Document:

Exhibit 10.78

 

 

Exchange
& Venture Agreement

by and
among

Cardiotech
International, Inc.,

Implant
Sciences, Inc.

and

CorNova,
Inc.

 

 

March 5,
2004

 

 

 

 

EXCHANGE
& VENTURE AGREEMENT

 

 

This EXCHANGE & VENTURE AGREEMENT
dated March 5, 2004 (“Agreement”) by and among Cardiotech International, Inc. (“Cardiotech”),
a Delaware corporation with its principal executive offices at 78E Olympia
Avenue, Woburn, Massachusetts 01801, (AMEX: CTE), and Implant Sciences, Inc. (“Implant”),
a Delaware corporation with its principal executive offices at 107 Audubon Road
#5, Wakefield, Massachusetts 01880, (AMEX: IMX); (Cardiotech and Implant are
collectively referred to herein as the “Participants “), and  CorNova, Inc., a Delaware corporation with
its principal executive offices at 274 Ash Street, Hopkinton, Massachusetts
01748 (the “Company” or “CorNova”).

 

R E C I T A L S :

 

FINANCING AND SHARE EXCHANGE

 

WHEREAS, the Participants wish to contribute certain
of their shares to the Company in exchange for shares of the Company in
accordance with the terms and conditions hereinafter set forth.

 

WHEREAS, the Participants will issue shares of their
common stock bearing an aggregate fair market value of one hundred fifty
thousand dollars ($150,000) valued at the end of business on November 18, 2003
to CorNova as follows:  Cardiotech will
issue 12,931 shares, and Implant will issue 10,344 shares (the 12,931 and
10,344 shares shall be referred to collectively as the “Contributory Shares”).

 

WHEREAS, CorNova, upon receipt of the Contributory
Shares, shall simultaneously issue and deliver one million five hundred
thousand (1,500,000) shares of its common stock to each of Cardiotech and
Implant, such shares constituting sixty percent (60%) of CorNova’s issued and
outstanding shares, on a fully diluted basis, as of the date of issuance.

 

WHEREAS, CorNova will use its best efforts to borrow
a minimum of fifty thousand dollars ($50,000) and up to one hundred fifty
thousand dollars ($150,000) in seed capital in 2004 to finance the startup of
its operations (“Seed Loans”).

 

WHEREAS, CorNova intends to raise a minimum of one
million dollars ($1,000,000) and up to three million dollars ($3,000,000) in a
Series A financing round to close in 2004 (“Series A Financing”).

 

WHEREAS, upon the closing of the minimum Series A
Financing, the Participants will each issue shares of their common stock equal
to up to twenty-five percent (25%) of the gross amount of the Series A
Financing up to the maximum of three

 

 

Cornova, Inc.

Exchange & Venture Agreement

 

million dollars ($3,000,000) (the “Investment
Shares”); bearing an aggregate fair market value of up to one million five
hundred thousand dollars ($1,500,000) valued at the end of business on the day
immediately preceding the date of the Series A Financing Closing.

 

 

TECHNOLOGY & VENTURE 

 

WHEREAS, CorNova is a start-up company, which has
not incurred any debts or liabilities in excess of fifty thousand dollars
($50,000) in the aggregate, focused on the development and marketing of
innovative interventional cardiology products. 
The initial target of CorNova is the development of a next-generation
drug-eluting stent.

 

WHEREAS, CorNova possesses, will develop or will
acquire the intellectual property relating to stent design, CE testing and drug
coatings.

 

WHEREAS, Cardiotech intends to grant to CorNova an
exclusive license for the technology consisting of Chronoflex DES polymer or
any poly (carbonate) urethane and containing derivative thereof solely for use
on drug-eluting stents.

 

WHEREAS, Utilizing the combined capabilities of the
Participants, CorNova will seek to produce a novel coronary stent system whose
design, materials, and manufacturing will be specific for drug elution
technology.

 

NOW THEREFORE, in consideration of one
dollar and the exchange of shares to be made, the mutual benefits to be derived
hereby and the representations, warranties, covenants and agreements herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, CorNova and the Participants agree
as follows:

 

ARTICLE
I.     Contributory Shares 

 

1.1  Cardiotech
Contributory Shares.

 
Subject to the terms and conditions hereinafter set forth, Cardiotech
shall issue, transfer and deliver to CorNova an aggregate of twelve thousand
nine hundred thirty-one (*12,931*) shares of Cardiotech common stock, $.01 par
value (the “Cardiotech Contributory Shares”) within fifteen (15) days of
the execution of this Agreement.  Upon
receipt of the Cardiotech Contributory Shares, the Company shall simultaneously
issue and deliver 1,500,000 shares of its common stock to Cardiotech, such
shares constituting thirty percent (30%) of CorNova’s issued and outstanding
shares, on a fully diluted basis, as of the date of issuance.

 

1.2           Implant
Contributory Shares.

  Subject to the terms and conditions
hereinafter set forth, Implant shall issue, transfer and 

 

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deliver to CorNova an aggregate of ten
thousand three hundred forty-forty (*10,344*) shares of Implant common stock,
$.10 par value (the “Implant Contributory Shares”) within fifteen (15)
days of the execution of this Agreement. 
Upon receipt of the Implant Contributory Shares, the Company shall
simultaneously issue and deliver 1,500,000 shares of its common stock to
Implant, such shares constituting thirty percent (30%) of CorNova’s issued and
outstanding shares, on a fully diluted basis, as of the date of issuance.

 

1.3           Terms
of Contributory Shares.

  The Cardiotech Contributory Shares and the Implant
Contributory Shares shall be referred to collectively herein as the “Contributory
Shares”.  The Contributory Shares
shall have the terms and be issued subject to the conditions as set forth
herein and in the respective certificates of incorporation of the Participants
as filed and recorded with the Secretary of State of the State of
Delaware.  The Contributory Shares shall
be contributed to CorNova to assist in securing the Seed Loans and to serve as
collateral against such loans in anticipation of the Participants respective
anticipated participation in CorNova and Technology.

 

ARTICLE
II.     CorNova Obligations upon
Contributory Shares 

 

II-A. Simultaneous with receipt of
the Contributory Shares by CorNova:

 

2.1           Seed
Loans.  CorNova shall use its best
efforts to borrow a minimum of fifty thousand dollars ($50,000) and up to one
hundred fifty thousand dollars ($150,000) in seed capital in 2004 to finance
the startup of its operations (“Seed Loans”) under the following terms
and conditions:

 

(a)          The Seed Loans
shall become due and payable fifteen months from receipt of the loan.

(b)         The Seed Loans shall bear
simple interest at an annual rate of ten percent (10%).

(c)          The Seed Loans
shall be secured by the Contributory Shares, as defined below.

(d)         The lenders making the Seed
Loans shall be issued warrants in proportion to the amount of all of the Seed
Loans made.  Assuming the maximum Seed
Loans, the Seed Loan lender(s) shall receive an aggregate of one hundred fifty
thousand (150,000) warrants (“Warrants”).  The Warrants shall entitle the holders thereof to purchase, in
the aggregate, one hundred fifty thousand (150,000) shares of common stock of
CorNova on or before January 5, 2007. 
The number of Warrants shall be reduced on a dollar-for-dollar basis
based on the size of the Seed Loans. The exercise price of each of the Warrants
shall be one hundred twenty percent (120%) of the fair market value of the
shares of CorNova as of the date of the closing of the Seed Loans as determined
in the reasonable discretion of by the board of directors of CorNova.

(e)          The proceeds of the Seed
Loans and the exercise of the Warrants shall be used for start-up capital,
expenses of the Series A Preferred stock capital raise, initial monthly

 

3

 

salary of the chairman of CorNova, professional
fees, and general working capital purposes.

(f)            The
capitalization of CorNova shall not exceed five million (5,000,000) shares of
common stock on a fully diluted basis, including the shares of common stock
underlying the Warrants, immediately following the issuance of the Contributory
Shares.

(g)         The lenders
making the Seed Loans shall qualify as accredited investors under the
Securities Laws.

(h)         Such other
terms and conditions as set forth in the form Subscription and Loan Agreements
and the Shareholder-Lender Promissory Notes evidencing the Seed Loans.

 

II-B. Upon receipt of the
Contributory Shares by CorNova:

 

2.2           Board
Representation.  CorNova shall, by
written consent of a majority of the shareholders of CorNova, increase the size
of its board and appoint Dr. Michael Szycher and Dr. Anthony J. Armini to be
directors of CorNova on its board of directors.  The board of directors of CorNova shall then be entirely
comprised of:  Dr. Stephen Eric Ryan,
Dr. Michael Szycher and Dr. Anthony J. Armini.

 

2.3           Chairman & CEO Compensation.  (a) Upon closing of the minimum Seed Loans, CorNova shall provide
monthly compensation to S. Eric Ryan, pursuant to the conditions set forth in
the consulting agreement attached hereto as Exhibit
2.3, for his services as CEO of CorNova
at the monthly rate of eight thousand dollars ($8,000).  CorNova shall also provide up to one
thousand dollars ($1,000) per month for health insurance for S. Eric Ryan and
his family upon the closing of the minimum Seed Loans.  Upon closing of the at least the minimum
Series A Financing the consulting agreement will expire.

