Document:

Exhibit 10.17

 

Loan No. V_30495

 

PREPARED OUTSIDE THE
COMMONWEALTH OF VIRGINIA

 

PREPARED BY AND UPON

RECORDATION RETURN TO:

 

Dechert

30 Rockefeller Plaza

New
York, New York 10112-2200

Attention: Paul A. Keenan, Esq.

 

 

RKB PENDER LLC, as grantor

(Borrower)

 

to

RICHARD W. KLEIN, JR., as trustee

(Trustee)

 

for the benefit of

 

JPMORGAN CHASE BANK, as beneficiary

(Lender)

 

 

DEED OF TRUST AND

SECURITY AGREEMENT

 

 

Dated: September 23, 2002

 

 

	
   

  	
  Location:

  	
  Pender Business Park

  	
   

  
	
   

  	
   

  	
  3922, 3924, 3926, & 3928 Pender Drive

  	
   

  
	
   

  	
   

  	
  Fairfax, VA 22030

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  County:

  	
  Fairfax County

  	
   

  

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  ARTICLE 1 - GRANTS OF SECURITY

  	
   

  	
  1

  
	
  Section 1.1.

  	
  PROPERTY CONVEYED

  	
   

  	
  1

  
	
  Section 1.2.

  	
  ASSIGNMENT OF RENTS

  	
   

  	
  4

  
	
  Section 1.3.

  	
  DEFINITION OF PERSONAL PROPERTY

  	
   

  	
  4

  
	
  Section 1.4.

  	
  PLEDGE OF MONIES HELD

  	
   

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2 - DEBT AND OBLIGATIONS SECURED

  	
   

  	
  4

  
	
  Section 2.1.

  	
  DEBT

  	
   

  	
  4

  
	
  Section 2.2.

  	
  OTHER OBLIGATIONS

  	
   

  	
  5

  
	
  Section 2.3.

  	
  DEBT AND OTHER OBLIGATIONS

  	
   

  	
  5

  
	
  Section 2.4.

  	
  PAYMENTS

  	
   

  	
  5

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3 - BORROWER COVENANTS

  	
   

  	
  6

  
	
  Section 3.1.

  	
  INCORPORATION BY REFERENCE

  	
   

  	
  6

  
	
  Section 3.2.

  	
  INSURANCE

  	
   

  	
  6

  
	
  Section 3.3.

  	
  PAYMENT OF TAXES, ETC

  	
   

  	
  12

  
	
  Section 3.4.

  	
  CONDEMNATION

  	
   

  	
  13

  
	
  Section 3.5.

  	
  USE AND MAINTENANCE OF PROPERTY

  	
   

  	
  13

  
	
  Section 3.6.

  	
  WASTE

  	
   

  	
  14

  
	
  Section 3.7.

  	
  COMPLIANCE WITH LAWS; ALTERATIONS

  	
   

  	
  14

  
	
  Section 3.8.

  	
  BOOKS AND RECORDS

  	
   

  	
  14

  
	
  Section 3.9.

  	
  PAYMENT FOR LABOR AND MATERIALS

  	
   

  	
  16

  
	
  Section 3.10.

  	
  PERFORMANCE OF OTHER AGREEMENTS

  	
   

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4 - SPECIAL COVENANTS

  	
   

  	
  16

  
	
  Section 4.1.

  	
  PROPERTY USE

  	
   

  	
  16

  
	
  Section 4.2.

  	
  ERISA

  	
   

  	
  16

  
	
  Section 4.3.

  	
  SINGLE PURPOSE ENTITY

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5 - REPRESENTATIONS AND WARRANTIES

  	
   

  	
  20

  
	
  Section 5.1.

  	
  BORROWER’S REPRESENTATIONS

  	
   

  	
  20

  
	
  Section 5.2.

  	
  WARRANTY OF TITLE

  	
   

  	
  20

  
	
  Section 5.3.

  	
  STATUS OF PROPERTY

  	
   

  	
  20

  
	
  Section 5.4.

  	
  NO FOREIGN PERSON

  	
   

  	
  21

  
	
  Section 5.5.

  	
  SEPARATE TAX LOT

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 6 - OBLIGATIONS AND RELIANCES

  	
   

  	
  22

  
	
  Section 6.1.

  	
  RELATIONSHIP OF BORROWER AND LENDER

  	
   

  	
  22

  
	
  Section 6.2.

  	
  NO RELIANCE ON LENDER

  	
   

  	
  22

  
	
  Section 6.3.

  	
  NO LENDER OBLIGATIONS

  	
   

  	
  22

  
	
  Section 6.4.

  	
  RELIANCE

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 7 - FURTHER ASSURANCES

  	
   

  	
  22

  

 

i

 

	
  Section 7.1.

  	
  RECORDING FEES

  	
   

  	
  22

  
	
  Section 7.2.

  	
  FURTHER ACTS

  	
   

  	
  23

  
	
  Section 7.3.

  	
  CHANGES IN TAX, DEBT CREDIT AND DOCUMENTARY STAMP LAWS

  	
   

  	
  24

  
	
  Section 7.4.

  	
  CONFIRMATION STATEMENT

  	
   

  	
  24

  
	
  Section 7.5.

  	
  SPLITTING OF SECURITY INSTRUMENT

  	
   

  	
  24

  
	
  Section 7.6.

  	
  REPLACEMENT DOCUMENTS

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 8 - DUE ON SALE/ENCUMBRANCE

  	
   

  	
  25

  
	
  Section 8.1.

  	
  LENDER RELIANCE

  	
   

  	
  25

  
	
  Section 8.2.

  	
  NO SALE/ENCUMBRANCE

  	
   

  	
  25

  
	
  Section 8.3.

  	
  EXCLUDED AND PERMITTED TRANSFERS

  	
   

  	
  26

  
	
  Section 8.4.

  	
  NO IMPLIED FUTURE CONSENT

  	
   

  	
  28

  
	
  Section 8.5.

  	
  COSTS OF CONSENT

  	
   

  	
  28

  
	
  Section 8.6.

  	
  CONTINUING SEPARATENESS REQUIREMENTS

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 9 - DEFAULT

  	
   

  	
  28

  
	
  Section 9.1.

  	
  EVENTS OF DEFAULT

  	
   

  	
  28

  
	
  Section 9.2.

  	
  DEFAULT INTEREST

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 10 - RIGHTS AND REMEDIES

  	
   

  	
  30

  
	
  Section 10.1.

  	
  REMEDIES

  	
   

  	
  30

  
	
  Section 10.2.

  	
  RIGHT OF ENTRY

  	
   

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 11 - INDEMNIFICATION; SUBROGATION

  	
   

  	
  36

  
	
  Section 11.1.

  	
  GENERAL INDEMNIFICATION

  	
   

  	
  36

  
	
  Section 11.2.

  	
  ENVIRONMENTAL INDEMNIFICATION

  	
   

  	
  37

  
	
  Section 11.3.

  	
  DUTY TO DEFEND AND ATTORNEYS AND OTHER FEES AND EXPENSES

  	
   

  	
  40

  
	
  Section 11.4.

  	
  SURVIVAL OF INDEMNITIES

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 12 - SECURITY AGREEMENT

  	
   

  	
  40

  
	
  Section 12.1.

  	
  SECURITY AGREEMENT

  	
   

  	
  40

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 13 - WAIVERS 

  	
   

  	
  41

  
	
  Section 13.1.

  	
  MARSHALLING AND OTHER MATTERS

  	
   

  	
  41

  
	
  Section 13.2.

  	
  WAIVER OF NOTICE

  	
   

  	
  42

  
	
  Section 13.3.

  	
  SOLE DISCRETION OF LENDER

  	
   

  	
  42

  
	
  Section 13.4.

  	
  SURVIVAL

  	
   

  	
  42

  
	
  Section 13.5.

  	
  WAIVER OF TRIAL BY JURY

  	
   

  	
  42

  
	
  Section 13.6.

  	
  WAIVER OF AUTOMATIC OR SUPPLEMENTAL STAY

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 14 - NOTICES

  	
   

  	
  43

  
	
  Section 14.1.

  	
  NOTICES

  	
   

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 15 - APPLICABLE LAW

  	
   

  	
  44

  
	
  Section 15.1.

  	
  GOVERNING LAW; JURISDICTION

  	
   

  	
  44

  
	
  Section 15.2.

  	
  USURY LAWS

  	
   

  	
  44

  

 

ii

 

	
  Section 15.3.

  	
  PROVISIONS SUBJECT TO APPLICABLE LAW

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 16 - SECONDARY MARKET

  	
   

  	
  45

  
	
  Section 16.1.

  	
  TRANSFER OF LOAN

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 17 - COSTS

  	
   

  	
  45

  
	
  Section 17.1.

  	
  PERFORMANCE AT BORROWER’S EXPENSE

  	
   

  	
  45

  
	
  Section 17.2.

  	
  ATTORNEY’S FEES FOR ENFORCEMENT

  	
   

  	
  45

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 18 - DEFINITIONS

  	
   

  	
  46

  
	
  Section 18.1.

  	
  GENERAL DEFINITIONS

  	
   

  	
  46

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 19 - MISCELLANEOUS PROVISIONS

  	
   

  	
  46

  
	
  Section 19.1.

  	
  NO ORAL CHANGE

  	
   

  	
  46

  
	
  Section 19.2.

  	
  LIABILITY

  	
   

  	
  46

  
	
  Section 19.3.

  	
  INAPPLICABLE PROVISIONS

  	
   

  	
  46

  
	
  Section 19.4.

  	
  HEADINGS, ETC

  	
   

  	
  46

  
	
  Section 19.5.

  	
  DUPLICATE ORIGINALS; COUNTERPARTS

  	
   

  	
  46

  
	
  Section 19.6.

  	
  NUMBER AND GENDER

  	
   

  	
  47

  
	
  Section 19.7.

  	
  SUBROGATION

  	
   

  	
  47

  
	
  Section 19.8.

  	
  ENTIRE AGREEMENT

  	
   

  	
  47

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 20 - TRUSTEE

  	
   

  	
  47

  
	
   

  	
   

  	
   

  
	
  ARTICLE 21 - SPECIAL STATE OF VIRGINIA PROVISIONS

  	
   

  	
  48

  

 

iii

 

Index of Defined Terms

 

	
  ADA

  	
   

  	
  14

  
	
  Applicable Laws

  	
   

  	
  14

  
	
  attorneys

  	
   

  	
  37

  
	
  attorneys’ fees

  	
   

  	
  46

  
	
  Bankruptcy Code

  	
   

  	
  2

  
	
  Borrower

  	
   

  	
  1, 46

  
	
  Business Day

  	
   

  	
  44

  
	
  Collateral

  	
   

  	
  41

  
	
  counsel fees

  	
   

  	
  46

  
	
  Debt

  	
   

  	
  4

  
	
  Default Rate

  	
   

  	
  30

  
	
  Environmental Indemnity

  	
   

  	
  6

  
	
  Environmental Law

  	
   

  	
  38, 39

  
	
  Environmental Lien

  	
   

  	
  39

  
	
  ERISA

  	
   

  	
  16

  
	
  Escrow Agreement

  	
   

  	
  3

  
	
  Event

  	
   

  	
  45

  
	
  Event of Default

  	
   

  	
  28

  
	
  Exculpated Portion

  	
   

  	
  36

  
	
  fees and expenses

  	
   

  	
  37

  
	
  Guarantor

  	
   

  	
  18

  
	
  Hazardous Substances

  	
   

  	
  39

  
	
  Improvements

  	
   

  	
  1

  
	
  Indemnified Parties

  	
   

  	
  39

  
	
  Insurance Premiums

  	
   

  	
  8

  
	
  Insured Casualty

  	
   

  	
  10

  
	
  Intangibles

  	
   

  	
  3

  
	
  Investor

  	
   

  	
  45

  
	
  Land

  	
   

  	
  1

  
	
  Lease

  	
   

  	
  2

  
	
  Leases

  	
   

  	
  2

  
	
  legal fees

  	
   

  	
  46

  
	
  Lender

  	
   

  	
  1, 46

  
	
  Loan

  	
   

  	
  27

  
	
  Loan Documents

  	
   

  	
  6

  
	
  Losses

  	
   

  	
  39

  
	
  Note

  	
   

  	
  1, 46

  
	
  Obligations

  	
   

  	
  5

  
	
  Original Principals

  	
   

  	
  26

  
	
  Other Charges

  	
   

  	
  12

  
	
  Other Loan Documents

  	
   

  	
  6

  
	
  Other Obligations

  	
   

  	
  5

  

 

1

 

	
  Permitted Exceptions

  	
   

  	
  20

  
	
  person

  	
   

  	
  46

  
	
  Personal Property

  	
   

  	
  4

  
	
  Policies

  	
   

  	
  8

  
	
  Policy

  	
   

  	
  8

  
	
  Property

  	
   

  	
  1, 46

  
	
  Qualified Insurer

  	
   

  	
  8

  
	
  Rating Agency

  	
   

  	
  45

  
	
  Release

  	
   

  	
  40

  
	
  Remediation

  	
   

  	
  40

  
	
  Rents

  	
   

  	
  2

  
	
  Securities

  	
   

  	
  45

  
	
  Security Instrument

  	
   

  	
  1

  
	
  Taxes

  	
   

  	
  12

  
	
  Trustee

  	
   

  	
  1

  
	
  Uniform Commercial Code

  	
   

  	
  2

  

 

2

 

THIS DEED OF TRUST AND
SECURITY AGREEMENT (this “Security
Instrument”) is
made as of the 23rd day of September, 2002, by RKB PENDER LLC, a
Delaware limited liability company, having its principal place of business at
c/o Republic Properties Corporation, 1280 Maryland Avenue, S.W., Suite 280,
Washington, D.C. 20024 (“Borrower”),
to RICHARD W. KLEIN, JR., an
individual, having an address at 9404 Ludgate Drive, Alexandria, VA 22309 (“Trustee”), for the benefit of JPMORGAN CHASE BANK, a New York banking corporation,
having its principal place of business at 270 Park Avenue, New York, New York
10017, as beneficiary (“Lender”).

 

RECITALS:

 

Borrower by its Fixed Rate
Note of even date herewith given to Lender is indebted to Lender in the
principal sum of $21,500,000.00 in lawful money of the United States of America
(such Fixed Rate Note, together with all extensions, renewals, modifications,
substitutions and amendments thereof, shall collectively be referred to as the “Note”), with interest from the date thereof at the rates
set forth in the Note, principal and interest to be payable in accordance with
the terms and conditions provided in the Note, and with a final maturity date
of October 1, 2009.

 

Borrower desires to secure the payment of the Debt (as defined in Article 2)
and the performance of all of its obligations under the Note and the Other
Obligations (as defined in Article 2).

 

ARTICLE 1 - GRANTS OF SECURITY

 

Section 1.1.                                   PROPERTY CONVEYED.  Borrower
does hereby irrevocably, unconditionally and absolutely, grant, bargain, sell,
pledge, enfeoff, assign, warrant, transfer and convey to Trustee (with power of
sale) in trust for the purposes herein set forth, the following property,
rights, interests and estates now owned, or hereafter acquired, by Borrower
(collectively, the “Property”):

 

(a)                                  Land. The real property described in Exhibit A attached hereto
and made a part hereof (collectively, the “Land”), together
with additional lands, estates and development rights hereafter acquired by
Borrower for use in connection with the development, ownership or occupancy of
such real property, and all additional lands and estates therein which may,
from time to time, by supplemental deed of trust or otherwise be expressly made
subject to the lien of this Security Instrument;

 

(b)                                 Improvements. 
The buildings, structures, fixtures, additions, accessions, enlargements,
extensions, modifications, repairs, replacements and improvements now or hereafter
erected or located on the Land (the “Improvements”);

 

(c)                                  Easements.  All easements, rights-of-way
or use, rights, strips and gores of land, streets, ways, alleys, passages,
sewer rights, water, water courses, water rights and powers, air rights and
development rights, and all estates, rights, titles, interests, privileges,
liberties, servitudes, tenements, hereditaments and appurtenances of any nature
whatsoever, in any way now or hereafter belonging, relating or pertaining to
the Land and the Improvements and the reversion and reversions, remainder and
remainders, and all land lying in the bed of any street, road or avenue, opened
or proposed, in front of

 

 

or adjoining the Land, to the center line thereof and all the estates,
rights, titles, interests, dower and rights of dower, curtesy and rights of
curtesy, property, possession, claim and demand whatsoever, both at law and in
equity, of Borrower of, in and to the Land and the Improvements and every part
and parcel thereof, with the appurtenances thereto;

 

(d)                                 Fixtures and Personal Property. 
All machinery, equipment, goods, inventory, consumer goods, fixtures
(including, but not limited to, all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures) and other property of every
kind and nature whatsoever owned by Borrower, or in which Borrower has or shall
have an interest, now or hereafter located upon the Land and the Improvements,
or appurtenant thereto, and usable in connection with the present or future use,
maintenance, enjoyment, operation and occupancy of the Land and the Improvements
and all building equipment, materials and supplies of any nature whatsoever
owned by Borrower, or in which Borrower has or shall have an interest, now or
hereafter located upon the Land and the Improvements, or appurtenant thereto,
or usable in connection with the present or future operation and occupancy of
the Land and the Improvements, and the right, title and interest of Borrower in
and to any of the Personal Property (as hereinafter defined) which may be
subject to any security interests, as defined in the Uniform Commercial Code,
as adopted and enacted by the state or states where any of the Property is
located (the “Uniform Commercial Code”),
superior in lien to the lien of this Security Instrument and all proceeds and
products of the above;

 

(e)                                  Leases and Rents. 
All leases and other agreements affecting the use, enjoyment or
occupancy of the Land and the Improvements heretofore or hereafter entered
into, whether before or after the filing by or against Borrower of any petition
for relief under 11 U.S.C. § 101 et  seq., as the same may be
amended from time to time (the “Bankruptcy Code”)
(individually, a “Lease”; collectively, the “Leases”) and all right, title and interest of Borrower, its
successors and assigns therein and thereunder, including, without limitation,
cash or securities deposited thereunder to secure the performance by the
lessees of their obligations thereunder and all rents (including all tenant
security and other deposits), additional rents, revenues, issues and profits (including
all oil and gas or other mineral royalties and bonuses) from the Land and the Improvements
whether paid or accruing before or after the filing by or against Borrower of
any petition for relief under the Bankruptcy Code (collectively the “Rents”) and all proceeds from the sale or other disposition
of the Leases and the right to receive and apply the Rents to the payment of
the Debt;

 

(f)                                    Condemnation Awards. 
All awards or payments, including interest thereon, which may heretofore
and hereafter be made with respect to the Property, whether from the exercise
of the right of eminent domain (including but not limited to any transfer made
in lieu of or in anticipation of the exercise of the right), or for a change of
grade, or for any other injury to or decrease in the value of the Property;

 

(g)                                 Insurance Proceeds. 
All proceeds of and any unearned premiums on any insurance policies
covering the Property, including, without limitation, the right to receive and
apply the proceeds of any insurance, judgments, or settlements made in lieu thereof,
for damage to the Property;

 

2

 

(h)                                 Tax Certiorari.  All
refunds, rebates or credits in connection with a reduction in real estate taxes
and assessments charged against the Property as a result of tax certiorari or
any applications or proceedings for reduction;

 

(i)                                     Conversion.  All proceeds of the conversion, voluntary or
involuntary, of any of the foregoing including, without limitation, proceeds of
insurance and condemnation awards, into cash or liquidation claims;

 

(j)                                     Rights.  The right, in the name and on
behalf of Borrower, to appear in and defend any action or proceeding brought
with respect to the Property and to commence any action or proceeding to
protect the interest of Trustee and/or Lender in the Property;

 

(k)                                  Agreements.  All
agreements (including, without limitation, that certain Escrow Agreement, dated
as of September 23, 2002, among Pender Office L.L.C., Borrower and
Tri-State Commercial Closings, Inc., together with any funds deposited or
to be deposited in accordance therewith), contracts (including purchase, sale,
option, right of first refusal and other contracts pertaining to the Property),
certificates, instruments, franchises, permits, licenses, approvals, consents,
plans, specifications and other documents, now or hereafter entered into, and
all rights therein and thereto, respecting or pertaining to the use, occupation,
construction, management or operation of the Property (including any
Improvements or respecting any business or activity conducted on the Land and
any part thereof) and all right, title and interest of Borrower therein and
thereunder, including, without limitation, the right, upon the happening of any
default hereunder, to receive and collect any sums payable to Borrower
thereunder;

 

(l)                                     Trademarks.  All
tradenames, trademarks, servicemarks, logos, copyrights, goodwill, books and
records and all other general intangibles relating to or used in connection
with the operation of the Property;

 

(m)                               Accounts.  All accounts, accounts
receivable, escrows (including, without limitation, all escrows, deposits,
reserves and impounds established pursuant to that certain Escrow Agreement for
Reserves and Impounds of even date herewith between Borrower and Lender;
hereinafter, the “Escrow Agreement”), documents,
instruments, chattel paper, claims, reserves (including deposits)
representations, warranties and general intangibles, as one or more of the
foregoing terms may be defined in the Uniform Commercial Code, and all contract
rights, franchises, books, records, plans, specifications, permits, licenses
(to the extent assignable), approvals, actions, choses, claims, suits, proofs
of claim in bankruptcy and causes of action which now or hereafter relate to,
are derived from or are used in connection with the Property, or the use,
operation, maintenance, occupancy or enjoyment thereof or the conduct of any
business or activities thereon (hereinafter collectively called the “Intangibles”); and

 

(n)                                 Other Rights.  Any
and all other rights of Borrower in and to the Property and any accessions,
renewals, replacements and substitutions of all or any portion of the Property
and all proceeds derived from the sale, transfer, assignment or financing of
the Property or any portion thereof.

 

3

 

Section 1.2.                                   ASSIGNMENT OF RENTS.  Borrower hereby absolutely and unconditionally
assigns to Lender Borrower’s right, title and interest in and to all current
and future Leases and Rents; it being intended by Borrower that this assignment
constitutes a present, absolute and unconditional assignment and not an
assignment for additional security only. Nevertheless, subject to the terms of
this Section 1.2 and the terms and conditions of that certain
Assignment of Rents and Leases, of even date herewith between Borrower and
Lender, Lender grants to Borrower a revocable license to collect and receive
the Rents. Borrower shall hold the Rents, or a portion thereof sufficient to
discharge all current sums due on the Debt, for use in the payment of such
sums.

