all
contractors, subcontractors, materialmen and professionals who provided work,
materials or services in connection with the Material Alteration have been paid
in full and have delivered unconditional releases of lien and (iii) all
material Licenses necessary for the use, operation and occupancy of the
Material Alteration (other than those which depend on the performance of tenant
improvement work) have been issued.  The
Borrowers shall reimburse Lender within ten (10) Business Days after
request therefor for all reasonable out-of-pocket costs and expenses (including
the reasonable fees of any architect, engineer or other professional engaged by
Lender) actually incurred by Lender in reviewing plans and specifications or in
making any determinations necessary to implement the provisions of this Section 5.4.2.

 

5.5                               Performance
of Other Agreements.  Each
Borrower shall observe and perform each and every term to be observed or
performed by it pursuant to the terms of any agreement or instrument affecting
or pertaining to any Property, including the Loan Documents.

 

5.6                               Cooperate
in Legal Proceedings.  Each
Borrower shall cooperate fully with Lender with respect to, and permit Lender,
at its option, to participate in, any proceedings before any Governmental
Authority which are reasonably likely to materially adversely affect the rights
of Lender under any Loan Document.

 

5.7                               Further
Assurances.  Each Borrower shall,
at the Borrowers’ sole cost and expense, (i) execute and deliver to Lender
such documents, instruments, certificates, assignments and other writings, and
do such other acts reasonably necessary, to evidence, preserve and/or protect
the collateral at any time securing or intended to secure the Debt and/or for
the better and 

 

40

 

more effective carrying out of the intents and
purposes of the Loan Documents, as Lender may reasonably require from time to
time; and (ii) upon Lender’s request therefor given from time to time
after the occurrence of any Event of Default pay for (a) reports of UCC,
federal tax lien, state tax lien, judgment and pending litigation searches with
respect to each Borrower and each SPE Party and (b) searches of title to
each Property, each such search to be conducted by search firms reasonably
designated by Lender in each of the locations reasonably designated by Lender.

 

5.8                               Environmental
Matters.

 

5.8.1                     Hazardous
Substances.  So long as a
Borrower owns or is in possession of any Property, the Borrowers shall (i) keep
such Property free from Hazardous Substances and in compliance with all
Environmental Laws (except those Hazardous Substances used by any Borrower
and/or tenants at the Properties in the ordinary course of their respective
businesses and in compliance with all applicable Environmental Laws), (ii) promptly
notify Lender if any Borrower shall become aware that (A) any Hazardous
Substance is on or near such Property in violation of any Environmental Law, (B) such
Property is in violation of any Environmental Laws or (C) any condition on
or near such Property shall pose a threat to the health, safety or welfare of
humans and (iii) remove such Hazardous Substances and/or cure such
violations and/or remove such threats, as applicable, if and to the extent
required by law, promptly after any Borrower becomes aware of same, at the
Borrowers’ sole expense.  Nothing herein
shall prevent any Borrower from recovering such expenses from any other party
that may be liable for such removal or cure.

 

5.8.2                     Environmental
Monitoring. (a)   The Borrowers shall give
prompt written notice to Lender of (i) any proceeding or inquiry by any
party (including any Governmental Authority) with respect to the presence of
any Hazardous Substance on, under, from or about any Property, (ii) all
claims made or threatened in writing by any third party (including any
Governmental Authority) against any Borrower or any Property or any party
occupying any Property relating to any loss or injury resulting from any
Hazardous Substance, and (iii) any Borrower’s discovery of any occurrence
or condition on any real property adjoining or in the vicinity of any Property
that could reasonably be expected to cause such Property to be subject to any
cleanup pursuant to any Environmental Law. 
Upon becoming aware of the presence of mold or fungus at any Property,
the Borrowers shall (i) undertake an investigation to identify the source(s) of
such mold or fungus and shall develop and implement an appropriate remediation
plan to eliminate the presence of any Toxic Mold, (ii) perform or cause to
be performed all acts required by any applicable Environmental Laws for the
remediation of any Toxic Mold (including taking any action necessary to clean
and disinfect any portions of such Property affected by Toxic Mold, including
providing any necessary moisture control systems at such Property), and (iii) provide
evidence reasonably satisfactory to Lender of the foregoing.  The Borrowers shall permit Lender to join and
participate in, as a party if it so elects, any legal or administrative
proceedings or other actions initiated with respect to any Property in
connection with any Environmental Law or Hazardous Substance, and the Borrowers
shall pay all reasonable attorneys’ fees and disbursements incurred by Lender
in connection therewith.

 

(b)         Upon Lender’s request, at
any time and from time to time, but not more than one time in any twelve (12)
month period (unless an Event of Default has occurred and is continuing), the
Borrowers shall provide an inspection or audit of any Property prepared by a
licensed hydrogeologist, licensed environmental engineer or qualified
environmental consulting 

 

41

 

firm approved by Lender in its reasonable discretion
assessing the presence or absence of Hazardous Substances on, in or near such
Property, and if an Event of Default has occurred and is continuing or Lender
in its good faith judgment determines that reasonable cause exists for the
performance of such environmental inspection or audit, then the cost and
expense of such audit or inspection shall be paid by the Borrowers, otherwise
the cost and expense of such audit or inspection shall be paid by Lender. Such
inspections and audit may include soil borings and ground water monitoring,
subject to the rights of tenants and occupants of the applicable Property.  If the Borrowers fail to provide any such
inspection or audit within thirty (30) days after such request, Lender may
order same, and the Borrowers hereby grants to Lender and its employees and
agents access to such Property and a license to undertake such inspection or
audit.  If Lender undertakes such
inspection or audit, (i) Lender shall cause all parties accessing the
applicable Property to be adequately insured (and naming the applicable
Borrower as additional insured, if available at no additional cost to Lender)
and (ii) Lender shall use, and cause all persons accessing the applicable
Property to use, commercially reasonable efforts not to unreasonably interfere
with the use, occupancy and enjoyment of such Property by the applicable
Borrower and the tenants and occupants thereof.

 

(c)          If any environmental
site assessment report prepared in connection with such inspection or audit
recommends that an operations and maintenance plan be implemented for any
Hazardous Substance, whether such Hazardous Substance existed prior to the
ownership of the Property in question by any Borrower, or presently exists or
is reasonably suspected of existing, the Borrowers shall cause such operations
and maintenance plan to be prepared and implemented at their expense upon
request of Lender, and with respect to any Toxic Mold, the Borrowers shall take
all action necessary to clean and disinfect any portions of the Improvements
with respect to such Property affected by Toxic Mold in or about such Improvements,
including providing any necessary moisture control systems at such
Property.  If any investigation, site
monitoring, containment, cleanup, removal, restoration or other work of any
kind is reasonably necessary under an applicable Environmental Law (“Remedial Work”), the Borrowers shall
commence all such Remedial Work within thirty (30) days after written demand by
Lender and thereafter diligently prosecute to completion all such Remedial Work
within such period of time as may be required under applicable law.  All Remedial Work shall be performed by
licensed contractors approved in advance by Lender and under the supervision of
a consulting engineer approved by Lender, in each case, in its reasonable discretion.  All costs of such Remedial Work shall be paid
by the Borrowers, including Lender’s reasonable attorneys’ fees and
disbursements incurred in connection with the monitoring or review of such
Remedial Work; provided that the Borrowers shall have access to funds in
the Cash Trap Reserve Subaccount in accordance with the terms and conditions of
Section 3.2.2(d) for the payment of such costs.  If the Borrowers do not timely commence and
diligently prosecute to completion the Remedial Work, Lender may (but shall not
be obligated to), upon not less than ten (10) days’ prior written notice
to the Borrowers, cause such Remedial Work to be performed at the Borrowers’
expense.  Notwithstanding the foregoing,
the Borrowers shall not be required to commence such Remedial Work within the
above specified time period: (x) if prevented from doing so by any
Governmental Authority, (y) if commencing such Remedial Work within such
time period would result in any Borrower or such Remedial Work violating any
Environmental Law, or (z) if the Borrowers, at their expense and after
prior written notice to Lender, is contesting by appropriate legal,
administrative or other proceedings, conducted in good faith and with due
diligence, the need to perform Remedial 

 

42

 

Work.  The
Borrowers shall have the right to contest the need to perform such Remedial
Work, provided that, (1) the Borrowers are permitted by the applicable
Environmental Laws to delay performance of the Remedial Work pending such
proceedings, (2) neither such Property nor any part thereof or interest
therein will be sold, forfeited or lost if the Borrowers fail to promptly
perform the Remedial Work being contested, and if the Borrowers fail to prevail
in the contest, the Borrowers would thereafter have the opportunity to perform
such Remedial Work, (3) Lender would not, by virtue of such permitted
contest, be exposed to any risk of any civil liability for which the Borrowers
have not furnished additional security as provided in clause (4) below, or
to any risk of criminal liability, and neither such Property nor any interest
therein would be subject to the imposition of any Lien for which the Borrowers
have not furnished additional security as provided in clause (4) below, as
a result of the failure to perform such Remedial Work and (4) the Borrowers
shall have furnished to Lender additional security in respect of the Remedial
Work being contested and the loss or damage that may result from the Borrowers’
failure to prevail in such contest in such amount as may be reasonably
requested by Lender but in no event less than one hundred five percent (105%)
of the cost of such Remedial Work as estimated by Lender or Lender’s Consultant
and any loss or damage that is reasonably likely to result from the Borrowers’
failure to prevail in such  contest.

 

(d)         No Borrower shall install
or permit to be installed on any Property any underground storage tank.

 

5.8.3                     O & M Program. 
In the event any environmental report delivered to Lender in
connection with the Loan recommends the development of or continued compliance
with an operation and maintenance program for any Property (including, without
limitation, with respect to the presence of asbestos and/or lead-based paint) (“O & M Program”),
the Borrowers shall develop (or continue to comply with, as the case may be)
such O & M Program and shall, during the term of the Loan, including
any extension or renewal thereof, comply in all material respects with the
terms and conditions of the O & M Program.

 

5.9                               Title
to the Property.  The Borrowers
shall warrant and defend the title to each Property, and the validity and
priority of all Liens granted or otherwise given to Lender under the Loan
Documents, subject only to Permitted Encumbrances, against the claims of all
Persons.

 

5.10                        Leases.

 

5.10.1              Generally.  Upon request, the Borrowers shall furnish
Lender with executed copies of all Material Leases then in effect and use
reasonable efforts to make all other Leases available to Lender, either at the
Properties or on an internet website. 
All renewals of Material Leases shall provide for rental rates and terms
comparable to existing local market rates and shall be arm’s length
transactions with bona fide, independent third-party tenants.

 

5.10.2              Material
Leases.  No Borrower shall
enter into a proposed Material Lease or a proposed renewal (other than a
renewal which a tenant may exercise as a matter of right pursuant to the terms
of such Material Lease and without the necessity of any Borrower’s consent),
extension or modification of an existing Material Lease without the prior
written consent of Lender, which consent shall not, so long as no Event of
Default is continuing, be unreasonably withheld or delayed.  Prior to seeking Lender’s consent to any
Material Lease, such Borrower shall deliver to Lender a copy of such proposed
Material Lease (a “Proposed Material 

 

43

 

Lease”)
blacklined to show changes from the standard form of Lease approved by Lender
and then being used by such Borrower.  Lender shall approve or disapprove each
Proposed Material Lease or proposed renewal, extension or modification of an
existing Material Lease for which Lender’s approval is required under this
Agreement within ten (10) Business Days of the submission by such Borrower
to Lender of a written request for such approval, accompanied by a final copy
of the Proposed Material Lease or proposed renewal, extension or modification
of an existing Material Lease.  If
requested by such Borrower, Lender will grant conditional approvals of Proposed
Material Leases or proposed renewals, extensions or modifications of existing
Material Leases at any stage of the leasing process, from initial “term sheet”
through negotiated lease drafts, provided that Lender shall retain the right to
disapprove any such Proposed Material Lease or proposed renewal, extension or
modification of an existing Material Lease, if subsequent to any preliminary
approval material changes are made to the terms previously approved by Lender,
or additional material terms are added that had not previously been considered
and approved by Lender in connection with such Proposed Material Lease or
proposed renewal, extension or modification of an existing Material Lease.  Provided that no Event of Default has occurred
and is continuing, if any Borrower provides Lender with a written request for
approval (which written request shall specifically refer to this Section 5.10.2
and shall state that failure by Lender to approve or disapprove within ten (10) days
will constitute a deemed approval) and Lender fails to reject the request in
writing delivered to the applicable Borrower within ten (10) days after
receipt by Lender of the request, the Proposed Material Lease or proposed
renewal, extension or modification of an existing Material Lease shall be
deemed approved by Lender, and such Borrower shall be entitled to enter into
such Proposed Material Lease or proposed renewal, extension or modification of
an existing Material Lease.

 

5.10.3              Ground Leases.

 

No Borrower shall enter
into a Ground Lease or a renewal, extension or modification of an existing
Ground Lease without the prior written consent of Lender, which consent shall
not, so long as no Event of Default is continuing, be unreasonably withheld or
delayed.  Prior to seeking Lender’s
consent to any Ground Lease, such Borrower shall deliver to Lender a copy of
such proposed ground lease (a “Proposed Ground Lease”).  Lender shall approve or disapprove each
Proposed Ground Lease or proposed renewal, extension or modification of an
existing Ground Lease for which Lender’s approval is required under this
Agreement within ten (10) Business Days of the submission by such Borrower
to Lender of a written request for such approval, accompanied by a final copy
of the Proposed Ground Lease or proposed renewal, extension or modification of
an existing Ground Lease.  If requested
by such Borrower, Lender will grant conditional approvals of Proposed Ground
Leases or proposed renewals, extensions or modifications of existing Ground
Leases at any stage of the leasing process, from initial “term sheet” through
negotiated lease drafts, provided that Lender shall retain the right to
disapprove any such Proposed Ground Lease or proposed renewal, extension or
modification of an existing Ground Lease, if subsequent to any preliminary
approval material changes are made to the terms previously approved by Lender,
or additional material terms are added that had not previously been considered
and approved by Lender in connection with such Proposed Ground Lease or
proposed renewal, extension or modification of an existing Ground Lease.  Notwithstanding anything the contrary
contained herein, after a Secondary Market Transaction, each Ground Lease shall
comply with Rating Agency guidelines.

 

44

 

5.10.4              Minor
Leases.  Notwithstanding
the provisions of Section 5.10.2 above, renewals, amendments and
modifications of existing Leases and proposed leases, shall not be subject to
the prior approval of Lender provided (i) the proposed lease would be a Minor
Lease or the existing Lease as amended or modified is a Minor Lease, (ii) the
renewal of the existing Lease may be exercised by the tenant thereunder as a
matter of right pursuant to the terms of such existing Lease and without the
necessity of any Borrower’s consent or if such renewal is not exercisable by
tenant as a matter of right pursuant to the terms of such Lease and without any
Borrower’s consent, such existing Lease is a Minor Lease, (iii) the
proposed lease shall be written substantially in accordance with the standard
form of Lease which shall have been approved by Lender (as such form may be
modified from time to time to conform to generally prevailing market
conditions, which modifications may be made without Lender’s consent), subject
to any commercially reasonable changes made in the course of negotiation with
the applicable tenant, and (iv) the Lease as amended or modified or the
renewal Lease or series of leases or proposed lease or series of leases: (a) shall
provide for net effective rental rates comparable to existing local market
rates, (b) shall have an initial term (together with all renewal options)
of no greater than ten (10) years, (c) shall provide for automatic
self-operative subordination to the applicable Mortgage and, at Lender’s
option, (x) attornment to Lender and (y) the unilateral right by
Lender, at the option of Lender, to subordinate the Lien of the applicable
Mortgage to the Lease, and (d) shall not contain any option to purchase,
any right of first refusal to purchase or any other provision which might
adversely affect the rights of Lender under the Loan Documents in any material
respect.