 

  (b) CorNova shall negotiate a
separate employment agreement with S. Eric Ryan for the continuation of his services
as Chairman and CEO with a base salary of at least fifteen thousand dollars
($15,000) per month.  CorNova shall also
provide up to $1,000 per month for health insurance for S. Eric Ryan and his
family.  Such employment agreement is to
commence after expiration of the consulting agreement and upon the closing of
at least the minimum Series A Financing. 
Further, Dr. Ryan will be paid a bonus equal to one full year of his
full salary upon either (a) receipt by CorNova of the release and discharge of the
security interests which are to be filed against the Investment Shares in favor
of the Series A Investors, or (b) the occurrence of an event requiring
mandatory conversion of the then outstanding preferred stock of CorNova.

 

2.4           Series A Offering.  CorNova shall commence on a best efforts
basis its Series A Financing, as hereinafter defined, under the following terms
and conditions:

 

(a)          The Series A
Financing shall commence within thirty (30) days of the

 

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closing of the Seed Loans and shall be completed or terminated twelve
(12) months after such commencement date; however, CorNova shall have an
additional thirty (30) days after the completion or termination date to close
on any then outstanding subscriptions to purchase any Series A Preferred Stock.

(b)         CorNova shall
amend its certificate of incorporation to provide for a series of convertible
voting preferred stock (“Series A Preferred Stock”) which shall be the
securities offered and sold in the Series A Financing.

(c)          The purchase
price per share of the Series A Preferred Stock is proposed to equal one dollar
20/100 ($1.20) (the “Series A Price”).

(d)         The Series A
Preferred Stock shall not be sold for less than one dollar ($1.00) per share
without the express written agreement of the board of directors of CorNova.

(e)          The conversion
price of the Series A Preferred Stock shall be convertible at no cost to the
Series A Preferred holder (the “Conversion Price”).  Each share of Preferred Stock shall be convertible
at the option of the holder into one (1) share of fully paid and nonassessable
shares of the common stock of CorNova.

(f)            Conversion of
the Series A Preferred Stock will be mandatory upon an initial public offering
of CorNova raising in excess of ten million dollars ($10,000,000), or an
acquisition for at least eighty percent (80%) of CorNova at a minimum purchase
price of two dollars 50/100 ($2.50) per share, or upon receipt of CE mark
approval of the Technology.

(g)         The Series A
Financing offering shall consist of a minimum of one million dollars
($1,000,000) and a maximum of three million dollars ($3,000,000).

(h)         CorNova does not anticipate
that the holders of the Series A Preferred Stock shall be entitled to dividend,
and the designation for the Series A Preferred Stock shall not be amended
without the express written agreement of the board of directors of CorNova.

(i)             The liquidation
preference of the Series A Preferred Stock shall be equal to the Series A
Price.

(j)             The redemption
rate of the Series A Preferred Stock shall not exceed one and 50/100 ($1.50)
dollars per share without the express written agreement of the board of
directors of CorNova.

(k)          The investors
of the Series A Financing shall receive a
senior security interest in the Investment Shares (collectively “Series A
Secured Interest”) subject to certain terms and conditions.

(l)             The Series A
Secured Interest shall be equal in all respects and of equal parity, position
and priority as among each Series A Financing investor.

(m)       The Series A Secured
Interest shall expire and be released upon CorNova achieving either of two
milestones: (i) CorNova securing a CE mark, or such other European authority
approval, of a bare coronary stent system, and/or (ii) preclinical
demonstration of a drug-eluting stent yielding results of at least a fifty percent (50%)
reduction in intimal hyperplasia.

 

II-C.

2.5           Rescission and
Termination If No Minimum Seed Loans. 
In the event  the

 

5

 

closing of at least the minimum Seed Loans has not occurred within
ninety (90) days of the date of this Agreement, the Participants shall together
have the right to rescind and terminate this Agreement.  Upon such rescission and termination by both
Participants, the Participants shall each return for cancellation the CorNova
Shares in exchange for the Contributory Shares.  Upon receipt by CorNova of written notice from both Participants
and receipt by CorNova of the CorNova Shares, CorNova shall immediately return
and deliver: (a) all of the Cardiotech Shares to Cardiotech, and (b) all of the
Implant Shares to Implant.  Immediately
thereafter, this Agreement shall be of no force and effect.

 

ARTICLE
III.     Investment Shares 

 

3.1                                 Cardiotech Investment Shares.  Upon CorNova securing the minimum Series A
Financing subject to the terms and conditions hereinafter set forth, Cardiotech
shall issue, transfer and deliver to CorNova an amount of Cardiotech common
stock, $.01 par value, (the “Cardiotech Investment Shares”) which amount
shall be calculated based upon the five (5) day average of the fair market
value of the closing price of Cardiotech common stock as published in the Wall
Street Journal on the dates immediately preceding each relevant closing of the
Series A Financing.  The amount of the
Cardiotech Investment Shares shall be equal to twenty-five percent (25%) of the
gross dollar amount of the Series A Financing raised and invested in CorNova on
a pro rata basis up to the maximum Series A Financing amount.  Thus, Cardiotech will be obligated to issue
and deliver to CorNova the Cardiotech Investment Shares equal to two hundred
fifty thousand dollars ($250,000) in value if the minimum Series A Financing is
completed; and Cardiotech will be obligated to issue and deliver to CorNova the
Cardiotech Investment Shares equal to seven hundred fifty thousand dollars
($750,000) in value if the maximum Series A Financing is completed.  In the event the Series A Financing exceeds
its maximum of three million dollars ($3,000,000), Cardiotech shall be
obligated to only contribute Cardiotech Investment Shares equal to seven
hundred fifty thousand dollars ($750,000) in value.

 

3.2                                 Implant
Investment Shares.  Upon
CorNova securing the minimum Series A Financing subject to the terms and conditions
hereinafter set forth, Implant shall issue, transfer and deliver to CorNova an
amount of Implant common stock, $.10 par value, (the “Implant Investment
Shares”) which amount shall be calculated based upon the five (5) day
average of the fair market value of the closing price of Implant common stock
as published in the Wall Street Journal on
the dates immediately preceding each relevant closing of the Series A
Financing.  The amount of the Implant
Investment Shares shall be equal to twenty-five percent (25%) of the gross
dollar amount of the Series A Financing raised and invested in CorNova on a pro rata basis up to the maximum Series A
Financing amount.  Thus, Implant will be
obligated to issue and deliver to CorNova the Implant Investment Shares equal
to two hundred fifty thousand dollars ($250,000) in value if the minimum Series
A Financing is completed; and Implant will be obligated to issue and deliver to
CorNova the Implant Investment Shares equal to seven hundred fifty thousand
dollars ($750,000) in value if the maximum Series A Financing is
completed.  In the event 

 

6

 

the Series A Financing exceeds its maximum of
three million dollars ($3,000,000), Implant shall be obligated to only
contribute Implant Investment Shares equal to seven hundred fifty thousand
dollars ($750,000) in value.

 

3.3           Investment Shares. 
The Cardiotech Investment Shares and the Implant Investment Shares shall
be referred to collectively herein as the “Investment Shares”.  The Investment Shares shall be issued
subject to the conditions as set forth herein and in the respective
certificates of incorporation of the Participants as filed and recorded with
the Secretary of State of the State of Massachusetts.

 

3.4           Subsequent Tranches of Investment Shares.  (a) 
The offering of the Series A Financing may be continued until the
maximum amount of capital has been raised, but no later than February 28, 2005.  At each subsequent closing tranche, the
Participants shall be obligated to issue Investment Shares as provided for
under this Article III to maintain its twenty-five percent (25%) pro rata portion of the Investment Shares
to be issued.

 

 
(b)  Upon CorNova securing
additional Series A Financing up to the maximum three million dollars
($3,000,000), each Participant shall issue, transfer and deliver to CorNova its
pro rata amount of its Investment
Shares which amount shall be calculated as set forth above.  The amount of additional Investment Shares
from each Participant to be issued at each subsequent closing tranche shall be
that pro rata number of new
shares separately combined with all previous issuances of Investment Shares
from each Participant which shall equal twenty-five percent (25%) [fifty
percent (50%) in the aggregate] of the gross dollar amount of the Series A
Financing raised and invested in CorNova up to twenty-five percent (25%) [fifty
percent (50%) in the aggregate] of the maximum Series A Financing amount.

 

  (c) 
CorNova, at its option and in its sole discretion, may delay the closing
of the minimum Series A Financing, and each subsequent tranche closing, in
order to sell and close on a greater number Series A shares in each tranche;
provided that each closing occur no later than twelve (12) months from the date
of the closing of the minimum Seed Loans, plus 30 days for subscriptions then
existing but not then closed.

 

ARTICLE
IV.     CorNova Shares

 

4.1                                 CorNova Shares
to Cardiotech.  Upon
receipt by CorNova of the Contributory Shares, CorNova shall simultaneously
issue, and deliver to Cardiotech one million five hundred thousand
(*1,500,000*) shares of the common stock of CorNova, par value $.0001 per
share, representing thirty percent (30%) of the issued and outstanding capital
stock of CorNova immediately prior to the issuance of any shares under the
Series A Financing.