 

Section 1.3.                                   DEFINITION OF PERSONAL PROPERTY.  For
purposes of this Security Instrument, (a) the Property identified in Subsections
1.1(d) through 1.1(n), inclusive, shall be collectively referred to
herein as the “Personal Property,” and (b) the Property identified in Subsection 1.1(d) shall
be referred to herein as the “Tangible
Personal Property”.

 

Section 1.4.                                   PLEDGE OF MONIES HELD. Borrower hereby pledges to Lender any and
all monies now or hereafter held by Lender, including, without limitation, any
sums deposited in the Funds (as defined in the Escrow Agreement), all insurance
proceeds described in Section 3.2 and condemnation awards or
payments described in Section 3.4, as additional security for the
Obligations until expended or applied as provided in this Security Instrument.

 

CONDITIONS TO GRANT

 

TO HAVE AND TO HOLD the above granted and described Property unto and
to the use and benefit of Trustee, and the successors and assigns of Trustee,
forever;

 

PROVIDED, HOWEVER, these presents are upon the express condition that,
if Borrower shall well and truly pay to Lender the Debt at the time and in the
manner provided in the Note and this Security Instrument, shall well and truly
perform the Other Obligations as set forth in this Security Instrument and
shall well and truly abide by and comply with each and every covenant and
condition set forth herein and in the Note, these presents and the estate
hereby granted shall cease, terminate and be void; provided however,
that Borrower’s obligation to indemnify and hold harmless Lender pursuant to
the provisions hereof with respect to matters relating to any period of time
during which this Security Instrument was in effect shall survive any such
payment or release.

 

ARTICLE 2 - DEBT AND OBLIGATIONS
SECURED

 

Section 2.1.                                   DEBT.  This Security Instrument and
the grants, assignments and transfers made in Article 1 are given
for the purpose of securing the following, in such order of priority as Lender
may determine in its sole discretion (the “Debt”):

 

(a)                                  the payment of the indebtedness evidenced
by the Note in lawful money of the United States of America;

 

(b)                                 the payment of interest, default interest,
late charges and other sums, as provided in the Note, this Security Instrument
or the Other Loan Documents (as hereinafter defined);

 

4

 

(c)                                  the payment of all other moneys agreed or
provided to be paid by Borrower in the Note, this Security Instrument or the
Other Loan Documents;

 

(d)                                 the payment of all sums advanced pursuant
to this Security Instrument to protect and preserve the Property and the lien
and the security interest created hereby; and

 

(e)                                  the payment of all sums advanced and costs
and expenses incurred by Lender in connection with the Debt or any part
thereof, any renewal, extension, or change of or substitution for the Debt or
any part thereof, or the acquisition or perfection of the security therefor,
whether made or incurred at the request of Borrower or Lender.

 

Section 2.2.                                   OTHER OBLIGATIONS.  This
Security Instrument and the grants, assignments and transfers made in Article 1
are also given for the purpose of securing the following (the “Other Obligations”):

 

(a)                                  the performance of all other obligations of
Borrower contained herein;

 

(b)                                 the performance of each obligation of
Borrower contained in any other agreement given by Borrower to Lender which is
for the purpose of further securing the obligations secured hereby, and any
amendments, modifications and changes thereto; and

 

(c)                                  the performance of each obligation of
Borrower contained in any renewal, extension, amendment, modification,
consolidation, change of, or substitution or replacement for, all or any part
of the Note, this Security Instrument or the Other Loan Documents.

 

Section 2.3.                                   DEBT AND OTHER OBLIGATIONS.  Borrower’s
obligations for the payment of the Debt and the performance of the Other
Obligations shall be referred to collectively herein as the “Obligations.”

 

Section 2.4.                                   PAYMENTS.  Unless payments are made in
the required amount in immediately available funds at the place where the Note
is payable, remittances in payment of all or any part of the Debt shall not,
regardless of any receipt or credit issued therefor, constitute payment until
the required amount is actually received by Lender in funds immediately
available at the place where the Note is payable (or any other place as Lender,
in Lender’s sole discretion, may have established by delivery of written notice
thereof to Borrower) and shall be made and accepted subject to the condition
that any check or draft may be handled for collection in accordance with the
practice of the collecting bank or banks. Acceptance by Lender of any payment
in an amount less than the amount then due shall be deemed an acceptance on
account only, and the failure to pay the entire amount then due shall be and
continue to be an Event of Default (as hereinafter defined).

 

5

 

ARTICLE 3 - BORROWER COVENANTS

 

Borrower covenants and agrees that:

 

Section 3.1.                                   INCORPORATION BY REFERENCE.  All
the covenants, conditions and agreements contained in (a) the Note, and (b) all
and any of the documents other than the Note or this Security Instrument now or
hereafter executed by Borrower and/or others and by or in favor of Lender in
connection with the creation of the Obligations, the payment of any other sums
owed by Borrower to Lender or the performance of any Obligations (collectively
the “Other Loan Documents”),
are hereby made a part of this
Security Instrument to the same extent and with the same force as if fully set
forth herein. The term “Loan Documents”as used herein shall individually and
collectively refer to the Note, this Security Instrument and the Other Loan
Documents; provided, however, that notwithstanding any provision of this
Security Instrument to the contrary, the Obligations of the Borrower under that
certain Environmental Indemnity Agreement of even date herewith executed by
Borrower in favor of Lender (the “Environmental
Indemnity”) shall not be deemed or construed to be
secured by this Security Instrument or otherwise restricted or affected by the
foreclosure of the lien hereof or any other exercise by Lender of its remedies
hereunder or under any other Loan Document, such Environmental Indemnity being
intended by the signatories thereto to be its (or their) unsecured obligation.

 

Section 3.2.                                   INSURANCE.

 

(a)                                  Borrower shall obtain and maintain, and
shall pay all premiums in accordance with Subsection 3.2(b) below
for, insurance for Borrower and the Property providing at least the following
coverages:

 

(i)                                     comprehensive all risk insurance
(including, without limitation, riot and civil commotion, vandalism, malicious
mischief, water, fire, burglary and theft and without any exclusion for
terrorism) on the Improvements and the Personal Property and in each case (A) in
an amount equal to 100% of the “Full Replacement Cost,” which for purposes of
this Security Instrument shall mean actual replacement value (exclusive of
costs of excavations, foundations, underground utilities and footings) with a
waiver of depreciation; (B) containing an agreed amount endorsement with
respect to the Improvements and Tangible Personal Property waiving all
co-insurance provisions; (C) providing that the deductible shall not
exceed the lesser of $10,000.00 or one percent (1%) of the face value of the
policy; and (D) containing Demolition Costs, Increased Cost of
Construction and “Ordinance or Law Coverage” or “Enforcement” endorsements in
amounts satisfactory to Lender if any of the Improvements or the use of the
Property shall at any time constitute legal non-conforming structures or uses
or the ability to rebuild the Improvements is restricted or prohibited. The
Full Replacement Cost may be redetermined from time to time by an appraiser or
contractor designated and paid by Lender or by an engineer or appraiser in the
regular employ of the insurer. No omission on the part of Lender to request any
such appraisals shall relieve Borrower of any of its obligations under this
Subsection;

 

(ii)                                  comprehensive general liability insurance
against claims for personal injury, bodily injury, death or property damage
occurring upon, in or about the Property, such insurance (A) to be on the
so-called “occurrence” form with a combined single limit of not less than
$1,000,000.00 and not less than

 

6

 

$3,000,000.00 if the Property has one or more elevators, as well as
liquor liability insurance in a minimum amount of $2,000,000.00 if any part of
the Property is covered by a liquor license and an aggregate coverage limit
acceptable to Lender; (B) to continue at not less than the aforesaid limit
until required to be changed by Lender in writing by reason of changed economic
conditions making such protection inadequate; (C) to cover at least the
following hazards: (1) premises and operations; (2) products and
completed operations on an “if any” basis; (3) independent contractors; (4) blanket
contractual liability for all written and oral contracts; (5) contractual
liability covering the indemnities contained in Article 11 hereof
to the extent the same is available; and (D) to be without deductible;

 

(iii)                               business income insurance (A) with
loss payable to Lender; (B) covering losses of income and Rents derived
from the Property resulting from any risk or casualty required to be insured
pursuant to Section 3.2(a)(i); (C) containing an extended
period of indemnity endorsement which provides that after the physical loss to
the Improvements and Tangible Personal Property has been repaired, 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 eighteen (18)
months from the date of the loss, whichever first occurs, and notwithstanding
that the policy may expire prior to the end of such period; and (D) in an
amount equal to 100% of the projected gross income from the Property for a
period of eighteen (18) months. The amount of such business income insurance
shall be determined by Lender prior to the date hereof and at least once each
year thereafter based on Borrower’s reasonable estimate of the gross income
from the Property for the succeeding eighteen (18) month period. All insurance
proceeds payable to Lender pursuant to this Subsection 3.2(a) shall
be held by Lender and shall be applied to the obligations secured hereunder
from time to time due and payable hereunder and under the Note; provided,
however, that nothing herein contained shall be deemed to relieve
Borrower of its obligations to pay the obligations secured hereunder on the
respective dates of payment provided for in the Note except to the extent such
amounts are actually paid out of the proceeds of such business income
insurance;

 

(iv)                              at all times during which structural
construction, repairs or alterations are being made with respect to the
Improvements: (A) owner’s contingent or protective liability insurance
covering claims not covered by or under the terms or provisions of the above
mentioned commercial general liability insurance policy; and (B) the
insurance provided for in Subsection 3.2(a)(i) written in a
so-called builder’s risk completed value form (1) on a non-reporting
basis, (2) against all risks insured against pursuant to Subsection 3.2(a)(i),
(3) including permission to occupy the Property, and (4) with an
agreed amount endorsement waiving co-insurance provisions;

 

(v)                                 workers’ compensation, subject to the
statutory limits of the state in which the Property is located, and employer’s
liability insurance with a limit of at least $1,000,000.00 per accident and per
disease per employee, and $1,000,000.00 for disease aggregate in respect of any
work or operations on or

 

7

 

about the Property, or in connection with the Property or its operation
(if applicable);

 

(vi)                              comprehensive boiler and machinery insurance
(without exclusion for explosion), if applicable, in amounts as shall be
reasonably required by Lender and covering all boilers or other pressure
vessels, machinery and equipment located at or about the Property (including,
without limitation, electrical equipment, sprinkler systems, heating and air
conditioning equipment, refrigeration equipment and piping);

 

(vii)                           flood hazard insurance if any portion of
the Improvements is currently or at any time in the future located in a
federally designated “special flood hazard area,” flood hazard insurance in an
amount equal to the lesser of (a) the outstanding principal balance of the
Note, (b) the Full Replacement Cost, or (c) the maximum amount of
such insurance available under the National Flood Insurance Act of 1968, the
Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform
Act of 1994, as each may be amended; and

 

(viii)                        such other insurance and in such amounts as
Lender from time to time may reasonably request against such other insurable
hazards which at the time are commonly insured against for property similar to
the Property located in or around the region in which the Property is located,
including, without limitation, earthquake insurance (in the event the Property
is located in an area with a high degree of seismic activity), sinkhole
insurance, mine subsidence insurance and environmental insurance.

 

(b)                                 All insurance provided for in Subsection 3.2(a) hereof
shall be obtained under valid and enforceable policies (the “Policies” or in the singular, the “Policy”),
in such forms and, from time to time
after the date hereof, in such amounts as may from time to time be satisfactory
to Lender, issued by financially sound and responsible insurance companies
authorized to do business in the state in which the Property is located as
admitted or unadmitted carriers which, in either case, have been approved by Lender
and which have a claims paying ability rating of AA or better issued by
Standard & Poor’s Ratings Group or with a claims paying ability rating
otherwise acceptable to Lender (each such insurer shall be referred to below as
a “Qualified Insurer”). Such Policies shall not be subject to
invalidation due to the use or occupancy of the Property for purposes more
hazardous than the use of the Property at the time such Policies were issued.
Not less than thirty (30) days prior to the expiration dates of the Policies theretofore
furnished to Lender pursuant to Subsection 3.2(a), certified copies
of the Policies marked “premium paid” or accompanied by evidence satisfactory
to Lender of payment of the premiums due thereunder (the “Insurance Premiums”), shall be delivered by Borrower to Lender;
provided, however, that in the case of renewal Policies, Borrower may furnish
Lender with binders therefor to be followed by the original Policies when
issued.

 

(c)                                  Borrower shall not obtain (i) separate
insurance concurrent in form or contributing in the event of loss with that
required in Subsection 3.2(a) to be furnished

 

8

 

by, or which may be reasonably required to be furnished by, Borrower,
or (ii) any umbrella or blanket liability or casualty Policy unless, in
each case, Lender’s interest is included therein as provided in this Security
Instrument and such Policy is issued by a Qualified Insurer. If Borrower
obtains separate insurance or an umbrella or a blanket Policy, Borrower shall
notify Lender of the same and shall cause certified copies of each Policy to be
delivered as required in Subsection 3.2(a). Any blanket insurance
Policy shall specifically allocate to the Property the amount of coverage from
time to time required hereunder (except in the case of the liability insurance)
and shall otherwise provide the same protection as would a separate Policy
insuring only the Property in compliance with the provisions of Subsection 3.2(a).

 

(d)                                 All Policies of insurance provided for or
contemplated by Subsection 3.2(a) shall name Lender, its
successors and assigns, including any servicers, trustees or other designees of
Lender, and Borrower as the insured or additional insured, as their respective
interests may appear, and in the case of property damage, boiler and machinery,
and flood insurance, shall contain a so-called New York standard
non-contributing Lender clause in favor of Lender providing that the loss
thereunder shall be payable to Lender.

 

(e)                                  All Policies of insurance provided for in Subsection 3.2(a) shall
contain clauses or endorsements to the effect that:

 

(i)                                     no act or negligence of Borrower, or anyone
acting for Borrower, or of any tenant under any Lease or other occupant, or
failure to comply with the provisions of any Policy which might otherwise
result in a forfeiture of the insurance or any part thereof, shall in any way
affect the validity or enforceability of the insurance insofar as Lender is
concerned;

 

(ii)                                  the Policy shall not be materially changed
(other than to increase the coverage provided on the Property thereby) or
canceled without at least thirty (30) days’ prior written notice to Lender and
any other party named therein as an insured;

 

(iii)                               each Policy shall provide that the issuers
thereof shall give written notice to Lender if the Policy has not been renewed
thirty (30) days prior to its expiration; and

 

(iv)                              Lender shall not be liable for any
Insurance Premiums thereon or subject to any assessments thereunder.

 

(f)                                    Borrower shall furnish to Lender within ten
(10) calendar days after Lender’s request therefor, a statement certified
by Borrower or a duly authorized officer of Borrower of the amounts of
insurance maintained in compliance herewith, of the risks covered by such
insurance and of the insurance company or companies which carry such insurance
and, if requested by Lender, verification of the adequacy of such insurance by an
independent insurance broker or appraiser acceptable to Lender.

 

9

 

(g)                                 If at any time Lender is not in receipt of
written evidence that all insurance required hereunder is in full force and
effect, Lender shall have the right but not the obligation, without notice to
Borrower, to take such action as Lender deems necessary to protect its interest
in the Property, including, without limitation, the obtaining of such insurance
coverage as Lender in its sole discretion deems appropriate, and all expenses
incurred by Lender in connection with such action or in obtaining such
insurance and keeping it in effect shall be paid by Borrower to Lender upon
demand and until paid shall be secured by this Security Instrument and shall
bear interest at the Default Rate (as hereinafter defined).

 

(h)                                 If the Property shall be damaged or
destroyed, in whole or in part, by fire or other casualty, Borrower shall give
prompt notice thereof to Lender.

 

(i)                                     In case of loss covered by Policies, Lender
may either (1) settle and adjust any claim without the consent of Borrower
if an Event of Default then exists (or if an Event of Default does not then
exist, Lender shall have the right to approve any settlement or adjustment of the
insurance claim that Borrower desires to agree to if the loss is more than
$100,000.00, provided that such consent shall not be unreasonably withheld), or
(2) allow Borrower to agree with the insurance company or companies on the
amount to be paid upon the loss; provided, that Borrower may adjust losses
aggregating not in excess of $100,000.00 if such adjustment is carried out in a
competent and timely manner, and provided that in any case Lender shall and is
hereby authorized to collect and receive any such insurance proceeds; and the
expenses incurred by Lender in the adjustment and collection of insurance
proceeds shall become part of the Debt and be secured hereby and shall be
reimbursed by Borrower to Lender upon demand (unless deducted by and reimbursed
to Lender from such proceeds).

 

(ii)                                  In the event of any insured damage to or
destruction of the Property or any part thereof (herein called an “Insured Casualty”), if (A) less than 50% of the total
floor area of the Improvements has been damaged, destroyed or rendered unusable
as a result of such Insured Casualty and in the reasonable judgment of Lender,
the Property can be restored within six (6) months after insurance
proceeds are made available and at least six (6) months prior to the
Maturity Date (as defined in the Note) to an economic unit not less valuable
(including an assessment by Lender of the impact of the termination of any
Leases due to such Insured Casualty) and not less useful than the same was
prior to the Insured Casualty, and after such restoration will adequately
secure the outstanding balance of the Debt, and (B) no Event of Default
(hereinafter defined) shall have occurred and be then continuing, then the
proceeds of insurance shall be applied to reimburse Borrower for the cost of
restoring, repairing, replacing or rebuilding the Property or part thereof
subject to Insured Casualty, as provided below; and Borrower hereby covenants
and agrees forthwith to commence and diligently to prosecute such restoring,
repairing, replacing or rebuilding; provided, however, in any event
Borrower shall pay all costs (and if required by Lender, Borrower shall deposit
the total thereof with Lender in advance) of such restoring,

 

10

 

repairing, replacing or rebuilding in excess of the net proceeds of
insurance made available pursuant to the terms hereof.

 

(iii)                               Except as provided above, the proceeds of
insurance collected upon any Insured Casualty shall, at the option of Lender in
its sole discretion, be applied to the payment of the Debt or applied to
reimburse Borrower for the cost of restoring, repairing, replacing or
rebuilding the Property or part thereof subject to the Insured Casualty, in the
manner set forth below. Any such application to the Debt shall not be
considered a voluntary prepayment requiring payment of the prepayment
consideration provided in the Note, and shall not reduce or postpone any
payments otherwise required pursuant to the Note, other than the final payment
on the Note.

 

(iv)                              Regardless of whether proceeds of
insurance, if any, are made available to Borrower for the restoring, repairing,
replacing or rebuilding of the Property, Borrower hereby covenants to restore,
repair, replace or rebuild the same to be of at least equal value and of
substantially the same character as prior to such damage or destruction, all to
be effected in accordance with applicable law and plans and specifications
approved in advance by Lender.

 

(v)                                 If Borrower is entitled to reimbursement
out of insurance proceeds held by Lender, such proceeds shall be disbursed from
time to time upon Lender being furnished with (1) evidence satisfactory to
it (which evidence may include inspection[s] of the work performed) that the
restoration, repair, replacement and rebuilding covered by the disbursement has
been completed in accordance with plans and specifications approved by Lender, (2) evidence
satisfactory to it of the estimated cost of completion of the restoration,
repair, replacement and rebuilding, (3) funds, or, at Lender’s option,
assurances satisfactory to Lender that such funds are available, sufficient in
addition to the proceeds of insurance to complete the proposed restoration,
repair, replacement and rebuilding, and (4) such architect’s certificates,
waivers of lien, contractor’s sworn statements, title insurance endorsements,
bonds, plats of survey and such other evidences of cost, payment and
performance as Lender may reasonably require and approve; and Lender may, in
any event, require that all plans and specifications for such restoration,
repair, replacement and rebuilding be submitted to and approved by Lender prior
to commencement of work. With respect to disbursements to be made by Lender: (A) no
payment made prior to the final completion of the restoration, repair,
replacement and rebuilding shall exceed ninety percent (90%) of the value of
the work performed from time to time; (B) funds other than proceeds of
insurance shall be disbursed prior to disbursement of such proceeds; and (C) at
all times, the undisbursed balance of such proceeds remaining in the hands of
Lender, together with funds deposited for that purpose or irrevocably committed
to the satisfaction of Lender by or on behalf of Borrower for that purpose,
shall be at least sufficient in the reasonable judgment of Lender to pay for
the cost of completion of the restoration, repair, replacement or rebuilding,
free and clear of all liens or claims for lien and the costs described in Subsection 3.2(h)(vi) below.
Any surplus which may remain out of insurance

 

11

 

proceeds held by Lender after payment of such costs of restoration,
repair, replacement or rebuilding shall be paid to any party entitled thereto.
In no event shall Lender assume any duty or obligation for the adequacy, form
or content of any such plans and specifications, nor for the performance,
quality or workmanship of any restoration, repair, replacement and rebuilding.

 

(vi)                              Notwithstanding anything to the contrary
contained herein, the proceeds of insurance reimbursed to Borrower in
accordance with the terms and provisions of this Security Instrument shall be
reduced by the reasonable costs (if any) incurred by Lender in the adjustment
and collection thereof and in the reasonable costs incurred by Lender of paying
out such proceeds (including, without limitation, reasonable attorneys’ fees
and costs paid to third parties for inspecting the restoration, repair,
replacement and rebuilding and reviewing the plans and specifications therefor).

 

Section 3.3.                                   PAYMENT OF TAXES. ETC.

 

(a)                                  Borrower shall pay all taxes, assessments,
water rates, sewer rents, governmental impositions, and other charges,
including without limitation, vault charges and license fees for the use of
vaults, chutes and similar areas adjoining the Land, now or hereafter levied or
assessed or imposed against the Property or any part thereof (the “Taxes”), all ground rents, maintenance charges and similar
charges, now or hereafter levied or assessed or imposed against the Property or
any part thereof (the “Other Charges”),
and all charges for utility services provided to the Property as same become due
and payable. Borrower will deliver to Lender, promptly upon Lender’s request, evidence
satisfactory to Lender that the Taxes, Other Charges and utility service
charges have been so paid or are not then delinquent. Borrower shall not allow
and shall promptly cause to be paid and discharged any lien or charge
whatsoever which may be or become a lien or charge against the Property. Except
to the extent sums sufficient to pay all Taxes and Other Charges have been
deposited with Lender in accordance with the terms of this Security Instrument,
Borrower shall furnish to Lender paid receipts for the payment of the Taxes and
Other Charges prior to the date the same shall become delinquent.