 

5.10.5              Additional
Covenants with respect to Leases. 
Each Borrower (i) shall observe and perform the material
obligations imposed upon the lessor under the Leases to which it is a party,
including, without limitation, any obligation it has undertaken to provide
tenant improvement allowances, and shall not do or permit anything to impair
the value of the Leases as security for the Debt; (ii) shall promptly send
copies to Lender of all material notices of default that such Borrower shall
send or receive under any Material Lease; (iii) shall enforce, in
accordance with commercially reasonable practices for properties similar to the
applicable Property, the terms, covenants and conditions in the Leases to be
observed or performed by the lessees, short of termination thereof; (iv)  shall
not collect any of the Rents more than one (1) month in advance (other
than security deposits); (v) shall not execute any other assignment of
lessor’s interest in the Leases or the Rents (except as contemplated by the
Loan Documents); (vi) shall not convey or transfer or suffer or permit a
conveyance or transfer of the applicable Property so as to effect a merger of
the estates and rights of, or a termination or diminution of the obligations
of, lessees under Leases; (vii) shall not consent to any assignment of or
subletting under any Material Lease unless required in accordance with its
terms without the prior consent of Lender, which, with respect to a subletting,
may not, so long as no Event of Default is continuing, be unreasonably withheld
or delayed; (viii) shall not cancel or terminate any Lease or accept a
surrender thereof (except in the exercise of such Borrower’s commercially
reasonable judgment in connection with a tenant default under a Minor Lease)
without the prior consent of Lender, which consent shall not, so long as no
Event of Default is continuing, be unreasonably withheld or delayed; (ix) shall
pay when due all leasing commissions payable by such Borrower in connection
with any Lease; and (x) shall cooperate with Lender to obtain
subordination non-disturbance and attornment agreements in form and substance
reasonably satisfactory to Lender 

 

45

 

from each tenant under any Material Lease.  Provided that no Event of Default has
occurred and is continuing, if any Borrower provides Lender with a written request for approval for
any action requiring Lender’s consent or approval under this Section 5.10.5 (which
written request shall specifically refer to this Section 5.10.5 and
shall state that failure by Lender to approve or disapprove such request within
ten (10) days will constitute a deemed approval and shall be accompanied
by a reasonably detailed description of the request) and Lender fails to reject
the request in writing delivered to the applicable Borrower within ten (10) days
after receipt by Lender of the request (which rejection shall set forth the
reasons for such rejection), the action which is the subject of such request
shall be deemed approved.

 

5.11                        Estoppel
Statements.

 

5.11.1              Borrower Estoppel
Statements.  Upon request of
Lender, the Borrowers shall, within ten (10) days after receipt of Lender’s
written request, furnish Lender with a statement addressed to Lender, its
successors and assigns, duly acknowledged and certified, setting forth (i) the
unpaid Principal, (ii) the Interest Rate, (iii) the date installments
of interest and/or Principal were last paid, (iv) any offsets or defenses
to the payment of the Debt, and (v) that the Loan Documents are valid,
legal and binding obligations and have not been modified or if modified, giving
particulars of such modification; provided that the Borrowers shall not
be required to deliver such statement more frequently than two (2) times
in any calendar year.

 

5.11.2              Lender Estoppel
Statements.  Upon request by the
Borrowers, Lender shall, within ten (10) days after receipt of written
request from the Borrowers, furnish the Borrowers with a statement, duly
acknowledged and certified, setting forth (i) the unpaid Principal, (ii) the
Interest Rate, (iii) the date installments of interest and/or Principal
were last paid, and (iv) whether, to Lender’s knowledge, there then exists
any Default or Event of Default; provided that Lender shall not be
required to deliver such statement more frequently than two (2) times in
any calendar year.

 

5.12                        Property
Management.

 

5.12.1              Management
Agreement.  Each Borrower shall (i) cause
each Property to be managed pursuant to a Management Agreement; (ii) promptly
perform and observe in all material respects all of the covenants required to
be performed and observed by it under any Management Agreement and do all things
necessary to preserve and to keep unimpaired its rights thereunder; (iii) promptly
notify Lender of any material default under any Management Agreement of which
it is aware; and (iv) promptly enforce in a commercially reasonable manner
the performance and observance of all of the covenants required to be performed
and observed by the Manager under any Management Agreement.  Without Lender’s prior written consent (which
consent shall not be unreasonably withheld or delayed), no Borrower shall (a) surrender,
terminate, cancel, extend or renew any Management Agreement or otherwise
replace any Manager or enter into any other management agreement (except
pursuant to Section 5.12.2); (b) reduce or consent to the
reduction of the term of any Management Agreement; (c) increase or consent
to the increase of the amount of any charges under any Management Agreement; (d) otherwise
modify, change, supplement, alter or amend in any material respect, or waive or
release any of its rights and remedies under, any Management Agreement; (e) suffer
or permit the occurrence and continuance of a default beyond any applicable
cure period under any Management Agreement (or any successor management 

 

46

 

agreement) if such default permits any Manager to
terminate any Management Agreement (or such successor management agreement).

 

5.12.2              Termination
of Manager.  If (i) an
Event of Default shall have occurred and be continuing, (ii) any Manager
is in default under any Management Agreement or (iii) the gross
negligence, malfeasance or willful misconduct of any Manager has occurred, the
applicable Borrower shall, at the request of Lender, terminate the applicable
Management Agreement and replace the applicable Manager with a replacement manager
acceptable to Lender in Lender’s discretion and the applicable Rating Agencies
on terms and conditions satisfactory to Lender and the applicable Rating
Agencies. The Borrowers may from time to time appoint one or more successor
managers to manage any Property, provided that such successor manager(s) and
Management Agreement(s) shall be approved in writing by Lender in Lender’s
reasonable discretion and, after a Secondary Market Transaction, the applicable
Rating Agencies (and Lender’s approval may be conditioned upon the Borrowers
delivering a Rating Comfort Letter as to such successor manager(s) and
Management Agreement(s)).  If at any time
Lender consents to the appointment of a new manager, such new manager and the
applicable Borrower shall, as a condition of Lender’s consent, execute a
consent and subordination of management agreement substantially in the form of
the Consent and Subordination of Manager of even date herewith executed and
delivered by each Manager to Lender.  Notwithstanding
anything to the contrary contained herein, each Borrower shall have the right
to terminate the Management Agreement with respect to the Properties owned by
such Borrower without Lender’s consent provided that (1) such Borrower
shall have entered into a new management agreement with a Qualified Manager,
which new management agreement shall have an effective date not later than
thirty (30) days after the date on which the then existing Management Agreement
is terminated (the “Replacement Management Agreement”)
and (2) such Qualified Manager shall have executed and delivered to Lender
prior to the effective date of such Replacement Management Agreement a Consent
and Subordination of Manager in the same form as the Consent and Subordination
of Manager executed and delivered to Lender on the date hereof.

 

5.12.3              Approvals.

 

Provided
no Event of Default has occurred and is continuing, if any Borrower provides
Lender with a written request for approval or consent for any action requiring
Lender’s consent or approval under Section 5.12.1 or 5.12.2 (which
written request shall specifically refer to Section 5.12.1 or 5.12.2,
as the case may be, and shall state that failure by Lender to approve or
disapprove such request within ten (10) days will constitute a deemed
approval and shall be accompanied by a reasonably detailed description of the
request) and Lender fails to reject the request in writing delivered to the
applicable Borrower within ten (10) days after receipt by Lender of the
request (which rejection shall set forth the reasons for such rejection), the
action which is the subject of such request shall be deemed approved.

 

5.13                        Special
Purpose Bankruptcy Remote Entity.  Each
Borrower and each SPE Party  shall at all
times be a Special Purpose Bankruptcy Remote Entity.  Neither any Borrower nor any SPE Party shall
directly or indirectly make any material change, amendment or modification to
its or such SPE Party’s organizational documents, or otherwise take any action
which could result in any Borrower or any SPE Party not being a Special Purpose
Bankruptcy 

 

47

 

Remote Entity. 
A “Special Purpose Bankruptcy Remote Entity”
shall have the meaning set forth on Schedule 6 hereto.

 

5.14                        Assumption in Non-Consolidation Opinion.  The Borrowers shall deliver to Lender
a substantive non-consolidation opinion letter in connection with the Loan in
form and substance reasonably acceptable to Lender from Greenberg Traurig, LLP
or other counsel reasonably acceptable to Lender.  Each Borrower and each SPE Party shall each
conduct its business so that the assumptions (with respect to each Person) made
in such substantive non-consolidation opinion letter shall be true and correct
in all material respects.

 

5.15                        Change
in Business or Operation of Property. 
No Borrower shall purchase or own any real property other than the
Properties and no Borrower shall enter into any line of business other than the
ownership and operation of the Properties, or make any material change in the
scope or nature of its business objectives, purposes or operations, or
undertake or participate in activities other than the continuance of its
present business.

 

5.16                        Debt
Cancellation.  No Borrower shall
cancel or otherwise forgive or release any claim or debt (other than
termination of Leases in accordance herewith) owed to such Borrower by any
Person, except for adequate consideration and in the ordinary course of such
Borrower’s business.

 

5.17                        Affiliate
Transactions  No Borrower shall enter into, or be a party to,
any transaction with an Affiliate of any Borrower or any of the partners of any
Borrower except in the ordinary course of business and on terms which are no
less favorable to such Borrower or such Affiliate than would be obtained in a
comparable arm’s-length transaction with an unrelated third party.

 

5.18                        Zoning.  No Borrower shall initiate or consent to
any zoning reclassification of any Property or seek any variance under any
existing zoning ordinance or use or permit the use of any Property in any
manner that could result in such use becoming a non-conforming use under any
zoning ordinance or any other applicable land use law, rule or regulation,
without the prior consent of Lender, which consent shall not be unreasonably
withheld, conditioned or delayed.

 

5.19                        No
Joint Assessment.  No Borrower
shall suffer, permit or initiate the joint assessment of any Property (i) with
any other real property constituting a tax lot separate from such Property, and
(ii) with any portion of such Property which may be deemed to constitute
personal property, or any other procedure whereby the lien of any taxes which
may be levied against such personal property shall be assessed or levied or
charged to such Property.

 

5.20                        Principal
Place of Business.  No Borrower
shall change its principal place of business or chief executive office without
first giving Lender thirty (30) days’ prior notice.

 

5.21                        Change
of Name, Identity or Structure.  No
Borrower shall change its name, identity (including its trade name or names) or
its partnership structure without notifying Lender of such change in writing at
least thirty (30) days prior to the effective date of such change and, in the
case of a change in such Borrower’s structure, without first obtaining the
prior written 

 

48

 

consent of Lender. 
Each Borrower shall execute and deliver to Lender, prior to or
contemporaneously with the effective date of any such change, any financing
statement or financing statement change required by Lender to establish or
maintain the validity, perfection and priority of the security interest granted
herein.  At the request of Lender, each
Borrower shall execute a certificate in form reasonably satisfactory to Lender
listing the trade names under which such Borrower intends to operate each
Property owned by such Borrower, and representing and warranting that such
Borrower does business under no other trade name with respect to such Property.

 

5.22                        Indebtedness.  No Borrower shall directly or indirectly
create, incur or assume any indebtedness other than the (i) Debt, (ii) unsecured
trade payables incurred in the ordinary course of business relating to the
ownership and operation of any Property and Permitted Equipment Financing that (A) are
not evidenced by a note, (B) do not exceed, at any time, a maximum
aggregate amount of three percent (3%) of the original amount of the Principal
and (C) are paid within sixty (60) days of the date invoiced and (iii) leasing
commissions and tenant improvement costs incurred by any Borrower in connection
with any Lease entered into in accordance with the terms and conditions of this
Agreement which (1) are not evidenced by a promissory note and (2) are
paid in accordance with the terms and conditions of such Lease (collectively, “Permitted Indebtedness”).  As used herein, “Permitted
Equipment Financing” means equipment financing that is (i) entered
into in the ordinary course of such Borrower’s business, (ii) for
equipment related to the ownership and operation of any Property whose removal
would not materially damage or impair the value of such Property, and (iii) which
is secured only by the financed equipment.

 

5.23                        Licenses.  No Borrower shall Transfer any License
required for the operation of any Property.

 

5.24                        Compliance
with Restrictive Covenants, Etc.No Borrower shall, without Lender’s
consent (such consent not to be unreasonably withheld, conditioned or delayed),
enter into, modify, waive in any material respect or release any Easements,
restrictive covenants or other Permitted Encumbrances, or suffer, consent to or
permit the foregoing.

 

5.25                        ERISA.

 

(1)          No Borrower shall engage
in any transaction which would cause any obligation, or action taken or to be
taken, hereunder (or the exercise by Lender of any of its rights under the
Note, this Agreement or the other Loan Documents) to be a non-exempt (under a
statutory or administrative class exemption) prohibited transaction under
ERISA.

 

(2)          No Borrower shall
maintain, sponsor, contribute to or become obligated to contribute to, or
suffer or permit any ERISA Affiliate of such Borrower to, maintain, sponsor,
contribute to or become obligated to contribute to, any Plan or any Welfare
Plan or permit the assets of such Borrower to become “plan assets,” whether by
operation of law or under regulations promulgated under ERISA.

 

(3)          Each Borrower shall
deliver to Lender such certifications or other evidence from time to time
throughout the Term, as requested by Lender in its reasonable 

 

49

 

discretion, that (A) such Borrower is not and does not maintain an
“employee benefit plan” as defined in Section 3(3) of ERISA, which is
subject to Title I of ERISA, or a “governmental plan” within the meaning of Section 3(3) of
ERISA; (B) such Borrower is not subject to state statutes regulating
investments and fiduciary obligations with respect to governmental plans; and (C) the
assets of such Borrower do not constitute “plan assets” within the meaning of
29 C.F.R. Section 2510.3-101.

 

5.26                        Prohibited
Transfers.   No Borrower shall
directly or indirectly make, suffer or permit the occurrence of any Transfer
other than a Permitted Transfer.  In
addition, without the prior written consent of Lender (which consent shall not
be unreasonably withheld, conditioned or delayed), no Borrower shall (i) sell,
convey, transfer, lease or assign, or enter into any agreement to sell, convey,
transfer, lease or assign, whether by law or otherwise, any of such Borrower’s
interests in any of its subsidiaries, except pursuant to the Pledges or (ii) cause
or permit any of such Borrower’s subsidiaries to sell, convey, transfer, lease
or assign, or enter into any agreement to sell, convey, transfer, lease or
assign, whether by law or otherwise, any of such subsidiary’s property.  Notwithstanding anything to the contrary
contained in this Agreement or in any of the other Loan Documents, none of the
foregoing restrictions, including the prohibition against Transfers, shall
apply to and no consent, approval or confirmation of, or notice to, any Lender
shall be required with respect to (1) any direct or indirect, voluntary or
involuntary, sale, conveyance, pledge, assignment, encumbrance, disposition or
other transfer, either in one or a series of transactions, of any direct or indirect
legal or beneficial interest in Guarantor or GKK Capital, L.P. (“GKK OP”) and/or any rights,
distributions, profits or proceeds relating thereto, including (but not limited
to) by way of any merger, consolidation, amalgamation, sale, or other transfer
of any kind of any stock, limited or general partnership interests, limited
liability company interests, trust certificates or other similar evidences of
ownership of legal or beneficial interests, as the case may be, of Guarantor or
GKK OP or any legal or beneficial interest therein; (2) any sale of all or
substantially all of the assets of Guarantor or GKK OP to any Person who
assumes all of the obligations of Guarantor or GKK OP, as applicable, under the
Loan Documents; provided, however, that if, after giving effect
to any of the foregoing, more than forty-nine percent (49%) in the aggregate of
the direct or indirect interests in any Borrower are owned by a Person and its
Affiliates that owned less than forty-nine percent (49%) of the direct or indirect
interests in such Borrower as of the date of the last insolvency opinion
delivered at the closing of the loan or under the Loan Documents, then the
Borrowers shall deliver to Lender a replacement insolvency opinion reasonably
acceptable to Lender; or (3) any current or additional borrowing or
financing by or other indebtedness of any nature of Guarantor or GKK OP and/or
any direct or indirect holder of a legal or beneficial interest therein and,
for the purposes of this sentence, “indebtedness” of a Person shall be deemed
to include (A) any indebtedness or liability of such Person (including,
without limitation, amounts for borrowed money and indebtedness in the form of
mezzanine debt and preferred equity); (B) obligations evidenced by bonds,
debentures, notes, or other similar instruments; (C) obligations for the
deferred purchase price of property or services (including trade obligations); (D) obligations
under letters of credit; (E) obligations under acceptance facilities; (F) all
guaranties, endorsements and other contingent obligations to purchase, to
provide funds for payment, to supply funds, to invest in any Person or entity,
or otherwise to assure a creditor against loss; and (G) obligations
secured by any liens, whether or not the obligations have been assumed.  No consent, approval or confirmation of, or 

 

50

 

notice to, any Lender shall be required with respect
to a Permitted Transfer unless expressly required by the terms and conditions
of this Agreement.