 

4.2                                 CorNova Shares
to Implant.  Upon
receipt by CorNova of the Contributory

 

7

 

Shares, CorNova shall simultaneously issue,
and deliver to Implant one million five hundred thousand (*1,500,000*) shares
of the common stock of CorNova, par value $.0001 per share, representing thirty
percent (30%) of the issued and outstanding capital stock
of CorNova immediately prior to the issuance of any shares under the Series A
Financing.

 

4.3                                 CorNova Shares.  The aggregate shares of the common stock of
CorNova in an amount of three million (3,000,000) shares to be issued to
Cardiotech and Implant shall be referred to herein as the “CorNova Shares”
and will equal sixty percent (60%) of the issued and outstanding capital stock
of CorNova, on a fully diluted basis, including any shares underlying any
warrants or options, immediately prior to the issuance of any shares under the
Series A Financing.

 

ARTICLE
V.     Exchange of Shares

 

5.1           Exchange of Shares.  The Contributory Shares, Investment Shares and the CorNova Shares
shall be issued in accordance with Articles I, III and IV hereof, and shall be
exchanged in accordance with this Article V (the “Exchange”).

 

  (a)  The Contributory Shares shall be delivered in accordance with
Article I, and the Contributory Shares shall be deemed exchanged upon such
event.  However such shares shall be
held by the Seed Loan lenders or by CorNova, as trustee for such lenders as
collateral subject to a security interest, and may not be transferred or
otherwise disposed of by CorNova prior to either the minimum closing or the
termination of the Series A Financing.

 

  (b)  The Investment Shares shall be delivered in accordance with
Article III and shall be deemed exchanged upon the minimum closing of the
Series A Financing.  However such shares
shall be held by the Series A Financing investors or by CorNova, as trustee for
such investors as collateral subject to a security interest, and may not be
transferred or otherwise disposed of by CorNova prior to satisfaction of the
milestones set forth in §2.4(m) hereof.

 

  (c)  The CorNova Shares shall be delivered in accordance with Article
IV and shall be deemed exchanged upon receipt and exchange of the Contributory
Shares.

 

  (d)  The consideration for the Exchange shall be the shares mutually
delivered and exchanged as herein set forth, and the license of the Technology
as set forth in Article VIII hereof.

 

ARTICLE
VI.     Shares, and Limitations on Shares

 

6.1                                 Shares to be
Fully Paid.  (a)
CorNova covenants that all shares of common stock which may be issued upon the
Exchange will be fully paid and nonassessable, and 

 

8

 

free
of all liens and encumbrances.

 

  (b) Cardiotech covenants that all shares of
common stock which may be issued upon the Exchange will be fully paid and
nonassessable, and free of all liens and encumbrances.

 

  (c) Implant covenants that all shares of
common stock which may be issued upon the Exchange will be fully paid and
nonassessable, and free of all liens and encumbrances.

 

6.2           CorNova
Limitation on Share Issuances. 
CorNova covenants that until either the minimum Series A Financing
closing or the termination of the Series A Financing, CorNova shall not:

 

(a) issue any securities, except: 
(i) its initial capitalization of 2 million shares which includes the
150,000 shares underlying those certain warrants issued or to be issued in
connection with the Seed Loans, (ii) the CorNova Shares, and (iii) the shares
to be issued under the Series A Financing.

 

(b) take any action which would cause any adjustments,
recapitalizations, splits, mergers, or other capital restructurings of its
securities.

 

6.3           Reservation of
Shares.  (a) CorNova has reserved,
free from preemptive rights, out of its authorized but unissued shares of
common stock, sufficient shares to provide for the issuance of the CorNova
Shares.

 

  (b) Cardiotech has reserved, free from
preemptive rights, out of its authorized but unissued shares of common stock,
sufficient shares to provide for the issuance of the Cardiotech Investment
Shares.

 

  (c) Implant has reserved, free from
preemptive rights, out of its authorized but unissued shares of common stock,
sufficient shares to provide for the issuance of the Implant Investment Shares.

 

ARTICLE
VII.     Accredited Investors;
Restricted Shares; Inside Information

 

7.1           Securities Laws Matters.

 

(a)  Investment
Purpose.  CorNova recognizes and understands that the Contributory Shares, and
the Investment Shares, respectively, to be issued to CorNova pursuant to this
Agreement, and the Participants each recognize and understand that the CorNova
Shares to be issued to each of the Participants pursuant to this Agreement, (collectively referred to as the “Securities”) for investment and
not with a view to the sale or distribution thereof, for its own account and
not on behalf of others (except its limited partners, or shareholders) and has
not granted any other person any right or option or any participation or
beneficial interest in any of the Securities. 
CorNova and each of the Participants confirms its understanding that the
Securities constitute restricted securities 

 

9

 

within the meaning of
Rule 144 of the Commission under the Securities Act of 1933, as amended (the “Securities
Act”), and that none of the Securities may be sold except pursuant to an
effective registration statement under the Securities Act or under the
securities laws of any state, or in a transaction exempt from registration
under the Securities Act, and acknowledges that it understands the meaning and
effect of such restriction.  CorNova and
each of the Participants are aware that no federal or state regulatory agency
or authority has passed upon the sale of the Securities or the terms of the
sale or the accuracy or adequacy of any material being provided to CorNova or
to the Participants and that the price of the Securities may not necessarily
bear any relationship to the underlying assets or value of the issuing
company.  CorNova understands that an
investment in the Securities involves a degree of risk.  The Participants each understand that an
investment in the Securities involves a high degree of risk.  The Securities are not being registered;
neither the Participants nor CorNova shall have any obligation or duty to
register the Securities.  The Securities
will be issued in reliance upon exemptions from the Securities Act and the
securities laws which are predicated, in part, on the representations,
warranties and agreements of each of the Participants, and CorNova,
respectively, to the other, contained herein.

 

(b-1)  CorNova
Qualifications.  CorNova represents
and warrants that (i) CorNova has business knowledge and experience, such
experience being based on actual participation therein of its chairman and its
advisors, (ii) CorNova is capable of evaluating the merits and risks of an
investment in the Securities and the suitability thereof as an investment therefor,
(iii) the Securities to be acquired by CorNova in connection with this
Agreement will be acquired solely for investment and not with a view toward
resale or redistribution in violation of the securities laws, and (iv) in
connection with the transactions contemplated hereby, no assurances have been
made concerning the future results of the Participants and their subsidiaries,
if any, or as to the value of the Securities. 
CorNova understands that neither of the Participants or its subsidiaries
or affiliates is under any obligation to file a registration statement or to
take any other action under the securities laws with respect to any such
securities.

 

(b-2)  Participants
Qualifications.  The Participants
represent and warrant that (i) the Participants have business knowledge and
experience, such experience being based on actual participation therein, (ii)
the Participants are each independently capable of evaluating the merits and
risks of an investment in the Securities and the suitability thereof as an investment
therefor, (iii) the Securities to be acquired by each of the Participants in
connection with this Agreement will be acquired solely for investment and not
with a view toward resale or redistribution in violation of the securities
laws, (iv) in connection with the transactions contemplated hereby, no
assurances have been made concerning the future results of CorNova or as to the
value of the Securities and (vi) each of the Participants are an “accredited
investor” within the meaning of Regulation D promulgated by the Securities
and Exchange Commission (the “Commission”) pursuant to the 1933
Act.  The Participants understand that
CorNova is closely-held and is not under any obligation to file a registration
statement or to take any other action under the securities laws with respect to
any such securities.

 

10

 

(c)  Knowledge
of Regulations.  The Participants,
and CorNova had each consulted with their own respective counsel in regard to
the securities laws and are fully aware (i) of the circumstances under which
they are each required to hold the Securities, (ii) of the limitations on the
transfer or disposition of the Securities, (iii) that the Securities must be
held indefinitely unless the transfer thereof is registered under the
securities laws or an exemption from registration is available and (iv) that no
exemption from registration is likely to become available for at least one year
from the date of acquisition of the Securities.  The Participants and CorNova have been advised by their
respective counsel as to the provisions of Rules 144 and 145 as promulgated by
the Commission under the 1933 Act and has been advised of the applicable
limitations thereof.  The Participants
and CorNova each independently acknowledge that the respective issuers of the
Securities are relying upon the truth and accuracy of the representations and
warranties in this Article VII in consummating the transactions contemplated by
this Agreement and upon such reliance shall not be registering the Securities
under the securities laws.  The
Participants each independently acknowledge that CorNova is closely-held, and
that no market whatsoever exists with respect to any of CorNova’s securities
and there are no plans to develop a market.