 

(b)                                 After prior written notice to Lender,
Borrower, at its 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 in whole or in part of any of the Taxes, provided
that (i) no Event of Default has occurred and is continuing under the Note,
this Security Instrument or any of the Other Loan Documents, (ii) Borrower
is permitted to do so under the provisions of any other mortgage, deed of trust
or deed to secure debt affecting the Property, (iii) such proceeding shall
suspend the collection of the Taxes from Borrower and from the Property or
Borrower shall have paid all of the Taxes, (iv) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any other
instrument to which Borrower is subject and shall not constitute a default
thereunder, (v) neither the Property nor any part thereof or interest therein
will be in danger of being sold, forfeited, terminated, canceled or lost, (vi) Borrower
shall have set aside and deposited with Lender adequate reserves for the

 

12

 

payment of the Taxes, together with all interest and penalties thereon,
unless Borrower has paid all of the Taxes, and (vii) if such Taxes have
not been paid in full, Borrower shall have furnished the security as may be
required in the proceeding, or as may be requested by Lender to insure the
payment of any contested Taxes, together with all interest and penalties
thereon.

 

Section 3.4.                                 CONDEMNATION.  Borrower
shall promptly give Lender notice of the actual or threatened commencement of
any condemnation or eminent domain proceeding and shall deliver to Lender
copies of any and all papers served in connection with such proceedings. Lender
is hereby irrevocably appointed as Borrower’s attorney-in-fact, coupled with an
interest, with exclusive power to collect, receive and retain any award or
payment for said condemnation or eminent domain and to make any compromise or
settlement in connection with such proceeding, subject to the provisions of
this Security Instrument. Notwithstanding any taking by any public or
quasi-public authority through eminent domain or otherwise (including but not
limited to any transfer made in lieu of or in anticipation of the exercise of
such taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Security Instrument and
the Debt shall not be reduced until any award or payment therefor shall have
been actually received and applied by Lender, after the deduction of expenses
of collection, to the reduction or 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
herein or in the Note. Borrower shall cause the award or payment made in any
condemnation or eminent domain proceeding, which is payable to Borrower, to be
paid directly to Lender. Lender may apply any award or payment to the reduction
or discharge of the Debt whether or not then due and payable (such application
to be free from any prepayment consideration provided in the Note, except that
if an Event of Default, or an event which with notice and/or the passage of
time, or both, would constitute an Event of Default, has occurred, then such
application shall be subject to the full prepayment consideration computed in
accordance with the Note). If the Property is sold, through foreclosure or
otherwise, prior to the receipt by Lender of the award or payment, Lender shall
have the right, whether or not a deficiency judgment on the Note shall have
been sought, recovered or denied, to receive the award or payment, or a portion
thereof sufficient to pay the Debt. Regardless of whether any award or payment
is made available to Borrower for the restoring, repairing, replacing or
rebuilding of the Property, Borrower hereby covenants to restore, repair,
replace or rebuild the same to be of at least equal value and of substantially
the same character as prior to such condemnation or eminent domain proceeding,
all to be effected in accordance with applicable law and plans and specifications
approved in advance by Lender.

 

Section 3.5.                                 USE AND MAINTENANCE OF PROPERTY.  Borrower shall cause the Property to be
maintained and operated in a good and safe condition and repair and in keeping
with the condition and repair of properties of a similar use, value, age,
nature and construction. Borrower shall not use, maintain or operate the
Property in any manner which constitutes a public or private nuisance or which
makes void, voidable, or cancelable, or increases the premium of, any insurance
then in force with respect thereto. The Improvements and the Tangible Personal
Property shall not be removed, demolished or materially altered (except for
normal replacement of the Personal Property with items of the same utility and
of equal or greater value) without the prior written consent of Lender.
Borrower shall promptly repair, replace or rebuild any part of the Property
which may be destroyed by any casualty, or become

 

13

 

damaged, worn or dilapidated or which may be affected by any proceeding
of the character referred to in Section 3.4 hereof and shall
complete and pay for any structure at any time in the process of construction
or repair on the Land. Borrower shall not initiate, join in, acquiesce in, or
consent to any change in any private restrictive covenant, zoning law or other
public or private restriction, limiting or defining the uses which may be made
of the Property or any part thereof. If under applicable zoning provisions the
use of all or any portion of the Property is or shall become a nonconforming
use, Borrower will not cause or permit the nonconforming use to be discontinued
or abandoned without the express written consent of Lender. Borrower shall not
take any steps whatsoever to convert the Property, or any portion thereof, to a
condominium or cooperative form of management.

 

Section 3.6.                                   WASTE.  Borrower shall not commit or
suffer any waste of the Property or, without first obtaining such additional
insurance as may be necessary to cover a proposed change in use of the
Property, make any change in the use of the Property which will in any way
materially increase the risk of fire or other hazard arising out of the
operation of the Property, or take any action that might invalidate or give
cause for cancellation of any Policy, or do or permit to be done thereon
anything that may in any way impair the value of the Property or the security
of this Security Instrument. Borrower will not, without the prior written
consent of Lender, permit any drilling or exploration for or extraction,
removal, or production of any minerals from the surface or the subsurface of
the Land, regardless of the depth thereof or the method of mining or extraction
thereof.

 

Section 3.7.                                   COMPLIANCE WITH LAWS; ALTERATIONS.

 

(a)                                  Borrower shall promptly comply with all
existing and future federal, state and local laws, orders, ordinances,
governmental rules and regulations or court orders affecting or which may
be interpreted to affect the Property, or the use thereof, including, but not
limited to, the Americans with Disabilities Act (the “ADA”)
(collectively “Applicable Laws”).

 

(b)                                 Notwithstanding any provisions set forth
herein or in any document regarding Lender’s approval of alterations of the
Property, Borrower shall not alter the Property in any manner which would
increase Borrower’s responsibilities for compliance with Applicable Laws
without the prior written approval of Lender. Lender’s approval of the plans,
specifications, or working drawings for alterations of the Property shall
create no responsibility or liability on behalf of Lender for their
completeness, design, sufficiency or their compliance with Applicable Laws. The
foregoing shall apply to tenant improvements constructed by Borrower or by any
of its tenants. Lender may condition any such approval upon receipt of a
certificate of compliance with Applicable Laws from an independent architect,
engineer, or other person acceptable to Lender.

 

(c)                                  Borrower shall give prompt notice to Lender
of the receipt by Borrower of any notice related to a violation of any
Applicable Laws and of the commencement of any proceedings or investigations
which relate to compliance with Applicable Laws.

 

(d)                                 Borrower shall take appropriate measures to
prevent and will not engage in or knowingly permit any illegal activities at
the Property.

 

14

 

Section 3.8.                                   BOOKS AND RECORDS.

 

(a)                                  Borrower shall keep accurate books and
records of account in accordance with sound accounting principles in which
full, true and correct entries shall be promptly made with respect to Borrower,
the Property and the operation thereof, and will permit all such books and
records (including without limitation all contracts, statements, invoices, bills
and claims for labor, materials and services supplied for the construction,
repair or operation to Borrower of the Improvements) to be inspected or audited
and copies made by Lender and its representatives during normal business hours
and at any other reasonable times. Borrower represents that its chief executive
office is as set forth in the introductory paragraph of this Security
Instrument and that all books and records pertaining to the Property are
maintained at the Property or such other location as may be expressly disclosed
to Lender in writing. Borrower will furnish, or cause to be furnished, to
Lender on or before forty-five (45) calendar days after the end of each
calendar quarter the following items, each certified by Borrower as being true
and correct, in such format and in such detail as Lender or its servicer may
request:

 

(i)                                     a written statement (rent roll) dated as of
the last day of each such calendar quarter identifying each of the Leases by
the term, space occupied, rental required to be paid (including percentage
rents and tenant sales, if applicable), security deposit paid, any rental
concessions, all rent escalations, any rents paid more than one (1) month
in advance, any special provisions or inducements granted to tenants, any
taxes, maintenance and other common charges paid by tenants, all vacancies and
identifying any defaults or payment delinquencies thereunder; and

 

(ii)                                  quarterly and year-to-date operating
statements prepared for each calendar quarter during each such reporting period
detailing the total revenues received, total expenses incurred, total cost of
all capital improvements, total debt service and total cash flow.

 

(b)                                 Within ninety (90) calendar days following
the end of each calendar year, Borrower shall furnish a statement of the
financial affairs and condition of the Borrower and the Property including a
statement of profit and loss for the Property in such format and in such detail
as Lender or its servicer may request, and setting forth the financial condition
and the income and expenses for the Property for the immediately preceding calendar
year prepared and audited by an independent certified public accountant. Borrower
shall deliver to Lender copies of all income tax returns, requests for
extension and other similar items contemporaneously with its delivery of same
to the Internal Revenue Service.

 

(c)                                  Borrower will permit representatives
appointed by Lender, including independent accountants, agents, attorneys,
appraisers and any other persons, to visit and inspect during its normal
business hours and at any other reasonable times any of the Property and to
make photographs thereof, and to write down and record any information such
representatives obtain, and shall permit Lender or its representatives to
investigate and verify the accuracy of the information furnished to Lender
under or in connection

 

15

 

with this Security Instrument or any of the Other Loan Documents and to
discuss all such matters with its officers, employees and representatives.
Borrower will furnish to Lender at Borrower’s expense all evidence which Lender
may from time to time reasonably request as to the accuracy and validity of or
compliance with all representations and warranties made by Borrower in the Loan
Documents and satisfaction of all conditions contained therein. Any inspection
or audit of the Property or the books and records of Borrower, or the procuring
of documents and financial and other information, by or on behalf of Lender,
shall be at Borrower’s expense (not to exceed $1,500.00 per year unless an
Event of Default exists) and shall be for Lender’s protection only, and shall
not constitute any assumption of responsibility or liability by Lender to
Borrower or anyone else with regard to the condition, construction, maintenance
or operation of the Property, nor Lender’s approval of any certification given
to Lender nor relieve Borrower of any of Borrower’s obligations.

 

(d)                                 Prior to the transfer of the Loan by Lender
pursuant to Section 16.1 hereof, Borrower shall deliver to Lender the
reports required by Section 3.8(a) on a monthly basis. Such reports
shall be delivered within twenty (20) calendar days after the end of each
calendar month.

 

Section 3.9.                                   PAYMENT FOR LABOR AND MATERIALS.  Borrower
will promptly pay when due all bills and costs for labor, materials, and
specifically fabricated materials incurred in connection with the Property and
never permit to exist beyond the due date thereof in respect of the Property or
any part thereof any lien or security interest, even though inferior to the
liens and the security interests hereof, and in any event never permit to be
created or exist in respect of the Property or any part thereof any other or
additional lien or security interest other than the liens or security interests
hereof, except for the Permitted Exceptions (as hereinafter defined).

 

Section 3.10.                             PERFORMANCE OF OTHER AGREEMENTS.  Borrower
shall observe and perform each and every term to be observed or performed by
Borrower pursuant to the terms of any agreement or recorded instrument
affecting or pertaining to the Property, or given by Borrower to Lender for the
purpose of further securing an obligation secured hereby and any amendments,
modifications or changes thereto.

 

ARTICLE 4 - SPECIAL COVENANTS

 

Borrower covenants and agrees that:

 

Section 4.1.                                 PROPERTY USE.  The
Property shall be used only for office uses, and for no other use without the
prior written consent of Lender, which consent may be withheld in Lender’s sole
and absolute discretion.

 

Section 4.2.                                ERISA.

 

(a)                                  It shall deliver to Lender such
certifications or other evidence from time to time throughout the term of the
Security Instrument, as requested by Lender in its sole discretion, that (i) Borrower
is not an “employee benefit plan” as defined in Section 3(3) of
Employee Retirement Income Security Act of 1974, as amended (“ERISA”), which is

 

16

 

subject to Title I of ERISA, or a “governmental plan” within the meaning
of Section 3(32) of ERISA; (ii) Borrower is not subject to
state statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (iii) one or more of the following circumstances
is true:

 

(i)                                     Equity interests in Borrower are publicly
offered securities, within the meaning of 29 C.F.R. §2510.3-101(b)(2);

 

(ii)                                  Less than twenty-five percent (25%) of each
outstanding class of equity interests in Borrower are held by “benefit plan
investors” within the meaning of 29 C.F.R. §2510.3-101(f)(2); or

 

(iii)                               Borrower qualifies as an “operating company”
or a “real estate operating company” within the meaning of 29 C.F.R. §2510.3-101(c) or
(e) or an investment company registered under The Investment Company Act
of 1940.

 

Section 4.3.                                   SINGLE PURPOSE ENTITY.  (1) Borrower
covenants and agrees that it has not and shall not:

 

(a)                                  engage in any business or activity other
than the acquisition, ownership, operation and maintenance of the Property, and
activities incidental thereto;

 

(b)                                 acquire or own any material asset other
than (i) the Property, and (ii) such incidental Personal Property as
may be necessary for the operation of the Property;

 

(c)                                  merge into or consolidate with any person
or entity or dissolve, terminate or liquidate in whole or in part, transfer or
otherwise dispose of all or substantially all of its assets or change its legal
structure, without in each case Lender’s consent;

 

(d)                                 fail to preserve its existence as an entity
duly organized, validly existing and in good standing (if applicable) under the
laws of the jurisdiction of its organization or formation, or without the prior
written consent of Lender, amend, modify, terminate or fail to comply with the
provisions of Borrower’s Partnership Agreement, Articles or Certificate of
Incorporation, Articles of Organization, Operating Agreement or similar organizational
documents, as the case may be;

 

(e)                                  own any subsidiary or make any investment
in or acquire the obligations or securities of any other person or entity
without the consent of Lender;

 

(f)                                    commingle its assets with the assets of any
of its partner(s), members, shareholders, affiliates, or of any other person or
entity or transfer any assets to any such person or entity other than
distributions on account of equity interests in the Borrower permitted
hereunder and properly accounted for;

 

(g)                                 incur any debt, secured or unsecured,
direct or contingent (including guaranteeing any obligation), other than the
Debt, except unsecured trade and operational debt incurred with trade creditors
in the ordinary course of its business of owning and operating the Property in
such amounts as are normal and reasonable under the

 

17

 

circumstances, provided that such debt is not evidenced by a note and
is paid within sixty (60) days of the date incurred (unless it is being
contested in good faith by Borrower) and provided in any event the outstanding
principal balance of such debt shall not exceed at any one time four percent
(4%) of the outstanding Debt;

 

(h)                                 allow any person or entity to pay its debts
and liabilities (except a Guarantor or Indemnitor) or fail to pay its debts and
liabilities solely from its own assets;

 

(i)                                     fail to maintain its records, books of
account and bank accounts separate and apart from those of the shareholders,
partners, members, principals and affiliates of Borrower, the affiliates of a
shareholder, partner or member of Borrower, and any other person or entity or
fail to prepare and maintain its own financial statements in accordance with
generally accepted accounting principles and susceptible to audit, or if such
financial statements are consolidated fail to cause such financial statements
to contain footnotes disclosing that the Property is actually owned by the
Borrower;

 

(j)                                     enter into any contract or agreement with
any shareholder, partner, member, principal or affiliate of Borrower, any
guarantor of all or a portion of the Debt (a “Guarantor”)
or any shareholder, partner, member, principal or affiliate thereof, except
upon terms and conditions that are intrinsically fair and substantially similar
to those that would be available on an arms-length basis with third parties
other than any shareholder, partner, member, principal or affiliate of Borrower
or Guarantor, or any shareholder, partner, member, principal or affiliate
thereof;

 

(k)                                  seek dissolution or winding up in whole, or
in part;

 

(1)                                  fail to correct any known misunderstandings
regarding the separate identity of Borrower;

 

(m)                               hold itself out to be responsible or pledge
its assets or credit worthiness for the debts of another person or entity or
allow any person or entity to hold itself out to be responsible or pledge its
assets or credit worthiness for the debts of the Borrower (except for a Guarantor
or Indemnitor);

 

(n)                                 make any loans or advances to any third
party, including any shareholder, partner, member, principal or affiliate of
Borrower, or any shareholder, partner, member, principal or affiliate thereof;

 

(o)                                 fail to file its own tax returns, if any,
as may be required by applicable law, to the extent (1) not part of a
consolidated group filing or a consolidated return or returns, or (2) not
treated as a division for tax purposes of another taxpayer, or fail to use
separate contracts, purchase orders, stationary, invoices and checks;

 

(p)                                 fail either to hold itself out to the
public as a legal entity separate and distinct from any other entity or person
or to conduct its business solely in its own name in order not (i) to
mislead others as to the entity with which such other party is transacting
business, or (ii) to suggest that Borrower is responsible for the debts of
any

 

18

 

third party (including any shareholder, partner, member, principal or
affiliate of Borrower, or any shareholder, partner, member, principal or
affiliate thereof);

 

(q)                                 fail to allocate fairly and reasonably
among Borrower and any third party (including, without limitation, any
Guarantor) any overhead for common employees, shared office space or other
overhead and administrative expenses;

 

(r)                                    allow any person or entity to pay the
salaries of its own employees or fail to maintain a sufficient number of
employees for its contemplated business operations;

 

(s)                                  fail to maintain adequate capital for the
normal obligations reasonably foreseeable in a business of its size and
character and in light of its contemplated business operations;

 

(t)                                    file a voluntary petition or otherwise
initiate proceedings to have the Borrower or any general partner or managing
member adjudicated bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against the Borrower or any general
partner or managing member, or file a petition seeking or consenting to
reorganization or relief of the Borrower or any general partner or managing
member as debtor under any applicable federal or state law relating to
bankruptcy, insolvency, or other relief for debtors with respect to the
Borrower or any general partner or managing member; or seek or consent to the
appointment of any trustee, receiver, conservator, assignee, sequestrator,
custodian, liquidator (or other similar official) of the Borrower or any
general partner or managing member or of all or any substantial part of the properties
and assets of the Borrower or any general partner or managing member, or make
any general assignment for the benefit of creditors of the Borrower or any
general partner or managing member, or admit in writing the inability of the
Borrower or any general partner or managing member to pay its debts generally
as they become due or declare or effect a moratorium on the Borrower or any
general partner or managing member debt or take any action in furtherance of
any such action;

 

(u)                                 share any common logo with or hold itself
out as or be considered as a department or division of (i) any
shareholder, partner, principal, member or affiliate of Borrower, (ii) any
affiliate of a shareholder, partner, principal, member or affiliate of
Borrower, or (iii) any other person or entity or allow any person or
entity to identify the Borrower as a department or division of that person or
entity; or

 

(v)                                 conceal assets from any creditor, or enter
into any transaction with the intent to hinder, delay or defraud creditors of
the Borrower or the creditors of any other person or entity.

 

(2)                                  If Borrower is a limited partnership or a
limited liability company (other than a Single Member LLC (as defined below)),
its sole general partner or managing member (the “SPE
Principal”) of Borrower, as applicable, is and shall be at all times
a corporation whose sole asset is its interest in Borrower and such SPE
Principal will at all times comply, and will cause Borrower to comply, with
each of the covenants, terms and provisions contained in Section 4.3(1) as
if such representation, warranty or covenant was

 

19

 

made directly by such SPE Principal. As used herein, the term “Single
Member LLC” means a limited liability company that (i) is either a single
member limited liability company or a multiple member limited liability company
that does not have an SPE Principal, (ii) is organized under the laws of
the State of Delaware, and (iii) provides in its organizational documents
that it will at all times have either (x) a member which owns no economic
interest in such Single Member LLC or (y) a “springing member” which will
automatically become a member of such Single Member LLC immediately prior to
the dissolution of the last remaining member.

 

ARTICLE 5 - REPRESENTATIONS AND
WARRANTIES

 

Section 5.l.                                      BORROWER’S REPRESENTATIONS.  Borrower
represents and warrants to Lender that each of the representations and
warranties set forth in that certain Closing Certificate of even date herewith
executed by Borrower in favor of Lender are true and correct as of the date
hereof and are hereby incorporated and restated in this Security Instrument by
this reference.

 

Section 5.2.                                   WARRANTY OF TITLE.  Borrower
represents and warrants that it has good and marketable title to the Property
and has the right to grant, bargain, sell, pledge, assign, warrant, transfer
and convey the same and that Borrower possesses an unencumbered fee simple
absolute estate in the Land and the Improvements and that it owns the Property
free and clear of all liens, encumbrances and charges whatsoever except for
those exceptions shown in the title insurance policy insuring the lien of this
Security Instrument (the “Permitted
Exceptions”). Borrower
represents and warrants that none of the Permitted Exceptions will materially
and adversely affect the ability of the Borrower to pay in full the Loan, the
use of the Property for the use currently being made thereof, the operation of
the Property or the value of the Property. Borrower shall, at its sole cost and
expense, forever warrant, defend and preserve the title and the validity and
priority of the lien of this Security Instrument and shall, at its sole cost
and expense, forever warrant and defend the same to Trustee and Lender against
the claims of all persons whomsoever.

 

Section 5.3.                                   STATUS OF PROPERTY.

 

(a)                                  No portion of the Improvements is located
in an area identified by the Secretary of Housing and Urban Development or any
successor thereto as an area having special flood hazards pursuant to the
National Flood Insurance Act of 1968 or the Flood Disaster Protection Act of
1973, as amended, or any successor law, or, if located within any such area,
Borrower has obtained and will maintain the insurance prescribed in Section 3.2
hereof.

 

(b)                                 Borrower has obtained all necessary
certificates, permits, licenses and other approvals, governmental and
otherwise, necessary for the use, occupancy and operation of the Property and
the conduct of its business (including, without limitation, certificates of
completion and certificates of occupancy) and all required zoning, building code,
land use, environmental and other similar permits or approvals, all of which
are in full force and effect as of the date hereof and not subject to
revocation, suspension, forfeiture or modification.

 

20

 

(c)                                  The Property and the present and
contemplated use and occupancy thereof are to the best knowledge of Borrower in
full compliance with all Applicable Laws, including, without limitation, zoning
ordinances, building codes, land use and environmental laws, laws relating to
the disabled (including, but not limited to, the ADA) and other similar laws.

 

(d)                                 The Property is served by all utilities
required for the current or contemplated use thereof. All utility service is
provided by public utilities and the Property has accepted or is equipped to
accept such utility service.

 

(e)                                  All public roads and streets necessary for
service of and access to the Property for the current or contemplated use
thereof have been completed, are serviceable and are physically and legally
open for use by the public.

 

(f)                                    The Property is served by public water and
sewer systems.