 

5.27                        Liens.  Without Lender’s prior written consent,
no Borrower shall create, incur, assume, permit or suffer to exist any Lien on
all or any portion of any Property or any direct or indirect legal or
beneficial ownership interest in such Borrower or any SPE Party, except Liens
in favor of Lender and Permitted Encumbrances, unless such Lien is bonded or
discharged within thirty (30) days after any Borrower first receives notice of
such Lien.

 

5.28                        Dissolution.  No Borrower shall (i) to the fullest
extent permitted by law, engage in any dissolution, liquidation or
consolidation or merger with or into any other business entity, (ii) engage
in any business activity not related to the ownership and operation of the
Properties owned by such Borrower or (iii) transfer, lease or sell, in one
transaction or any combination of transactions, all or substantially all of the
property or assets of such Borrower except to the extent expressly permitted by
the Loan Documents.

 

5.29                        Expenses.  The Borrowers shall reimburse Lender
within ten (10) Business Days of Borrowers’ receipt of written notice from
Lender for all reasonable out-of-pocket costs and expenses (including
reasonable attorneys’ fees and disbursements) actually incurred by Lender or
Servicer in connection with the Loan, including (i) the preparation,
negotiation, execution and delivery of the Loan Documents and the consummation
of the transactions contemplated thereby and all the costs of furnishing all
opinions by counsel for any Borrower; (ii) each Borrower’s and Lender’s
ongoing performance under and compliance with the Loan Documents, including
confirming compliance with environmental and insurance requirements; (iii) the
negotiation, preparation, execution, delivery and administration of any consents,
amendments, waivers or other modifications of or under any Loan Document and
any other documents or matters requested by any Borrower; (iv) filing and
recording of any Loan Documents; (v) title insurance, surveys, inspections
and appraisals required to be obtained and/or delivered by Borrowers pursuant
to the terms hereof or as a condition precedent to the closing of the Loan; (vi) the
creation, perfection or protection of Lender’s Liens in the Properties and the
Cash Management Accounts (including fees and expenses for title and lien
searches, intangibles taxes, personal property taxes, mortgage recording taxes,
due diligence expenses, travel expenses, accounting firm fees, costs of
appraisals, environmental reports and Lender’s Consultant, surveys and engineering
reports); (vii) enforcing or preserving any rights in response to third
party claims or the prosecuting or defending of any action or proceeding or
other litigation, in each case against, under or affecting any Borrower, the
Loan Documents, any Property, or any other security given for the Loan; and (viii) enforcing
any obligations of or collecting any payments due from any Borrower under any
Loan Document or with respect to any Property or in connection with any
refinancing or restructuring of the Loan in the nature of a “work-out”, or any
insolvency or bankruptcy proceedings. 
Any costs and expenses due and payable by the Borrowers hereunder which
are not paid by the Borrowers within ten (10) Business Days after written
request thereof from Lender may be paid from any amounts in the Deposit
Account, with notice thereof to the Borrowers. 
The obligations and liabilities of the Borrowers under this Section 5.29
shall survive the Term and the exercise by Lender of any of its rights or
remedies under the Loan Documents, including the acquisition of any Property by
foreclosure or a conveyance in lieu of foreclosure.

 

51

 

5.30                        Indemnity.  The Borrowers shall defend, indemnify and
hold harmless Lender and each of its Affiliates and their respective successors
and assigns, including the directors, officers, partners, members,
shareholders, participants, employees, professionals and agents of any of the
foregoing (including any Servicer) and each other Person, if any, who Controls
Lender, its Affiliates or any of the foregoing (each, an “Indemnified
Party”), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including the reasonable
fees and disbursements of counsel for an Indemnified Party in connection with
any investigative, administrative or judicial proceeding commenced or
threatened, whether or not Lender shall be designated a party thereto, court
costs and costs of appeal at all appellate levels, investigation and laboratory
fees, reasonable consultant fees and litigation expenses), that are actually
incurred by any Indemnified Party (collectively, the “Indemnified
Liabilities”) in any manner arising out of or by reason of the
Loan, including: (i) any breach by any Borrower of its obligations under,
or any misrepresentation by any Borrower contained in, any Loan Document; (ii) the
use or intended use of the proceeds of the Loan; (iii) any information
provided by or on behalf of any Borrower, or contained in any documentation
approved by such Borrower; (iv) ownership of the Mortgages, the Properties
or any interest therein, or receipt of any Rents; (v) any accident, injury
to or death of persons or loss of or damage to property occurring in, on or
about any Property or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (vi) any use, nonuse or condition
in, on or about any Property or on adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways; (vii) performance of
any labor or services or the furnishing of any materials or other property in
respect of any Property; (viii) the presence, disposal, escape, seepage,
leakage, spillage, discharge, emission, release, or threatened release of any
Hazardous Substance on, from or affecting any Property; (ix) any personal
injury (including wrongful death) or property damage (real or personal)
arising out of or related to such Hazardous Substance; (x) any lawsuit
brought or threatened, settlement reached, or government order relating to such
Hazardous Substance; (xi) any violation of the Environmental Laws which is
based upon or in any way related to such Hazardous Substance, including the
costs and expenses of any Remedial Work; (xii) any failure of any Property
to comply with any Legal Requirement; (xiii) any claim by brokers, finders
or similar persons claiming to be entitled to a commission in connection with
any Lease or other transaction involving any Property or any part thereof, or
any liability asserted against Lender with respect thereto; and (xiv) the
claims of any lessee of any portion of any Property or any Person acting
through or under any lessee or otherwise arising under or as a consequence of
any Lease; provided, however, that Borrowers shall not have any obligation to
any Indemnified Party hereunder to the extent that it is finally judicially
determined that such Indemnified Liabilities arise from the gross negligence,
illegal acts, fraud or willful misconduct of such Indemnified Party.  Any amounts payable to any Indemnified Party
by reason of the application of this paragraph shall be payable on demand and
shall bear interest at the Interest Rate from the date loss or damage is
sustained by any Indemnified Party until paid. 
The obligations and liabilities of the Borrowers under this Section 5.30
shall survive the Term and the exercise by Lender of any of its rights or
remedies under the Loan Documents, including the acquisition of any Property by
foreclosure or a conveyance in lieu of foreclosure, but solely as respects
matters arising or events occurring prior to the end of the Term.

 

52

 

5.31                      Patriot
Act Compliance.  (a)                     Each Borrower will use its good
faith and commercially reasonable efforts to comply with the Patriot Act (as
defined below) and all applicable requirements of governmental authorities
having jurisdiction over such Borrower and any Property, including those
relating to money laundering and terrorism. 
Lender shall have the right to audit each Borrower’s compliance with the
Patriot Act and all applicable requirements of governmental authorities having
jurisdiction over such Borrower and any Property, including those relating to
money laundering and terrorism.  In the
event that any Borrower fails to comply with the Patriot Act or any such
requirements of governmental authorities, then Lender may, at its option, cause
such Borrower to comply therewith and any and all reasonable out-of-pocket
costs and expenses incurred by Lender in connection therewith shall be secured
by the Mortgages and the other Loan Documents and shall be due and payable
within ten (10) Business Days after request therefor.  For purposes hereof, the term “Patriot Act” means the Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA
PATRIOT ACT) Act of 2001, as the same may be amended from time to time, and
corresponding provisions of future laws.

 

(b)         Neither any Borrower nor
any partner in any Borrower or member of such partner nor, to any Borrower’s
knowledge, any owner of a direct or indirect interest in any Borrower (a) is
listed on any Government Lists (as defined below), (b) is a person who has
been determined by competent authority to be subject to the prohibitions
contained in Presidential Executive Order No. 13224 (Sept. 23, 2001) or
any other similar prohibitions contained in the rules and regulations of
OFAC (as defined below) or in any enabling legislation or other Presidential
Executive Orders in respect thereof, (c) has been previously indicted for
or convicted of any felony involving a crime or crimes of moral turpitude or
for any Patriot Act Offense (as defined below), or (d) is currently under
investigation by any governmental authority for alleged criminal activity.  For purposes hereof, the term “Patriot Act Offense” means any
violation of the criminal laws of the United States of America or of any of the
several states, or that would be a criminal violation if committed within the
jurisdiction of the United States of America or any of the several states,
relating to terrorism or the laundering of monetary instruments, including any
offense under (a) the criminal laws against terrorism; (b) the
criminal laws against money laundering, (c) the Bank Secrecy Act, as
amended, (d) the Money Laundering Control Act of 1986, as amended, or the (e) Patriot
Act.  “Patriot Act Offense” also includes
the crimes of conspiracy to commit, or aiding and abetting another to commit, a
Patriot Act Offense.  For purposes
hereof, the term “Government Lists” means (i) the
Specially Designated Nationals and Blocked Persons Lists maintained by Office
of Foreign Assets Control (“OFAC”), (ii) any
other list of terrorists, terrorist organizations or narcotics traffickers
maintained pursuant to any of the Rules and Regulations of OFAC that
Lender notified the Borrowers in writing is now included in “Governmental Lists”,
or (iii) any similar lists maintained by the United States Department of
State, the United States Department of Commerce or any other government
authority or pursuant to any Executive Order of the President of the United
States of America that Lender notified the Borrowers in writing is now included
in “Governmental Lists”.

 

53

 

5.32                        Payment
of Approved Operating Expenses and Approved Capital Expenses.

 

The Borrowers shall pay all Approved Operating Expenses
and Approved Capital Expenses as they are incurred and become due.

 

6.                                    NOTICES
AND REPORTING

 

6.1                               Notices.  All notices, consents, approvals and
requests required or permitted hereunder or under any other Loan Document (a “Notice”) shall be given in
writing and shall be effective for all purposes if either hand delivered with
receipt acknowledged, or by a nationally recognized overnight delivery service
(such as Federal Express), or by certified or registered United States mail,
return receipt requested, postage prepaid, or by facsimile and confirmed by
facsimile answer back, in each case addressed as follows (or to such other
address or Person as a party shall designate from time to time by notice to the
other party):  If to Lender: Gramercy
Investment Trust, 420 Lexington Avenue, New York, New York 10170, Attention:
Andrew Falk, Telecopier (212) 216-1785, with a copy to: Morrison &
Foerster LLP, 1290 Avenue of the Americas, New York, New York 10104, Attention:
Jeffrey J. Temple, Esq., Telecopier: (212) 468-7900; if to any Borrower:
610 Old York Road, Suite 300, Jenkintown, Pennsylvania 19046, Attention:
Office of the General Counsel, Telecopier: (215) 572-1596, with a copy to 610 Old York Road, Suite 300,
Jenkintown, Pennsylvania 19046, Attention: Treasury Department, Telecopier: (215) 572-1596, and a copy to:
Greenberg Traurig, 200 Park Avenue, 15th Floor, New York, New York 10166,
Attention: Gary Kleinman, Esq., Telecopier: (212) 801-6400.  A notice shall be deemed to have been
given:  in the case of hand delivery, at
the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; in the case of
overnight delivery, upon the first attempted delivery on a Business Day; or in
the case of facsimile, upon the confirmation of such facsimile transmission.

 

6.2                               Borrower
Notices and Deliveries.  The
Borrowers shall (a) give prompt written notice to Lender of: (i) any
litigation, governmental proceedings or claims or investigations pending or threatened
against any Borrower or any SPE Party which, if adversely determined against
such Borrower, would reasonably be expected to result in a Material Adverse
Change; (ii) any material adverse change in any Borrower’s or any SPE
Party’s condition, financial or otherwise, or of the occurrence of any Event of
Default of which any Borrower has actual knowledge; and (b) furnish and
provide to Lender: (i) any Securities and Exchange Commission or other
public filings, if any, of any Borrower or any SPE Party within ten (10) Business
Days of such filing and (ii) all instruments, documents, boundary surveys,
footing or foundation surveys, certificates, plans and specifications,
appraisals, title and other insurance reports and agreements, reasonably
requested, from time to time, by Lender in accordance with the terms of this
Agreement.

 

6.3                               Financial
Reporting

 

6.3.1                     Bookkeeping.  The Borrowers shall keep on a calendar
year basis, in accordance with GAAP (or such other basis reasonably acceptable
to Lender), proper and accurate books, records and accounts reflecting all of
the financial affairs of the Borrowers and all items of income and expense and
any services, Equipment with respect to all Properties or furnishings provided
in connection with the operation of the Properties, whether such income or
expense is realized by the Borrowers, any Manager or any Affiliate of any
Borrower.  Lender shall have the right
from time to time during normal business hours upon reasonable notice to
examine such books, records and accounts at the office of the Borrowers or
other Person 

 

54

 

maintaining them, and to make such copies or extracts thereof as Lender
shall desire.  During the continuance of
an Event of Default, the Borrowers shall pay any reasonable out-of-pocket costs
incurred by Lender to examine such books, records and accounts, as Lender shall
determine to be necessary or appropriate in the protection of Lender’s
interest.

 

6.3.2                     Annual Reports.  Each Borrower shall furnish to Lender
annually, within one hundred twenty (120) days after each calendar year, a
complete copy of such Borrower’s unaudited annual financial statements, each in
accordance with GAAP (or such other basis reasonably acceptable to Lender) and
containing balance sheets and statements of profit and loss for such Borrower
and the Properties owned by such Borrower in such detail as Lender may
reasonably request.  Each such statement (x) shall
be in form and substance reasonably satisfactory to Lender, (y) shall set
forth the financial condition and the income and expenses for the Properties
owned by such Borrower for the immediately preceding calendar year, including
statements of annual Net Operating Income as well as a list of tenants, if any,
occupying more than twenty percent (20%) of the rentable space of each such
Property, (z) shall be accompanied by an Officer’s Certificate certifying,
to such officer’s actual knowledge, that such statement is true, correct,
complete and accurate in all material respects and presents fairly the
financial condition of each such Property and has been prepared in accordance
with GAAP (or such other basis reasonably acceptable to Lender).

 

6.3.3                     Quarterly Reports.  Each Borrower shall furnish to Lender
within forty-five (45) days after the end of each calendar quarter the
following items: (i) operating statements for each calendar month during
such calendar quarter, noting Net Operating Income and other information
necessary and sufficient under GAAP (or such other basis reasonably acceptable
to Lender) to fairly represent the financial position and results of operation
of the Properties owned by such Borrower during each such calendar month, all
in form satisfactory to Lender; (ii) a balance sheet for each calendar
month during such calendar quarter; (iii) a statement of the actual
Capital Expenses made by such Borrower during each calendar quarter as of the
last day of such calendar quarter; (iv) a statement that such Borrower has
not incurred any indebtedness other than indebtedness permitted hereunder; and (vi) an
aged receivables report for each calendar month during such calendar quarter
for the Properties owned by such Borrower. 
Each such statement shall be accompanied by an Officer’s Certificate
certifying, to such officer’s actual knowledge, that such items are true,
correct, accurate and complete in all material respects and fairly present the
financial condition and results of the operations of Borrower and the Property
in accordance with GAAP (or such other basis reasonably acceptable to Lender),
subject to normal year-end adjustments.

 

6.3.4                     Other Reports.  The Borrowers shall furnish to Lender,
within twenty (20) Business Days after request, such further detailed
information with respect to the operation of any Property and the financial
affairs of any Borrower, each SPE Party or any Manager as may be reasonably
requested by Lender or any applicable Rating Agency.