 

(d-1)  Disclosures
of Participants.  CorNova has been
furnished with copies through the Securities and Exchange Commission EDGAR
website of:  (i) the definitive proxy
statements filed with the Commission in connection with the annual meeting of
stockholders of each of Cardiotech and Implant during the previous 12 months,
and (ii) copies of the Cardiotech and Implant Annual Reports on Form 10-K
for the fiscal year most recently ended, Cardiotech and Implant Quarterly
Reports on Form 10-Q for the quarter most recently ended, filed with the
Commission under the Exchange Act, and all Cardiotech and Current Reports on
Form 8-K filed during the previous 12 months, as filed with the Commission
under the Exchange Act (collectively, the “SEC Reports”).  The Participants have made available to
CorNova the opportunity to ask questions and receive answers concerning the
terms and conditions of the transactions contemplated by this Agreement and to
obtain any additional information which they possess or could reasonably
acquire for the purpose of verifying the accuracy of information furnished to
CorNova as set forth herein or for the purpose of considering the transactions
contemplated hereby.

 

(d-2)  Disclosures
of CorNova.  The Participants has
been furnished with a summary description of the terms of the Securities and
CorNova has made available to the Participants the opportunity to ask questions
and receive answers concerning the terms and conditions of the transactions
contemplated by this Agreement and to obtain any additional information which
they possess or could reasonably acquire for the purpose of verifying the
accuracy of information furnished to the Participants as set forth herein or
for the purpose of considering the transactions contemplated hereby.

 

(e)  Opportunity
to Meet with Management.  Management
of CorNova, and management of each of the Participants each acknowledge that it
has had an opportunity 

 

11

 

to meet with and ask questions of the other’ as
management concerning the business and financial condition of the other, and
the terms and conditions of this transaction as well as to obtain such
information as deemed necessary to be requested.  Any questions or concerns raised concerning the transaction or
the other companies have been answered to the satisfaction of inquiring party.

 

(f)  Risk
of Loss; Experience.  CorNova and
each of the Participants respective decision to engage in the Exchange is based
upon its own independent evaluation of the other.  Each party hereto recognizes
that the Exchange is speculative.  The
parties have carefully reviewed and understands the various risks of the
Exchange, and CorNova and each of the Participants can afford to bear the risks
of engaging in the Exchange; including the risk of losing their respective
entire investment, and the risk that the Securities shall be illiquid for an
indefinite period of time.  CorNova and
each of the Participants represent for itself that it has the business and
financial experience necessary to evaluate the investment in the risks thereto.

 

(g)  Restrictive
Legend.  The Participants and
CorNova acknowledge and agree that the certificates representing the Securities
to be acquired pursuant to this Agreement will be imprinted with a restrictive
legend substantially as follows:

 

THE SECURITIES REPRESENTED BY
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS AND
ARE “RESTRICTED SECURITIES” AS THAT TERM IS DEFINED IN RULE 144 UNDER THE
ACT.  NEITHER THE SHARES NOR ANY
INTEREST THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED, PLEDGED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT AND SUCH STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION
UNDER SUCH ACT AND SUCH LAWS WHICH, IN THE OPINION OF COUNSEL FOR THE HOLDER,
WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COUNSEL FOR THIS
CORPORATION, IS AVAILABLE.

 

The
Participants and CorNova understand and agree that appropriate stop transfer
notations will be placed in the records of the issuer and with its respective
transfer agent, if any, in respect of the Securities which are to be issued
pursuant to this Agreement.

 

7.2.          No Trading on
Inside Information.   CorNova
and the Participants are hereby advised as follows:

 

The Participants are two publicly traded
companies (collectively “P-T-Cs”). 
The use of material nonpublic information in securities transactions
(referred to as “Insider Trading”) or the communication of such
information to others who use it in securities trading (referred to as “Tipping”)
violates the United States federal securities laws.  Such violations may result in harsh consequences for the
individuals, entities or persons 

 

12

 

involved, including exposure to
investigations by the U.S. Securities and Exchange Commission (“SEC”),
criminal and civil prosecution, disgorgement of any profits realized or losses
avoided (under certain laws and rules the calculation of profits realized and
losses avoided could exceed the actual amounts realized or avoided) through the
use of the nonpublic information and penalties based upon such profits or
losses.

 

The negotiations leading up to, and the
signing of this Agreement, the Series A Financing and the Closing contemplated
hereunder, may constitute material nonpublic information.  Accordingly, each person who reads this
Agreement may be prohibited by law from trading in the securities of the P-T-Cs
or directly or indirectly disclosing such information to any other person(s) so
that they may trade in the securities of the P-T-Cs, until two (2) full
business days after the respective P-T-Cs have made adequate public disclosure through
a press release or filed a report on Form 8-K with the SEC.

 

It is difficult to describe what constitutes
“material” information, but each person who reads this Agreement should assume
that any information, positive or negative, which might be of significance to an investor determining whether
to purchase, sell or hold the P-T-Cs’ securities, would be material.

 

7.3           No Disclosure until Closing of
Series A Financing.  Until the minimum closing of the Series A Financing
has been consummated or terminated, without the prior express written approval
of all of the parties hereto, neither CorNova nor either of the Participants
shall make any public announcement with respect to the Exchange or the
Technology License, or any relationship between the Participants and
CorNova.  Notwithstanding however, that
the Participants shall not be prohibited from making public announcements or
filings that are required under any law or pursuant to the rules and
regulations promulgated by the Commission or the American Stock Exchange to
which the Participants are subject. 
None of the parties hereto shall be prohibited from making any
disclosures with respect to the transactions and matters contemplated herein
under a subpoena or court order of competent jurisdiction.  Provided, however, that the party required
to make such disclosure, announcement or filing shall immediately notify the
other parties hereto of such pending disclosure to provide them with an
opportunity to object and intervene through appropriate legal process.

 

ARTICLE
VIII.     License of Technology &
Venture

 

8.1           License of Technology.  Simultaneous with the issuance and exchange of the Investment
Shares, as set forth in Article III and the Exchange as set forth in Article V,
Cardiotech shall grant, convey and provide (“Technology License”) to
CorNova an exclusive license, subject to customary terms and conditions to be
set forth in a separate license agreement (the “License”), for the
technology consisting of Chronoflex DES polymer or any poly (carbonate) urethane
containing derivative thereof for use on drug-eluting stents (collectively the
“Technology”).

 

13

 

8.2                                 No
Collaboration.  Upon
execution of this Agreement and through the term of the License, Cardiotech
shall not:  (a) collaborate on or
participate in any Technology research with other parties; or (b) share, sell,
transfer or otherwise provide any intellectual property with respect to
Technology research or products with other parties.

 

8.3                                 Venture.   CorNova shall focus its resources on the development and marketing
of innovative interventional cardiology products.  The initial target of CorNova is the development of a next-generation
drug-eluting stent.  CorNova will direct its resources to develop or acquire technology relating to stent design, CE testing and drug coatings,
including but not limited to  Chronoflex DES polymer or any
polycarbonate­polyurethane and containing derivative thereof for use on drug-eluting stents.  Utilizing the combined capabilities of the
Participants, CorNova will seek to produce a novel coronary stent system whose
design, materials, and manufacturing will be specific for drug elution
technology.

 

ARTICLE
IX.     Miscellaneous

 

9.1                                 Closing.  The closing of the Contributory Shares and
the CorNova Shares, and the subsequent completion of the Exchange of the
Investment Shares and the Technology License, provided for herein (individually
or collectively the “Closing”) shall occur the offices of one of the
Participants, or at such place and upon such date as CorNova and the
Participants may mutually agree.

 

9.2                                 Fees
and Expenses.  Each party hereto shall pay its own
attorneys fees and its own out-of-pocket expenses incurred prior to and in
connection with the transactions contemplated hereby.  In addition, CorNova shall pay the reasonable attorneys fees of
the Participants’ counsel up to an aggregate maximum of twenty thousand dollars
($20,000) in legal fees including out-of-pocket expenses for their review and
services in connection with the Series A Financing.  CorNova shall, without incurring any further expense, have a
right to review or audit the legal fees and services provided thereunder, and
the right to review work product subject to redaction.

 

9.3                                 Modification, Termination or Waiver. 
This Agreement may be amended, modified, superseded or terminated, and
any of the terms, covenants, representations, warranties or conditions hereof
may be waived, but only by a written instrument executed by the party waiving
compliance.  The failure of any party at
any time or times to require performance of any provision hereof shall in no
manner affect the right of such party at a later time to enforce the same.

 

9.4                                 Notices.  Any notice requests, demands and other communications required or which may
be given hereunder shall be in writing and
shall be deemed to have been duly given if delivered either personally
or by either U.S. Mail certified or
registered mail, postage prepaid, or by
overnight delivery service with all delivery charges prepaid, and fax if
available, addressed to the parties at their respective addresses

 

14

 

set forth or referred
to below:

 

	
  If to
  CorNova, to:

  	
  With
  copies, to:

  
	
   

  	
   

  
	
  CorNova, Inc.

  	
  Kenneth B. Lerman, P.C.

  
	
  274 Ash Street

  	
  651 Day Hill Road

  
	
  Hopkinton, MA 01748

  	
  Windsor, Connecticut 06095

  
	
   

  	
   

  
	
  Attention:

  	
  S.
  Eric Ryan, M.D.

  	
  Attention:  

  	
  Kenneth B. Lerman, Esquire

  
	
   

  	
  Chairman

  	
   

  	
   

  
	
  Fax:
  (508) 435-3866

  	
  Fax: (860) 285-0139

  
	
   

  	
   

  
	
  If to
  Cardiotech, to:

  	
  If to
  Cardiotech and/or Implant, with copies, to:

  
	
   

  	
   

  
	
  Cardiotech International,
  Inc.