 

(g)                                 The Property is free from damage caused by
fire or other casualty. There is no pending or, to the best knowledge of
Borrower, threatened condemnation proceedings affecting the Property or any
portion thereof.

 

(h)                                 All costs and expenses of any and all
labor, materials, supplies and equipment used in the construction of the
Improvements have been paid in full and no notice of any mechanics’ or
materialmen’s liens or of any claims of right to any such liens have been
received.

 

(i)                                     Borrower has paid in full for, and is the
owner of, all furnishings, fixtures and equipment (other than tenants’
property) used in connection with the operation of the Property, free and clear
of any and all security interests, liens or encumbrances, except the lien and
security interest created hereby.

 

(j)                                     All liquid and solid waste disposal, septic
and sewer systems located on the Property are to the best knowledge of Borrower
in a good and safe condition and repair and in compliance with all Applicable
Laws.

 

(k)                                  All Improvements lie within the boundary of
the Land.

 

Section 5.4.                                   NO FOREIGN PERSON.  Borrower
is not a “foreign person” within the meaning of Section 1445(f)(3) of
the Internal Revenue Code of 1986, as amended, and the related Treasury
Department regulations, including temporary regulations.

 

Section 5.5.                                  SEPARATE TAX LOT.  The
Property is assessed for real estate tax purposes as one or more wholly
independent tax lot or lots, separate from any adjoining land or improvements
not constituting a part of such lot or lots, and no other land or improvements
is assessed and taxed together with the Property or any portion thereof.

 

21

 

ARTICLE 6 - OBLIGATIONS AND RELIANCES

 

Section 6.1.                                   RELATIONSHIP OF BORROWER AND LENDER.  The
relationship between Borrower and Lender is solely that of debtor and creditor,
and Lender has no fiduciary or other special relationship with Borrower, and no
term or condition of any of the Note, this Security Instrument and the other
Loan Documents shall be construed so as to deem the relationship between
Borrower and Lender to be other than that of debtor and creditor.

 

Section 6.2.                                   NO RELIANCE ON LENDER.  The
partners, members, principals and (if Borrower is a trust) beneficial owners of
Borrower are experienced in the ownership and operation of properties similar
to the Property, and Borrower and Lender are relying solely upon such expertise
and business plan in connection with the ownership and operation of the
Property. Borrower is not relying on Lender’s expertise, business acumen or
advice in connection with the Property.

 

Section 6.3.                                   NO LENDER OBLIGATIONS.

 

(a)                                  Notwithstanding the provisions of Subsections
1.1 (e) and 1.1(1) or Section 1.2. Lender is not
undertaking (i) any obligations under the Leases; or (ii) any obligations
with respect to such agreements, contracts, certificates, instruments, franchises,
permits, trademarks, licenses and other documents.

 

(b)                                 By accepting or approving anything required
to be observed, performed or fulfilled or to be given to Lender pursuant to
this Security Instrument, the Note or the Other Loan Documents, including
without limitation, any officer’s certificate, balance sheet, statement of
profit and loss or other financial statement, survey, appraisal, or insurance
policy, Lender shall not be deemed to have warranted, consented to, or affirmed
the sufficiency, legality or effectiveness of same, and such acceptance or approval
thereof shall not constitute any warranty or affirmation with respect thereto
by Lender.

 

Section 6.4.                                   RELIANCE.  Borrower recognizes and
acknowledges that in accepting the Note, this Security Instrument and the Other
Loan Documents, Lender is expressly and primarily relying on the truth and
accuracy of the warranties and representations set forth in Article 5
and that certain Closing Certificate of even date herewith executed by
Borrower, without any obligation to investigate the Property and
notwithstanding any investigation of the Property by Lender; that such reliance
existed on the part of Lender prior to the date hereof; that such warranties
and representations are a material inducement to Lender in accepting the Note,
this Security Instrument and the Other Loan Documents; and that Lender would
not be willing to make the Loan (as hereinafter defined) and accept this
Security Instrument in the absence of the warranties and representations as set
forth in Article 5 and such Closing Certificate.

 

ARTICLE 7 - FURTHER ASSURANCES

 

Section 7.1.                                   RECORDING FEES.  Borrower
will pay all taxes, filing, registration or recording fees, and all expenses
incident to the preparation, execution, acknowledgment and/or recording of the
Note, this Security Instrument, the Other Loan Documents, any note or deed of
trust supplemental hereto, any security instrument with respect to the Property
and any

 

22

 

instrument of further assurance, and any modification or amendment of
the foregoing documents, and all federal, state, county and municipal taxes,
duties, imposts, assessments and charges arising out of or in connection with
the execution and delivery of this Security Instrument, any deed of trust
supplemental hereto, any security instrument with respect to the Property or
any instrument of further assurance, and any modification or amendment of the
foregoing documents, except where prohibited by law so to do.

 

Section 7.2.                                   FURTHER ACTS.  Borrower
will, at the cost of Borrower, and without expense to Lender, do, execute,
acknowledge and deliver all and every such further acts, deeds, conveyances,
deeds of trust, assignments, notices of assignments, transfers and assurances
as Lender shall, from time to time, require, for the better assuring,
conveying, assigning, transferring, and confirming unto Lender the property and
rights hereby granted, bargained, sold, conveyed, confirmed, pledged, assigned,
warranted and transferred or intended now or hereafter so to be, or which
Borrower may be or may hereafter become bound to convey or assign to Lender, or
for carrying out the intention or facilitating the performance of the terms of
this Security Instrument or for filing, registering or recording this Security
Instrument, or for complying with all Applicable Laws. Borrower, on demand,
will execute and deliver and hereby authorizes Lender to execute in the name of
Borrower or without the signature of Borrower to the extent Lender may lawfully
do so, one or more financing statements, chattel mortgages or other
instruments, to evidence more effectively the security interest of Lender in
the Property. Borrower grants to Lender an irrevocable power of attorney
coupled with an interest for the purpose of exercising and perfecting any and
all rights and remedies available to Lender at law and in equity, including
without limitation such rights and remedies available to Lender pursuant to
this Section 7.2.

 

Section 7.3.                                   CHANGES IN TAX, DEBT CREDIT AND DOCUMENTARY
STAMP LAWS.

 

(a)                                  If any law is enacted or adopted or amended
after the date of this Security Instrument which imposes a tax, either directly
or indirectly, on the Debt or Lender’s interest in the Property, requires
revenue or other stamps to be affixed to the Note, this Security Instrument, or
the Other Loan Documents, or imposes any other tax or charge on the same,
Borrower will pay the same, with interest and penalties thereon, if any. If Lender
is advised by counsel chosen by it that the payment of tax by Borrower would be
unlawful or taxable to Lender or unenforceable or provide the basis for a
defense of usury, then Lender shall have the option, by written notice of not
less than ninety (90) calendar days, to declare the Debt immediately due and
payable.

 

(b)                                 Borrower will not claim or demand or be
entitled to any credit or credits on account of the Debt for any part of the
Taxes or Other Charges assessed against the Property, or any part thereof, and
no deduction shall otherwise be made or claimed from the assessed value of the
Property, or any part thereof, for real estate tax purposes by reason of this
Security Instrument or the Debt. If such claim, credit or deduction shall be required
by law, Lender shall have the option, by written notice of not less than ninety
(90) calendar days, to declare the Debt immediately due and payable.

 

23

 

Section 7.4.                                   CONFIRMATION STATEMENT.

 

(a)                                  After request by Lender, Borrower, within
ten (10) days, shall furnish Lender or any proposed assignee with a
statement, duly acknowledged and certified, confirming to Lender (or its
designee) (i) the amount of the original principal amount of the Note, (ii) the
unpaid principal amount of the Note, (iii) the rate of interest of the
Note, (iv) the terms of payment and maturity date of the Note, (v) the
date installments of interest and/or principal were last paid, and (vi) that,
except as provided in such statement, there are no defaults or events which
with the passage of time or the giving of notice or both, would constitute an
event of default under the Note or this Security Instrument; provided, however,
Lender shall not be entitled hereunder to receive more than one (1) such
statement in each calendar year.

 

(b)                                 Subject to the provisions of the Leases,
Borrower shall request one or more lessees to deliver to Lender, promptly upon
request by Lender (but not more frequently than once annually so long as
Borrower is not in default hereunder), duly executed estoppel certificates from
any one or more lessees as required by Lender attesting to such facts regarding
the Lease as Lender may reasonably require, including but not limited to
attestations that each Lease covered thereby is in full force and effect with
no defaults thereunder on the part of any party, that none of the Rents have
been paid more than one month in advance, and that the lessee claims no defense
or offset against the full and timely performance of its obligations under the
Lease, and Borrower shall deliver to Lender, promptly after receipt thereof by
Borrower, each estoppel certificate received from any lessee.

 

(c)                                  Upon any transfer or proposed transfer
contemplated by Section 16.1 hereof, at Lender’s request, Borrower,
any Guarantors and any Indemnitors shall provide an estoppel certificate to the
Investor (defined in Section 16.1) or any prospective Investor in
such form, substance and detail as Lender, such Investor or prospective Investor
may reasonably require.

 

Section 7.5.                                   SPLITTING OF SECURITY INSTRUMENT.  This
Security Instrument and the Note shall, at any time until the same shall be
fully paid and satisfied, at the sole election of Lender, be split or divided
into two or more notes and two or more security instruments, each of which
shall cover all or a portion of the Property to be more particularly described
therein. To that end, Borrower, upon written request of Lender, shall execute,
acknowledge and deliver, or cause to be executed, acknowledged and delivered by
the then owner of the Property, to Lender and/or its designee or designees
substitute notes and security instruments in such principal amounts,
aggregating not more than the then unpaid principal amount of Debt, and
containing terms, provisions and clauses similar to those contained herein and
in the Note, and such other documents and instruments as may be required by
Lender, provided that Lender shall pay all costs actually incurred by Lender in
connection therewith.

 

Section 7.6.                                   REPLACEMENT DOCUMENTS.  Upon
receipt of an affidavit of an officer of Lender as to the loss, theft,
destruction or mutilation of the Note or any Other Loan Document which is not
of public record, and, in the case of any such mutilation, upon surrender and
cancellation of such Note or Other Loan Document, Borrower, at its expense,
will issue, in lieu thereof, a replacement Note or Other Loan Document prepared
by Lender, dated the date of such lost, stolen, destroyed or mutilated Note or
Other Loan Document in the same principal

 

24

 

amount thereof and otherwise having identical provision, provided that
Lender shall pay all costs actually incurred by Lender in connection therewith.

 

ARTICLE 8 - DUE ON SALE/ENCUMBRANCE

 

Section 8.1.                                   LENDER RELIANCE.  Borrower
acknowledges that Lender has examined and relied on the creditworthiness of
Borrower and experience of Borrower and its partners, members, principals and
(if Borrower is a trust) beneficial owners in owning and operating properties
such as the Property in agreeing to make the Loan, and will continue to rely on
Borrower’s ownership of the Property as a means of maintaining the value of the
Property as security for repayment of the Debt and the performance of the Other
Obligations. Borrower acknowledges that Lender has a valid interest in
maintaining the value of the Property so as to ensure that, should Borrower
default in the repayment of the Debt or the performance of the Other
Obligations, Lender can recover the Debt by a sale of the Property.

 

Section 8.2.                                   NO SALE/ENCUMBRANCE.

 

(a)                                  Borrower agrees that Borrower shall not,
without the prior written consent of Lender, Transfer the Property or any part
thereof or permit the Property or any part thereof to be Transferred. Lender
shall not be required to demonstrate any actual impairment of its security or
any increased risk of default hereunder in order to declare the Debt
immediately due and payable upon Borrower’s Transfer of the Property without Lender’s
consent.

 

(b)                                 As used in Section 8.2(a), “Transfer”
shall mean any voluntary or involuntary sale, conveyance, mortgage, grant,
bargain, encumbrance, pledge, assignment or transfer of all or any part of the
Property or Borrower or any direct or indirect interest therein including, but
not limited to: (i) an installment sales agreement wherein Borrower agrees
to sell the Property or any part thereof for a price to be paid in
installments; (ii) an agreement by Borrower leasing all or a substantial
part of the Property for a purpose other than actual occupancy by a space
tenant thereunder; (iii) a sale, assignment or other transfer of, or the
grant of a security interest in, Borrower’s right, title and interest in and to
any Leases or any Rents; (iv) if Borrower, Guarantor, or any managing
member or general partner of Borrower or Guarantor is a corporation, any
Transfer of such corporation’s stock (or the stock of any corporation directly
or indirectly controlling such Borrower, Guarantor, managing member or general
partner 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 forty-nine
percent (49%) or more of such corporation’s stock shall directly or indirectly
be vested in or pledged to a party or parties who are not now stockholders (provided,
however, in no event shall this subpart [iv] apply to any Guarantor
whose stock or shares are traded on a nationally recognized stock exchange); (v) if
Borrower, Guarantor, or any managing member or general partner of Borrower or Guarantor
is a limited liability company or partnership, the Transfer by which an aggregate
of forty-nine percent (49%) or more of the ownership interest in such limited liability
company or forty-nine percent (49%) or more of the partnership interests in
such partnership shall directly or indirectly be vested in or pledged to
parties not having an ownership interest as of the date of this Security
Instrument; (vi) if Borrower, any

 

25

 

Guarantor or any managing member or general partner of Borrower or any
Guarantor is a partnership, limited liability company or joint venture, the
change, removal or resignation of a general partner, managing member or joint
venturer or the Transfer directly or indirectly of all or any portion of the
partnership or ownership interest of any general partner, managing member or
joint venturer; and (vii) except as expressly permitted by Section 8.3.
any Transfer by an Original Principal, directly or indirectly, of its ownership
interest in the Borrower.

 

Section 8.3.                                   EXCLUDED AND PERMITTED TRANSFERS.

 

(a)                                  A Transfer within the meaning of this Article 8
shall not include (i) transfers of ownership interests in the Borrower,
any general partner or managing member or any Guarantor made by devise or
descent or by operation of law upon the death of a joint tenant, partner,
member or shareholder, subject, however, to all the following requirements: (A) written
notice of any transfer under this Section 8.3, whether by will,
trust or other written instrument, operation of law or otherwise, is provided
to Lender or its servicer, together with copies of such documents relating to
the transfer as Lender or its servicer may reasonably request, (B) control
over the management and operation of the Property is retained by one or more of
Steven A. Grigg, Richard Kramer, Mark Keller and David Peter (the “Original Principals”, whether one or more) at all times
prior to the death or legal incapacity of all the Original Principals and is
thereafter assumed by persons who are acceptable in all respects to Lender in
its sole and absolute discretion, and (D) no such transfer, death or other
event has any adverse effect either on the bankruptcy-remote status of Borrower
under the requirements of any Rating Agency or on the status of Borrower as a
continuing legal entity liable for the payment of the Debt and the performance
of all other obligations secured hereby, (ii) transfers of direct or
indirect limited partnership interests in RKB Washington Property Fund I L.P.,
a Delaware limited partnership (“RKB Fund”),
subject, however, to each of the following requirements: (A) control over
the management and operation of the Property is retained by one or more of the
Original Principals, (B) one or more of the Original Principals shall at
all times maintain, directly or indirectly, an equity ownership position in RKB
Fund in an amount at least equal to the lesser of (A) 9% of the outstanding
limited partnership interests of RKB Fund or (B) such amount obtained through
capital contributions of $9,000,000.00, (iii) transfers otherwise by
operation of law in the event of a bankruptcy, or (iv) a Lease of all or a
portion of the Property to a space tenant.

 

(b)                                 The prohibitions in Subsection 8.2(a) shall
not apply to an inter vivos or testamentary transfer of ownership interests to
one or more family members of Original Principals or a trust in which all of
the beneficial interest is held by one or more family members of Original
Principals or a partnership or limited liability company in which a majority of
the capital and profits interests are held by one or more family members of Original
Principals, provided, that any inter vivos transfer of all or any
portion of the ownership interests in the Borrower, such general partner or
managing member or such Guarantor is made in connection with Original
Principals’ bona fide, good faith estate planning and that the person(s) with
voting control of Borrower or the management of the Property are (i) the
same person(s) who had such voting control and management rights

 

26

 

 

immediately prior to the transfer in question, or (ii) reasonably
acceptable to Lender and provided further that no such transfer shall
have any adverse effect on the bankruptcy remote status of Borrower under the
requirements of any Rating Agency. Lender acknowledges that Original Principals
and/or an Original Principal’s spouse are acceptable to exercise voting control
of Borrower and the management of the Property. As used herein, “family members”
shall include the spouse, children and grandchildren and any lineal
descendants.

 

(c)                                  Notwithstanding the provisions of Section 8.2
above, Lender will give its consent to three separate sales or transfers of the
Property or ownership interests in the Borrower, a general partner or managing
member of the Borrower, or any Guarantor, if (but only if) no Event of Default
under the Loan Documents has occurred and is continuing, and if each of the
following conditions precedent have been fully satisfied (as determined in
Lender’s sole and absolute discretion): (i) the grantee’s or transferee’s
integrity, reputation, financial condition, character and management ability
are satisfactory to Lender in its sole discretion, and all information relating
thereto requested by Lender is delivered to Lender at least 30 days prior to
the proposed transfer (provided, however, that if RKB Fund exercises its right
pursuant to its operating agreement to remove RKB Washington Property Fund I
(General Partner) LLC as the general partner of RKB Fund, Lender shall not
unreasonably withhold its consent to a replacement general partner), (ii) the
grantee’s or transferee’s (and its sole general partner’s or managing member’s)
single purpose and bankruptcy remote character are satisfactory to Lender in
its sole discretion, and all information relating thereto requested by Lender
is delivered to Lender at least 30 days prior to the proposed transfer, (iii) Lender
has obtained such estoppels from any guarantors of the Note or replacement
guarantors and such other legal opinions regarding substantive consolidation
issues, enforceability of the assumption documents, no adverse impact on the
Securities or any REMIC holding the Note and similar matters as Lender may
require, (iv) all of Lender’s costs and expenses associated with the sale
or transfer (including reasonable attorneys’ fees) are paid by Borrower or the
grantee or transferee, (v) the payment of a transfer fee not to exceed 1%
of the then unpaid principal balance of the loan evidenced by the Note and
secured hereby (the “Loan”), (vi) the
execution and delivery to Lender of a written assumption agreement and/or
substitute guaranty (in its sole and absolute discretion) and such
modifications to the Loan Documents executed by such parties and containing
such terms and conditions as Lender may require in its sole and absolute
discretion prior to such sale or transfer (provided that in the event the Loan
is included in a REMIC and is a performing Loan, no modification to the terms
and conditions shall be made or permitted that would cause (A) any adverse
tax consequences to the REMIC or any holders of any Mortgage-Backed
Pass-Through Securities, (B) the Security Instrument to fail to be a
Qualifying Security Instrument under applicable federal law relating to REMIC’s,
or (C) result in a taxation of the income from the Loan to the REMIC or
cause a loss of REMIC status), (vii) if applicable, the delivery to Lender
of an endorsement (at Borrower’s sole cost and expense) to Lender’s policy of
title insurance then insuring the lien created by this Security Instrument in
form and substance acceptable to Lender in its sole judgment and (vii) written
confirmation from the Rating Agencies that such transfer will not result in a
qualification, downgrade or withdrawal of the then-current rating of the
Securities.

 

27

 

(d)                                 Without limiting the foregoing, if Lender
shall consent to a transfer of the Property, the written assumption agreement
described in Subsection 8.3(c)(vi) above shall provide for the
release of Borrower and, if approved by Lender, each Guarantor and Indemnitor
of personal liability under the Note and Other Loan Documents, but only as to
acts or events occurring, or obligations arising, after the closing of such
transfer.

 

Section 8.4.                                   NO IMPLIED FUTURE CONSENT.  Lender’s
consent to one sale, conveyance, alienation, mortgage, encumbrance, pledge or
transfer of the Properly shall not be deemed to be a waiver of Lender’s right
to require such consent to any future occurrence of same. Any sale, conveyance,
alienation, mortgage, encumbrance, pledge or transfer of the Property made in
contravention of this Article 8 shall be null and void and of no
force and effect.

 

Section 8.5.                                   COSTS OF CONSENT.  Borrower
agrees to bear and shall pay or reimburse Lender on demand for all reasonable
expenses (including, without limitation, all recording costs, reasonable
attorneys’ fees and disbursements and title search costs) incurred by Lender in
connection with the review, approval and documentation of any such sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer.

 

Section 8.6. CONTINUING
SEPARATENESS REQUIREMENTS.  In no
event shall any of the terms and provisions of this Article 8 amend
or modify the terms and provisions contained in Section 4.3 herein.