 

6.3.5                     Annual Budget.  The Borrowers and Lender have agreed that
the budget attached hereto as Schedule 8 is the pro forma budget for the
Properties for the calendar year 2008, which Lender hereby approves (the “Initial Budget”).  The Borrowers shall deliver to Lender any
proposed revision to the Initial Budget and if such revision, by itself or together
with

 

55

 

any previous revision to the Initial Budget, increases the total costs
set forth in the Initial Budget by more than five percent (5%) (excluding, for
purposes of this calculation, increases in the costs of Taxes, Insurance
Premiums and utilities), such revision shall be subject to Lender approval
which approval shall not be unreasonably withheld, conditioned or delayed.  For each successive calendar year during the
Term, the Borrowers shall prepare and submit to Lender by December 15th of
such calendar year a proposed pro forma budget for the Properties for the
succeeding calendar year (the “Annual Budget”,
and each Annual Budget approved (or deemed approved pursuant to the terms of
this Section 6.3.5) by Lender is referred to herein as the “Approved Annual Budget”), and,
promptly after preparation thereof, any revisions to such Annual Budget.  If (a) any proposed Annual Budget for
the succeeding calendar year reflects an increase in the total costs set forth
in the Annual Budget in effect at the end of the then current calendar year of
more than five percent (5%) (excluding, for purposes of this calculation,
increases in the costs of Taxes, Insurance Premiums and utilities) or (b) any
proposed revision to any Annual Budget which, by itself or together with any
previous revision to such Annual Budget, increases the total costs set forth in
such Annual Budget by more than five percent (5%) (excluding, for purposes of
this calculation, increases in the costs of Taxes, Insurance Premiums and
utilities), then such Annual Budget or proposed revision, as the case may be,
shall be subject to Lender approval which approval shall not be unreasonably
withheld, conditioned or delayed, otherwise no approval of Lender shall be
required except upon the occurrence and continuance of an Event of
Default.  Lender’s failure to approve or
disapprove any Annual Budget or proposed revision within thirty (30) days after
Lender’s receipt thereof shall be deemed to constitute Lender’s approval
thereof.  The Annual Budget shall consist
of (i) an operating expense budget showing, on a month-by-month basis, in
reasonable detail, each line item of the Borrowers’ anticipated operating
income and operating expenses (on a cash and accrual basis) (and once such
Annual Budget has been approved (or deemed approved pursuant to the terms of
this Section 6.3.5) by Lender, such operating expense budget shall
be referred to herein as the “Approved Operating Budget”),
and (ii) a Capital Expense budget showing in reasonable detail, each line
item of anticipated Capital Expenses (and once such Annual Budget has been
approved (or deemed approved pursuant to the terms of this Section 6.3.5)
by Lender, such Capital Expense budget shall be referred to herein as the “Approved Capital Budget”).   Until such time that any Annual Budget has
been approved (or deemed to have been approved) by Lender, the prior Approved
Annual Budget shall apply for all purposes hereunder (with adjustments for
increases for any non-discretionary expenses and other adjustments approved by
Lender in its reasonable discretion).

 

7.                                    INSURANCE;
CASUALTY; AND CONDEMNATION

 

7.1                               Insurance

 

7.1.1                     Coverage.  With respect to each Property, the
Borrowers, at their sole cost, for the mutual benefit of each Borrower and
Lender, shall obtain and maintain during the Term the following policies of
insurance:

 

(a)          Property insurance
insuring against loss or damage customarily included under so called “all risk”
or “special form” policies including and, if required by Lender, with
reasonable sublimits acceptable to Lender, flood (including seepage and
sewer backup), hurricane/wind and/or earthquake (including earth movement)
coverage and terrorism coverage (defined as certified and non-certified in the
Terrorism Risk Insurance Program Reauthorization

 

56

 

Act of 2007 “TRIPRA”)
subject to subsection (n) below and such other insurable hazards as, under
good insurance practices, from time to time are insured against for other
property and buildings similar to the premises in nature, use, location,
height, and type of construction.  Such
insurance policy shall also insure ordinance and law insurance covering (i) loss
to the undamaged portion of the property that is required to be demolished, (ii) the
cost to demolish and clear the site of undamaged property, and (iii) the
increased cost of construction to rebuild, in accordance with building codes
and regulations in excess of the cost to rebuild with same materials and
specifications as existed prior to the loss or damage in amounts satisfactory
to Lender.  Such insurance policy shall (I) be
in an amount equal to 100% of the then current replacement cost of the
Improvements (exclusive of foundations, footings and underground equipment)
with respect to such Property without deduction for physical depreciation, (II) have
deductibles no greater than $100,000 per occurrence with the exception of
hurricane/wind coverage and earthquake coverage which, in each case, can be no
greater than 50% of the total values per location and flood coverage which can
be no greater than $500,000 for any Property designated by the Federal
Emergency Management Agency as a Zone “A” or “V” Special Hazard Area, (III) be
paid annually in advance (IV) be on a replacement cost basis and contain
either no coinsurance or, if coinsurance, an agreed amount endorsement waiving
coinsurance, and shall cover, without limitation, all tenant improvements and
betterments that the Borrower are required to insure on a replacement cost
basis (V) cover soft costs including, but not limited to, real estate
taxes, interest on the Loan, fees and other recurring expenses and (VI) include
a standard joint loss agreement. Lender shall be named Mortgagee and Loss Payee
on a Standard Mortgagee Endorsement.

 

(b)         Flood insurance if any
part of such Property is located in an area now or hereafter designated by the
Federal Emergency Management Agency as a Zone “A” & “V” Special Hazard
Area, or such other Special Hazard Area if Lender so requires in its sole
discretion.  At Lender’s reasonable
discretion, such policy shall (i) be in an amount equal to (A) 100%
of the full replacement cost of the Improvements on such Property (without any
deduction for depreciation) or (B) such other amount as agreed to by
Lender, or at Lender’s reasonable discretion, regardless of flood zones in
amounts satisfactory to Lender and (ii) have a maximum permissible
deductible of $100,000, except for any Property designated by the Federal Emergency
Management Agency as a Zone “A” or “V” Special Hazard Area which may carry a
deductible no greater than $500,000.

 

(c)          Commercial General
Liability insurance utilizing the Insurance Services Organization form No. CG0001
or its equivalent.  Such policy(ies)
shall (i) be written on an occurrence form; (ii) maintain limits of
liability of (A) $1,000,000 bodily injury and property damage, (B) $2,000,000
general aggregate per location, (C) $2,000,000 products and completed
operations and in the aggregate (D) $1,000,000 personal and advertising
injury and in the aggregate, (E) $5,000,000 liquor law liability if
applicable to operations of such Property (F) $5,000,000 garage liability
if applicable to operations of such Property, (G) $1,000,000 garage keeper’s
legal liability, including per occurrence of no less than $100,000 if
applicable to operations of such Property, (H) $1,000,000 innkeeper’s
legal liability if applicable to operations of such Property, (I) $1,000,000
employers liability if the property is located in North Dakota, Ohio,
Washington, West Virginia or Wyoming; (iii) include standard ISO
contractual liability covering the indemnity of this Loan, to the extent it
applies to the coverage provided in this

 

57

 

policy; (iv) not maintain any deductible, without written
permission of the Lender; (v) provide XCU coverage with regard to
construction projects; (vi) include two (2) years extended completed
operations coverage after completion of any construction project; (vii) include
Knowledge of Accident endorsement acknowledging that notice of a claim or an
incident that may lead to a claim is not considered notice to the insured
unless an executive officer or a so called risk manager has notice of such claim
or incident; and (viii) be primary to any other insurance that may be
maintained by the Lender.

 

(d)         Automobile Insurance in
the amount of $1,000,000 which shall cover all owned, hired or leased vehicles
and include non-owned and hired car coverage.

 

(e)          Umbrella Liability
Insurance which shall (i) include all the terms required in Section 7.1.2
of this Agreement; (ii) include limits of liability of $50,000,000 or as
otherwise specified by the Lender; (iii) be excess of, and at least
following form of the primary commercial general liability, employers liability
and automobile liability policies and; (iv) follow form of aggregate
limits of the commercial general liability.

 

(f)            “All Risk” or Special
Form” business income insurance including rental value and extra expense which
shall (i) name Lender as “Lender Loss Payee”; (ii) be in an amount
equal to one hundred percent (100%) of the projected Rents from such Property
during the period of restoration; (iii) contain an unlimited indemnity
period during the period that it takes to repair, restore and/or rebuild the
damaged property; (iv) contain an extended period of indemnity endorsement
which provides that after the physical loss to such Property has been repaired
and restored the continued loss of income will be insured until such income
either returns to the same level it was at prior to the loss, or the expiration
of twelve (12) months from the date that such Property is repaired and restored
and operations are resumed, whichever first occurs, and notwithstanding that
the policy may expire prior to the end of such period; and (v) include an
amount of such insurance which is to be no less than two (2) times the
current annual business income (including Rents) or, at Lender’s reasonable
discretion, Rent insurance and such insurance shall contain all of the same
provisions of Sections 7.1.1(a), (b) and (g).  The amount of such insurance shall be
increased from time to time (but not less than annually) during the Term as and
when the estimated or actual Rents (or business income) increase(s).

 

(g)         Boiler and Machinery “all
risk” policy, utilizing the standard “comprehensive” policy form, or its
equivalent, covering steam boilers, pipes, turbines engines miscellaneous
electrical apparatus, elevators, escalators, machinery, air conditioning
equipment and any other steam pressure vessels. 
Such policy (or policies) shall (i) include all the terms required
in Sections 7.1.1 (a) and (g) of this Agreement; (ii) include
replacement cost coverage on a new for old basis; (iii) include insurance
limits in an amount no less than the greater of (a) $25,000,000, or (b) 25%
of the 100% replacement value of the building erected on such Property; (iv) include
a property damage deductible not greater than $100,000 for property damage and
a twenty four (24) hour waiting period for business income or rent and extra
expense.

 

(h)         Worker’s Compensation
statutory coverage including employer’s liability insurance limits or no less
than $1,000,000/$1,000,000/$1,000,000.

 

58

 

(i)             During any period of
repair or restoration, and if the property and liability form do not otherwise
apply, Builder’s Risk “all-risk” Insurance. 
Such policy(ies) shall (i) utilize a completed value form; (ii) include
all the terms required in Sections 7.1.1, 7.1.2, and 7.1.3
of this Agreement and cover 100% of the total costs of construction; (iii) include
foundations, excavations, underground machinery or equipment, retaining walls,
and all paved surfaces; (vi) maintain sub-limits for each of the perils of
Flood and Earthquake to be the greater of (a) $10,000,000, (b) 25% of
the 100% replacement value of the project, or (c) the amount otherwise
specified by Lender; (vii) allow for permission to occupy as Lender may
request, in form and substance acceptable to Lender, or at Lender’s reasonable
discretion, equivalent insurance provided in Section 7.1.

 

(j)             [reserved]

 

(k)          Employee Dishonesty
(Fidelity Bond).  Such policy shall (i) cover
all employees of the Borrowers; (ii) maintain limit of $500,000 or as
otherwise stated by the Lender; and (iii) cover all members of the
cooperative board if the project is a cooperative entity or members of the
condominium board if the project is a condominium.

 

(l)             Professional
Liability insurance (Errors & Omissions), shall be maintained for each
architect, engineer and other professionals. 
Such policy shall: (i) maintain limits of $5,000,000, or other
limits satisfactory to Lender, per occurrence, and in the aggregate; (ii) be
written on a claims made basis, with a retroactive date no later than the
commencement of the professional’s effective date of service; (iii) if
policy is terminated, an extended discovery period (tail coverage) shall be
purchased for a period of no less than three (3) extended years, specific
to this project; and (iv) maintain a deductible not to exceed $50,000.

 

(m)       If commercially available,
such other insurance as may from time to time be reasonably required by Lender
in order to protect its interests.

 

(n)         Notwithstanding anything
in subsection (a) above to the contrary, the Borrowers shall be required
to obtain and maintain coverage in their property and business income
(including Rents) insurance Policies (or by separate Policies) against loss or
damage by terrorism in an amount equal to 100% of the “Full Replacement Cost”
of such Property and following the terms and conditions of Sections 7.1(a) and
(f); provided that such coverage is commercially available.  In the event that such coverage with respect
to terrorist acts is not included as part of the “all risk” property and
business income (including rents) policy required by subsection (a) and
(f) above, the Borrowers shall, nevertheless be required to obtain
coverage for terrorism (as stand alone coverage) in an amount equal to 100% of
the “Full Replacement Cost” of such Property plus business income; provided
that such coverage is available. 
Notwithstanding the foregoing, as long as TRIPRA or its reasonable
equivalent is commercially available, the Borrowers will be required to
maintain insurance against certified terrorism as defined in TRIPRA.  Coverage shall be purchased in limits
equivalent to the full replacement cost of the Building and Rents as required
in this Agreement.  Notwithstanding the
foregoing sentence, if TRIPRA, its replacement, or any other government or
regulatory program is not available, the Borrowers shall not be obligated to
expend more than 150% of the annual premium paid by the Borrowers for their “all-risk”
or “special form” insurance required in this Agreement,

 

59

 

excluding the cost of any coverage for acts of terrorism previously
provided by insurers (“Terrorism Insurance Cap”).
If the cost for Terrorism Insurance exceeds the Terrorism Insurance Cap, the
Borrowers shall purchase the maximum amount of terrorism insurance available
with funds equal to the Terrorism Insurance Cap.  The Borrowers shall obtain the
coverage required under this subsection (j) from a carrier which
otherwise satisfies the rating criteria specified in Section 7.1.2
(a “Qualified Carrier”) or in the event
that such coverage is not available from a Qualified Carrier, the Borrowers
shall obtain such coverage from insurance companies rated “A” or better by
S&P.

 

7.1.2                     Policies.  All policies of insurance (the “Policies”) required pursuant to Section 7.1.1
shall (i) be issued by companies approved by Lender and licensed to do
business in the applicable State, with a claims paying ability rating of “A” or
better by S&P (and the equivalent by any other Rating Agency) (provided,
however for multi-layered policies, (A) if four (4) or less insurance
companies issue the Policies, then at least 75% of the insurance coverage
represented by the Policies must be provided by insurance companies with a
claims paying ability rating of “A” or better by S&P (and the equivalent by
any other Rating Agency), with no carrier below “BBB” (and the equivalent by
any other Rating Agency) or (B) if five (5) or more insurance
companies issue the Policies, then at least 60% of the insurance coverage
represented by the Policies must be provided by insurance companies with a
claims paying ability rating of “A” or better by S&P (and the equivalent by
any other Rating Agency), with no carrier below “BBB” (and the equivalent by any
other Rating Agency),  and a rating
of A:X or better in the current Best’s Insurance Reports; (ii) name Lender
and its successors and/or assigns as their interest may appear as the mortgagee
(in the case of property insurance), loss payee (in the case of business income
or rents coverage) and an additional insured (in the case of liability
insurance); (iii) contain (in the case of property insurance) a
Non-Contributory Standard Mortgagee Clause and a Lender’s Loss Payable
Endorsement, or their equivalents, naming Lender as the person to which all
payments made by such insurance company shall be paid; (iv) contain a
waiver of subrogation against Lender; (v) be assigned and the originals
thereof delivered to Lender; (vi) contain such provisions as Lender deems
reasonably necessary or desirable to protect its interest, including (A) endorsements
providing that neither any Borrower, Lender nor any other party shall be a
co-insurer under the Policies, (B) that Lender shall receive at least
thirty (30) days’ prior written notice of any modification, reduction or
cancellation of any of the Policies, (C) an agreement whereby the insurer
waives any right to claim any premiums and commissions against Lender, provided
that the policy need not waive the requirement that the premium be paid in
order for a claim to be paid to the insured and (D) providing that Lender
is permitted to make payments to effect the continuation of such policy upon
notice of cancellation due to non-payment of premiums; (vii) in the event
any insurance policy (except for general public and other liability and workers
compensation insurance) shall contain breach of warranty provisions, such
policy shall provide that with respect to the interest of Lender, such
insurance policy shall not be invalidated by and shall insure Lender regardless
of (A) any act, failure to act or negligence of or violation of
warranties, declarations or conditions contained in such policy by any named
insured, (B) the occupancy or use of the premises for purposes more hazardous
than permitted by the terms thereof, or (C) any foreclosure or other
action or proceeding taken by Lender pursuant to any provision of the Loan
Documents; and (viii) be satisfactory in form and substance to Lender and
approved by Lender as to amounts, form, risk coverage, deductibles, loss payees
and insureds.  The Borrowers shall pay
the premiums for such

 

60

 

Policies (the “Insurance Premiums”)
as the same become due and payable and furnish to Lender evidence of the
renewal of each of the Policies together with (unless such Insurance Premiums
have been paid by Lender pursuant to Section 3.2) receipts for or
other evidence of the payment of the Insurance Premiums reasonably satisfactory
to Lender.  If the Borrowers do not
furnish such evidence and receipts at least ten (10) days prior to the
expiration of any expiring Policy, then Lender may, but shall not be obligated
to, procure such insurance and pay the Insurance Premiums therefor, and the
Borrowers shall reimburse Lender for the cost of such Insurance Premiums
promptly on demand, with interest accruing at the Default Rate.  Within thirty (30) days after request by
Lender, the Borrowers shall obtain such increases in the amounts of coverage
required hereunder as may be reasonably requested by Lender, taking into
consideration changes in the value of money over time, changes in liability
laws, changes in prudent customs and practices, and the like.

 

7.1.3                     Miscellaneous Insurance Provisions

 

(a)          Policy Endorsements: All
endorsements of the Policies or attachments to certificates of insurance, shall
reflect the terms and conditions of the insurance requirements and
administration provisions and shall indicate the effective date, policy number,
insurance company, and shall be appropriately executed by authorized
representatives of the insurance companies so as to confirm their validity.