  	
   

  
	
  78E
  Olympia Avenue

  	
  Attorneys at Law

  
	
  Woburn, Massachusetts
  01801

  	
  Ellenoff Grossman &
  Schole LLP

  
	
   

  	
  370 Lexington Avenue

  
	
   

  	
  New York, New York 10017

  
	
  Attention:

  	
  Michael Szycher, Ph.D.,

  	
  Attention:  

  	
  Barry I. Grossman

  
	
   

  	
  Chairman & CEO

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Fax: (781) 937-4218

  	
  Fax: (212) 370-7889

  
	
   

  	
   

  
	
  If
  to Implant, to:

  	
   

  
	
   

  	
   

  
	
  Implant Sciences, Inc.

  	
   

  
	
  107
  Audubon Road #5

  	
   

  
	
  Wakefield,
  Massachusetts 01880

  	
   

  
	
   

  	
   

  
	
  Attention:

  	
  Anthony
  Armini, Ph.D.

  	
   

  
	
   

  	
  President
  & CEO

  	
   

  
	
  Fax:
  (781) 246-1167

  	
   

  
						

 

If mailed, delivery shall be deemed five (5) days after the date of
mailing; if overnight delivery, delivery shall be deemed the next business day
provided such services were selected and paid for.  The parties may change the persons and addresses to which the
notices or other communications are to be sent to it by giving written notice
of any such change in the manner provided herein for giving notice.

 

9.5           Binding Effect and Assignment.

  This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
parties hereto.  No assignment of any
rights or delegation of any obligations provided for herein may be made by any
party without the express written consent of the other party.

 

15

 

9.6                                 Entire Agreement. 
This Agreement, along with the other agreements referenced herein,
contain the entire Agreement between the parties with respect to the subject
matter hereof.  In the event of a
conflict or inconsistency, this Agreement is the definitive and governing
agreement with respect to the subject matter hereof.

 

9.7                                 Calendar Days.  All references to “days” in this agreement
with respect to the amount of time allocated for notices, performance or other
periods shall mean calendar days, unless otherwise specified.

 

9.8                                 Exhibits.  All Exhibits annexed hereto
and the documents and instruments referred to herein or required to be
delivered simultaneously herewith or at the Closing are expressly made a part
of this Agreement as fully as though completely set forth herein, and all
references to this Agreement herein or in any such Exhibits, documents or
instruments shall be deemed to refer to and include all such Exhibits,
documents and instruments.  Any
execution of this Agreement is subject to the receipt of current and complete
exhibits.

 

9.9                                 Governing Law. 
This Agreement shall be governed by, and construed in accordance with
the laws of the State of Delaware.

 

9.10                           Consent to Jurisdiction.  The
parties here to consent to jurisdiction of the Courts of the State of
Massachusetts and to the U.S. District Court in the District of Massachusetts.

 

9.11                           Counterparts. 
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original, but which together shall constitute one and the same
instrument.

 

9.12                           Section Headings.  The
section headings contained in this Agreement are inserted for convenience of
reference only and shall not affect the meaning or interpretation of this
Agreement.

 

[The remainder of this page has been left intentionally
blank.  The Signature page follows.]

 

16

 

WITNESS the execution of this Agreement as of the date first above
written.

 

	
   

  	
   

  
	
  CorNova, Inc.

  	
   

  
	
   

  	
   

  
	
  By:

  	
    /s/ S. Eric Ryan

  	
   

  
	
  S. Eric Ryan

  	
   

  
	
  Chairman

  	
   

  
			

 

	
   

  	
   

  
	
  Cardiotech International, Inc.

  	
  Implant Sciences, Inc.

  
	
   

  	
   

  
	
  By: 

  	
   /s/ Michael Szycher

  	
   

  	
  By: 

  	
  /s/
  Anthony Armini

  	
   

  
	
  Michael Szycher

  	
  Anthony Armini

  
	
  Chairman & CEO

  	
  President & CEO

  
						

 

17Exhibit 10.9A

 

 

LOAN AGREEMENT

 

Dated as of September 19, 2003

 

Between

 

AMERIVEST CENTERRA INC.

AMERIVEST PARKWAY INC.

AMERIVEST BLACK CANYON INC.,

collectively, as Borrower

 

and

 

GREENWICH CAPITAL FINANCIAL PRODUCTS INC.,

as Lender

 

 

	
   

  	
  Property
  Locations:

  	
  Centerra
  Office Building, Denver, CO

  
	
   

  	
   

  	
  Parkway
  Centre II, Plano, TX

  
	
   

  	
   

  	
  Southwest
  Gas Building, Phoenix, AZ

  

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  DEFINITIONS; PRINCIPLES
  OF CONSTRUCTION

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Specific
  Definitions

  	
   

  
	
   

  	
  1.2

  	
  Index of Other Definitions

  	
   

  
	
   

  	
  1.3

  	
  Principles of
  Construction

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  GENERAL LOAN TERMS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  The Loan

  	
   

  
	
   

  	
  2.2

  	
  Interest; Monthly Payments

  	
   

  
	
   

  	
   

  	
  2.2.1

  	
  Generally

  	
   

  
	
   

  	
   

  	
  2.2.2

  	
  Default Rate

  	
   

  
	
   

  	
   

  	
  2.2.3

  	
  Taxes

  	
   

  
	
   

  	
   

  	
  2.2.4

  	
  New Payment Date

  	
   

  
	
   

  	
  2.3

  	
  Loan Repayment

  	
   

  
	
   

  	
   

  	
  2.3.1

  	
  Repayment

  	
   

  
	
   

  	
   

  	
  2.3.2

  	
  Mandatory Prepayments

  	
   

  
	
   

  	
   

  	
  2.3.3

  	
  Defeasance

  	
   

  
	
   

  	
   

  	
  2.3.4

  	
  Optional Prepayments

  	
   

  
	
   

  	
  2.4

  	
  Release of Property

  	
   

  
	
   

  	
   

  	
  2.4.1

  	
  Release on Defeasance

  	
   

  
	
   

  	
   

  	
  2.4.2

  	
  Sale of a Property

  	
   

  
	
   

  	
   

  	
  2.4.3

  	
  Release on
  Payment in Full

  	
   

  
	
   

  	
  2.5

  	
  Payments and
  Computations

  	
   

  
	
   

  	
   

  	
  2.5.1

  	
  Making of Payments

  	
   

  
	
   

  	
   

  	
  2.5.2

  	
  Computations

  	
   

  
	
   

  	
   

  	
  2.5.3

  	
  Late Payment Charge

  	
   

  
	
   

  	
  2.6

  	
  Fees

  	
   

  
	
   

  	
   

  	
  2.6.1

  	
  Origination Fees

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  CASH MANAGEMENT
  AND RESERVES

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Cash Management Arrangements

  	
   

  
	
   

  	
  3.2

  	
  Required Repairs

  	
   

  
	
   

  	
   

  	
  3.2.1

  	
  Completion
  of Required Repairs

  	
   

  
	
   

  	
   

  	
  3.2.2

  	
  Required
  Repairs Reserves

  	
   

  
	
   

  	
  3.3

  	
  Taxes and
  Insurance

  	
   

  
	
   

  	
  3.4

  	
  Capital Expense
  Reserves

  	
   

  
	
   

  	
  3.5

  	
  Rollover Reserves

  	
   

  
	
   

  	
  3.6

  	
  Operating Expense
  Subaccount

  	
   

  
	
   

  	
  3.7

  	
  Casualty/Condemnation
  Subaccount

  	
   

  
	
   

  	
  3.8

  	
  Security Deposits

  	
   

  
	
   

  	
  3.9

  	
  Cash Collateral
  Subaccount.

  	
   

  
	
   

  	
  3.10

  	
  Grant of
  Security Interest; Application of Funds

  	
   

  
	
   

  	
  3.11

  	
  Property Cash Flow Allocation

  	
   

  

 

i

 

	
  4.