 

ARTICLE 9 - DEFAULT

 

Section 9.1.                                   EVENTS OF DEFAULT.  The
occurrence of any one or more of the following events shall constitute an “Event of Default”:

 

(a)                                  if any portion of the Debt is not paid
prior to the seventh (7th) calendar day after the same is due or if the entire
Debt is not paid on or before the maturity date, along with applicable
prepayment premiums, if any;

 

(b)                                 if Borrower, or its general partner or
managing member, if applicable, violates or does not comply with any of the
provisions of Section 4.3 or Article 8;

 

(c)                                  if any representation or warranty of
Borrower or of its members, general partners, principals, affiliates, agents or
employees, or of any Guarantor made herein or in the Environmental Indemnity or
in any other Loan Document, in any guaranty, or in any certificate, report,
financial statement or other instrument or document furnished to Lender shall
have been false or misleading in any material respect when made;

 

(d)                                 if Borrower or any Guarantor shall make an
assignment for the benefit of creditors or if Borrower or any Guarantor shall
admit in writing its inability to pay, or Borrower’s or any Guarantor’s failure
to pay its debts as they become due;

 

(e)                                  if (i) Borrower or any subsidiary or
general partner or managing member of Borrower, or any Guarantor shall commence
any case, proceeding or other action (A) under any existing or future law
of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship or relief of debtors, seeking to

 

28

 

have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or other relief
with respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian, conservator or other similar official for it or for all or
any substantial part of its assets, or Borrower or any subsidiary or general
partner or managing member of Borrower, or any Guarantor shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against Borrower or any subsidiary or general partner or managing
member of Borrower, or any Guarantor any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the entry
of an order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of sixty (60) calendar days;
or (iii) there shall be commenced against Borrower or any subsidiary or
general partner or managing member of Borrower or any Guarantor any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial part of
its assets which results in the entry of any order for any such relief which
shall not have been vacated, discharged, or stayed or bonded pending appeal
within sixty (60) calendar days from the entry thereof; or (iv) Borrower
or any subsidiary or general partner or managing member of Borrower, or any
Guarantor shall take any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii) or
(iii) above; or (v) Borrower or any subsidiary or general partner or
managing member of Borrower, or any Guarantor shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due;

 

(f)                                    subject to Borrower’s right to contest
certain liens as provided in this Security Instrument, if the Property becomes
subject to any mechanic’s, materialman’s or other lien other than a lien for
local real estate taxes and assessments not then due and payable and the lien
shall remain undischarged of record (by payment, bonding or otherwise) for a
period of thirty (30) calendar days;

 

(g)                                 if any federal tax lien is filed against
Borrower, any general partner or managing member of Borrower, any Guarantor or
the Property and same is not discharged of record within thirty (30) calendar
days after same is filed;

 

(h) except as permitted in this
Security Instrument, the actual or threatened alteration, improvement,
demolition or removal of any of the Improvements without the prior consent of
Lender;

 

(i) damage to the Property in any
manner which is not covered by insurance, which lack of coverage arises solely
as a result of Borrower’s failure to maintain the insurance required under this
Security Instrument;

 

(j) without Lender’s prior consent, which
consent shall not be unreasonably withheld, (i) the property management
agent for the Property is changed from Republic Properties Corporation or from
any successor property manager approved by Lender, (ii) any property
management agent for the Property is removed by Borrower, or (iii) there
is any material change in the property management agreement of the Property;

 

29

 

(k)                                  this Security Instrument shall cease to constitute
a first-priority lien on the Property (other than in accordance with its
terms);

 

(1)                                  seizure or forfeiture of the Property, or
any portion thereof, or Borrower’s interest therein, resulting from criminal
wrongdoing or other unlawful action of Borrower, its affiliates, or any tenant
in the Property under any federal, state or local law;

 

(m)                               if Borrower consummates a nonexempt
prohibited transaction described in Section 406 of ERISA or Section 4975
of the Internal Revenue Code of 1986, as amended, as such sections relate to
Borrower;

 

(n)                                 if any default occurs under any guaranty or
indemnity including the Environmental Indemnity executed in connection herewith
and such default continues after the expiration of applicable grace periods, or
such guaranty or indemnity shall cease to be in full force and effect, or any
guarantor or indemnitor shall deny or disaffirm its obligation thereunder; and

 

(o)                                 if Borrower or any Guarantor, as the case
may be, shall continue to be in default under any other term, covenant or
condition of this Security Instrument or any Other Loan Documents for thirty
(30) calendar days after notice from Lender; provided that if such
default cannot reasonably be cured within such thirty (30) calendar day period
and Borrower (or such Guarantor as the case may be) shall have commenced to
cure such default within such thirty (30) calendar day period and thereafter
diligently and expeditiously proceeds to cure the same, such thirty (30)
calendar day period shall be extended for so long as it shall require Borrower
(or such Guarantor as the case may be) in the exercise of due diligence to cure
such default, it being agreed that no such extension shall be for a period in
excess of one hundred twenty (120) calendar days after the notice from Lender
referred to above.

 

Section 9.2.                                   DEFAULT INTEREST.  Borrower
will pay, from the date of an Event of Default through the earlier of the date
upon which the Event of Default is cured or the date upon which the Debt is
paid in full, interest on the unpaid principal balance of the Note at the
Default Rate (as defined in the Note).

 

ARTICLE 10 - RIGHTS AND REMEDIES

 

Section 10.1.                             REMEDIES.  Upon the occurrence of any
Event of Default, Borrower agrees that Lender may take such action, by or
through Trustee, by Lender itself or otherwise, without notice or demand, as it
deems advisable to protect and enforce its rights against Borrower and in and
to the Property, including, but not limited to, the following actions, each of
which may be pursued concurrently or otherwise, at such time and in such order
as Lender may determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Lender:

 

(a)                                  Right to Perform Borrower’s Covenants.  If
Borrower has failed to keep or perform any covenant whatsoever contained in
this Security Instrument or the Other Loan Documents, Lender may, but shall not
be obligated to any person to do so, perform or attempt to perform said
covenant and any payment made or expense incurred in the

 

30

 

performance or attempted performance of any such covenant, together
with any sum expended by Lender that is chargeable to Borrower or subject to
reimbursement by Borrower under the Loan Documents, shall be and become a part
of the “Debt”, and Borrower promises, upon demand, to pay to Lender, at the
place where the Note is payable, all sums so incurred, paid or expended by
Lender, with interest from the date when paid, incurred or expended by Lender
at the Default Rate.

 

(b)                                 Right of Entry.  Lender
may, prior or subsequent to the institution of any foreclosure proceedings,
enter upon the Property, or any part thereof, and take exclusive possession of
the Property and of all books, records, and accounts relating thereto and to
exercise without interference from Borrower any and all rights which Borrower
has with respect to the management, possession, operation, protection, or
preservation of the Property, including without limitation the right to rent
the same for the account of Borrower and to deduct from such Rents all costs,
expenses, and liabilities of every character incurred by Lender in collecting
such Rents and in managing, operating, maintaining, protecting, or preserving
the Property and to apply the remainder of such Rents on the Debt in such
manner as Lender may elect. All such costs, expenses, and liabilities incurred
by Lender in collecting such Rents and in managing, operating, maintaining,
protecting, or preserving the Property, if not paid out of Rents as hereinabove
provided, shall constitute a demand obligation owing by Borrower and shall bear
interest from the date of expenditure until paid at the Default Rate, all of
which shall constitute a portion of the Debt. If necessary to obtain the possession
provided for above, Lender may invoke any and all legal remedies to dispossess
Borrower, including specifically one or more actions for forcible entry and
detainer, trespass to try title, and restitution. In connection with any action
taken by Lender pursuant to this Subsection 10.1(b), Lender shall
not be liable for any loss sustained by Borrower resulting from any failure to
let the Property, or any part thereof, or from any other act or omission of
Lender in managing the Property unless such loss is caused by the willful
misconduct of Lender, nor shall Lender be obligated to perform or discharge any
obligation, duty, or liability under any Lease or under or by reason hereof or
the exercise of rights or remedies hereunder. Borrower shall and does hereby
agree to indemnify Lender for, and to hold Lender harmless from, any and all
liability, loss, or damage, which may or might be incurred by Lender under any
such Lease or under or by reason hereof or the exercise of rights or remedies
hereunder, and from any and all claims and demands whatsoever which may be
asserted against Lender by reason of any alleged obligations or undertakings on
its part to perform or discharge any of the terms, covenants, or agreements
contained in any such Lease. Should Lender incur any such liability, the amount
thereof, including without limitation costs, expenses, and reasonable attorneys’
fees, together with interest thereon from the date of expenditure until paid at
the Default Rate, shall be secured hereby, and Borrower shall reimburse Lender
therefor immediately upon demand. Nothing in this Subsection 10.1(b) shall
impose any duty, obligation, or responsibility upon Lender for the control,
care, management, leasing, or repair of the Property, nor for the carrying out
of any of the terms and conditions of any such Lease; nor shall it operate to
make Lender responsible or liable for any waste committed on the Property by
the tenants or by any other parties, or for any hazardous substances or
environmental conditions on or under the Property, or for any dangerous or
defective condition of the Property or for any negligence in the management,
leasing,

 

31

 

upkeep, repair, or control of the Property resulting in loss or injury
or death to any tenant, licensee, employee, or stranger. Borrower hereby
assents to, ratifies, and confirms any and all actions of Lender with respect
to the Property taken under this subsection.

 

(c)                                  Acceleration. 
Upon the occurrence of an Event of Default (other than an Event of
Default described in Section 9.1 (d) or (e) above)
and at any time thereafter Lender may, without notice, demand, presentment,
notice of nonpayment or nonperformance, protest, notice of protest, notice of
intent to accelerate, notice of acceleration, or any other notice or any other
action, all of which are hereby waived by Borrower and all other parties
obligated in any manner whatsoever on the Debt, declare the entire unpaid
balance of the Debt immediately due and payable, and upon such declaration, the
entire unpaid balance of the Debt shall be immediately due and payable. Upon
the occurrence of an Event of Default described in Section 9.1(d) or
(e) above, the entire unpaid balance of the Debt shall immediately
and automatically become due and payable, without notice or demand.

 

(d)                                 Foreclosure-Power of Sale. 
Lender may institute a proceeding or proceedings, judicial, or
nonjudicial, by advertisement or otherwise, for the complete or partial
foreclosure of this Security Instrument or the complete or partial sale of the Property
under power of sale or under any applicable provision of law. Lender may, through
the Trustee, sell the Property, and all estate, right, title, interest, claim
and demand of Borrower therein, and all rights of redemption thereof, at one or
more sales, as an entirety or in parcels, with such elements of real and/or
personal property, and at such time and place and upon such terms as it may
deem expedient, or as may be required by applicable law, and in the event of a
sale, by foreclosure or otherwise, of less than all of the Property, this
Security Instrument shall continue as a lien and security interest on the remaining
portion of the Property.

 

(e)                                  Rights Pertaining to Sales. 
Subject to the requirements of applicable law and except as otherwise
provided herein, the following provisions shall apply to any sale or sales of
all or any portion of the Property under or by virtue of Subsection 10.1(d) above,
whether made under the power of sale herein granted or by virtue of judicial proceedings
or of a judgment or decree of foreclosure and sale:

 

(i)                                     Trustee or Lender may conduct any number of
sales from time to time. The power of sale set forth above shall not be
exhausted by any one or more such sales as to any part of the Property which
shall not have been sold, nor by any sale which is not completed or is
defective in Lender’s opinion, until the Debt shall have been paid in full.

 

(ii)                                  Any sale may be postponed or adjourned by
public announcement at the time and place appointed for such sale or for such
postponed or adjourned sale without further notice.

 

(iii)                               After each sale, Lender, Trustee or an
officer of any court empowered to do so shall execute and deliver to the
purchaser or purchasers at such sale a good and sufficient instrument or
instruments granting, conveying,

 

32

 

assigning and transferring all right, title and interest of Borrower in
and to the property and rights sold and shall receive the proceeds of said sale
or sales and apply the same as specified in the Note. Each of Trustee and
Lender is hereby appointed the true and lawful attorney-in-fact of Borrower,
which appointment is irrevocable and shall be deemed to be coupled with an
interest, in Borrower’s name and stead, to make all necessary conveyances,
assignments, transfers and deliveries of the property and rights so sold,
Borrower hereby ratifying and confirming all that said attorney or such
substitute or substitutes shall lawfully do by virtue thereof. Nevertheless,
Borrower, if requested by Trustee or Lender, shall ratify and confirm any such
sale or sales by executing and delivering to Trustee, Lender or such purchaser
or purchasers all such instruments as may be advisable, in Trustee’s or Lender’s
judgment, for the purposes as may be designated in such request.

 

(iv)                              Any and all statements of fact or other
recitals made in any of the instruments referred to in Subsection 10.1(e)(iii) given
by Trustee or Lender shall be taken as conclusive and binding against all
persons as to evidence of the truth of the facts so stated and recited.

 

(v)                                 Any such sale or sales shall operate to
divest all of the estate, right, title, interest, claim and demand whatsoever,
whether at law or in equity, of Borrower in and to the properties and rights so
sold, and shall be a perpetual bar both at law and in equity against Borrower
and any and all persons claiming or who may claim the same, or any part thereof
or any interest therein, by, through or under Borrower to the fullest extent
permitted by applicable law.

 

(vi)                              Upon any such sale or sales, Lender may bid
for and acquire the Property and, in lieu of paying cash therefor, may make
settlement for the purchase price by crediting against the Debt the amount of the
bid made therefor, after deducting therefrom the expenses of the sale, the cost
of any enforcement proceeding hereunder, and any other sums which Trustee or
Lender is authorized to deduct under the terms hereof, to the extent necessary
to satisfy such bid.

 

(vii)                           Upon any such sale, it shall not be
necessary for Trustee, Lender or any public officer acting under execution or
order of court to have present or constructively in its possession any of the
Property.

 

(f)                                    Lender’s Judicial Remedies. Lender, or Trustee upon written request
of Lender, may proceed by suit or suits, at law or in equity, to enforce the
payment of the Debt to foreclose the liens and security interests of this
Security Instrument as against all or any part of the Property, and to have all
or any part of the Property sold under the judgment or decree of a court of
competent jurisdiction. This remedy shall be cumulative of any other
nonjudicial remedies available to Lender under this Security Instrument, the
Note or the Other Loan Documents. Proceeding with a request or receiving a
judgment for legal relief shall not be or be deemed to be an election of
remedies or bar any available nonjudicial remedy of Lender.

 

33

 

(g)                                 Lender’s Right to Appointment of Receiver. Lender, as a matter of right and (i) without
regard to the sufficiency of the security for repayment of the Debt and without
notice to Borrower, (ii) without any showing of insolvency, fraud, or
mismanagement on the part of Borrower, (iii) without the necessity of
filing any judicial or other proceeding other than the proceeding for
appointment of a receiver, and (iv) without regard to the then value of
the Property, shall be entitled to the appointment of a receiver or receivers
for the protection, possession, control, management and operation of the
Property, including (without limitation), the power to collect the Rents,
enforce this Security Instrument and, in case of a sale and deficiency, during
the full statutory period of redemption (if any), whether there be a redemption
or not, as well as during any further times when Borrower, except for the
intervention of such receiver, would be entitled to collection of such Rents.
Borrower hereby irrevocably consents to the appointment of a receiver or
receivers. Any receiver appointed pursuant to the provisions of this subsection shall
have the usual powers and duties of receivers in such matters.

 

(h)                                 Commercial Code Remedies.  Lender
may exercise any and all rights and remedies granted to a secured party upon
default under the Uniform Commercial Code, including, without limiting the
generality of the foregoing: (i) the right to take possession of the
Personal Property or any part thereof, and to take such other measures as
Lender may deem necessary for the care, protection and preservation of the
Personal Property, and (ii) request Borrower at its expense to assemble
the Personal Property and make it available to Lender at a convenient place
acceptable to Lender. Any notice of sale, disposition or other intended action
by Lender with respect to the Personal Property sent to Borrower in accordance
with the provisions hereof at least five (5) days prior to such action,
shall constitute commercially reasonable notice to Borrower.

 

(i)                                     Apply Escrow Funds.  Lender
may apply any Funds (as defined in the Escrow Agreement) and any other sums
held in escrow or otherwise by Lender in accordance with the terms of this
Security Instrument or any Other Loan Document to the payment of the following
items in any order in its uncontrolled discretion:

 

(i)                                     Taxes and Other Charges;

 

(ii)                                  Insurance Premiums;

 

(iii)                               Interest on the unpaid principal balance of
the Note;

 

(iv)                              Amortization of the unpaid principal
balance of the Note; and

 

(v)                                 All other sums payable pursuant to the
Note, this Security Instrument and the Other Loan Documents, including without
limitation advances made by Lender pursuant to the terms of this Security
Instrument.

 

(j)                                     Other Rights.  Lender
(i) may surrender the Policies maintained pursuant to this Security
Instrument or any part thereof, and upon receipt shall apply the unearned
premiums as a credit on the Debt, and, in connection therewith, Borrower hereby
appoints Lender as agent and attorney-in-fact (which is coupled with an interest
and is therefore irrevocable) for Borrower to collect such premiums; and (ii) may
apply the Tax

 

34

 

and Insurance Escrow Fund (as defined in the Escrow Agreement) and/or
the Replacement Escrow Fund (as defined in the Escrow Agreement) and any other
funds held by Lender toward payment of the Debt; and (iii) shall have and
may exercise any and all other rights and remedies which Lender may have at law
or in equity, or by virtue of any of the Loan Documents, or otherwise.

 

(k)                                  Discontinuance of Remedies.  In
case Lender shall have proceeded to invoke any right, remedy, or recourse
permitted under the Loan Documents and shall thereafter elect to discontinue or
abandon same for any reason, Lender shall have the unqualified right so to do
and, in such event, Borrower and Lender shall be restored to their former
positions with respect to the Debt, the Loan Documents, the Property or
otherwise, and the rights, remedies, recourses and powers of Lender shall
continue as if same had never been invoked.

 

(1)                                  Remedies Cumulative.  All
rights, remedies, and recourses of Lender granted in the Note, this Security
Instrument and the Other Loan Documents, any other pledge of collateral, or
otherwise available at law or equity: (i) shall be cumulative and
concurrent; (ii) may be pursued separately, successively, or concurrently
against Borrower, the Property, or any one or more of them, at the sole
discretion of Lender; (iii) may be exercised as often as occasion therefor
shall arise, it being agreed by Borrower that the exercise or failure to
exercise any of same shall in no event be construed as a waiver or release
thereof or of any other right, remedy, or recourse; (iv) shall be
nonexclusive; (v) shall not be conditioned upon Lender exercising or
pursuing any remedy in relation to the Property prior to Lender bringing suit
to recover the Debt; and (vi) in the event Lender elects to bring suit on
the Debt and obtains a judgment against Borrower prior to exercising any
remedies in relation to the Property, all liens and security interests,
including the lien of this Security Instrument, shall remain in full force and
effect and may be exercised thereafter at Lender’s option.

 

(m)                               Bankruptcy Acknowledgment.  In
the event the Property or any portion thereof or any interest therein becomes
property of any bankruptcy estate or subject to any state or federal insolvency
proceeding, then Lender shall immediately become entitled, in addition to all
other relief to which Lender may be entitled under this Security Instrument, to
obtain (i) an order from the Bankruptcy Court or other appropriate court
granting immediate relief from the automatic stay pursuant to § 362
of the Bankruptcy Code so to permit Lender to pursue its rights and remedies
against Borrower as provided under this Security Instrument and all other
rights and remedies of Lender at law and in equity under applicable state law,
and (ii) an order from the Bankruptcy Court prohibiting Borrower’s use of
all “cash collateral” as defined under § 363 of the Bankruptcy
Code. In connection with such Bankruptcy Court orders, Borrower shall not
contend or allege in any pleading or petition filed in any court proceeding
that Lender does not have sufficient grounds for relief from the automatic
stay. Any bankruptcy petition or other action taken by the Borrower to stay,
condition, or inhibit Lender from exercising its remedies are hereby admitted
by Borrower to be in bad faith and Borrower further admits that Lender would
have just cause for relief from the automatic stay in order to take such
actions authorized under state law.

 

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(n)                                 Application of Proceeds.  The
proceeds from any sale, lease, or other disposition made pursuant to this
Security Instrument, or the proceeds from the surrender of any insurance
policies pursuant hereto, or any Rents collected by Lender from the Property,
or the Tax and Insurance Escrow Fund or the Replacement Escrow Fund (as defined
in the Escrow Agreement) or proceeds from insurance which Lender elects to
apply to the Debt pursuant to Article 3 hereof, shall be applied by
Trustee, or by Lender, as the case may be, to the Debt in the following order
and priority: (1) to the payment of all expenses of advertising, selling,
and conveying the Property or part thereof, and/or prosecuting or otherwise
collecting Rents, proceeds, premiums or other sums including reasonable
attorneys’ fees and a reasonable fee or commission to Trustee, not to exceed
Ten Thousand Dollars ($10,000.00); (2) to that portion, if any, of the
Debt with respect to which no person or entity has personal or entity liability
for payment (the “Exculpated Portion”), and with
respect to the Exculpated Portion as follows: first, to accrued but unpaid interest,
second, to matured principal, and third, to unmatured principal in inverse
order of maturity; (3) to the remainder of the Debt as follows: first, to
the remaining accrued but unpaid interest, second, to the matured portion of
principal of the Debt, and third, to prepayment of the unmatured portion, if
any, of principal of the Debt applied to installments of principal in inverse
order of maturity; (4) the balance, if any or to the extent applicable,
remaining after the full and final payment of the Debt to the holder or
beneficiary of any inferior liens covering the Property, if any, in order of
the priority of such inferior liens (Trustee and Lender shall hereby be
entitled to rely exclusively on a commitment for title insurance issued to
determine such priority); and (5) the cash balance, if any, to the
Borrower. The application of proceeds of sale or other proceeds as otherwise
provided herein shall be deemed to be a payment of the Debt like any other
payment. The balance of the Debt remaining unpaid, if any, shall remain fully
due and owing in accordance with the terms of the Note and the other Loan
Documents.

 

Section 10.2.                             RIGHT OF ENTRY. 
Lender and its agents shall have the right to enter and inspect the
Property at all reasonable times.

 

ARTICLE 11 - INDEMNIFICATION;
SUBROGATION

 

Section 11.1.                             GENERAL INDEMNIFICATION.

 

(a)                                  Borrower shall indemnify, defend and hold
Lender and Trustee harmless against: (i) any and all claims for brokerage,
leasing, finder’s or similar fees which may be made relating to the Property or
the Debt other than any such fee claimed by a person engaged by Lender, and (ii) any
and all liability, obligations, losses, damages, penalties, claims, actions,
suits, costs and expenses (including Lender’s reasonable attorneys’ fees, together
with reasonable appellate counsel fees, if any) of whatever kind or nature
which may be asserted against, imposed on or incurred by Lender or Trustee in
connection with the Debt, this Security Instrument, the Property, or any part
thereof, or the exercise by Lender or Trustee of any rights or remedies granted
to it under this Security Instrument; provided, however, that nothing
herein shall be construed to obligate Borrower to indemnify, defend and hold
harmless Lender from and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, suits, costs and expenses enacted

 

36

 

against, imposed on or incurred by Lender by
reason of Lender’s willful misconduct or gross negligence.