 

(b)         Loss Payable and/or
Additional Insured Provisions: As respects the following policies (i) All
property (including but not limited to separate property policies such as
flood, terrorism), business income (or rent), boiler & machinery and
builders risk policies shall name the applicable Borrower as the named insured
and shall include (a) a New York State standard mortgagee clause, or its
equivalent, which is acceptable to Lender, it’s assigns as their interests may
appear, as mortgagee and loss payee, and (b) an endorsement including the
Lender, as additional insured, as its interest may appear, and as loss payee; (ii) commercial
general liability and umbrella liability policies shall name the applicable
Borrower as the named insured, and shall include the Lender and it’s assigns as
their interests may appear, as additional insureds: (ii) employee
dishonesty policies shall name the applicable Borrower and the Cooperative
Entity as named insured and shall include Lender as loss payee.

 

(c)          Mortgage and/or
Additional Insured Clauses: (i) all original or certified copies of the
original property, business income, boiler & machinery, builders risk,
terrorism, federal flood and employee dishonesty policies shall be provided to
the Lender including required Lender and/or additional insured and/or loss
payable clauses, as noted above; (ii) all original or copies of the
original commercial general liability and umbrella liability policies shall be
provided to the Lender including required additional insured endorsements; and (iii) certificates
of Insurance, complying with all terms of this agreement, shall be provided to
the Lender with respect to the workers compensation and employee dishonesty
policies.

 

(d)         Certificates of
Insurance: Where appropriate, and at the sole discretion of the Lender, (i) certificates
of insurance may be accepted, in lieu of original or certified original policies.  In these situations the certificates must
comply with the following requirements: (a) all appropriate additional
insured endorsements shall be attached to the certificate indicating (I) the
addition of the Lender to the policy as required above, (II) that the
Lender will not be notified, as required above, of cancellation, material
change or non-renewal and, (III) the insured’s name,

 

61

 

insurance company’s name, policy number, effective
date and signature of authorized insurance company representative; (ii) the
certificate forms used should be Acord 25 for all policies, except Acord 28 for
property, business income, federal flood, builder’s risk and employee
dishonesty policies; (iii) the cancellation provisions on Acord 25 should
be identical to the policy endorsements that are attached to the certificate or
policy, if available; (iv) the Lender shall be the certificate holder and,
where applicable, the additional interest of the Lender as required above,
should be indicated; and (v) Policy limits and terms, as required in this
Agreement, must be incorporated into the certificates.

 

(e)          Policy Term and Premium
Payment: (i) every policy must be written for a term of not less than one (1) year,
(ii) an existing policy with fewer than twelve (12) months remaining on
its term on the Closing Date may be, at Lender sole discretion, acceptable on a
case by case basis; and (iii) the Borrowers must provide evidence that all
policies have been paid in full prior to the Closing Date.

 

(f)            Blanket Policies: The
Borrowers may comply with and satisfy the requirements of this insurance
section through the use of a blanket or package policy (or policies) of
insurance covering one or more of the Properties and other properties and
liabilities of the Borrowers, provided that each Property so covered is listed
and identifiable in the policy and it contains the required Lender and
additional insured clauses, naming Lender specifically applicable to such
Property.  Further, if the blanket policy
does not have allocated sublimits, the policy remains subject to review and
approval by Lender based on the schedule of locations and values

 

7.2                               Casualty

 

7.2.1                     Notice;
Restoration.  If any Property is
damaged or destroyed, in whole or in part, by fire or other casualty (a “Casualty”), the Borrowers shall give
prompt notice thereof to Lender. 
Following the occurrence of a Casualty, the Borrowers, regardless of
whether insurance proceeds are available, shall proceed to restore, repair, replace
or rebuild the Property subject to a Casualty in accordance with Legal
Requirements to be of at least equal value and of substantially the same
character as prior to such damage or destruction; provided, however,
that if the Borrowers are diligently pursuing a refinancing and release of such
Property from the Lien of the Loan Documents, then the Borrowers shall have no
obligation to begin restoring, repairing, replacing or rebuilding such Property
until the ninetieth (90th) day following the day on which such
Casualty occurred.

 

7.2.2                     Settlement of Proceeds.  If a Casualty covered by any of the
Policies (an “Insured Casualty”) occurs
where the loss does not exceed the greater of $1,000,000 or twenty percent
(20%) of the of the Appraised Value of the Property subject to such Casualty,
provided no Event of Default has occurred and is continuing, the Borrowers may
settle and adjust any claim without the prior consent of Lender; provided
such adjustment is carried out in a commercially reasonable and timely manner,
and the Borrowers are hereby authorized to collect and receipt for the
insurance proceeds (the “Proceeds”).  In the event of an Insured Casualty where the
loss equals or exceeds the greater of $1,000,000 and twenty percent (20%) of
the of the Appraised Value of the Property subject to such Insured Casualty (a “Significant Casualty”), provided no
Event of Default has occurred and is continuing, the Borrowers may settle and
adjust any claim with the consent of Lender, which consent shall not be unreasonably
withheld, conditioned or delayed, and agree with the insurer(s) on the
amount to be paid on the loss and the Proceeds shall be due and payable solely
to Lender and held by Lender in the Casualty/Condemnation Subaccount and
disbursed in accordance herewith.  If an
Event of

 

62

 

Default has occurred and is continuing, Lender shall
have the sole right to settle, adjust and collect on any claim under any of the
Policies and the Borrowers shall have no right to participate in such
settlement, adjustment or collection.  If
any Borrower or any party other than Lender is a payee on any check
representing Proceeds with respect to a Significant Casualty, such Borrower
shall promptly endorse, and the Borrowers shall cause all such third parties to
endorse, such check payable to the order of Lender.  If such check is not endorsed within ten (10) Business
Days after receipt of such check by any Borrower, each Borrower hereby
irrevocably appoints Lender as its attorney-in-fact, coupled with an interest,
to endorse such check payable to the order of Lender.  If Lender is permitted to participate in the
settlement and collection of Proceeds, the reasonable out-of-pocket expenses incurred
by Lender in the settlement, adjustment and collection of the Proceeds shall
become part of the Debt and shall be reimbursed by the Borrowers to Lender
within thirty (30) days after written request therefor.  Notwithstanding anything to the contrary
contained herein, if in connection with a Casualty any insurance carrier makes
a payment under a property insurance Policy that the Borrowers propose be
treated as business or rental interruption insurance, then, notwithstanding any
designation (or lack of designation) by the insurance carrier as to the purpose
of such payment, as between Lender and the Borrowers, such payment shall not be
treated as business or rental interruption insurance proceeds unless the
Borrowers have demonstrated to Lender’s reasonable satisfaction that the
remaining net Proceeds that will be received from the property insurance
carriers are sufficient to pay one hundred percent (100%) of the cost of fully
restoring the Improvements with respect to the subject Property or, if such net
Proceeds are to be applied to repay the Debt in accordance with the terms
hereof, that such remaining net Proceeds will be sufficient to pay the Release
Price in full for such Property.

 

7.3                             Condemnation

 

7.3.1                     Notice;
Restoration.  The Borrowers shall
promptly give Lender notice of the actual or threatened commencement of any
condemnation or eminent domain proceeding affecting any Property (a “Condemnation”) and shall deliver to
Lender copies of any and all papers served in connection with such
Condemnation.  Following the occurrence
of a Condemnation, the Borrowers, regardless of whether an Award is available,
shall proceed to restore, repair, replace or rebuild the Property subject to a
Condemnation in accordance with Legal Requirements to the extent practicable to
be of at least equal value and of substantially the same character (and to have
the same utility) as prior to such Condemnation; provided, however,
that if the Borrowers are diligently pursuing a refinancing and release of such
Property from the Lien of the Loan Documents, then the Borrowers shall have no
obligation to begin restoring, repairing, replacing or rebuilding such Property
until the ninetieth (90th) day following the day on which such
Condemnation is complete.

 

7.3.2                     Collection of Award.  If a Condemnation occurs where the loss
does not exceed the greater of $1,000,000 or twenty percent (20%) of the
Appraised Value of the Property subject to such Condemnation, provided no Event
of Default has occurred and is continuing, the Borrowers may make any
compromise, adjustment or settlement in connection with such Condemnation
without the prior consent of Lender; provided such adjustment is carried
out in a commercially reasonable and timely manner, and the Borrowers are
hereby authorized to collect and receive any award or payment in respect of
such Condemnation (an “Award”).  In the event a Condemnation occurs where
where the loss equals or exceeds the greater of $1,000,000 and twenty percent
(20%) of the Appraised Value of the Property subject to such Condemnation (a

 

63

 

“Significant Condemnation”),
provided no Event of Default has occurred and is continuing, the Borrowers may
make any compromise, adjustment or settlement in connection with such
Condemnation with the consent of Lender, which consent shall not be
unreasonably withheld, conditioned or delayed and the Award shall be due and
payable solely to Lender and held by Lender in the Casualty/Condemnation
Subaccount and disbursed in accordance herewith.  If an Event of Default has occurred and is
continuing, Lender shall have the sole right to make any compromise,
adjustment, settlement or collection in connection with a Condemnation and the
Borrowers shall have no right to participate in such compromise, settlement,
adjustment or collection.  If any
Borrower or any party other than Lender is a payee on any check representing an
Award with respect to a Significant Condemnation, such Borrower shall promptly
endorse, and the Borrowers shall cause all such third parties to endorse, such
check payable to the order of Lender.  If
such check is not endorsed within ten (10) Business Days after receipt of
such check by any Borrower, each Borrower hereby irrevocably appoints Lender as
its attorney-in-fact, coupled with an interest, to endorse such check payable
to the order of Lender.  If Lender is
permitted to participate in the compromise, adjustment, settlement or
collection of an Award, the reasonable out-of-pocket expenses incurred by
Lender in the compromise, adjustment, settlement or collection of such Award
shall become part of the Debt and shall be reimbursed by the Borrowers to
Lender within thirty (30) days after written request therefor.  Notwithstanding any Condemnation (or any
transfer made in lieu of or in anticipation of such Condemnation), the
Borrowers shall continue to pay the Debt at the time and in the manner provided
for in the Loan Documents, and the Debt shall not be reduced unless and until
any Award shall have been actually received and applied by Lender to expenses of
collecting the Award and to discharge of the Debt. Lender shall not be limited
to the interest paid on the Award by the condemning authority but shall be
entitled to receive out of the Award interest at the rate or rates provided in
the Note.  If any Property is sold,
through foreclosure or otherwise, prior to the receipt by Lender of such Award,
Lender shall have the right, whether or not a deficiency judgment on the Note
shall be recoverable or shall have been sought, recovered or denied, to receive
all or a portion of the Award sufficient to pay the Debt.  Lender shall hold any Award received by it in
the Casualty/Condemnation Subaccount and disburse such Award in accordance with
the terms hereof.

 

7.4                             Application
of Proceeds or Award.

 

7.4.1                     Application to Restoration.  If an Insured Casualty or Condemnation
occurs with respect to a Property where (i) the loss is in an aggregate
amount less than fifteen percent (15%) of the unpaid Principal, (ii) in
the reasonable judgment of Lender, such Property can be restored within twelve
(12) months, and prior to six (6) months before the Stated Maturity Date
and prior to the expiration of the rental or business interruption insurance
with respect thereto, to such Property’s pre-existing condition and utility as
existed immediately prior to such Insured Casualty or Condemnation and to an
economic unit not less valuable and not less useful than the same was
immediately prior to the Insured Casualty or Condemnation, and after such
restoration will adequately secure the Debt and (iii) less than (x) fifty
percent (50%), in the case of an Insured Casualty or (y) fifteen percent
(15%), in the case of a Condemnation, of the rentable area of the Improvements
on such Property have been damaged, destroyed or rendered unusable as a result
of such Insured Casualty or Condemnation; (iv) Leases demising in the
aggregate at least sixty-five percent (65%) of the total rentable space under
Leases in effect with

 

64

 

respect to such Property and in effect as of the date of the occurrence
of such Insured Casualty or Condemnation remain in full force and effect during
and after the completion of the Restoration (hereinafter defined); and (v) no
Event of Default shall have occurred and be then continuing, then the Proceeds
or the Award, as the case may be (after reimbursement of any expenses incurred
by Lender), shall be promptly applied to reimburse the Borrowers for the cost
of restoring, repairing, replacing or rebuilding such Property (the “Restoration”), in the manner set
forth herein.  The Borrowers shall
commence and diligently prosecute such Restoration.  Notwithstanding the foregoing, in no event
shall Lender be obligated to apply the Proceeds or Award to reimburse the
Borrowers for the cost of Restoration unless, in addition to satisfaction of
the foregoing conditions, both (x) the Borrowers shall pay all costs of
such Restoration in excess of the net amount of the Proceeds or the Award made
available pursuant to the terms hereof and if Lender reasonably estimates that
such costs will equal or exceed $5,000,000, then the Borrowers shall deposit
with Lender in advance of commencement of Restoration security to insure the
payment of such costs which security (A) shall not exceed one hundred and
five percent (105%) of the Lender’s reasonable estimate of such excess costs
and (B) may take the form of cash, a letter of credit in form and
substance reasonably acceptable to Lender from an institution reasonably
acceptable to Lender, a completion bond in form and substance reasonably
acceptable to Lender from an issuer reasonably acceptable to Lender, a guaranty
in form and substance reasonably acceptable to Lender from an entity reasonably
acceptable to Lender or such other form as is reasonably acceptable to Lender
(each, “Acceptable Security”); and (y) Lender
shall have received evidence reasonably satisfactory to it that during the
period of the Restoration, the Rents will be at least equal to the sum of the
operating expenses and Debt Service and other reserve payments required
hereunder, as reasonably determined by Lender.

 

7.4.2                     Application to Debt.  Except as provided in Section 7.4.1,
any Proceeds and/or Award, whether received by any Borrower or Lender, shall be
promptly applied to the payment of (i) accrued but unpaid interest on the
Note, (ii) the unpaid Principal and (iii) other charges due under the
Note and/or any of the other Loan Documents, or applied to reimburse the
Borrowers for the cost of any Restoration, in the manner set forth in Section 7.4.3.

 

7.4.3                     Procedure for Application to Restoration.  If the Borrowers are entitled to
reimbursement out of the Proceeds or an Award held by Lender, such Proceeds or
Award shall be disbursed from time to time from the Casualty/Condemnation
Subaccount upon Lender being furnished with (i) evidence satisfactory to
Lender of the estimated cost of completion of the Restoration, (ii) a
fixed price or guaranteed maximum cost construction contract and construction
budget for Restoration reasonably satisfactory to Lender, (iii) prior to
the commencement of Restoration, Acceptable Security which, in addition to the
Proceeds or Award, is in Lender’s reasonable judgment required to complete the
proposed Restoration, (iv) such architect’s certificates, waivers of lien,
contractor’s sworn statements, title insurance endorsements, bonds, plats of
survey, permits, approvals, licenses and such other documents and items as
Lender may reasonably require and approve in Lender’s reasonable discretion,
and (v) all plans and specifications for such Restoration, such plans and
specifications to be approved by Lender in its reasonable discretion prior to
commencement of any work.  Lender may, at
the Borrowers’ expense, retain a consultant to review and approve all requests
for disbursements, which approval shall also be a condition precedent to any
disbursement.  Disbursements from the
Casualty/Condemnation Subaccount shall be subject to the following conditions:  (1)  prior to

 

65

 

completion of fifty percent (50%) of any budget line item set forth in
the construction budget approved by Lender pursuant to this Section 7.4.3
(the “Construction Budget”),
disbursements from the Casualty/Condemnation Subaccount for the payment of
costs with respect to such budget line item shall not exceed ninety-five
percent (95%) of the total cost of work represented by such budget line item; (2) funds
other than the Proceeds or Award shall be disbursed prior to disbursement of
such Proceeds or Award; (3) and at all times, the undisbursed balance of
such Proceeds or Award remaining in the hands of Lender, together with
Acceptable Security deposited for that purpose or irrevocably committed to the
satisfaction of Lender by or on behalf of the Borrowers for that purpose, shall
be at least sufficient in the reasonable judgment of Lender to pay for the cost
of completion of the Restoration, free and clear of all Liens or claims for
Lien.  Provided no Event of Default then
exists, any surplus that remains out of the Proceeds held by Lender after
payment of such costs of Restoration shall be paid to the Borrowers.  Any surplus that remains out of the Award
received by Lender after payment of such costs of Restoration shall be returned
to the Borrowers.