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Organization; Special
  Purpose

  	
   

  
	
   

  	
  4.2

  	
  Proceedings;
  Enforceability

  	
   

  
	
   

  	
  4.3

  	
  No Conflicts

  	
   

  
	
   

  	
  4.4

  	
  Litigation

  	
   

  
	
   

  	
  4.5

  	
  Agreements

  	
   

  
	
   

  	
  4.6

  	
  Title

  	
   

  
	
   

  	
  4.7

  	
  No Bankruptcy Filing

  	
   

  
	
   

  	
  4.8

  	
  Full and Accurate Disclosure

  	
   

  
	
   

  	
  4.9

  	
  Tax Filings

  	
   

  
	
   

  	
  4.10

  	
  No Plan Assets

  	
   

  
	
   

  	
  4.11

  	
  Compliance

  	
   

  
	
   

  	
  4.12

  	
  Contracts

  	
   

  
	
   

  	
  4.13

  	
  Federal Reserve Regulations;
  Investment Company Act

  	
   

  
	
   

  	
  4.14

  	
  Easements; Utilities and
  Public Access

  	
   

  
	
   

  	
  4.15

  	
  Physical Condition

  	
   

  
	
   

  	
  4.16

  	
  Leases

  	
   

  
	
   

  	
  4.17

  	
  Fraudulent Transfer

  	
   

  
	
   

  	
  4.18

  	
  Ownership of Borrower

  	
   

  
	
   

  	
  4.19

  	
  Purchase Options

  	
   

  
	
   

  	
  4.20

  	
  Management Agreement

  	
   

  
	
   

  	
  4.21

  	
  Hazardous Substances

  	
   

  
	
   

  	
  4.22

  	
  Name; Principal Place of Business

  	
   

  
	
   

  	
  4.23

  	
  Other Debt

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Existence

  	
   

  
	
   

  	
  5.2

  	
  Taxes and Other Charges

  	
   

  
	
   

  	
  5.3

  	
  Access to Property

  	
   

  
	
   

  	
  5.4

  	
  Repairs;
  Maintenance and Compliance; Alterations

  	
   

  
	
   

  	
   

  	
  5.4.1

  	
  Repairs; Maintenance and
  Compliance

  	
   

  
	
   

  	
   

  	
  5.4.2

  	
  Alterations

  	
   

  
	
   

  	
  5.5

  	
  Performance of Other
  Agreements

  	
   

  
	
   

  	
  5.6

  	
  Cooperate in Legal
  Proceedings

  	
   

  
	
   

  	
  5.7

  	
  Further Assurances

  	
   

  
	
   

  	
  5.8

  	
  Environmental
  Matters

  	
   

  
	
   

  	
   

  	
  5.8.1

  	
  Hazardous Substances

  	
   

  
	
   

  	
   

  	
  5.8.2

  	
  Environmental
  Monitoring

  	
   

  
	
   

  	
  5.9

  	
  Title
  to the Property

  	
   

  
	
   

  	
  5.10

  	
  Leases

  	
   

  
	
   

  	
   

  	
  5.10.1

  	
  Generally

  	
   

  
	
   

  	
   

  	
  5.10.2

  	
  Material Leases

  	
   

  

 

ii

 

	
   

  	
   

  	
  5.10.3

  	
  Minor Leases

  	
   

  
	
   

  	
   

  	
  5.10.4

  	
  Additional Covenants with
  respect to Leases

  	
   

  
	
   

  	
  5.11

  	
  Estoppel Statement

  	
   

  
	
   

  	
  5.12

  	
  Property
  Management

  	
   

  
	
   

  	
   

  	
  5.12.1

  	
  Management
  Agreement

  	
   

  
	
   

  	
   

  	
  5.12.2

  	
  Termination of Manager

  	
   

  
	
   

  	
  5.13

  	
  Special Purpose Bankruptcy
  Remote Entity

  	
   

  
	
   

  	
  5.14

  	
  Assumption in
  Non-Consolidation Opinion

  	
   

  
	
   

  	
  5.15

  	
  Change in Business or
  Operation of Property

  	
   

  
	
   

  	
  5.16

  	
  Debt Cancellation

  	
   

  
	
   

  	
  5.17

  	
  Affiliate Transactions

  	
   

  
	
   

  	
  5.18

  	
  Zoning

  	
   

  
	
   

  	
  5.19

  	
  No Joint Assessment

  	
   

  
	
   

  	
  5.20

  	
  Principal Place of Business

  	
   

  
	
   

  	
  5.21

  	
  Change of Name,
  Identity or Structure

  	
   

  
	
   

  	
  5.22

  	
  Indebtedness

  	
   

  
	
   

  	
  5.23

  	
  Licenses

  	
   

  
	
   

  	
  5.24

  	
  Compliance with
  Restrictive Covenants, Etc

  	
   

  
	
   

  	
  5.25

  	
  ERISA

  	
   

  
	
   

  	
  5.26

  	
  Prohibited Transfers

  	
   

  
	
   

  	
   

  	
  5.26.1

  	
  Generally

  	
   

  
	
   

  	
   

  	
  5.26.2

  	
  Transfer and Assumption

  	
   

  
	
   

  	
  5.27

  	
  Liens

  	
   

  
	
   

  	
  5.28

  	
  Dissolution

  	
   

  
	
   

  	
  5.29

  	
  Expenses

  	
   

  
	
   

  	
  5.30

  	
  Indemnity

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  NOTICES AND REPORTING

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  Notices

  	
   

  
	
   

  	
  6.2

  	
  Borrower Notices and
  Deliveries

  	
   

  
	
   

  	
  6.3

  	
  Financial Reporting

  	
   

  
	
   

  	
   

  	
  6.3.1

  	
  Bookkeeping

  	
   

  
	
   

  	
   

  	
  6.3.2

  	
  Annual Reports

  	
   

  
	
   

  	
   

  	
  6.3.3

  	
  Monthly/Quarterly Reports

  	
   

  
	
   

  	
   

  	
  6.3.4

  	
  Other Reports

  	
   

  
	
   

  	
   

  	
  6.3.5

  	
  Annual Budget

  	
   

  
	
   

  	
   

  	
  6.3.6

  	
  Breach

  	
   

  
	
   

  	
   

  	
   

  
	
  7.

  	
  INSURANCE; CASUALTY; AND
  CONDEMNATION

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Insurance

  	
   

  
	
   

  	
   

  	
  7.1.1

  	
  Coverage

  	
   

  
	
   

  	
   

  	
  7.1.2

  	
  Policies

  	
   

  

 

iii

 

	
   

  	
  7.2

  	
  Casualty

  	
   

  
	
   

  	
   

  	
  7.2.1

  	
  Notice; Restoration

  	
   

  
	
   

  	
   

  	
  7.2.2

  	
  Settlement of Proceeds

  	
   

  
	
   

  	
  7.3

  	
  Condemnation

  	
   

  
	
   

  	
   

  	
  7.3.1

  	
  Notice; Restoration

  	
   

  
	
   

  	
   

  	
  7.3.2

  	
  Collection of Award

  	
   

  
	
   

  	
  7.4

  	
  Application of Proceeds
  or Award

  	
   

  
	
   

  	
   

  	
  7.4.1

  	
  Application to
  Restoration

  	
   

  
	
   

  	
   

  	
  7.4.2

  	
  Application
  to Debt

  	
   

  
	
   

  	
   

  	
  7.4.3

  	
  Procedure for Application
  to Restoration

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  DEFAULTS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Events of
  Default

  	
   

  
	
   

  	
  8.2

  	
  Remedies

  	
   

  
	
   

  	
   

  	
  8.2.1

  	
  Acceleration

  	
   

  
	
   

  	
   

  	
  8.2.2

  	
  Remedies
  Cumulative

  	
   

  
	
   

  	
   

  	
  8.2.3

  	
  Severance

  	
   

  
	
   

  	
   

  	
  8.2.4

  	
  Delay

  	
   

  
	
   

  	
   

  	
  8.2.5

  	
  Lender’s Right to
  Perform

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  SPECIAL
  PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Sale of Note and
  Secondary Market Transaction

  	
   

  
	
   

  	
   

  	
  9.1.1

  	
  General; Borrower Cooperation

  	
   

  
	
   

  	
   

  	
  9.1.2

  	
  Use of Information

  	
   

  
	
   

  	
   

  	
  9.1.3

  	
  Borrower
  Obligations Regarding Disclosure Documents

  	
   

  
	
   

  	
   

  	
  9.1.4

  	
  Borrower
  Indemnity Regarding Filings

  	
   

  
	
   

  	
   

  	
  9.1.5

  	
  Indemnification
  Procedure

  	
   

  
	
   

  	
   

  	
  9.1.6

  	
  Contribution

  	
   

  
	
   

  	
   

  	
  9.1.7

  	
  Rating Surveillance

  	
   

  
	
   

  	
   

  	
  9.1.8

  	
  Severance of Loan

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  MISCELLANEOUS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Exculpation

  	
   

  
	
   

  	
  10.2

  	
  Brokers and Financial
  Advisors

  	
   

  
	
   

  	
  10.3

  	
  Retention of Servicer

  	
   

  
	
   

  	
  10.4

  	
  Survival

  	
   

  
	
   

  	
  10.5

  	
  Lender’s Discretion

  	
   

  
	
   

  	
  10.6

  	
  Governing Law

  	
   

  
	
   

  	
  10.7

  	
  Modification, Waiver
  in Writing

  	
   

  
	
   

  	
  10.8

  	
  Trial by Jury

  	
   

  
	
   

  	
  10.9

  	
  Headings/Exhibits

  	
   

  
	
   

  	
  10.10

  	
  Severability

  	
   

  

 

iv

 

	
   

  	
  10.11

  	
  Preferences

  	
   

  
	
   

  	
  10.12

  	
  Waiver of Notice

  	
   

  
	
   

  	
  10.13

  	
  Remedies of Borrower

  	
   

  
	
   

  	
  10.14

  	
  Prior
  Agreements

  	
   

  
	
   

  	
  10.15

  	
  Offsets, Counterclaims and
  Defenses

  	
   

  
	
   

  	
  10.16

  	
  Publicity

  	
   

  
	
   

  	
  10.17

  	
  No Usury

  	
   

  
	
   

  	
  10.18

  	
  Conflict; Construction of
  Documents

  	
   

  
	
   

  	
  10.19

  	
  No Third Party Beneficiaries

  	
   

  
	
   

  	
  10.20

  	
  Yield Maintenance Premium

  	
   

  
	
   

  	
  10.21

  	
  Assignment

  	
   

  
	
   

  	
  10.22

  	
  Set-Off

  	
   

  
	
   

  	
  10.23

  	
  Counterparts

  	
   

  

 

v

 

LOAN AGREEMENT

 

LOAN AGREEMENT dated as of September 19, 2003 (as the same may be modified,
supplemented, amended or otherwise changed, this “Agreement”) between AMERIVEST CENTERRA INC., a Colorado
corporation, AMERIVEST PARKWAY INC.,
a Texas corporation, and AMERIVEST BLACK
CANYON INC., an Arizona corporation (together with their permitted
successors and assigns, “Borrower”),
and GREENWICH CAPITAL FINANCIAL PRODUCTS INC.,
a Delaware corporation (together with its successors and assigns, “Lender”).