 

(b)                                 If Lender is made a party defendant to any
litigation or any claim is threatened or brought against Lender concerning the
secured indebtedness, this Security Instrument, the Property, or any part
thereof, or any interest therein, or the construction, maintenance, operation
or occupancy or use thereof, then Lender shall notify Borrower of such
litigation or claim and Borrower shall indemnify, defend and hold Lender
harmless from and against all liability by reason of said litigation or claims,
including reasonable attorneys’ fees (together with reasonable appellate
counsel fees, if any). The right to such attorneys’ fees (together with
reasonable appellate counsel fees, if any) and expenses incurred by Lender in
any such litigation or claim of the type described in this Subsection 11.1
(b). whether or not any such litigation or claim is prosecuted to judgment,
shall be deemed to have accrued on the commencement of such claim or action and
shall be enforceable whether or not such claim or action is prosecuted to
judgment. If Lender commences an action against Borrower to enforce any of the
terms hereof or to prosecute any breach by Borrower of any of the terms hereof
or to recover any sum secured hereby, Borrower shall pay to Lender its
reasonable attorneys’ fees (together with reasonable appellate counsel fees, if
any) and expenses. If Borrower breaches any term of this Security Instrument,
Lender may engage the services of an attorney or attorneys to protect its
rights hereunder, and in the event of such engagement following any breach by Borrower,
Borrower shall pay Lender reasonable attorneys’ fees (together with reasonable
appellate counsel fees, if any) and expenses incurred by Lender, whether or not
an action is actually commenced against Borrower by reason of such breach. All references
to “attorneys” in this Subsection 11.1 (b) and
elsewhere in this Security Instrument shall include without limitation any
attorney or law firm engaged by Lender and Lender’s in-house counsel, and all
references to “fees and expenses” in this Subsection 11. (b) and elsewhere in this
Security Instrument shall include without limitation any fees of such attorney
or law firm and any allocation charges and allocation costs of Lender’s
in-house counsel.

 

(c)                                  A waiver of subrogation shall be obtained
by Borrower from its insurance carrier and, consequently, Borrower waives any
and all right to claim or recover against Lender, its officers, employees,
agents and representatives, for loss of or damage to Borrower, the Property,
Borrower’s property or the properly of others under Borrower’s control from any
cause insured against or required to be insured against by the provisions of
this Security Instrument.

 

Section 11.2.                             ENVIRONMENTAL INDEMNIFICATION.  Borrower
shall, at its sole cost and expense, protect, defend, indemnify, release and
hold harmless the Indemnified Parties from and against any and all Losses (as
hereinafter defined) imposed upon or incurred by or asserted against any
Indemnified Parties (other than those arising solely from a state of facts that
first came into existence after Lender acquired title to the Property through
foreclosure or a deed in lieu thereof), and directly or indirectly arising out
of or in any way relating to any one or more of the following: (a) any
presence of any Hazardous Substances (as hereinafter defined) in, on, above, or
under the Property in violation of any Environmental Law; (b) any past,
present or future Release (as hereinafter defined) of Hazardous Substances in,
on, above, under or from the

 

37

 

Property; (c) any activity by Borrower, any person or entity
affiliated with Borrower, and any tenant or other user of the Property in
connection with any actual, proposed or threatened use, treatment, storage,
holding, existence, disposition or other Release, generation, production,
manufacturing, processing, refining, control, management, abatement, removal,
handling, transfer or transportation to or from the Property of any Hazardous Substances
at any time located in, under, on or above the Property; (d) any activity
by Borrower, any person or entity affiliated with Borrower, and any tenant or
other user of the Property in connection with any actual or proposed
Remediation (as hereinafter defined) of any Hazardous Substances at any time
located in, under, on or above the Property, whether or not such Remediation is
voluntary or pursuant to court or administrative order, including but not
limited to any removal, remedial or corrective action; (e) any past,
present or threatened non-compliance or violations of any Environmental Law (as
hereinafter defined) (or permits issued pursuant to any Environmental Law) in
connection with the Property or operations thereon, including but not limited
to any failure by Borrower, any person or entity affiliated with Borrower, and
any tenant or other user of the Property to comply with any order of any
governmental authority in connection with any Environmental Laws; (f) the
imposition, recording or filing or the future imposition, recording or filing
of any Environmental Lien (as hereinafter defined) encumbering the Property; (g) any
administrative processes or proceedings or judicial proceedings in any way
connected with any matter addressed in this Section 11.2; (h) any
misrepresentation or inaccuracy in any representation or warranty or material
breach or failure to perform any covenants or other obligations under the
Environmental Indemnity of even date executed by Borrower and Indemnitor; and (i) any
diminution in value of the Property in any way connected with any occurrence or
other matter referred to in this Section 11.2.

 

The term “Environmental Law”
means any present and future
federal, state and local laws, statutes, ordinances, rules, regulations and the
like, as well as common law, relating to protection of human health or the
environment, relating to Hazardous Substances, relating to liability for or
costs of Remediation or prevention of Releases of Hazardous Substances or
relating to liability for or costs of other actual or threatened danger to
human health or the environment. The term “Environmental Law” includes,
but is not limited to, the following statutes, as amended, any successor
thereto, and any regulations promulgated pursuant thereto, and any state or
local statutes, ordinances, rules, regulations and the like addressing similar
issues: the Comprehensive Environmental Response, Compensation and Liability
Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous
Substances Transportation Act; the Resource Conservation and Recovery Act
(including but not limited to Subtitle I relating to underground storage
tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act;
the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational
Safety and Health Act; the Federal Water Pollution Control Act; the Federal
Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the
National Environmental Policy Act; and the River and Harbors Appropriation Act.
The term “Environmental Law”also includes, but is not limited to,
any present and future federal, state and local laws, statutes, ordinances,
rules, regulations and the like, as well as common law: conditioning transfer
of property upon a negative declaration or other approval of a governmental
authority of the environmental condition of the Property or requiring
notification or disclosure of Releases of Hazardous Substances or other
environmental condition of the Property to any governmental authority or other
person or entity, whether or not in connection with transfer of title to or
interest in property.

 

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The term “Environmental Lien”
includes but is not limited to
any lien or other encumbrance imposed pursuant to Environmental Law, whether
due to any act or omission of Borrower or any other person or entity.

 

The term “Hazardous Substances”
includes but is not limited to
any and all substances (whether solid, liquid or gas) defined, listed, or
otherwise classified as pollutants, hazardous wastes, hazardous substances,
hazardous materials, extremely hazardous wastes, or words of similar meaning or
regulatory effect under any present or future Environmental Laws or that may
have a negative impact on human health or the environment, including but not
limited to petroleum and petroleum products, asbestos and asbestos-containing
materials, polychlorinated biphenyls, lead, lead-based paints, radon,
radioactive materials, flammables and explosives.

 

The term “Indemnified Parties”
includes but is not limited to
Lender, any person or entity who is or will have been involved in originating
the Loan evidenced by the Note, any person or entity who is or will have been
involved in servicing the Loan, any person or entity in whose name the
encumbrance created by this Security Instrument is or will have been recorded,
persons and entities who may hold or acquire or will have held a full or
partial interest in the Loan (including but not limited to those who may
acquire any interest in Securities, as well as custodians, trustees and other
fiduciaries who hold or have held a full or partial interest in the Loan for
the benefit of third parties), as well as the respective directors, officers,
shareholders, partners, employees, agents, servants, representatives,
contractors, subcontractors, affiliates, subsidiaries, participants, successors
and assign of any and all of the foregoing (including but not limited to any
other person or entity who holds or acquires or will have held a participation
or other full or partial interest in the Loan or the Property, whether during
the term of the Loan or as part of or following foreclosure pursuant to the
Loan) and including but not limited to any successors by merger, consolidation
or acquisition of all or a substantial part of Lender’s assets and business.

 

The term “Losses”  includes but is not limited to any claims,
suits, liabilities (including but not limited to strict liabilities),
administrative or judicial actions or proceedings, obligations, debts, damages,
losses, costs, expenses, diminutions in value, fines, penalties, charges, fees,
expenses, costs of Remediation (whether or not performed voluntarily),
judgments, award, amounts paid in settlement, foreseeable and unforeseeable
consequential damages, litigation costs, attorneys’ fees, engineer’s fees,
environmental consultants’ fees and investigation costs (including but not
limited to costs for sampling, testing and analysis of soil, water, air,
building materials, and other materials and substances whether solid, liquid or
gas), of whatever kind or nature, and whether or not incurred in connection
with any judicial or administrative proceedings.

 

The term “Release”  with respect to any Hazardous Substance
includes but is not limited to any release, deposit, discharge, emission,
leaking, leaching, spilling, seeping, migrating, injecting, pumping, pouring,
emptying, escaping, dumping, disposing or other movement of Hazardous
Substances that is in violation of any Environmental Law.

 

The term “Remediation”
includes but is not limited to
any response, remedial, removal, or corrective action; any activity to cleanup,
detoxify, decontaminate, contain or otherwise remediate any Hazardous
Substance; any actions to prevent, cure or mitigate any Release of any

 

39

 

Hazardous Substance; any action to comply with any
Environmental Laws or with any permits issued pursuant thereto; any inspection,
investigation, study, monitoring, assessment, audit, sampling and testing,
laboratory or other analysis, or evaluation relating to any Hazardous
Substances or to anything referred to in this Article 11.

 

Section 11.3.                             DUTY TO DEFEND AND ATTORNEYS AND OTHER FEES
AND EXPENSES.  Upon written request by any Indemnified Party,
Borrower shall defend such Indemnified Party (if requested by any Indemnified
Party, in the name of the Indemnified Party) by attorneys and other
professionals approved by the Indemnified Parties. Notwithstanding the foregoing,
any Indemnified Parties may, in their sole and absolute discretion, engage
their own attorneys and other professionals to defend or assist them, and, at
the option of Indemnified Parties, their attorneys shall control the resolution
of claim or proceeding. Upon demand, Borrower shall pay or, in the sole and
absolute discretion of the Indemnified Parties, reimburse, the Indemnified
Parties for the payment of reasonable fees and disbursements of attorneys,
engineers, environmental consultants, laboratories and other professionals in
connection therewith.

 

Section 11.4.                             SURVIVAL OF INDEMNITIES.  Notwithstanding
any provision of this Security Instrument or any other Loan Document to the
contrary, the provisions of Section 11.1 and Section 11.2,
and Borrower’s obligations thereunder, shall survive (a) the repayment of
the Note, (b) the foreclosure of this Security Instrument, and (c) the
release (or reconveyance, as applicable) of the lien of this Security
Instrument.

 

ARTICLE 12 - SECURITY AGREEMENT

 

Section 12.1.                             SECURITY AGREEMENT.  This
Security Instrument is both a real property mortgage and a “security agreement”
within the meaning of the Uniform Commercial Code. The Property includes both
real and personal property and all other rights and interests, whether tangible
or intangible in nature, of Borrower in the Property. Borrower by executing and
delivering this Security Instrument has granted and hereby grants to Lender, as
security for the Obligations, a security interest in the Property to the full
extent that the Property may be subject to the Uniform Commercial Code (said
portion of the Property so subject to the Uniform Commercial Code being called
in this paragraph the “Collateral”).
Borrower hereby agrees with Lender to
execute and deliver to Lender, in form and substance satisfactory to Lender,
such financing statements, continuation statements, other uniform commercial
code forms and shall pay all expenses and fees in connection with the filing
and recording thereof, and such further assurances as Lender may from time to
time, reasonably consider necessary to create, perfect, and preserve Lender’s
security interest herein granted. This Security Instrument shall also
constitute a “fixture filing” for the purposes of the Uniform Commercial Code.
All or part of the Property are or are to become fixtures. Information
concerning the security interest herein granted may be obtained from the
parties at the addresses of the parties set forth in the first paragraph of
this Security Instrument. If an Event of Default shall occur, Lender, in
addition to any other rights and remedies which they may have, shall have and
may exercise immediately and without demand, any and all rights and remedies
granted to a secured party upon default under the Uniform Commercial Code,
including, without limiting the generality of the foregoing, the right to take
possession of the Collateral or any part thereof, and to take such other
measures as Lender may deem necessary for the care, protection and preservation
of the Collateral. Upon

 

40

 

request or demand of Lender, Borrower shall at its expense assemble the
Collateral and make it available to Lender at a convenient place acceptable to
Lender. Borrower shall pay to Lender on demand any and all expenses, including
legal expenses and attorneys’ fees, incurred or paid by Lender in protecting
the interest in the Collateral and in enforcing the rights hereunder with
respect to the Collateral. Any notice of sale, disposition or other intended
action by Lender with respect to the Collateral sent to Borrower in accordance
with the provisions hereof at least five (5) days prior to such action,
shall constitute commercially reasonable notice to Borrower. The proceeds of
any disposition of the Collateral, or any part thereof, may be applied by
Lender to the payment of the Obligations in such priority and proportions as
Lender in its discretion shall deem proper. In the event of any change in name,
identity or structure of any Borrower, such Borrower shall notify Lender
thereof, and promptly after request shall execute, file and record such Uniform
Commercial Code forms as are necessary to maintain the priority of Lender’s
lien upon and security interest in the Collateral, and shall pay all expenses
and fees in connection with the filing and recording thereof. If Lender shall
require the filing or recording of additional Uniform Commercial Code forms or
continuation statements, Borrower shall, promptly after request, execute, file
and record such Uniform Commercial Code forms or continuation statements as
Lender shall deem necessary, and shall pay all expenses and fees in connection
with the filing and recording thereof it being understood and agreed, however,
that no such additional documents shall increase Borrower’s obligations under
the Note, this Security Instrument and the Other Loan Documents. Borrower
hereby irrevocably appoints Lender as its attomey-in-fact, coupled with an
interest, to file with the appropriate public office on its behalf any
financing or other statements signed only by Lender, as Borrower’s
attorney-in-fact, in connection with the Collateral covered by this Security
Instrument. Notwithstanding the foregoing, Borrower shall appear and defend in
any action or proceeding which affects or purports to affect the Property and
any interest or right therein, whether such proceeding effects title or any
other rights in the Property (and in conjunction therewith, Borrower shall
fully cooperate with Lender in the event Lender is a party to such action or
proceeding).

 

ARTICLE 13 - WAIVERS

 

Section 13.1.                             MARSHALLING AND OTHER MATTERS.  Borrower
hereby waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement and redemption laws now or hereafter
in force and all rights of marshalling in the event of any sale hereunder of
the Property or any part thereof or any interest therein. Further, Borrower
hereby expressly waives any and all rights of redemption from sale under any
order or decree of foreclosure of this Security Instrument on behalf of
Borrower, and on behalf of each and every person acquiring any interest in or
title to the Property subsequent to the date of this Security Instrument and on
behalf of all persons to the extent permitted by applicable law.

 

Section 13.2.                             WAIVER OF NOTICE.  Borrower
shall not be entitled to any notices of any nature whatsoever from Lender
except with respect to matters for which this Security Instrument specifically
and expressly provides for the giving of notice by Lender to Borrower and
except with respect to matters for which Lender is required by applicable law
to give notice, and Borrower hereby expressly waives the right to receive any
notice from Lender with respect to any matter for which this Security
Instrument does not specifically and expressly provide for the giving of notice
by Lender to Borrower.

 

41

 

Section 13.3.                             SOLE DISCRETION OF LENDER.  Wherever
pursuant to this Security Instrument Lender exercises any right given to it to
approve or disapprove, or any arrangement or term is to be satisfactory to
Lender, the decision of Lender to approve or disapprove or to decide that
arrangements or terms are satisfactory or not satisfactory shall be in the sole
discretion of Lender and shall be final and conclusive, except as may be
otherwise expressly and specifically provided herein.

 

Section 13.4.                             SURVIVAL.  The indemnifications made
pursuant to Article 11, shall continue indefinitely in full force
and effect and shall survive and shall in no way be impaired by: any
satisfaction or other termination of this Security Instrument, any assignment
or other transfer of all or any portion of this Security Instrument or Lender’s
interest in the Property (but, in such case, shall benefit both Indemnified
Parties and any assignee or transferee), any exercise of Lender’s rights and
remedies pursuant hereto including but not limited to foreclosure or acceptance
of a deed in lieu of foreclosure, any exercise of any rights and remedies
pursuant to the Note or any of the Other Loan Documents, any transfer of all or
any portion of the Property (whether by Borrower or by Lender following
foreclosure or acceptance of a deed in lieu of foreclosure or at any other time),
any amendment to this Security Instrument, the Note or the Other Loan
Documents, and any act or omission that might otherwise be construed as a
release or discharge of Borrower from the obligations pursuant hereto.

 

Section 13.5.                             WAIVER OF TRIAL BY JURY.

 

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 THIS SECURITY
INSTRUMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR
OTHER ACTION ARISING IN CONNECTION THEREWITH INCLUDING, BUT NOT LIMITED TO
THOSE RELATING TO (A) ALLEGATIONS THAT A PARTNERSHIP EXISTS BETWEEN LENDER
AND BORROWER; (B) USURY OR PENALTIES OR DAMAGES THEREFOR; (C) ALLEGATIONS
OF UNCONSCIONABLE ACTS, DECEPTIVE TRADE PRACTICE, LACK OF GOOD FAITH OR FAIR
DEALING, LACK OF COMMERCIAL REASONABLENESS, OR SPECIAL RELATIONSHIPS (SUCH AS
FIDUCIARY, TRUST OR CONFIDENTIAL RELATIONSHIP); (D) ALLEGATIONS OF DOMINION,
CONTROL, ALTER EGO, INSTRUMENTALITY, FRAUD, REAL ESTATE FRAUD,
MISREPRESENTATION, DURESS, COERCION, UNDUE INFLUENCE, INTERFERENCE OR
NEGLIGENCE; (E) ALLEGATIONS OF TORTIOUS INTERFERENCE WITH PRESENT OR
PROSPECTIVE BUSINESS RELATIONSHIPS OR OF ANTITRUST; OR (F) SLANDER, LIBEL
OR DAMAGE TO REPUTATION. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
KNOWINGLY AND VOLUNTARILY BY 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. LENDER AND BORROWER ARE EACH HEREBY AUTHORIZED TO
FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS
WAIVER BY BORROWER AND LENDER.

 

42

 

Section 13.6.                             WAIVER OF AUTOMATIC OR SUPPLEMENTAL STAY.  In
the event of the filing of any voluntary or involuntary petition under the
Bankruptcy Code by or against Borrower (other than an involuntary petition
filed by or joined in by Lender), the Borrower shall not assert, or request any
other party to assert, that the automatic stay under § 362 of the
Bankruptcy Code shall operate or be interpreted to stay, interdict, condition,
reduce or inhibit the ability of Lender to enforce any rights it has by virtue
of this Security Instrument, or any other rights that Lender has, whether now
or hereafter acquired, against any guarantor of the Debt. Further, Borrower
shall not seek a supplemental stay or any other relief, whether injunctive or
otherwise, pursuant to § 105 of the Bankruptcy Code or any other
provision therein to stay, interdict, condition, reduce or inhibit the ability
of Lender to enforce any rights it has by virtue of this Security Instrument
against any guarantor of the Debt. The waivers contained in this paragraph are
a material inducement to Lender’s willingness to enter into this Security
Instrument and Borrower acknowledges and agrees that no grounds exist for
equitable relief which would bar, delay or impede the exercise by Lender of
Lender’s rights and remedies against Borrower or any guarantor of the Debt.

 

ARTICLE 14 - NOTICES

 

Section 14.1.                             NOTICES.  All notices or other written
communications hereunder shall be deemed to have been properly given (i) upon
delivery to the addressee, if delivered in person or by facsimile transmission
with receipt acknowledged, (ii) upon delivery to the addressee, after
having been deposited for overnight delivery courier service, or (iii) upon
delivery to the addressee, after having been deposited in any post office or
mail depository regularly maintained by the U.S. Postal Service and sent by
registered or certified mail, postage prepaid, return receipt requested, as
evidenced by the return receipt that delivery was made or that acceptance of
delivery was refused by the addressee, addressed as follows:

 

	
  If to Borrower:

  	
  RKB Pender LLC

  
	
   

  	
  c/o Republic Properties Corporation

  
	
   

  	
  1280 Maryland Avenue, S.W., Suite 280

  
	
   

  	
  Washington, D.C. 20024

  
	
   

  	
  Attention: President

  
	
   

  	
  Facsimile No.: (202) 863-4049

  
	
   

  	
   

  
	
  With a copy to:

  	
  Arent Fox Kintner Plotkin & Kahn PLLC

  
	
   

  	
  1050 Connecticut Avenue, N.W.

  
	
   

  	
  Washington, D.C. 20036-5339

  
	
   

  	
  Attention: Joseph M. Fries, Esq.

  
	
   

  	
  Facsimile No.: (202) 857-6395

  

 

43

 

	
  If to Lender:

  	
  JPMorgan Chase Bank

  
	
   

  	
  c/o J.P. Morgan Mortgage Capital, Inc.

  
	
   

  	
  400 Perimeter Center Terrace

  
	
   

  	
  Suite 575

  
	
   

  	
  Atlanta, Georgia 30346

  
	
   

  	
  Attention: L. Edward Register, Jr.

  
	
   

  	
  Facsimile No.: (770) 351-8398

  
	
   

  	
   

  
	
  With a copy to:

  	
  Dechert

  
	
   

  	
  30 Rockefeller Plaza

  
	
   

  	
  New York, New York 10112-2200

  
	
   

  	
  Attention: Paul A. Keenan, Esq.

  
	
   

  	
  Facsimile No.: (212) 698-3599

  

 

or addressed as such party may from time to time designate by written
notice to the other parties. For purposes of this subsection, the term “Business Day” shall mean a day on which commercial banks
are not authorized or required by law to close in New York, New York.

 

Any party by notice to the other parties may designate additional or
different addresses for subsequent notices or communications.

 

ARTICLE 15 - APPLICABLE LAW

 

Section 15.1.                             GOVERNING LAW: JURISDICTION.  This
Security Instrument shall be governed by and construed in accordance with
applicable federal law and the laws of the state where the Property is located,
without reference or giving effect to any choice of law doctrine. Borrower
hereby irrevocably submits to the jurisdiction of any court of competent
jurisdiction located in the state in which the Property is located in
connection with any proceeding arising out of or relating to this Security
Instrument.

 

Section 15.2.                            USURY LAWS.  This
Security Instrument and the Note are subject to the express condition that at
no time shall Borrower be obligated or required to pay interest on the Debt at
a rate which could subject the holder of the Note to either civil or criminal
liability as a result of being in excess of the maximum interest rate which
Borrower is permitted by applicable law to contract or agree to pay. If by the
terms of this Security Instrument or the Note, Borrower is at any time required
or obligated to pay interest on the Debt at a rate in excess of such maximum
rate, the rate of interest under the Security Instrument and the Note shall be
deemed to be immediately reduced to such maximum rate and the interest payable
shall be computed at such maximum rate and all prior interest payments in
excess of such maximum rate shall be applied and shall be deemed to have been
payments in reduction of the principal balance of the Note. All sums paid or
agreed to be paid to Lender for the use, forbearance, or detention of the Debt
shall, to the extent permitted by applicable law, be amortized, prorated,
allocated, and spread throughout the full stated term of the Note until payment
in full so that the rate or amount of interest on account of the Debt does not
exceed the maximum lawful rate of interest from time to time in effect and
applicable to the Debt for so long as the Debt is outstanding.