 

8.                                    DEFAULTS

 

8.1                             Events
of Default.  An “Event of Default”
shall exist with respect to the Loan if any of the following shall occur:

 

(a)          any portion of the Debt
is not paid within five (5) days of the date when due with respect to any
regularly scheduled payment hereunder and within five (5) days after
written request therefor with respect to all other payments; provided
that the Borrowers shall not, in any event, be liable to the extent funds to
pay such amounts are available in the Cash Trap Reserve Subaccount and Lender
failed to disburse same to the Borrowers pursuant to the terms and conditions
of Section 3.2.2;

 

(b)         any of the Taxes are not
paid when due (unless Lender is paying such Taxes pursuant to Section 3.2),
subject to the Borrowers’ right to contest Taxes in accordance with Section 5.2;

 

(c)          the Policies are not
kept in full force and effect, or are not delivered to Lender upon request;

 

(d)         a Transfer other than a
Permitted Transfer occurs;

 

(e)          any representation or
warranty made by any Borrower or Guarantor in any Loan Document or in any
report, certificate, financial statement or other document or agreement
furnished by any Borrower or Guarantor in connection with any Loan Document,
shall be false or misleading as of the date such representation or warranty was
made and the failure of such representation to be true or not misleading
results in a Material Adverse Change;

 

(f)            any Borrower, any SPE
Party or Guarantor shall make a general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts as they
become due;

 

66

 

(g)         a receiver, liquidator or
trustee shall be appointed for any Borrower, any SPE Party or Guarantor; or any
Borrower, any SPE Party or Guarantor shall be adjudicated a bankrupt or
insolvent; or any petition for bankruptcy, reorganization or arrangement
pursuant to federal bankruptcy law, or any similar federal or state law, shall
be filed by or against, consented to, or acquiesced in by, any Borrower, any
SPE Party or Guarantor, as the case may be; or any proceeding for the
dissolution or liquidation of any Borrower, any SPE Party or Guarantor shall be
instituted; provided, however, if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by such Borrower, such SPE
Party or Guarantor, as the case may be, only upon the same not being
discharged, stayed or dismissed within ninety (90) days;

 

(h)         any Borrower breaches any
covenant contained in Sections 5.10, 5.12.1(a) - (f),
5.13, 5.15, 5.22, 5.25, or 5.28 and if such
breach (i) results in a Material Adverse Change, such breach continues
uncured for ten (10) days following the Borrowers receipt of written
notice from Lender identifying such breach and (ii) does not result in a
Material Adverse Change, such breach continues uncured for thirty (30) days
following the Borrowers receipt of written notice from Lender identifying such
breach;

 

(i)             except as permitted
hereunder, the alteration, improvement, demolition or removal of all or a
material portion of the Improvements with respect to any Property without the
prior written consent of Lender if and only if such consent is required
pursuant to the terms and conditions of this Agreement;

 

(j)             any of the assumptions
contained in any substantive non-consolidation opinion, delivered to Lender by
the Borrowers’ counsel in connection with the Loan or otherwise hereunder, were
not true and correct in any material respect as of the date of such opinion and
the same can reasonably be expected to result in substantive consolidation of
the Borrowers or any of them in the bankruptcy of another Person; or

 

(k)          a default which results
in a Material Adverse Change shall be continuing under any of the other terms,
covenants or conditions of this Agreement or any other Loan Document not
otherwise specified in this Section 8.1 for thirty (30) days after
written notice to the Borrowers from Lender, in the case of any default which
can be cured by the payment of a sum of money, or for sixty (60) days after
notice from Lender in the case of any other default; provided, however,
that if such non-monetary default is susceptible of cure but cannot reasonably
be cured within such sixty (60) day period, and the Borrowers shall have
commenced to cure such default within such sixty (60) day period and thereafter
diligently and expeditiously proceed to cure the same, such sixty (60) day
period shall be extended for an additional period of time as is reasonably
necessary for the Borrowers in the exercise of due diligence to cure such
default, such additional period not to exceed one hundred twenty (120) days.

 

8.2                             Remedies

 

8.2.1                     Acceleration.  Upon the occurrence of an Event of
Default (other than an Event of Default described in paragraph (f) or
(g) of Section 8.1) and at any time and from time to time
thereafter, in addition to any other rights or remedies available to it
pursuant to the Loan Documents or at law or in equity, Lender may take such
action, without notice or demand, that Lender deems advisable to protect and
enforce its rights against the Borrowers and in and to any Property; including
declaring the Debt to be immediately due and payable (including unpaid

 

67

 

interest, Default Rate interest, Late Payment Charges and any other
amounts owing by the Borrowers), without notice or demand; and upon any Event
of Default described in paragraph (f) or (g) of Section 8.1,
the Debt (including unpaid interest, Default Rate interest, Late Payment Charges
and any other amounts owing by the Borrowers) shall immediately and
automatically become due and payable, without notice or demand, and each
Borrower hereby expressly waives any such notice or demand, anything contained
in any Loan Document to the contrary notwithstanding.

 

8.2.2                     Remedies Cumulative.  Upon the occurrence of an Event of
Default, all or any one or more of the rights, powers, privileges and other
remedies available to Lender against any Borrower under the Loan Documents or
at law or in equity may be exercised by Lender at any time and from time to
time, whether or not all or any of the Debt shall be declared, or be
automatically, due and payable, and whether or not Lender shall have commenced
any foreclosure proceeding or other action for the enforcement of its rights
and remedies under any of the Loan Documents. 
Any such actions taken by Lender shall be cumulative and concurrent and
may be pursued independently, singly, successively, together or otherwise, at
such time and in such order as Lender may determine in its discretion, to the
fullest extent permitted by law, without impairing or otherwise affecting the
other rights and remedies of Lender permitted by law, equity or contract or as
set forth in the Loan Documents.  Without
limiting the generality of the foregoing, each Borrower agrees that if an Event
of Default is continuing, (i) to the extent permitted by applicable law,
Lender is not subject to any “one action” or “election of remedies” law or
rule, and (ii) all Liens and other rights, remedies or privileges provided
to Lender shall remain in full force and effect until Lender has exhausted all
of its remedies against the Properties, the Mortgages have been foreclosed, the
Properties have been sold and/or otherwise realized upon in satisfaction of the
Debt or the Debt has been paid in full. 
To the extent permitted by applicable law, nothing contained in any Loan
Document shall be construed as requiring Lender to resort to any portion of any
Property for the satisfaction of any of the Debt in preference or priority to
any other portion, and Lender may seek satisfaction out of all of the
Properties or any part thereof, in its discretion.

 

8.2.3                     Severance.  Upon the occurrence of an Event of
Default, Lender shall have the right from time to time to sever the Note and
the other Loan Documents into one or more separate notes, mortgages and other
security documents in such denominations and priorities of payment and liens as
Lender shall determine in its discretion for purposes of evidencing and
enforcing its rights and remedies.  The
Borrowers shall execute and deliver to Lender from time to time, promptly after
the request of Lender, a severance agreement and such other documents as Lender
shall request in order to effect the severance described in the preceding
sentence, all in form and substance reasonably satisfactory to Lender; provided
that such severance shall not change the terms of the Loan or impose any
additional obligations on the Borrowers or decrease any of the Borrowers’ rights
under the Loan Documents and the outstanding principal balance of all the Notes
evidencing the Loan (or components of such Notes) immediately after the
effective date of such severance equals the outstanding principal balance of
the Loan immediately prior to such severance and the weighted average of the
interest rates for all such Notes (or components of such Notes) immediately
after the effective date of such severance equals the interest rate of the
original Note immediately prior to such severance and no such severance of the
Note into multiple notes or components shall result in any actual or

 

68

 

potential increase in the effective interest rate on the Loan by reason
of the actual or potential disproportionate repayment of various components of
the Loan (i.e., there shall be no “rate creep”).  Each Borrower hereby absolutely and
irrevocably appoints Lender as its true and lawful attorney, coupled with an
interest, in its name and stead to make and execute all documents necessary or
desirable to effect such severance, each Borrower ratifying all that such
attorney shall do by virtue thereof; provided that Lender shall only
exercise such power if such Borrower refuses to execute and deliver any documents
within ten (10) Business Days after request therefor and then only if all
documents submitted to each Borrower for execution are in accordance with the
terms of this Section 8.2.3. 
The cost of severing the Note and other Loan Documents as provided for in
this Section shall be borne solely by Lender.

 

8.2.4                     Delay. 
No delay or omission to exercise any remedy, right or power accruing
upon an Event of Default, or the granting of any indulgence or compromise by
Lender shall impair any such remedy, right or power hereunder or be construed
as a waiver thereof, but any such remedy, right or power may be exercised from
time to time and as often as may be deemed expedient.  A waiver of one Default or Event of Default
shall not be construed to be a waiver of any subsequent Default or Event of
Default or to impair any remedy, right or power consequent thereon.  Notwithstanding any other provision of this
Agreement, Lender reserves the right to seek a deficiency judgment or preserve
a deficiency claim in connection with the foreclosure of any Mortgages to the
extent necessary to foreclose on all or any portion of the Properties, the
Rents, the Cash Management Accounts or any other collateral.

 

8.2.5                     Lender’s Right to Perform.  If the Borrowers fail to perform any covenant
or obligation contained herein and such failure shall continue uncured for the
cure period applicable thereto as set forth in this Agreement (or if no cure
period is set forth in this Agreement, then such failure continues uncured for
a period of five (5) Business Days after the Borrowers’ receipt of written
notice thereof from Lender) then, without in any way limiting Lender’s right to
exercise any of its rights, powers or remedies as provided hereunder, or under
any of the other Loan Documents, Lender may, but shall have no obligation to,
perform, or cause performance of, such covenant or obligation, and all costs,
expenses, liabilities, penalties and fines of Lender incurred or paid in
connection therewith shall be payable by the Borrowers to Lender upon demand
and if not paid shall be added to the Debt (and to the extent permitted under
applicable laws, secured by the Mortgages and other Loan Documents) and shall
bear interest thereafter at the Default Rate. 
Notwithstanding the foregoing, Lender shall have no obligation to send
notice to the Borrowers of any such failure.

 

69

 

9.             SPECIAL PROVISIONS

 

9.1          Sale of Note and Secondary Market Transaction.

9.1.1       General; Borrower Cooperation.  Lender shall have the right
at any time and from time to time (i) to sell or otherwise transfer the
Loan or any portion thereof or the Loan Documents or any interest therein to
one or more investors, (ii) to sell participation interests in the Loan to
one or more investors or (iii) to securitize the Loan or any portion
thereof in a single asset securitization or a pooled loan securitization of rated
single or multi-class securities (the “Securities”)
secured by or evidencing ownership interests in the Note and the Mortgages
(each such sale, assignment, participation and/or securitization is referred to
herein as a “Secondary Market Transaction”).  In connection with any Secondary Market
Transaction, the Borrowers shall use all commercially reasonable efforts and
cooperate fully and in good faith with Lender and otherwise assist Lender in
satisfying the market standards to which Lender customarily adheres or which
may be reasonably required in the marketplace or by the Rating Agencies in
connection with any such Secondary Market Transactions, including: (a) to (i) provide
such financial and other factual information to the extent in any Borrower’s possession
or reasonable control with respect to any Property, any Borrower and its
Affiliates, any Manager and any tenants of any Property, (ii)  provide
business plans and budgets relating to any Property and (iii)  permit or
cause to be performed or permitted such site inspection, appraisals, surveys,
market studies, environmental reviews and reports, engineering reports and
other due diligence investigations of any Property, as may be reasonably
requested from time to time by Lender or the Rating Agencies or as may be
necessary or appropriate in connection with a Secondary Market Transaction or
Exchange Act requirements; provided that any of the foregoing shall be
performed so as to not unreasonably interfere with the rights of tenants and
other occupants of such Property to the use and enjoyment of such Property (the
items provided to Lender pursuant to this paragraph (a) being called the “Provided Information”), together, if
customary, with appropriate verification of and/or consents to the Provided
Information through letters of auditors or opinions of counsel of independent
attorneys reasonably acceptable to Lender and the Rating Agencies; (b) cause
counsel to render opinions as to non-consolidation and any other opinion
customary in securitization transactions with respect to any Property, any
Borrower and its Affiliates, which counsel and opinions shall be reasonably
satisfactory to Lender and the Rating Agencies; (c) make such
representations and warranties as of the closing date of any Secondary Market
Transaction with respect to any Property, any Borrower and the Loan Documents
as are customarily provided in such transactions and as may be reasonably
requested by Lender or the Rating Agencies and consistent with the facts
covered by such representations and warranties as they exist on the date
thereof provided that the same shall not be more extensive than the
representations and warranties made in the Loan Documents; (d) provide
current certificates of good standing and qualification with respect to each
Borrower and each SPE Party from appropriate Governmental Authorities; and (e) execute
such amendments to the Loan Documents and each Borrower’s organizational
documents, as may be requested by Lender or the Rating Agencies or otherwise to
effect a Secondary Market Transaction, provided that nothing contained in this
subsection (e) shall result in any material change in the transaction
or otherwise impose any additional obligations on any Borrower or decrease any
Borrower’s right under any of the Loan Documents or result in the imposition of
any Taxes or Other Charges on any Borrower. 
The Borrowers’ cooperation obligations set forth herein shall continue
until the Loan has been paid in full. 
All out-of-pocket costs and expenses incurred by the Borrowers in
connection with the Borrowers’ complying with requests made under this Section 9.1.1

 

70

 

(including, without limitation, reasonable attorneys’ fees and the fees
and expenses of the Rating Agencies) shall be paid by Lender.

 

9.1.2       Use of
Information.  Each
Borrower understands that all or any portion of the Provided Information and
the Required Records may be included in disclosure documents in connection with
a Secondary Market Transaction, including a prospectus or private placement
memorandum (each, a “Disclosure Document”)
and may also be included in filings with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the “Securities
Act”), or the Securities and Exchange Act of 1934, as amended
(the “Exchange Act”), or provided
or made available to investors or prospective investors in the Securities, the
Rating Agencies, and service providers or other parties relating to the
Secondary Market Transaction.  If the Disclosure
Document is required to be revised, each Borrower shall cooperate with Lender
(at Lender’s sole cost and expense) in updating the Provided Information or
Required Records for inclusion or summary in the Disclosure Document or for
other use reasonably required in connection with a Secondary Market Transaction
by providing all current factual information pertaining to any Borrower, any
Manager and any Property necessary to keep the Disclosure Document accurate and
complete in all material respects with respect to such matters.

 

9.1.3       Borrower Obligations
Regarding Disclosure Documents.  In
connection with a Disclosure Document, the Borrowers shall: (a) certify in
writing that the Borrowers have carefully examined those specific factual
portions of such Disclosure Document pertaining to the Borrowers, any Property,
any Manager and the Loan as requested by Lender, and that, to each Borrower’s
knowledge, such portions do not contain any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
made, in the light of the circumstances under which they were made, not
misleading or otherwise identify any untrue statement or material fact or
disclose any previously omitted material fact, as the case may be; and (b) indemnify
(in a separate instrument of indemnity, if so requested by Lender) (i) any
underwriter, syndicate member or placement agent (collectively, the “Underwriters”) retained by Lender or
its issuing company affiliate (the “Issuer”) in
connection with a Secondary Market Transaction, (ii) Lender and (iii) the
Issuer that is named in the Disclosure Document or registration statement
relating to a Secondary Market Transaction (the “Registration
Statement”), and each of the Issuer’s directors, each of its
officers who have signed the Registration Statement and each person or entity
who controls the Issuer or the Lender within the meaning of Section 15 of
the Securities Act or Section 30 of the Exchange Act (collectively within
(iii), the “Gramercy Group”), and each
of its directors and each person who controls each of the Underwriters, within
the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act (collectively, the “Underwriter Group”)
for any actual losses, claims, damages or liabilities (the “Liabilities”) to which Lender, the
Gramercy Group or the Underwriter Group becomes subject (including reimbursing
all of them for any reasonable legal or other expenses actually incurred in
connection with investigating or defending the Liabilities) insofar as the
Liabilities arise out of any untrue statement of any material fact contained in
any of the sections of the Disclosure Documents applicable to the Borrowers,
any Manager, any Property or the Loan that are reviewed and approved by the
Borrowers, or arise out of the omission to state therein a material fact
required to be stated in the applicable portions of such sections or necessary
in order to make the statements in the applicable portions of such sections in
light of

 

71

 

the circumstances under which they were made, not
misleading in any material respect; provided, however, that the
Borrowers shall not be required to indemnify Lender, the Gramercy Group or the
Underwriter Group for any Liabilities relating to untrue statements or
omissions which the Borrowers or their attorneys or representatives identified
to Lender in writing at the time of the Borrowers’ examination of such
Disclosure Document or for any Liabilities arising from or caused by Lender’s
gross negligence or willful misconduct.