 

1.                                      DEFINITIONS; PRINCIPLES OF CONSTRUCTION

 

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

 

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

 

Allocated Loan Amount: 
shall mean the amount set forth opposite the particular Project on Schedule 6
attached hereto.

 

Approved Capital Expenses: 
Capital Expenses incurred by Borrower, which Capital Expenses shall
either be (i) included in the Approved Capital Budget for the current calendar
month or (ii) approved by Lender, in its reasonable discretion.

 

Approved Leasing Expenses: 
actual out-of-pocket expenses incurred by Borrower and payable to third
parties that are not Affiliates of Borrower or Guarantor in leasing space at
the Property pursuant to Leases entered into in accordance with the Loan
Documents, including brokerage commissions and tenant improvements, which
expenses (i) are (A) specifically approved by Lender in connection with
approving the applicable Lease, which approval shall not be unreasonably
withheld by Lender, (B) incurred in the ordinary course of business and on
market terms and conditions in connection with Leases which do not require
Lender’s approval under the Loan Documents, or (C) otherwise approved by
Lender, which approval shall not be unreasonably withheld or delayed, and (ii)
are substantiated by executed Lease documents and brokerage agreements.

 

Approved Operating Expenses: 
operating expenses incurred by Borrower which (i) are included in the
Approved Operating Budget for the current calendar month, (ii) are for real
estate taxes, insurance premiums, electric, gas, oil, water, sewer or other
utility service to the Property or (iii) have been approved by Lender, which
approval shall not be unreasonably withheld by Lender.

 

Available Cash:  as
of each Payment Date during the continuance of Cash Management Period, the
amount of Rents, if any, remaining in the Deposit Account after the application
of all of the payments required under clauses (i) through (vii) of
Section 3.11(a).

 

1

 

Black Canyon Mortgage: 
shall mean that certain Deed of Trust entered into as of the date hereof
and given by AmeriVest Black Canyon Inc. to Lender and encumbering the Project
located in Phoenix, Arizona.

 

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

 

Calculation Date:  the
last day of each calendar quarter during the Term.

 

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

 

Cash Management Period: 
shall commence upon Lender giving notice to the Clearing Bank of the
occurrence of any of the following: (i) the Stated Maturity Date, or (ii) a
Default or an Event of Default; and shall end upon Lender giving notice to the
Clearing Bank that the sweeping of funds into the Deposit Account may cease, which
notice Lender shall only be required to give if (1) the Loan and all other
obligations under the Loan Documents have been repaid in full or (2) the Stated
Maturity Date has not occurred and with respect for the matters described in
clause (ii) above, such Event of Default has been cured and no other Event of
Default has occurred and is continuing.

 

Centerra Mortgage: 
shall mean that certain Deed of Trust entered into as of the date hereof
and given by AmeriVest Centerra Inc. to Lender and encumbering the Project
located in Denver, Colorado.

 

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

 

Control: 
with respect to any Person, either (i) ownership directly or indirectly
of 49% or more of all equity interests in such Person or (ii) the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, through the ownership of voting
securities, by contract or otherwise.

 

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

 

Debt Service: 
with respect to any particular period, the greater of (i) scheduled
Principal and interest payments due under the Note in such period or (ii) the
product of (A) the outstanding principal as of the end of such period
multiplied by (B) 10.09%.

 

Debt Service Coverage Ratio:  as
of any date, the ratio calculated by Lender of (i) the Net Operating Income for
the 12 month period ending with the most recently completed calendar month to
(ii) the Debt Service with respect to such period.

 

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

 

2

 

Default Rate:  a
rate per annum equal to the lesser of (i) the maximum rate permitted by
applicable law, or (ii) 5% above the Interest Rate, compounded monthly.

 

Defeasance Collateral: 
U.S. Obligations, which provide payments (i) on or prior to, but as
close as possible to, all Payment Dates and other scheduled payment dates, if
any, under the Note after the Defeasance Date and up to and including the
Stated Maturity Date, and (ii) in amounts equal to or greater than the
Scheduled Defeasance Payments.

 

Defeasance Percentage:  the
percentage derived by dividing, (i) in the case of an initial Partial
Defeasance, the original principal amount of the Defeased Note by the original
principal amount of the Note or (ii) in the case of a subsequent Defeasance,
the amount of the subsequent Defeased Note by the original principal amount of
its corresponding Undefeased Note.

 

Deposit Bank: 
Wachovia Bank, National Association, or such other bank or depository
selected by Lender in its discretion.

 

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

 

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

 

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

 

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

 

GCM: 
Greenwich Capital Financial Products Inc.

 

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

 

Guarantor: 
AmeriVest Properties Inc., a Maryland corporation.

 

Interest Period:  (i)
the period from the date hereof through the first day thereafter that is the
last day of a calendar month and (ii) each period thereafter from the 1st day
of each calendar month through the last day of each such calendar month; except
that the Interest Period, if any, that would otherwise commence before and end
after the Maturity Date shall end on the Maturity Date.

 

3

 

Interest Rate:  a
rate of interest equal to five and thirteen one-hundredths percent (5.13%) per
annum, which includes a servicing fee of three (3) basis points per annum (or,
when applicable pursuant to this Note or any other Loan Document, the Default
Rate).

 

Key Principal(s): 
AmeriVest Properties Inc.

 

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

 

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

 

Lien:  any
mortgage, deed of trust, lien (statutory or otherwise), pledge, hypothecation,
easement, restrictive covenant, preference, assignment, security interest or
any other encumbrance, charge or transfer of, or any agreement to enter into or
create any of the foregoing, on or affecting all or any part of the Property or
any interest therein, or any direct or indirect interest in Borrower, including
any conditional sale or other title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing, the
filing of any financing statement, and mechanic’s, materialmen’s and other
similar liens and encumbrances.

 

Loan Documents: 
this Agreement and all other documents, agreements and instruments now
or hereafter evidencing, securing or delivered to Lender in connection with the
Loan, including the following, each of which is dated as of the date
hereof:  (i) the Note made by Borrower
to Lender in the aggregate principal amount equal to the Loan (the “Note”), (ii) the
three (3) Deeds of Trust, Assignment of Leases and Rents and Security Agreement
made by Borrower in favor of Lender which covers the Properties (collectively,
the “Mortgage”),
(iii) the three (3) Assignments of Leases and Rents from Borrower to Lender,
(iv) Assignment of Agreements, Licenses, Permits and Contracts from Borrower to
Lender, (v) the Clearing Account Agreement (the “Clearing Account Agreement”) among
Borrower, Lender, Manager and Clearing Bank, (vi) the Deposit Account Agreement
(the “Deposit Account
Agreement”) among Borrower, Lender, Manager and the Deposit Bank
and (vii) the Guaranty of Recourse Obligations made by Guarantor; as each of
the foregoing may be (and each of the foregoing defined terms shall refer to
such documents as they may be) amended, restated, replaced, supplemented or
otherwise modified from time to time.

 

Loan to Value Ratio:  shall mean the ratio, as determined by
Lender, of the principal balance of the Note and all other indebtedness secured
by liens or encumbrances 

 

4

 

against
the Property to the fair market value of the Property, as such fair market
value is determined based upon an M.A.I. appraisal satisfactory to Lender.

 

Management Agreement:  the
management agreement between Borrower and Manager, pursuant to which Manager is
to manage the Property, as same may be amended, restated, replaced,
supplemented or otherwise modified from time to time in accordance with
Section 5.12.

 

Manager: 
AmeriVest Properties Inc., a Maryland corporation, or any successor,
assignee or replacement manager appointed by Borrower in accordance with
Section 5.12.

 

Material Alteration:  any
alteration affecting structural elements of the Property the cost of which
exceeds $250,000; provided, however, that in no event shall (i) any Required
Repairs, (ii) any tenant improvement work performed pursuant to any Lease
existing on the date hereof or entered into hereafter in accordance with the
provisions of this Agreement, or (iii) alterations performed as part of a
Restoration, constitute a Material Alteration.