 

44

 

Section 15.3.                             PROVISIONS SUBJECT TO APPLICABLE LAW.  All
rights, powers and remedies provided in this Security Instrument may be
exercised only to the extent that the exercise thereof does not violate any
applicable provisions of law and are intended to be limited to the extent
necessary so that they will not render this Security Instrument invalid, unenforceable
or not entitled to be recorded, registered or filed under the provisions of any
applicable law. If any term of this Security Instrument or any application
thereof shall be invalid or unenforceable, the remainder of this Security
Instrument and any other application of the term shall not be affected thereby.

 

ARTICLE 16 - SECONDARY MARKET

 

Section 16.1.                            TRANSFER OF LOAN.  Lender
may, at any time, sell, transfer or assign the Note, this Security Instrument
and the Other Loan Documents, and any or all servicing rights with respect
thereto, or grant participations therein or issue mortgage pass-through
certificates or other securities evidencing a beneficial interest in a rated or
unrated public offering or private placement (the “Securities”). Lender may forward to each purchaser, transferee, assignee, servicer,
participant, investor in such Securities or any Rating Agency rating such
Securities (collectively, the “Investor”)
and each prospective Investor, all
documents and information which Lender now has or may hereafter acquire
relating to the Debt and to Borrower, any Guarantor, any Indemnitor and the
Property, whether furnished by Borrower, any Guarantor, any Indemnitor or
otherwise, as Lender determines necessary or desirable. The term “Rating Agency” shall mean each statistical rating agency that has assigned a rating to
the Securities.

 

ARTICLE 17 - COSTS

 

Section 17.1.                             PERFORMANCE AT BORROWER’S EXPENSE.  Borrower
acknowledges and confirms that Lender shall impose certain administrative
processing and/or commitment fees in connection with (a) the extension,
renewal, modification, amendment and termination (excluding the scheduled
maturity of the Note) of its loans, (b) the release or substitution of
collateral therefor, or (c) obtaining certain consents, waivers and
approvals with respect to the Property (the occurrence of any of the above
shall be called an “Event”).
Borrower hereby acknowledges and agrees to pay, immediately, upon demand, all
such fees (as the same may be increased or decreased from time to time), and
any additional fees of a similar type or nature which may be imposed by Lender
from time to time, upon the occurrence of any Event.

 

Section 17.2.                             ATTORNEY’S FEES FOR ENFORCEMENT.  (a) Borrower
shall pay all legal fees incurred by Lender in connection with (i) the
preparation of the Note, this Security Instrument and the Other Loan Documents
and (ii) the items set forth in Section 17.1 above, and (b) Borrower
shall pay to Lender on demand any and all expenses, including legal expenses
and attorneys’ fees, incurred or paid by Lender in protecting its interest in
the Property or Personal Property and/or collecting any amount payable or in
enforcing its rights hereunder with respect to the Property or Personal
Property, whether or not any legal proceeding is commenced hereunder or
thereunder and whether or not any default or Event of Default shall have
occurred and is continuing, together with interest thereon at the Default Rate
from the date of payment or incurring by Lender until paid by Borrower.

 

45

 

ARTICLE 18 - DEFINITIONS

 

Section 18.1.                             GENERAL DEFINITIONS.  Unless
the context clearly indicates a contrary intent or unless otherwise
specifically provided herein, words used in this Security Instrument may be
used interchangeably in singular or plural form and the word “Borrower” shall mean “each Borrower and any subsequent owner or owners of the
Property or any part thereof or any interest therein,” the word “Lender” shall mean “Lender and any subsequent holder of the Note,” the word “Note” shall mean “the Note and any other evidence of indebtedness secured by
this Security Instrument,” the word “person”shall include an individual,
corporation, partnership, trust, unincorporated association, government,
governmental authority, and any other entity, the word “Property” shall include any portion of the Property and any interest therein, and
the phrases “attorneys’ fees,” “legal
fees” and “counsel fees” shall include any and all attorneys’, paralegal and law clerk fees and
disbursements, including, but not limited to, fees and disbursements at the
pre-trial, trial and appellate levels incurred or paid by Lender in protecting
its interest in the Property, the Leases and the Rents and enforcing its rights
hereunder.

 

ARTICLE 19 - MISCELLANEOUS PROVISIONS

 

Section 19.1.                             NO ORAL CHANGE.  This
Security Instrument, the Note, and the Other Loan Documents and any provisions
hereof or thereof, may not be modified, amended, waived, extended, changed, discharged
or terminated orally or by any act or failure to act on the part of Borrower or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change,
discharge or termination is sought.

 

Section 19.2.                             LIABILITY.  If Borrower consists of more
than one person, the obligations and liabilities of each such person hereunder
shall be joint and several. This Security Instrument shall be binding upon and
inure to the benefit of Borrower and Lender and their respective successors and
assigns forever.

 

Section 19.3.                             INAPPLICABLE PROVISIONS.  If
any term, covenant or condition of the Note or this Security Instrument is held
to be invalid, illegal or unenforceable in any respect, the Note and this
Security Instrument shall be construed without such provision.

 

Section 19.4.                             HEADINGS, ETC.  The
headings and captions of various Sections of this Security Instrument are for
convenience of reference only and are not to be construed as defining or
limiting, in any way, the scope or intent of the provisions hereof.

 

Section 19.5.                             DUPLICATE ORIGINALS; COUNTERPARTS.  This
Security Instrument may be executed in any number of duplicate originals and
each duplicate original shall be deemed to be an original. This Security
Instrument may be executed in several counterparts, each of which counterparts
shall be deemed an original instrument and all of which together shall
constitute a single Security Instrument. The failure of any party hereto to execute
this Security Instrument, or any counterpart hereof, shall not relieve the
other signatories from their obligations hereunder.

 

46

 

Section 19.6.                             NUMBER AND GENDER.  Whenever
the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa.

 

Section 19.7.                             SUBROGATION.  If
any or all of the proceeds of the Note have been used to extinguish, extend or
renew any indebtedness heretofore existing against the Property, then, to the
extent of the funds so used, Lender shall be subrogated to all of the rights,
claims, liens, titles, and interests existing against the Property heretofore
held by, or in favor of, the holder of such indebtedness and such former
rights, claims, liens, titles, and interests, if any, are not waived but rather
are continued in full force and effect in favor of Lender and are merged with
the lien and security interest created herein as cumulative security for the
repayment of the Debt, the performance and discharge of Borrower’s obligations
hereunder, under the Note and the Other Loan Documents and the performance and
discharge of the Other Obligations.

 

Section 19.8.                             ENTIRE AGREEMENT.  The
Note, this Security Instrument and the Other Loan Documents constitute the
entire understanding and agreement between Borrower and Lender with respect to
the transactions arising in connection with the Debt and supersede all prior
written or oral understandings and agreements between Borrower and Lender with
respect thereto. Borrower hereby acknowledges that, except as incorporated in
writing in the Note, this Security Instrument and the Other Loan Documents,
there are not, and were not, and no persons are or were authorized by Lender to
make, any representations, understandings, stipulations, agreements or
promises, oral or written, with respect to the transaction which is the subject
of the Note, this Security Instrument and the Other Loan Documents.

 

ARTICLE 20 - TRUSTEE

 

Trustee may resign by the giving of notice of such resignation in
writing or verbally to Lender. If Trustee shall die, resign, or become
disqualified from acting in the execution of this trust, or if, for any reason,
Lender shall prefer to appoint a substitute trustee or multiple substitute
trustees, or successive substitute trustees or successive multiple substitute
trustees, to act instead of the aforenamed Trustee, Lender shall have full
power to appoint a substitute trustee (or, if preferred, multiple substitute
trustees) in succession who shall succeed (and if multiple substitute trustees
are appointed, each of such multiple substitute trustees shall succeed) to all
the estates, rights, powers, and duties of the aforenamed Trustee. Such
appointment may be executed by any authorized agent of Lender, and if such
Lender be a corporation and such appointment be executed in its behalf by any
officer of such corporation, such appointment shall be conclusively presumed to
be executed with authority and shall be valid and sufficient without proof of
any action by the board of directors or any superior officer of the
corporation. Borrower hereby ratifies and confirms any and all acts which the
aforenamed Trustee, or his successor or successors in this trust, shall do
lawfully by virtue hereof. If multiple substitute Trustees are appointed, each
of such multiple substitute Trustees shall be empowered and authorized to act
alone without the necessity of the joinder of the other multiple substitute
trustees, whenever any action or undertaking of such substitute trustees is
requested or required under or pursuant to this Security Instrument or
applicable law. Any substitute Trustee appointed pursuant to any of the provisions
hereof shall, without any further act, deed, or conveyance, become vested with
all the estates, properties, rights, powers, and trusts of its or his
predecessor in the rights hereunder with like effect as if originally named as
Trustee herein; but nevertheless, upon the written request of

 

47

 

Lender
or of the substitute Trustee, the Trustee ceasing to act shall execute and
deliver any instrument transferring to such substitute Trustee, upon the trusts
herein expressed, all the estates, properties, rights, powers, and trusts of
the Trustee so ceasing to act, and shall duly assign, transfer and deliver any
of the property and moneys held by such Trustee to the substitute Trustee so
appointed in the Trustee’s place. No fees or expenses shall be payable to
Trustee, except in connection with a foreclosure of the Property or any part
thereof or in connection with the release of the Property following payment in
full of the Debt.

 

ARTICLE 21 - SPECIAL STATE OF VIRGINIA
PROVISIONS

 

Section 21.1.                             PRINCIPLES OF CONSTRUCTION.  In
the event of any inconsistencies between the terms and provisions of this
Security Instrument and Article 21 of this Security Instrument, the
terms and provisions of Article 21 shall govern and control.

 

Section 21.2.                             NOTICES.  All notices and communications
delivered pursuant any provision of this Security Instrument concerning an
Event of Default shall be effective in accordance with the provisions of said
provisions, provided, that service of a notice as permitted by §1-15.1 of the
Virginia Code, as amended, shall be considered complete when the requirements
of that statute are met.

 

Section 21.3.                             FINANCING STATEMENT.  This Security Instrument shall also be
effective as a financing statement covering minerals or the like (including oil
and gas) and accounts subject to Section 8.9-103 of the Commonwealth of
Virginia Uniform Commercial Code, as amended, and similar provisions (if any)
of the Uniform Commercial Code as enacted in any other state where the Property
is situated which will be financed at the wellhead or minehead of the wells or
mines located on the Property and is to be filed for record in the real estate
records of each county where any part of the Property is situated. This Security
Instrument shall also be effective as a financing statement covering any other
property and may be filed in any other appropriate filing or recording office.

 

Section 21.4.                             ACCELERATION UPON TRANSFER.  If
any sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer,
other than a transfer permitted under Article 8 of this Security
Instrument or other relevant terms of the Loan Documents occurs without Lender’s
consent, then at Lender’s sole option, Lender may, by written notice to Borrower,
declare the Debt immediately due and payable. Without limiting the generality
of the foregoing, the following provision is set forth herein in order to
comply with the requirements of §6.1-330.88 of the Code of Virginia, if such
requirements are applicable to the property: NOTICE - THE OBLIGATIONS SECURED HEREBY ARE SUBJECT TO CALL IN FULL OR
THE TERMS THEREOF BEING MODIFIED IN THE EVENT OF SALE OR CONVEYANCE OF THE PROPERTY CONVEYED OTHER
THAN A SALE OR CONVEYANCE PERMITTED UNDER ARTICLE 8 OF THIS SECURITY
INSTRUMENT OR OTHER RELEVANT TERMS OF THE LOAN DOCUMENTS.

 

Section 21.5.                             RELEASE.  If and when Borrower has paid
all of the Debt, as the same become due and payable, and all of the covenants,
warranties, undertakings and agreements of Borrower in this Security Instrument
are kept and performed, and all obligations, if any, of Lender for future
advances have been terminated, then, and in that event only, all rights under

 

48

 

this
Security Instrument and the other Loan Documents shall terminate (except to the
extent expressly provided herein with respect to indemnifications,
representations and warranties and other rights which are to continue following
the release hereof), and the Trustee, upon request by Lender, will provide a
release of this Security Instrument to Borrower. Borrower shall be responsible
for the recordation of such release and payment of any recording costs
associated therewith.

 

Section 21.6.                             RIGHTS AND REMEDIES OF TRUSTEE.

 

Upon the occurrence and during the continuance of
an Event of Default by Borrower:

 

(i)                                     Trustee may take possession of and sell the
Property, or any part thereof requested by Lender to be sold, and in connection
therewith Borrower hereby authorizes and empowers Trustee to take possession of
and sell (or in case of the default of any purchaser to resell) the Property,
or any part thereof, all in accordance with the laws or rules of court of
the Commonwealth of Virginia relating to deeds of trust, including any amendments
thereof, or additions thereto, which do not materially change or impair the
remedy. In connection with any foreclosure, Lender and/or Trustee may (A) procure
such title reports, surveys, tax histories and appraisals as they deem
reasonably necessary, and (B) make such commercially reasonable repairs
and additions to the Property as they deem reasonably necessary, all of which
shall constitute “Expenses” (hereinafter defined). In the case of any sale
under this Security Instrument, by virtue of judicial proceedings or otherwise,
the Property may be sold as an entirety or in parcels, by one sale or by
several sales, and any fixtures or collateral encumbered by this Security
Instrument may be sold at the same sale as the Property or in one or more
sales, as may be deemed by Trustee to be appropriate and without regard to any
right of Borrower or any other person to the marshalling of assets, for cash,
on credit or for other property, for immediate or future delivery, and for such
price or prices and on such terms having first given such notice prior to the
sale of such time, place and terms by publication in at least one newspaper
published or having general circulation in the city or county in which the
Property is located or at such time or times as may be required by the laws of
the Commonwealth of Virginia or rule of court of the Commonwealth of
Virginia, and such other times and by such other methods, if any, as Trustee,
in its sole discretion, shall deem advantageous and proper. “Expenses” means all reasonable out-of-pocket costs and expenses of any nature
whatsoever incurred at any time and from time to time (whether before or after
an Event of Default) by Lender or Trustee in exercising or enforcing any
rights, powers and remedies provided in this Security Instrument or any of the
other Loan Documents, including, without limitation, reasonable attorneys’
fees, court costs, receiver’s fees, management fees and reasonable
out-of-pocket costs incurred in the repair, maintenance and operation of, or
taking possession of, or selling, the Property.

 

(ii)                                  Any sale hereunder may be made at public
auction, at such time or times, at such place or places, and upon such terms
and conditions and after such previous public notice as Trustee shall deem
appropriate and advantageous and as

 

49

 

required by the laws of the Commonwealth of Virginia. The parties
hereto agree that the advertisement required is as follows: (A) if the
advertisement is inserted on a weekly basis, publication once a week for two (2) weeks
shall be sufficient; and (B) if the advertisement is inserted on a daily
basis, publication once a day for three (3) days, which may be consecutive
days, shall be sufficient.

 

(iii)                               Upon the terms of such sale being complied
with, Trustee shall convey to, and at the cost of, the purchaser or purchasers
the interest of Borrower in the Property so sold, free and discharged of and
from all estate, title or interest therein of Borrower, at law or in equity,
such purchaser or purchasers being hereby discharged from all liability to see
to the application of the purchase money.

 

(iv)                              Lender and any affiliate thereof may be a
purchaser of the Property or of any part thereof or of any interest therein at
any public sale thereof, whether pursuant to foreclosure or power of sale or
otherwise hereunder, without thereby forfeiting its right to collect any
deficiency from Borrower (subject, however, to the provisions of Section 10
of the Note); and Lender may apply upon the purchase price the Debt secured
hereby owing to Lender. Lender, upon any such purchase, shall acquire good
title to the properties so purchased, free of the lien of this Security
Instrument and free of all rights of redemption in Borrower and free of all
liens and encumbrances subordinate to this Security Instrument.

 

Section 21.7.                             STATUTORY CONDITIONS.  This
Security Instrument is made under and pursuant to the provisions of the Code of
Virginia, Sections 26-49, 55-58.1, 55-59, 55-59.1 through 55-59.4 and 55-60, as
amended, and shall be construed to impose and confer upon the parties hereto
and Lender all the rights, duties, and obligations prescribed by said Sections
26-49, 55-58.1, 55-59, 55-59.1 through 55-59.4 and 55-60, as amended, except as
herein otherwise restricted, expanded or changed, to the extent said Sections
may be so restricted, expanded or changed under law, including without
limitation the following rights, duties and obligations described in short
form:

 

(i)                                     All exemptions are hereby waived.

 

(ii)                                  Subject to call on Event of Default which
is continuing.

 

(iii)                               Renewal, extension, or reinstatement
permitted.

 

(iv)                              Substitution of trustees collectively or of
any of them individually by the Lender is permitted for any reason whatsoever,
and any number of times without exhaustion of the right to do so.

 

(v)                                 Advertisement required, once a week for two
successive weeks or once a day for three consecutive days, in any newspaper of
general circulation in the County or City in which the property is situate.

 

(vi)                              Any Trustee may act.

 

50

 

(vii)                           The Trustee may require a deposit in the
amount of two percent (2%) of the unpaid principal indebtedness then secured
hereby or Fifty Thousand Dollars ($50,000.00), whichever is greater, to
accompany each bid at foreclosure sale or sale in lieu thereof.

 

Section 21.8.                             APPLICATION OF FORECLOSURE SALE PROCEEDS.  The
proceeds of such sale or sales under this Security Instrument, whether under
the assent to a decree, the power of sale, or by equitable foreclosure, shall
be held by Trustee and applied as follows: FIRST (A) all
Expenses incurred in connection with such sale or in preparing the Property for
such sale and of obtaining possession including, among other things, counsel
fees reasonably incurred shall be allowed and paid out of the proceeds of such
sale or sales, (B) the Trustee’s Commission (hereinafter defined) and
expenses and (C) all taxes, levies, assessments or other charges relating
to the Property which have or in the opinion of Trustee may have, priority over
the lien of this Security Instrument, including the pro rata portion thereof
applicable to the taxable period during which any payment is made pursuant to
this subsection; SECOND, to pay all of the Debt and
all interest then due and accrued thereon, which shall include interest through
the date of ratification of the auditor’s account; THIRD,
to pay the amount of any liens of record inferior to this Security Instrument,
together with lawful interest, and lawful claims of third parties against the
proceeds of any sale; and LASTLY, to pay
the surplus, if any, to Borrower or any person entitled thereto unless
otherwise required by law or directed by a court of competent jurisdiction. In
the event that the proceeds of any such sale or sales, together with all other
monies at the time held by Trustee under this Security Instrument, are
insufficient to pay the foregoing costs and expenses, Lender may, at its sole
option, advance such sums as Lender in its sole and absolute discretion shall
determine for the purpose of paying all or any part of such costs and expenses,
and all such sums so advanced shall be (A) a lien against the Property, (B) added
to the amount due under the Note and secured by this Security Instrument, and (C) payable
within five (5) days after demand with interest at the rate of interest
applicable to the principal balance of the Note, from and including the date
each such advance is made. In any event, Borrower shall be liable to Lender for
any deficiency if the proceeds of any such sale or sales are insufficient to
pay, in full, all amounts to be distributed pursuant to the Clauses First
through Second above. Borrower shall pay to Trustee a commission in the amount
of $10,000.00 if the Property is advertised for sale under the provisions of
this Security Instrument and is not sold, and the Borrower shall also pay or
reimburse Trustee for all of Trustee’s reasonable out-of-pocket expenses and
disbursements hereunder regardless of whether the Property is sold (the “Trustee’s Commission”).

 

Section 21.9.                             NOTICE INFORMATION.  As
of the date of this Security Instrument, the name of the holder of the Note is
JPMorgan Chase Bank and the address to which communications may be mailed or
delivered to the noteholder is 270 Park Avenue, New York, New York 10017.

 

[signature page follows]

 

51

 

IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been executed by
Borrower the day and year first above written.

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  RKB PENDER LLC, a Delaware limited liability

  company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Steven A. Grigg

  	
   

  
	
   

  	
  Name:

  	
  Steven A. Grigg

  
	
   

  	
  Title:

  	
  President

  
					

 

 

	
   

  	
  CITY OF WASHINGTON

  	
  )

  	
   

  
	
   

  	
  DISTRICT OF COLUMBIA

  	
  )

  	
  ss:

  

 

 

 

On the 17th day of September in the year 2002, before me, the
undersigned, a Notary Public in and for said state, personally appeared Steven
A. Grigg personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the person, or the entity upon behalf of which the
person acted, executed the instrument.

 

	
   

  	
  /s/ Melissa T. Jones

  	
   

  
	
   

  	
  Notary Public

  	
   

  
	
   

  	
   

  
	
   

  	
  Melissa T. Jones, Notary Public

  
	
   

  	
  Washington, D. C.

  
	
   

  	
  My Commission Expires January 31, 2005

  

 

 

Exhibit A

Legal Description

 

All that certain lot or parcel of land situate and lying in Fairfax
County, Virginia, and more particularly described as follows:

 

Beginning at an iron pipe found on the northwesterly right-of-way line
of Pender Drive, said pipe marking the most easterly corner of Parcel “G”,
Pender Business Park (Deed Book 5874, page 1377) 

 

thence departing from said Pender Drive and with
the northeasterly line of said Parcel “G”, Pender Business Park

 

N 64 degrees 29’ 30” W, 444.38 feet

 

to an iron pipe found on
the easterly line of the property now or formerly of Fair Center Office
Associates, L.L.C. (Deed Book 10772, Page 1492);

 

thence with said easterly line of Fair Center Office Associates, L.L.C.
and continuing with the easterly lines of the properties now or formerly of A
and A Fairfax Ridge Inc. (Deed Book 10069, Page 453), Rinaldi-Vetter Cross
Partnership (Deed Book 5575, Page 669), and National Rifle Association of
America (Deed Book 8474, Page 1260)

 

N 08 degrees 06’ 55” E, 691.27 feet to an iron pipe found and

 

N 07 degrees 39’ 43” E, 294.10 feet

 

to an iron pipe found on the southerly right-of-way line of Interstate
Route 66;

thence with the said southerly right-of-way line of Interstate Route 66

 

N 77 degrees 02’ 21” E, 444.68 feet

 

to an iron pipe found marking the northwesterly corner of the property
now or formerly of Elman Fairfax Associates LP (Deed Book 11439, page 1241);

 

thence departing from Interstate Route 66 and with the westerly lines
of said Elman Fairfax Associates LP the following three (3) courses;

 

S 10 degrees 36’ 48” E, 455.49 feet to an iron pipe found; 

 

S 37 degrees 48’ 15” W, 144.16 feet to an iron pipe found and 

 

S 52 degrees 11’ 45” E, 200.75 feet 

 

to
a spat set in the concrete sidewalk on the aforementioned northwesterly
right-of-way line

 

 

of Pender Drive marking the point of curvature of
a nontangent curve to the left;

 

thence with said northwesterly right-of-way line of Pender Drive the
following three (3) courses:

 

280.08 feet along the arc of said curve having a radius of 785.00 feet
and a chord bearing and chord of S 34 degrees 05’ 49” W, 278.59 feet
respectively, to an iron pipe found;

 

S 23 degrees 52’ 33” W, 259.00 feet to an iron pipe found marking the
point of curvature of a curve to the right and

 

130.65 feet along the arc of said curve having a radius of 815.00 feet
and a chord bearing and chord of S 28 degrees 28’ 06” W, 130.51 feet
respectively,

 

to the point of beginning.