 

9.1.4       Borrower
Indemnity Regarding Filings.  The
Borrowers shall carefully examine those specific factual portions of any
filings to be made by Lender under the Exchange Act in connection with a
Secondary Market Transaction pertaining to the Borrowers, any Property, any
Manager and the Loan which the Borrowers are specifically requested in writing
to review.  In connection with filings
under the Exchange Act, the Borrowers shall (i) indemnify Lender, the
Gramercy Group and the Underwriter Group for any Liabilities to which Lender,
the Gramercy Group or the Underwriter Group becomes subject insofar as the
Liabilities arise out of the omission to state in the sections of any such
filings that the Borrowers are specifically requested to review a material fact
required to be stated in such sections in order to make the statements therein,
in light of the circumstances under which they were made not misleading in any
material respect and (ii) reimburse Lender, the Gramercy Group or the
Underwriter Group for any reasonable legal or other out-of-pocket expenses
actually incurred by Lender, the Gramercy Group or the Underwriter Group in
connection with defending or investigating the Liabilities; provided, however,
that the Borrowers shall not be required to indemnify Lender, the Gramercy
Group or the Underwriter Group for any Liabilities relating to untrue
statements or omissions which the Borrowers or their attorneys or
representatives identified to Lender in writing at the time of the Borrowers’
examination of such filings or for any Liabilities arising from or caused by
Lender’s gross negligence or willful misconduct.

 

9.1.5       Indemnification
Procedure.  Promptly after
receipt by an indemnified party under Section 9.1.3 or 9.1.4
of notice of the commencement of any action for which a claim for
indemnification is to be made against the Borrowers, such indemnified party
shall notify the Borrowers in writing of such commencement, but the omission to
so notify the Borrowers will not relieve the Borrowers from any liability that
they may have to any indemnified party hereunder except to the extent that
failure to notify causes prejudice to the Borrowers.  If any action is brought against any
indemnified party, and it notifies the Borrowers of the commencement thereof,
the Borrowers will be entitled, jointly with any other indemnifying party, to
participate therein and, to the extent that it (or they) may elect by written
notice delivered to the indemnified party promptly after receiving the
aforesaid notice of commencement, to assume the defense thereof with counsel
satisfactory to such indemnified party in its discretion.  After notice from the Borrowers to such
indemnified party under this Section 9.1.5, the Borrowers shall not
be responsible for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, if the defendants in
any such action include both the Borrowers and an indemnified party, and any
indemnified party shall have reasonably concluded that there are any legal
defenses available to it and/or other indemnified parties that are different
from or additional to those available to the Borrowers, then the indemnified
party or parties shall have the right to select separate counsel to assert such
legal defenses and to otherwise participate in the defense of such action on
behalf of such indemnified

 

72

 

party or parties. 
The Borrowers shall not be liable for the expenses of more than one
separate counsel unless there are legal defenses available to it that are
different from or additional to those available to another indemnified party.

 

9.1.6       Contribution.  In order to provide for just and
equitable contribution in circumstances in which the indemnity agreement
provided for in Section 9.1.3 or 9.1.4 is for any reason
held to be unenforceable by an indemnified party in respect of any Liabilities
(or action in respect thereof) referred to therein which would otherwise be
indemnifiable under Section 9.1.3 or 9.1.4, the Borrowers
shall contribute to the amount paid or payable by the indemnified party as a
result of such Liabilities (or action in respect thereof); provided, however,
that no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person not
guilty of such fraudulent misrepresentation. 
In determining the amount of contribution to which the respective
parties are entitled, the following factors shall be considered:  (i) the Gramercy Group’s and the
Borrowers’ relative knowledge and access to information concerning the matter
with respect to which the claim was asserted; (ii) the opportunity to
correct and prevent any statement or omission; and (iii) any other
equitable considerations appropriate in the circumstances.  Lender and the Borrowers hereby agree that it
may not be equitable if the amount of such contribution were determined by pro
rata or per capita allocation.

 

9.1.7       Rating
Surveillance.  At Lender’s
sole cost and expense, Lender will retain the Rating Agencies to provide rating
surveillance services on Securities.

 

9.1.8       Severance
of Loan.  At Lender’s sole
cost and expense, Lender shall have the right, at any time (whether prior to,
in connection with, or after any Secondary Market Transaction), with respect to
all or any portion of the Loan, to modify, split and/or sever all or any portion
of the Loan as hereinafter provided. 
Without limiting the foregoing, Lender may (i) cause the Note and
the Mortgages to be split into a first and second mortgage loan, (ii) create
one more senior and subordinate notes (i.e., an A/B or
A/B/C structure), (iii) create multiple components of the Note or Notes
(and allocate or reallocate the principal balance of the Loan among such
components) or (iv) otherwise sever the Loan into two or more loans
secured by mortgages and by a pledge of partnership or membership interests
(directly or indirectly) in the Borrowers (i.e., a senior
loan/mezzanine loan structure), in each such case, in whatever proportion and
whatever priority Lender determines; provided, however, in each
such instance, the outstanding principal balance of all the Notes evidencing
the Loan (or components of such Notes) immediately after the effective date of
such modification equals the outstanding principal balance of the Loan
immediately prior to such modification and the weighted average of the interest
rates for all such Notes (or components of such Notes) immediately after the
effective date of such modification equals the interest rate of the original
Note immediately prior to such modification and no such separation of the Note
into multiple notes or components shall result in any actual or potential
increase in the effective interest rate on the Loan by reason of the actual or
potential disproportionate repayment of various components of the Loan (i.e.,
there shall be no “rate creep”).  If
requested by Lender, at Lender’s sole cost and expense, the Borrowers (and the
Borrowers’ constituent members, if applicable, and Guarantor) shall execute
within ten (10) Business Days after such request, such documentation as
Lender may reasonably request to evidence and/or effectuate any such
modification or severance; provided such documentation

 

73

 

does not impose any additional obligations on the
Borrowers or Guarantor or decrease the Borrowers’ rights under the Loan
Documents.

 

10.          MISCELLANEOUS

 

10.1        Exculpation.  Subject to the qualifications below,
Lender shall not enforce the liability and obligation of any Borrower to
perform and observe the obligations contained in the Loan Documents by any action
or proceeding wherein a money judgment shall be sought against such Borrower,
except that Lender may bring a foreclosure action, an action for specific
performance or any other appropriate action or proceeding to enable Lender to
enforce and realize upon its interest and rights under the Loan Documents, or
in any Property, the Rents or any other collateral given to Lender pursuant to
the Loan Documents; provided, however, that, except as
specifically provided herein, any judgment in any such action or proceeding
shall be enforceable against such Borrower only to the extent of such Borrower’s
interest in each Property, in the Rents and in any other collateral given to
Lender, and Lender shall not sue for, seek or demand any deficiency judgment
against such Borrower in any such action or proceeding under or by reason of or
under or in connection with any Loan Document. 
The provisions of this Section shall not, however, (i) constitute
a waiver, release or impairment of any obligation evidenced or secured by any
Loan Document; (ii) impair the right of Lender to name any Borrower as a
party defendant in any action or suit for foreclosure and sale under any
Mortgage; (iii) affect the validity or enforceability of any of the Loan
Documents or any guaranty made in connection with the Loan or any of the rights
and remedies of Lender thereunder; (iv) impair the right of Lender to
obtain the appointment of a receiver; (v) impair the enforcement of any
Assignment of Leases; (vi) constitute a prohibition against Lender to
commence any other appropriate action or proceeding in order for Lender to
fully realize the security granted by the Mortgages or to exercise its remedies
against any Property; or (vii) constitute a waiver of the right of Lender
to enforce the liability and obligation of any Borrower, by money judgment or
otherwise, to the extent of any loss, actual damage, out-of-pocket cost,
out-of-pocket expense, liability, claim or other obligation actually incurred
by Lender (including reasonable attorneys’ fees and costs reasonably incurred)
arising out of or in connection with the following (all such liability and
obligation of such Borrower for any or all of the following being referred to
herein as “Borrower’s Recourse Liabilities”):

 

(a)           fraud or intentional misrepresentation
by any Borrower, any SPE Party or Guarantor in connection with obtaining the
Loan;

 

(b)           intentional physical
waste of any Property or any material portion thereof;

 

(c)           misappropriation of any
(i) Proceeds paid by reason of any Insured Casualty, (ii) any Award
received in connection with a Condemnation or (iii) any proceeds from any
sale of any Property or any portion thereof received by any Borrower or any of
its Affiliates;

 

(d)           all Rents of each
Property received or collected by the Borrowers after an Event of Default and
not applied to payment of Principal, payment of interest due under the Note,
payment of other sums due in respect of the Loan or payment of actual operating
expenses of the Properties (except to the extent that such application of such
funds is prevented by

 

74

 

bankruptcy, receivership,
or similar judicial proceeding in which the Borrowers are legally prevented
from directing the disbursement of such sums);

 

(e)           misappropriation
(including failure to turn over to Lender promptly following an Event of
Default) of tenant security deposits and rents collected in advance, or of
funds held by the Borrowers for the benefit of another party;

 

(f)            the failure to pay
Taxes unless the Borrowers are contesting the same and only if and to the
limited extent that cash flow from the Properties is sufficient to pay such
Taxes and has not otherwise been applied to the payment of amounts due in
respect of the Loan or operating expenses; provided that the Borrowers
shall not, in any event, be liable to the extent funds to pay such amounts are
available in the Cash Trap Reserve Subaccount and Lender failed to disburse
same to the Borrowers pursuant to the terms and conditions of Section 3.2.2;

 

(g)           the breach of any
representation, warranty, covenant or indemnification in any Loan Document
concerning Environmental Laws or Hazardous Substances, including Sections
4.21 and 5.8, and clauses (viii) through (xi) of
Section 5.30;

 

(h)           failure to pay charges
for labor or materials or other charges for work performed by or at the
direction of any Borrower that can create Liens on any portion of any Property
unless such charges are the subject of a bona fide dispute in which the
Borrowers are contesting the amount or validity thereof and only to the extent
that cash flow from the Properties is sufficient to pay such charges and has
not otherwise been applied to the payment of amounts due in respect of the Loan
or operating expenses; or

 

(i)            a breach of the covenants
set forth in Section 5.13 (other than those regarding solvency or
capital adequacy) to the extent such breach by itself or together with one or
more other breaches of such covenants makes it reasonably likely that a
Borrower would be substantively consolidated with another Person.

 

Notwithstanding anything to the contrary in this
Agreement or any of the Loan Documents, (A) Lender shall not be deemed to
have waived any right which Lender may have under Section 506(a), 506(b),
1111(b) or any other provisions of the U.S. Bankruptcy Code to file a
claim for the full amount of the Debt or to require that all collateral shall
continue to secure all of the Debt in accordance with the Loan Documents, and (B) Lender’s
agreement not to pursue personal liability of any Borrower as set forth above
SHALL BECOME NULL AND VOID and shall be of no further force and effect, and the
Debt shall be fully recourse to each Borrower in the event that one or more of
the following occurs (each, a “Springing Recourse Event”):
(i) an Event of Default described in Section 8.1(d) 
shall have occurred or (ii) the occurrence of any condition or event
described in either Section 8.1(f) or Section 8.1(g) and,
with respect to such condition or event described in Section 8.1(g),
any Borrower, any SPE Party, Guarantor or any Affiliate of any of the foregoing
Controlled by GKK OP consents in writing to, aids, solicits or otherwise
cooperates or colludes to cause such condition or event or fails to file a
motion opposing such condition or event and such condition or event occurs.

 

10.2        Brokers and Financial
Advisors.  Each Borrower hereby
represents that it has dealt with no financial advisors, brokers, underwriters,
placement agents, agents or finders in

 

75

 

connection with the Loan.  The Borrowers shall indemnify and hold Lender
harmless from and against any and all claims, liabilities, costs and expenses
(including attorneys’ fees, whether incurred in connection with enforcing this
indemnity or defending claims of third parties) of any kind in any way relating
to or arising as a result of a breach of the representations made by each
Borrower in the immediately preceding sentence. 
The provisions of this Section 10.2 shall survive the
expiration and termination of this Agreement and the repayment of the Debt.

 

10.3        Retention of Servicer.  Lender reserves the right to retain the
Servicer to act as its agent hereunder with such powers as are specifically
delegated to the Servicer by Lender, whether pursuant to the terms of this
Agreement, any pooling and servicing agreement or similar agreement entered
into as a result of a Secondary Market Transaction, the Deposit Account
Agreement or otherwise, together with such other powers as are reasonably incidental
thereto.  The Borrowers shall pay the
reasonable fees and expenses of the Servicer; provided that the
Borrowers’ obligation pursuant to this sentence shall be capped each year
during the Term at .05% of the outstanding principal balance of the Loan for
such year, which balance shall be determined on a monthly basis and the ratable
portion of the annual fee imposed thereon.

 

10.4        Survival.  This Agreement and all covenants,
agreements, representations and warranties made herein and in the certificates
delivered pursuant hereto shall survive the making by Lender of the Loan and
the execution and delivery to Lender of the Note, and shall continue in full
force and effect so long as any of the Debt is unpaid or such longer period if
expressly set forth in this Agreement. 
All of the Borrowers’ covenants and agreements in this Agreement shall
inure to the benefit of the respective legal representatives, successors and
assigns of Lender.

 

10.5        Lender’s Discretion.  Whenever pursuant to this Agreement or any
other Loan Document, Lender exercises any right given to it to approve or
disapprove, or consent or withhold consent, or any arrangement or term is to be
satisfactory to Lender or is to be in Lender’s discretion, the decision of
Lender to approve or disapprove, to consent or withhold consent, or to decide
whether arrangements or terms are satisfactory or not satisfactory, or
acceptable or unacceptable or in Lender’s discretion shall (except as is
otherwise specifically herein provided) be in the sole discretion of Lender and
shall be final and conclusive.  Whenever pursuant to this Agreement or any
other Loan Document (a) the Rating Agencies are given any right to approve
or disapprove, (b) a Rating Comfort Letter is required or (c) any
arrangement or term is to be satisfactory to the Rating Agencies, the approval
of Lender shall be substituted therefore prior to a Secondary Market
Transaction.  After a Secondary Market
Transaction has occurred, if Lender has made a request for a Rating Comfort
Letter which is required pursuant to the terms and conditions of this Agreement
or the other Loan Documents, then Lender shall (1) thirty (30) days after
such request if a Rating Comfort Letter has not been provided or has not been
denied by the Rating Agencies, provide the Borrowers with a notice updating the
status of such request; and (2) if a Rating Comfort Letter has not been
provided or has not been denied by the Rating Agencies sixty (60) days after (a) such
request and (b) delivery to Lender and the Rating Agencies of all
information and documentation reasonably required by Lender and/or the Rating
Agencies in connection with such request, the approval of Lender shall be
substituted for a Rating Comfort Letter, which approval by Lender shall not be
unreasonably withheld, conditioned or delayed, and Lender shall notify the
Borrowers on such sixtieth (60th) day of Lender’s approval or denial
of such request, which notice shall contain, if such request is denied

 

76

 

by Lender, a reasonably
detailed explanation of the reason for such denial by Lender.  If the Rating Agencies shall deny a request
by the Borrowers and/or Lender for a Rating Comfort Letter, Lender shall use
commercially reasonable efforts to cause such Rating Agencies to provide a
reasonably detailed explanation of the reason for such denial.

 

10.6       Governing Law. (a)      THIS AGREEMENT WAS
NEGOTIATED IN THE STATE OF NEW YORK AND THE PROCEEDS OF THE NOTE DELIVERED
PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE
PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE
UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING MATTERS
OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS
ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT
AT ALL TIMES, WITH RESPECT TO EACH PROPERTY, THE PROVISIONS FOR THE CREATION,
PERFECTION, AND ENFORCEMENT OF THE LIENS CREATED PURSUANT TO THE LOAN DOCUMENTS
SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH
SUCH PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT
PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL
GOVERN THE VALIDITY AND THE ENFORCEABILITY OF ALL LOAN DOCUMENTS AND THE
DEBT.  TO THE FULLEST EXTENT PERMITTED BY
LAW, EACH BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO
ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE
NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO § 5-1401 OF THE
NEW YORK GENERAL OBLIGATIONS LAW.

 

(b)   ANY LEGAL SUIT, ACTION OR
PROCEEDING AGAINST LENDER OR ANY BORROWER ARISING OUT OF OR RELATING TO THIS
AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK COUNTY,
NEW YORK AND EACH BORROWER WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING,
AND EACH BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH
COURT IN ANY SUIT, ACTION OR PROCEEDING. 
WITHIN FIVE (5) BUSINESS DAYS AFTER THE DATE HEREOF, UNLESS EACH
BORROWER ESTABLISHES A BUSINESS ADDRESS IN NEW YORK, NEW YORK, EACH BORROWER
SHALL DESIGNATE AND APPOINT A PERSON WITH AN OFFICE IN NEW YORK, NEW YORK AS
ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND
ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE OF
SUCH BORROWER MAILED OR DELIVERED TO SUCH BORROWER IN

 

77

 

THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON SUCH BORROWER (UNLESS LOCAL LAW
REQUIRES ANOTHER METHOD OF SERVICE), IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
THE STATE OF NEW YORK.  EACH BORROWER (i) SHALL
GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT
HEREUNDER, (ii) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE
AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH OFFICE SHALL BE
DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND (iii) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

 

10.7        Modification, Waiver in
Writing.  No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement or of any other Loan Document, nor consent to any departure by any
Borrower therefrom, shall in any event be effective unless the same shall be in
a writing signed by the party against whom enforcement is sought, and then such
waiver or consent shall be effective only in the specific instance, and for the
purpose, for which given.  Except as
otherwise expressly provided herein, no notice to or demand on any Borrower
shall entitle such Borrower to any other or future notice or demand in the
same, similar or other circumstances. 
Neither any failure nor any delay on the part of Lender in insisting
upon strict performance of any term, condition, covenant or agreement, or
exercising any right, power, remedy or privilege hereunder, or under any other
Loan Document, shall operate as or constitute a waiver thereof, nor shall a
single or partial exercise thereof preclude any other future exercise, or the
exercise of any other right, power, remedy or privilege.  In particular, and not by way of limitation,
by accepting payment after the due date of any amount payable under any Loan
Document, Lender shall not be deemed to have waived any right either to require
prompt payment when due of all other amounts due under the Loan Documents, or
to declare an Event of Default for failure to effect prompt payment of any such
other amount.

 

10.8        Trial by Jury.  EACH BORROWER AND LENDER HEREBY AGREE NOT
TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY
RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM
OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY BY EACH BORROWER AND LENDER, AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
TRIAL BY JURY WOULD OTHERWISE ACCRUE. 
ANY PARTY IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY
PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER.

 

10.9        Headings/Exhibits.  The Section headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.  The Exhibits attached hereto, are hereby
incorporated by reference as a part of the Agreement with the same force and
effect as if set forth in the body hereof.

 

78

 

10.10      Severability.   Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.

 

10.11      Preferences.   Upon the occurrence and continuance of an
Event of Default, Lender shall have the continuing and exclusive right to apply
or reverse and reapply any and all payments by any Borrower to any portion of
the Debt.  To the extent any Borrower
makes a payment to Lender, or Lender receives proceeds of any collateral, which
is in whole or part subsequently invalidated, declared to be fraudulent or
preferential, set aside or required to be repaid to a trustee, receiver or any
other party under any bankruptcy law, state or federal law, common law or
equitable cause, then, to the extent of such payment or proceeds received, the
Debt or part thereof intended to be satisfied shall be revived and continue in
full force and effect, as if such payment or proceeds had not been received by
Lender.  This provision shall survive the
expiration or termination of this Agreement and the repayment of the Debt.

 

10.12      Waiver of Notice.   No Borrower shall be entitled to any
notices of any nature whatsoever from Lender except with respect to matters for
which this Agreement or any other Loan Document specifically and expressly
requires the giving of notice by Lender to such Borrower and except with
respect to matters for which such Borrower is not, pursuant to applicable Legal
Requirements, permitted to waive the giving of notice.  Each Borrower hereby expressly waives the
right to receive any notice from Lender with respect to any matter for which no
Loan Document specifically and expressly requires the giving of notice by
Lender to such Borrower.

 

10.13      Remedies of Borrower.   If a claim or adjudication is made that
Lender or any of its agents, including Servicer, has acted unreasonably or
unreasonably delayed acting in any case where by law or under any Loan
Document, Lender or any such agent, as the case may be, has an obligation to
act reasonably or promptly, each Borrower agrees that neither Lender nor its
agents, including Servicer, shall be liable for any monetary damages, and each
Borrower’s sole remedy shall be to commence an action seeking injunctive relief
or declaratory judgment.  Any action or
proceeding to determine whether Lender has acted reasonably shall be determined
by an action seeking declaratory judgment.

 

10.14      Prior Agreements. 
 This Agreement and the other Loan Documents contain
the entire agreement of the parties hereto and thereto in respect of the
transactions contemplated hereby and thereby, and all prior agreements,
understandings and negotiations among or between such parties, whether oral or
written, are superseded by the terms of this Agreement and the other Loan
Documents.

 

10.15      Offsets, Counterclaims and Defenses.   Each Borrower
hereby waives the right to assert a counterclaim, other than a compulsory
counterclaim, in any action or proceeding brought against it by Lender or its
agents, including Servicer, or otherwise offset any obligations to make
payments required under the Loan Documents. 
Any assignee of Lender’s interest in and to the Loan Documents shall
take the same free and clear of all offsets, counterclaims or 

 

79

 

defenses which are unrelated to the Loan and the Loan
Documents and which any Borrower may otherwise have against any assignor of
such documents, and no such unrelated offset, counterclaim or defense shall be
interposed or asserted by any Borrower in any action or proceeding brought by
any such assignee upon such documents, and any such right to interpose or
assert any such unrelated offset, counterclaim or defense in any such action or
proceeding is hereby expressly waived by each Borrower.

 

10.16      Publicity.   Lender shall have the right
(without the consent of any Borrower) to issue press releases, advertisements
and other promotional materials describing Lender’s participation in the
origination of the Loan or the Loan’s inclusion in any Secondary Market
Transaction effectuated or to be effectuated by Lender; provided, however,
that, in either case, to the extent the aforementioned materials concern or
pertain to any Borrower, its Affiliates, the Loan, any Manager or the Properties
(or any of them), each Borrower’s prior written consent, not to be unreasonably
withheld, conditioned or delayed, shall be required, unless such press
releases, advertisements and other promotional materials include and/or
disclose only the names of the Borrowers, any Manager, Lender and the
Properties, the address of the Properties, the cities and states in which the
Properties are located, a description of the property type of the Properties,
the amount of the Loan and/or a description of the financing type of the Loan
(i.e., term, fixed rate, floating rate) (in which case, no Borrower’s consent
shall be required); provided, further that, the Borrowers shall
be deemed to have consented to the disclosure by Lender of such other
information if the Borrowers fail to respond to Lender’s written request for
the Borrowers’ consent within five (5) Business Days of receipt of such
Lender’s request.  All news releases,
publicity or advertising by the Borrowers or their Affiliates through any media
intended to reach the general public which refers to the Loan Documents or the
financing evidenced by the Loan Documents, to Lender or any of its Affiliates
shall be subject to the prior reasonable approval of Lender, except for
disclosures required by law or regulation which shall not require Lender
approval but which shall require prior notice to Lender.

 

10.17      No Usury.   The Borrowers and Lender intend at all
times to comply with applicable state law or applicable United States federal
law (to the extent that it permits Lender to contract for, charge, take,
reserve or receive a greater amount of interest than under state law) and that
this Section 10.17 shall control every other agreement in the Loan
Documents.  If the applicable law (state
or federal) is ever judicially interpreted so as to render usurious any amount
called for under the Note or any other Loan Document, or contracted for,
charged, taken, reserved or received with respect to the Debt, or if Lender’s
exercise of the option to accelerate the maturity of the Loan or any prepayment
by the Borrowers results in the Borrowers having paid any interest in excess of
that permitted by applicable law, then it is the Borrowers’ and Lender’s
express intent that all excess amounts theretofore collected by Lender shall be
credited against the unpaid Principal and all other Debt (or, if the Debt has
been or would thereby be paid in full, refunded to the Borrowers), and the
provisions of the Loan Documents immediately be deemed reformed and the amounts
thereafter collectible thereunder reduced, without the necessity of the
execution of any new document, so as to comply with applicable law, but so as
to permit the recovery of the fullest amount otherwise called for
thereunder.  All sums paid or agreed to
be paid to Lender for the use, forbearance or detention of the Loan shall, to
the extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Loan until payment in full so
that the rate or amount of interest on account of 

 

80

 

the Debt does not exceed the maximum lawful rate from
time to time in effect and applicable to the Debt for so long as the Debt is
outstanding.  Notwithstanding anything to
the contrary contained in any Loan Document, it is not the intention of Lender
to accelerate the maturity of any interest that has not accrued at the time of
such acceleration or to collect unearned interest at the time of such
acceleration.

 

10.18      Conflict; Construction of Documents.   In the event of any conflict between the
provisions of this Agreement and any of the other Loan Documents, the
provisions of this Agreement shall control. 
The parties hereto acknowledge that each is represented by separate
counsel in connection with the negotiation and drafting of the Loan Documents
and that the Loan Documents shall not be subject to the principle of construing
their meaning against the party that drafted them.

 

10.19      No Third Party Beneficiaries.   The Loan Documents are solely for the
benefit of Lender and the Borrowers and nothing contained in any Loan Document
shall be deemed to confer upon anyone other than the Lender and the Borrowers
any right to insist upon or to enforce the performance or observance of any of
the obligations contained therein.

 

10.20      [reserved]

10.21      Assignment.   

The Loan, the Note, the
Loan Documents and/or Lender’s rights, title, obligations and interests therein
may be assigned by Lender and any of its successors and assigns to any Person
at any time in its discretion, in whole or in part, whether by operation of law
(pursuant to a merger or other successor in interest) or otherwise.  Upon such assignment, all references to
Lender in this Loan Agreement and in any Loan Document shall be deemed to refer
to such assignee or successor in interest and such assignee or successor in
interest shall thereafter stand in the place of Lender.  No Borrower may assign its rights, title,
interests or obligations under this Loan Agreement or under any of the Loan Documents.

 

10.22      [reserved]  

10.23      [reserved]

10.24      Set-Off.   

In addition to any rights and remedies of Lender
provided by this Loan Agreement and by law, Lender shall have the right,
without prior notice to any Borrower, any such notice being expressly waived by
each Borrower to the extent permitted by applicable law, upon any amount
becoming due and payable by any Borrower hereunder (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by Lender or any
Affiliate thereof to or for the credit or the account of such Borrower.  Lender agrees promptly to notify the
Borrowers after any such set-off and application made by Lender; provided
that the failure to give such notice shall not affect the validity of such
set-off and application.

 

10.25      Counterparts.   This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
an original, but all of which shall together constitute one and the same
instrument.

 

81

 

10.26      Cross Default; Cross Collateralization.

 

(a)   Each
Borrower acknowledges that Lender has made the Loan to the Borrowers upon the
security of their collective interest in the Properties and in reliance upon
the aggregate of the Properties taken together being of greater value as
collateral security than the sum of the Properties taken separately.  Each Borrower agrees that the Mortgages are
and will be cross-collateralized and cross-defaulted with each other so that (i) an
Event of Default under any of the Mortgages shall constitute an Event of
Default under the other Mortgages which secures the Note; (ii) an Event of
Default under the Note or this Agreement shall constitute an Event of Default
under each Mortgage; and (iii) each Mortgage shall constitute security for
the Note as if a single blanket lien were placed on all of the Properties as
security for the Note.  Each Borrower
covenants and agrees that in the case of an Event of Default (i) Lender
shall have the right to pursue all of its rights and remedies in one
proceeding, or separately and independently in separate proceedings from time
to time, as mortgagee, in its sole and absolute discretion, shall determine from
time to time, (ii) Lender is not required to either marshal assets, sell
any individual Property in any inverse order of alienation, or be subject to
any “one action” or “election of remedies” law or rule, (iii) the exercise
by Lender of any remedies against any one item of Property will not impede
Lender from subsequently or simultaneously exercising remedies against any
other item of Property and (iv) all liens and other rights, remedies or
privileges provided to Lender shall remain in full force and effect until
Lender has exhausted all of its remedies against the Properties and all
Properties have been foreclosed, sold and/or otherwise realized upon in
satisfaction of the Loan.

 

(b)   Each
Borrower hereby acknowledges and agrees that, by virtue of the foregoing
provisions of subsection (a), each Borrower has a direct and material interest
in preventing the occurrence of an Event of Default under any of the Loan
Documents.  Accordingly, each Borrower is
willing to continue to make or receive loans (each an “Intra-Obligor
Loan”, and collectively, the “Intra-Obligor
Loans”) in order to provide for the payment of all amounts due
under the Loan Documents and, in so doing, to avoid an Event of Default
thereunder.  In the event and to the
extent that the proceeds from any of the Properties or any other collateral
granted to Lender by any Borrower (the “Creditor”)
are applied to any payments due with respect to the Properties or other
collateral owned by any other Borrower (the “Debtor”)
from and after the date hereof, then the Creditor shall be deemed to have made
an Intra-Obligor Loan to Debtor in the amount of such proceeds so applied (the “Intra-Obligor Loan Amount”).  Such Intra-Obligor Loan shall be deemed to be
made on a non-recourse basis and shall be repaid out of the future proceeds of
the Properties or other collateral owned by the Debtor, together with interest
thereon at a rate to be agreed upon from time to time by each Borrower.

 

(c)   All
Intra-Obligor Loans deemed to be made under this Agreement shall be evidenced
by this Agreement, shall be an obligation of the Debtor which owes such
Intra-Obligor Loan solely by its execution of this Agreement and shall not be
evidenced by any separate instrument. 
Each party hereby waives presentment, notice of dishonor, protest and
notice of non-payment or non-performance with respect to each Intra-Obligor
Loan for which it is liable under this Agreement.  Interest and principal on Intra-Obligor Loans
shall be paid solely out of net proceeds from the Properties owned by the
Debtor or other property owned by the Debtor and shall be subject in all cases
to the terms and conditions of the Loan Documents, and the payments from such
sources shall be the sole and exclusive remedy available to any Creditor 

 

82

 

during the Term. 
Each such payment of principal or interest on Intra-Obligor Loans shall
be subordinate and subject to the prior payment of all amounts payable under
the Loan Documents.  To the extent such
sources of payment are insufficient to pay interest and principal on any
Intra-Obligor Loan, the Creditor owed such Intra-Obligor Loan shall not have
any claim against the Debtor which owes such Intra-Obligor Loan for such
amounts or lien on or security interest in any of the assets of such Debtor and
no further or additional recourse shall be available against the Debtor.  At any time during the Term, all payments
received on account of any Intra-Obligor Loan under this Agreement shall be
credited first to interest, then to principal. 
Accrued but unpaid interest shall not be compounded.

 

[Remainder of Page Intentionally Left Blank]

 

83

 

IN WITNESS WHEREOF, the parties hereto have caused this Loan Agreement
to be duly executed by their duly authorized representatives, all as of the day
and year first above written.

 

	
   

  	
  FIRST STATES INVESTORS HFS, L.P., a Delaware 

  limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  First States Investors HFS GP, LLC, a Delaware 

  limited liability company, its general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Sonya A. Huffman

  
	
   

  	
   

  	
   

  	
  Name: Sonya A. Huffman

  
	
   

  	
   

  	
   

  	
  Title: Vice President

  

 

 

	
   

  	
  FIRST STATES INVESTORS FPC, L.P., a Delaware

  limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  First States Investors FPC GP, LLC, a Delaware 

  limited liability company, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Sonya A. Huffman

  
	
   

  	
   

  	
   

  	
  Name:  Sonya
  A. Huffman

  
	
   

  	
   

  	
   

  	
  Title:  Vice
  President

  

 

 

	
   

  	
  FIRST STATES INVESTORS TRS, L.P., a Delaware 

  limited partnership

  
	
   

  	
   

  
	
   

  	
  By:

  	
  First States Investors TRS GP, LLC, a Delaware 

  limited liability company, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Sonya A. Huffman

  
	
   

  	
   

  	
   

  	
  Name:  Sonya
  A. Huffman

  
	
   

  	
   

  	
   

  	
  Title:  Vice
  President

  

 

 

	
   

  	
  GRAMERCY INVESTMENT TRUST, a Maryland real 

  estate investment trust

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Robert R. Foley

  
	
   

  	
   

  	
  Name:

  	
  Robert R. Foley

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

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