 

Containing 600,391 square feet or 13.78308 acres
of land, more or less.

 

Tax Map Nos.:

047-3-01-0058-A

047-3-01-0058-B

 

 

AND BEING the same property conveyed to RKB Pender LLC, a Delaware
limited liability company, by Deed from Render Office, L.L.C., a Delaware
limited liability company, recorded immediately prior hereto in the Land
Records of Fairfax County, Virginia.Exhibit
10.18

 

DEED OF
TRUST NOTE

 

	
  $40,000,000

  	
   

  	
  June 13, 2003

  

 

                FOR VALUE RECEIVED, RKB WILLOWWOOD LLC, a Delaware limited
liability company having its principal place of business at 1280 Maryland
Avenue, SW, Suite 280, Washington D.C. 20024 (hereinafter referred to as “Borrower”), promises to pay to the order of ARCHON FINANCIAL, L.P., a Delaware limited partnership, at
its principal place of business at 600 East Las Colinas Boulevard, Suite 450,
Irving, Texas 75039 (hereinafter referred to as “Lender”),
or at such place as the holder hereof may from time to time designate in
writing, the principal sum of Forty Million and No/100
Dollars ($40,000,000), in lawful money
of the United States of America, with interest thereon to be computed on the
unpaid principal balance from time to time outstanding at the Contract Rate (as
hereinafter defined), and to be paid in installments as provided herein:

 

1.     Payment Terms.   Borrower
shall pay to Lender a payment of interest only for the period from and
including the first date on which principal is advanced to Borrower on this
Note to and including the last day of that same month, which amount will be
reserved and paid to Lender on the first date on which principal is advanced to
Borrower on this Note. Interest shall thereafter be due and payable monthly, in
arrears, commencing on August 1, 2003, and continuing on the first day of each
calendar month thereafter up to and including June 1, 2008. The outstanding
principal balance of this Note, together with all accrued but unpaid interest
thereon, shall be due and payable on July 1, 2008, or upon earlier maturity
hereof whether by acceleration or otherwise (the “Maturity
Date”). Interest on the principal sum of this Note shall be
calculated on the basis of the actual number of days elapsed in the related
interest accrual period over a three-hundred-sixty (360) day year. The first
interest accrual period hereunder shall commence on and include the date that
principal is advanced hereunder and shall end on and include the last day of
such calendar month; unless principal is advanced on the last day of a month,
in which case the first interest accrual period shall consist of only such last
day. Each interest accrual period thereafter shall commence on the first day of
each calendar month during the term of this Note and shall end on and include
the last day of the calendar month. All amounts due under this Note shall be
payable without setoff, counterclaim or any other deduction whatsoever. THIS IS A BALLOON NOTE REQUIRING NO SCHEDULED INSTALLMENT PAYMENTS OF
PRINCIPAL.

 

2.     Interest.   The term “Contract Rate” as used in this Note means a rate of four and
fifty one-hundredths percent (4.50%) per annum.

 

3.     Security.   This Note is
evidence of that certain loan made by Lender to Borrower contemporaneously
herewith (the “Loan”). This Note is secured by
(a) a Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing
of even date herewith in the amount of this Note given by Borrower for the use
and benefit of Lender covering the fee estate of Borrower in certain premises
as more particularly described therein (the “Deed of
Trust”), (b) an Assignment of Leases and Rents of even date herewith
executed by Borrower in favor of Lender (the “Assignment
of Leases”), and (c) the other Loan Documents (as hereinafter
defined). The term “Loan Documents”
as used in this Note means collectively this Note, the Deed of Trust, the
Assignment of Leases and any and all other documents securing, evidencing, or
guaranteeing all or any portion of the Loan or otherwise executed and/or
delivered in connection with this Note and the Loan.

 

 

4.     Late Charge.   If any sum
payable under this Note is not paid within five (5) days of (and including) the
date on which it is due, Borrower shall pay to Lender upon demand an amount
equal to the lesser of five percent (5%) of such unpaid sum or the maximum
amount permitted by applicable law in order to defray a portion of the expenses
incurred by Lender in handling and processing such delinquent payment and to
compensate Lender for the loss of the use of such delinquent payment, and such
amount shall be secured by the Loan Documents. If the day when any payment
required under this Note is due is not a Business Day (as hereinafter defined),
then payment shall be due on the first Business Day thereafter. The term “Business Day” shall mean a day other than (i) a Saturday or Sunday,
or (ii) any day on which banking and savings and loan institutions in New York
are authorized or obligated by law or executive order to be closed.

 

5.     Default and Acceleration.   The
whole of the principal sum of this Note, together with all interest accrued and
unpaid thereon and all other sums due under the Loan Documents (all such sums
hereinafter collectively referred to as the “Debt”),
or any portion thereof, shall without notice become immediately due and payable
at the option of Lender if any payment required in this Note is not paid within
five (5) days after the date on which it is due or upon the happening of any
other “Event of Default” (as defined in the
Deed of Trust). In the event that it should become necessary to employ counsel
to collect or enforce the Debt or to protect or foreclose the security therefor
or to defend against any claims asserted by Borrower arising from or related to
the Loan Documents, Borrower also shall pay on demand all such costs incurred
by Lender, including reasonable attorneys’ fees and costs incurred for the
services of counsel whether or not suit be brought.

 

6.     Default Interest.   Borrower
does hereby agree that upon the occurrence and during the continuance of an
Event of Default (including upon the failure of Borrower to pay the Debt in
full on the Maturity Date), Lender shall be entitled to receive and Borrower
shall pay interest on the entire unpaid principal sum and any other amounts due
at a rate (the “Default Rate”) equal to the lesser
of (a) the maximum rate permitted by applicable law, or (b) five percent (5%)
above the Contract Rate. The Default Rate shall be computed from the occurrence
of the Event of Default until the date Borrower cures the Event of Default and
such cure is accepted by Lender. This charge shall be added to the Debt and
shall be secured by the Deed of Trust. This paragraph, however, shall not be
construed as an agreement or privilege to extend the date of the payment of the
Debt, nor as a waiver of any other right or remedy accruing to Lender by reason
of the occurrence of any Event of Default.

 

7.     Defeasance.   The principal
balance of this Note may not be prepaid in whole or in part (except with
respect to the application of Involuntary Payments (as defined below)) prior to
the Maturity Date; provided, however, Borrower shall have the right and option
to release the “Trust Property” (as defined in the
Deed of Trust) from the lien of the Deed of Trust in accordance with the terms
and provisions set forth in the Deed of Trust (“Defeasance”).
Notwithstanding the foregoing sentence, Borrower shall have the privilege to
prepay the entire amount of the outstanding Debt on the first (1st) day of any
of the three (3) calendar months preceding the month in which the scheduled
Maturity Date occurs without Defeasance or the payment of the Yield Maintenance
Premium (as defined in the Deed of Trust) or any other premium or penalty.
Notwithstanding the foregoing, if prior to the scheduled Maturity Date
(excluding, however, during the three (3) months preceding the scheduled
Maturity Date) and during the existence of any Event of Default, Borrower shall
tender payment of an amount sufficient to satisfy the Debt at any time prior to
a sale of the Trust Property either through foreclosure or the exercise of the
other remedies available to Lender under the Deed of Trust, such tender by
Borrower shall be deemed to be voluntary and Borrower shall pay, in addition to
the Debt, the greater of (a) the Yield Maintenance

 

 

2

 

Premium, if any, that would be payable in
connection with a Defeasance, or (b) three percent (3%) of the unpaid principal
balance of this Note. In addition to the foregoing, Borrower shall not be
required to pay any fee or consideration if, in accordance with the terms and
conditions of the Deed of Trust, Lender receives (i) insurance proceeds or
other payments as a result of fire or other casualties, or (ii) awards or other
payments made in any condemnation or eminent domain proceedings (collectively, “Involuntary Prepayments”), and such Involuntary Prepayments
are applied by Lender toward reduction of the Debt; provided, however, if an
Event of Default, or an event with notice and/or the passage of time would
constitute an Event of Default, exists, then the Borrower shall pay to the
Lender an additional amount equal to the greater of (A) the Yield Maintenance
Premium, if any, that would be required if such Involuntary Prepayment had been
Defeased, or (B) three percent (3%) of the Involuntary Prepayment.

 

8.     Savings Clause.   It is
expressly stipulated and agreed to be the intent of Borrower and Lender at all
times to comply with applicable state law or applicable United States federal
law (to the extent that United States federal law permits Lender to contract
for, charge, take, reserve, or receive a greater amount of interest than under
state law) and that this paragraph shall control every other covenant and
agreement in this Note and the other Loan Documents. If the applicable law
(state or federal) is ever judicially interpreted so as to render usurious any
amount called for under this Note or under any of the other Loan Documents, 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 Date, or if
any prepayment or the exercise of any Defeasance by Borrower results in
Borrower having paid any interest in excess of that permitted by applicable
law, then it is Lender’s express intent that all excess amounts theretofore
collected by Lender shall be credited on the principal balance of this Note and
all other Debt and the provisions of this Note and the other Loan Documents
immediately be deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of any new
documents, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder.
All sums paid or agreed to be paid to Lender for the use, forbearance, or
detention of the Debt shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full stated term of
the Debt until payment in full so that the rate or amount of interest on
account of 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 herein or in any of the
other Loan Documents, 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.

 

9.     No Oral Change; Successors and Assigns; Liability.   This
Note may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Borrower or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change,
discharge or termination is sought. Whenever used, the singular number shall
include the plural, the plural the singular, and the words “Lender” and “Borrower” shall
include their respective successors, assigns, heirs, executors and
administrators. If Borrower consists of more than one person or party, the
obligations and liabilities of each such person or party shall be joint and
several.

 

10.  Waivers.   Except as
specifically provided in the Loan Documents, Borrower and any endorsers,
sureties or guarantors hereof jointly and severally waive presentment and
demand for payment, notice of intent to accelerate maturity, notice of
acceleration of maturity, protest and notice of protest and non-payment, all
applicable exemption rights, valuation and appraisement, notice of demand, and
all

 

3

 

other notices in connection with the
delivery, acceptance, performance, default or enforcement of the payment of
this Note and the bringing of suit and diligence in taking any action to
collect any sums owing hereunder or in proceeding against any of the rights and
collateral securing payment hereof. Borrower and any surety, endorser or
guarantor hereof agree (i) that the time for any payments hereunder may be
extended from time to time without notice and consent, (ii) to the acceptance
by Lender of further collateral, (iii) the release by Lender of any existing
collateral for the payment of this Note, (iv) to any and all renewals, waivers
or modifications that may be granted by Lender with respect to the payment or
other provisions of this Note, and/or (v) that additional Borrowers, endorsers,
guarantors, or sureties may become parties hereto all without notice to them
and without in any manner affecting their liability under or with respect to
this Note. No extension of time for the payment of this Note or any installment
hereof shall affect the liability of Borrower under this Note or any endorser
or guarantor hereof even though the Borrower or such endorser or guarantor is
not a party to such agreement. Failure of Lender to exercise any of the options
granted herein to Lender upon the happening of one or more of the events giving
rise to such options shall not constitute a waiver of the right to exercise the
same or any other option at any subsequent time in respect to the same or any
other event. The acceptance by Lender of any payment hereunder that is less
than payment in full of all amounts due and payable at the time of such payment
shall not constitute a waiver of the right to exercise any of the options
granted herein to Lender at that time or at any subsequent time or nullify any
prior exercise of any such option without the express written acknowledgement
of the Lender.

 

11.  Authority.   Borrower (and the
undersigned representative of Borrower, if any) represents that Borrower has
full power, authority and legal right to execute, deliver and perform its
obligations pursuant to this Note, the Deed of Trust and the other Loan
Documents and that this Note, the Deed of Trust and the other Loan Documents
constitute valid and binding obligations of Borrower.

 

12.  Notices.   All notices or other
communications required or permitted to be given pursuant hereto shall be given
in the manner specified in the Deed of Trust directed to the parties at their
respective addresses as provided therein.

 

13.  Exculpation.   Subject to the
qualifications below, Lender shall not enforce the liability and obligation of
Borrower to perform and observe the obligations contained in this Note, the
Deed of Trust or in any of the other Loan Documents by any action or proceeding
wherein a money judgment shall be sought against 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 interests under this Note, the Deed of Trust and the other Loan Documents,
or in the Trust Property, the Rents (as defined in the Deed of Trust), 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 Borrower only to the
extent of Borrower’s interest in the Trust Property, in the Rents and in any
other collateral given to Lender. By accepting this Note, the Deed of Trust and
the other Loan Documents, Lender agrees that it shall not except as otherwise
herein provided, sue for, seek or demand any deficiency judgment or other
monetary judgment against Borrower in any such action or proceeding under or by
reason of or under or in connection with this Note, the Deed of Trust or the
other Loan Documents. The provisions of this paragraph shall not, however, (a)
constitute a waiver, release or impairment of any obligation evidenced or
secured by any of the Loan Documents; (b) impair the right of Lender to name
Borrower as a party defendant in any action or suit for foreclosure and sale
under the Deed of Trust; (c) affect the validity or enforceability of any
guaranty or indemnity made in connection with the Loan or any of the rights and
remedies of the Lender thereunder; (d) impair

 

4

 

the right of Lender to obtain the appointment
of a receiver; (e) impair the enforcement of the Assignment of Leases; or (f)
constitute a waiver of the right of Lender to enforce the liability and
obligation of Borrower, by money judgment or otherwise, to the extent of, but only to the extent of, any loss, damage, cost, expense,
liability, claim or other obligation incurred by Lender (including attorneys’
fees and costs reasonably incurred) arising out of or in connection with the
following:

 

(i)            Actual fraud and intentional
misrepresentation by Borrower or any of its partners, officers, principals,
members, any guarantor or any other person authorized to make statements or
representations, or act, on behalf of Borrower in connection with the Loan;

 

(ii)           Affirmative acts of physical waste
committed on the Trust Property; damage to the Trust Property as a result of
the intentional misconduct of Borrower or any of its principals, officers,
general partners or members, or any agent or employee of any such persons; or
the removal of any portion of the Trust Property in violation of the terms of
the Loan Documents following and during the continuance of an Event of Default;

 

(iii)          subject to any right to contest such
matters, as provided in the Deed of Trust, failure to pay any valid taxes and
assessments, mechanic’s liens, materialmen’s liens or other liens which could
create liens on any portion of the Trust Property which would be superior to
the lien or security title of the Deed of Trust or the other Loan Documents, to
the full extent of the amount claimed by any such lien claimant;

 

(iv)          all legal costs and expenses
(including attorneys’ fees) reasonably incurred by Lender in connection with
litigation or other legal proceedings involving the collection or enforcement
of the Loan or preservation of Lender’s rights under the Loan Documents,
including any costs incurred by Lender arising from or relating to the filing
of a petition under the U.S. Bankruptcy Code by or against Borrower, other than
those customarily incurred by a lender in realizing upon its lien in an
uncontested foreclosure sale after an undisputed default; provided,
however, that no liability for any such
costs and expenses shall arise in connection with a bona fide good faith
litigation;

 

(v)           the breach in any material respect of
any representation, warranty, covenant or indemnification provision in that
certain Environmental and Hazardous Substance Indemnification Agreement of even
date herewith given by Borrower to Lender or in the Deed of Trust concerning
environmental laws, hazardous substances or asbestos;

 

(vi)          the misapplication or conversion by
Borrower of (A) any insurance proceeds paid by reason of any loss, damage or destruction
to the Trust Property, (B) any awards or other amounts received in connection
with the condemnation of all or a portion of the Trust Property, or (C) any
Rents following and during the continuance of an Event of Default;

 

(vii)         any security deposits or other
refundable deposits collected with respect to the Trust Property which are not
delivered to Lender upon a sale or foreclosure of the Trust Property or other
action in lieu thereof, except to the extent any such security

 

5

 

deposits were applied in
accordance with the terms and conditions of any of the Leases (as defined in
the Deed of Trust) prior to the occurrence of the Event of Default that gave
rise to such sale or foreclosure or action in lieu thereof; and

 

(viii)        failure to maintain any Policies
required under Paragraph 2 of the Deed of Trust, or to pay or provide the
amount of any insurance deductible, to the extent of the applicable deductible,
following a Casualty (as defined in the Deed of Trust) or other insured event
(other than a circumstance of non-conformity arising by reason of a change in
insurance market circumstance subsequent to the origination of the Loan which
prevents such maintenance).

 

With respect to liability
arising under clause (iii) and (viii) above, such liability shall not arise to
the extent, but only the extent, the required amounts had been paid by Borrower
to Lender pursuant to the Deed of Trust or the failure to pay, maintain or
provide in any such case is due to the operation of the Trust Property failing
to generate revenues sufficient, on a first priority basis, for the payment or
maintenance thereof.

 

Notwithstanding anything to
the contrary in this Note 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 secured by the Deed of Trust or to
require that all collateral shall continue to secure all of the Debt owing to
Lender in accordance with the Loan Documents, and (B) the Debt shall be fully
recourse to Borrower in the event that: (i) the Trust Property or any part
thereof becomes an asset in a voluntary bankruptcy or voluntary insolvency
proceeding under the U.S. Bankruptcy Code; (ii) Borrower engages in any
business activities other than those related to the Trust Property or violates
the restrictions on indebtedness set forth in the Deed of Trust; (iii) Borrower
fails to obtain Lender’s prior written consent to any subordinate financing or
other voluntary lien encumbering the Trust Property or any interests in Borrower;
(iv) Borrower fails to obtain Lender’s prior written consent to any assignment,
transfer, or conveyance of the Trust Property or any interest therein as
required by the Deed of Trust; or (v) there is an intentional breach of, or
deliberate failure to perform, any of the representations, covenants and
agreements of Section 1(I) of the Deed of Trust occurs.

 

14.  WAIVER OF JURY TRIAL.   BORROWER AND LENDER HEREBY EACH AGREES NOT TO ELECT A TRIAL BY JURY OF
ANY ISSUE TRIABLE OF RIGHT BY JURY, AND EACH WAIVES 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 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. LENDER AND BORROWER ARE EACH HEREBY AUTHORIZED TO
FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS
WAIVER BY BORROWER AND LENDER.

 

15.  Transfer.   Lender shall have
the unrestricted right at any time or from time to time to sell this Note and
the loan evidenced by this Note and the Loan Documents or participation
interests therein.

 

6

 

Borrower shall execute, acknowledge and
deliver any and all instruments requested by Lender to satisfy such purchasers
or participants that the unpaid indebtedness evidenced by this Note is
outstanding upon the terms and provisions set out in this Note and the other
Loan Documents. To the extent, if any, specified in such assignment or
participation, such assignee(s) or participant(s) shall have the rights and
benefits with respect to this Note and the other Loan Documents as such
assignee(s) or participant(s) would have if they were the Lender hereunder.

 

16.  APPLICABLE LAW; JURISDICTION AND VENUE.   THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE IN WHICH THE LAND (AS DEFINED IN THE DEED OF TRUST) IS
LOCATED AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWER AND
LENDER, TO THE FULL EXTENT PERMITTED BY LAW, EACH HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
(A) SUBMITS TO PERSONAL JURISDICTION IN THE STATE WHERE THE LAND IS LOCATED
OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR RELATING TO
THIS NOTE, (B) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT
IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN EITHER THE
CITY OR THE COUNTY WHERE THE LAND IS LOCATED, (C) SUBMITS TO THE JURISDICTION
OF SUCH COURTS, AND (D) TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT
BORROWER AND LENDER WILL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER
FORUM AND BORROWER AND LENDER EACH FURTHER CONSENTS AND AGREES TO SERVICE OF
ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO BORROWER
OR LENDER, AS THE CASE MAY BE, AT THE ADDRESS FOR NOTICES DESCRIBED ON THE
FIRST PAGE HEREOF, AND CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE
IN EVERY RESPECT VALID AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT
THE VALIDITY OR EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED
BY LAW).

 

17.  Special State Provisions.

 

(a)           In
the event of any conflict between the terms and provisions of this paragraph
and any other provision of this Note, the terms and provisions of this
paragraph shall govern and control.

 

(b)           Any
action, suit or proceeding arising out of or relating to this Note or any of
the other Loan Documents may be instituted in the Circuit Court of the city or
county in which the Trust Property is located or in the United States District
Court for the district in which the Trust Property is located (assuming such
Court has jurisdiction), at the option of Lender, and Borrower waives all
objections it may have to such venue and irrevocably submits to the
jurisdiction of either of such Courts in any such action, suit or proceeding.
Nothing herein shall affect the right of Lender to proceed in any other court
having jurisdiction over any such action, suit or proceeding.

 

7

 

18.  Notices.   All notices required
or permitted to be given under this Note shall be delivered in the manner set
forth in Section 37 of the Deed of Trust.

 

Remainder
of page intentionally blank

Signature
page(s) follow

 

8

 

Borrower has duly executed
this Note to be effective as of the date first above written.

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  RKB WILLOWWOOD LLC

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  RKB Willowwood Manager LLC

  
	
   

  	
   

  	
  Its Managing Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Steven A. Grigg

  
	
   

  	
   

  	
   

  	
  Name: 

  	
  Steven A. Grigg

  
	
   

  	
   

  	
   

  	
  Title: 

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

 

Signature
Page to Deed of Trust Note

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