 

Material Lease:  all
Leases which individually or in the aggregate with respect to the same tenant
and its Affiliates (i) cover more than 7,500 square feet of the Improvements or
(ii)  have a gross annual rent of more
than 5% of the total annual Rents or (iii) demise at least one full floor of
the Improvements.

 

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

 

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

 

Note: shall mean that certain Promissory Note
dated as of the date hereof in the principal amount of $39,000,000 given by
Borrower to Lender.

 

Net Operating Income:  for
any period, the underwritten net cash flow of the Property determined by Lender
in its sole and absolute discretion in accordance with Lender’s then current
underwriting standards for loans of this type and the then current underwriting
standards of the Rating Agencies (including adjustments for market vacancy,
bankrupt tenants, leasing costs and capital items).

 

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

 

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

 

Parkway Mortgage: 
shall mean that certain Deed of Trust entered into as of the date hereof
and given by AmeriVest Parkway Inc. to Lender and encumbering the Project
located in Plano, Texas.

 

5

 

Partial Release: 
shall have the meaning accorded to such term in Section 2.4.2.

 

Partial Release Amount: 
shall mean (i) an amount equal to 125% of the Allocated Loan Amount
allocated to the released Project, and (ii) the (A) Prepayment Consideration
applicable thereto or (B) Yield Maintenance Premium, as applicable.

 

Payment Date:  the
1st day of each calendar month or, upon Lender’s exercise of its right to
change the Payment Date in accordance with Section 2.2.4, the New
Payment Date (in either case, if such day is not a Business Day, the Payment
Date shall be the first Business Day thereafter).  The first Payment Date hereunder shall be November 1, 2003.

 

Permitted Encumbrances:  (i)
the Liens created by the Loan Documents, (ii) all Liens and other matters
disclosed in the Title Insurance Policy, (iii) Liens, if any, for Taxes or
Other Charges not yet due and payable and not delinquent, (iv) any workers’,
mechanics’ or other similar Liens on the Property provided that any such Lien
is bonded or discharged within 45 days after Borrower first receives notice of
such Lien and (v) such other title and survey exceptions as Lender approves in
writing in Lender’s discretion.

 

Permitted Transfers:  (i)
a Lease entered into in accordance with the Loan Documents, (ii) a Permitted
Encumbrance, (iii) a Transfer and Assumption or (iv) provided that no Default
or Event of Default shall then exist, a Transfer of an interest in Borrower
provided that (A) such Transfer shall not (x) cause the transferee (other than
Key Principal), together with its Affiliates, to acquire Control of Borrower or
to increase its direct or indirect interest in Borrower to an amount which
equals or exceeds 49% or (y) result in Borrower no longer being Controlled by
Key Principal(s), (B) after giving effect to such Transfer, Key Principal(s) shall
continue to own at least 51% of all equity interests (direct or indirect) in
Borrower, (C) Borrower shall give Lender notice of such Transfer together with
copies of all instruments effecting such Transfer not less than 10 days prior
to the date of such Transfer, and (D) the legal and financial structure of
Borrower and its members and the single purpose nature and bankruptcy
remoteness of Borrower and its members after such Transfer, shall satisfy
Lender’s then current applicable underwriting criteria and requirements or (v)
provided that no Default or Event of Default shall then exist, a Transfer of an
interest in Borrower which shall cause the transferee to increase its direct or
indirect interest in Borrower to an amount which equals or exceeds 49% or which
results in a change of Control of Borrower, provided that (A) such Transfer is
first approved by Lender in its sole and absolute discretion, and (B) if such
Transfer occurs after a Secondary Market Transaction, Borrower, at its sole
cost and expense, shall have (1) delivered (or caused to be delivered) to
Lender, a Rating Comfort Letter, (2) delivered (or caused to be delivered) to
Lender and the applicable Rating Agencies, a substantive non consolidation
opinion with respect to Borrower in form and substance satisfactory to Lender
and the applicable Rating Agencies and (3) reimbursed Lender for all reasonable
expenses incurred by it in connection with such Transfer.

 

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

 

6

 

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

 

Prepayment Consideration shall be the amount equal to the greater of
(i) one percent (1%) of the aggregate Loan balance at the time of prepayment,
or (ii) (A) the amount of the monthly interest which would otherwise be payable
on the principal balance being prepaid from the date of the first day of the
calendar month immediately following the date of prepayment (unless prepayment
is tendered on the first day of any calendar month during the term of the Note,
in which case from the date of prepayment) to and including the Maturity Date;
over (B) the amount of the monthly interest the Lender would earn if the
principal balance being prepaid were reinvested for the period from the first
day of the calendar month immediately following the date of prepayment (unless
prepayment is tendered on the first day of any calendar month during the term
of this Note, in which case from the date of prepayment) to and including the Maturity
Date at the Treasury Rate (as hereinafter defined), such difference to be
discounted to present value at the Treasury Rate.  The “Treasury Rate” shall be the annualized yield on
securities issued by the United States Treasury having a maturity corresponding
to the remaining term to the originally scheduled Maturity Date of this Note,
as quoted in Federal Reserve Statistical Release [H. 15(519)] under the
heading “U.S. Government Securities - Treasury Constant Maturities” for the
Treasury Rate Determination Date (as defined below), converted to a monthly
equivalent yield.  If yields for such
securities of such maturity are not shown in such publication, then the
Treasury Rate shall be determined by Lender by linear interpolation between the
yields of securities of the next longer and next shorter maturities.  If said Federal Reserve Statistical Release
or any other information necessary for determination of the Treasury Rate in
accordance with the foregoing is no longer published or is otherwise unavailable,
then the Treasury Rate shall be reasonably determined by Lender based on
comparable data.  The term “Treasury
Rate Determination Date” shall mean the date which is five (5) banking days
prior to the scheduled prepayment date.

 

Project: 
shall mean each of the office buildings located at the following
addresses:  (i) the Centerra Office
Building, Denver, Colorado; (ii) Parkway Centre II, Plano, Texas; and (iii) the
Southwest Gas Building, Phoenix, Arizona (each a “Project” and collectively, the “Projects”)

 

Project Owner: 
shall mean any of:  AmeriVest
Centerra Inc., a Colorado corporation, AmeriVest Parkway Inc., a Texas
corporation and AmeriVest Black Canyon Inc., an Arizona corporation.

 

Property or Properties:  the
parcels of real property and Improvements thereon owned by Borrower and
encumbered by the Mortgages; together with all rights pertaining to such real
property and Improvements, and all other collateral for the Loan as more
particularly described in the Granting Clauses of the Mortgages and referred to
therein as the Mortgaged Property or Trust Property, as applicable.  The Properties are known as the Centerra
Office Building located in Denver, Colorado, Parkway Center II located in
Plano, Texas and the Southwest Gas Building located in Phoenix, Arizona.

 

7

 

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

 

Rating Comfort Letter:  a
letter issued by each of the applicable Rating Agencies which confirms that the
taking of the action referenced to therein will not result in any
qualification, withdrawal or downgrading of any existing ratings of Securities
created in a Secondary Market Transaction.

 

Release Date:  the
earlier to occur of (i) the forty second (42nd) Payment Date of the Term and
(ii) the date that is two (2) years from the “startup day” (within the meaning
of Section 860G(a)(9) of the Code) of the REMIC Trust established in
connection with a Securitization involving this Loan.

 

REMIC Trust:  a
“real estate mortgage investment conduit” within the meaning of
Section 860D of the Code that holds the Note.

 

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

 

Scheduled Defeasance Payments:  (i)
in the case of a Full Defeasance, the Monthly Debt Service Payment Amount
required under the Note (or, to the extent that there has been a previous
Partial Defeasance, the Undefeased Note, as the case may be), for all Payment
Dates occurring after the Defeasance Date (including the outstanding Principal
balance on the Note (or, Undefeased Note, as the case may be) as of the Stated
Maturity Date) and (ii) in the case of a Partial Defeasance, the Monthly Debt
Service Payment Amount multiplied by the Defeasance Percentage for all Payment
Dates occurring after the Defeasance Date (including the outstanding Principal
Balance on the Note (or the Undefeased Note, as the case may be) as of the Stated
Maturity Date).

 

Security Agreement:  a
security agreement in form and substance that would be satisfactory to Lender
(in Lender’s sole but good faith discretion) pursuant to which Borrower grants
Lender a perfected, first priority security interest in the Defeasance
Collateral Account and the Defeasance Collateral.

 

8

 

Servicer:  a
servicer selected by Lender to service the Loan.

 

State:  the
state in which the Property is located.

 

Stated Maturity Date: 
October 1, 2008, as such date may be changed in accordance with Section 2.2.4.

 

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

 

Term:  the
entire term of this Agreement, which shall expire upon repayment in full of the
Debt and full performance of each and every obligation to be performed by
Borrower pursuant to the Loan Documents.

 

Title Insurance Policy:  the
TLTA mortgagee title insurance policy as to the Project known as Parkway Center
II in Plano, Texas, and the ALTA mortgagee title insurance policy as to the
Projects known as the Centerra Office Building in Denver, Colorado and the
Southwest Gas Building in Phoenix, Arizona, each in the form acceptable to
Lender issued with respect to the Property and insuring the Lien of the
Mortgage.

 

Transfer:  any
sale, conveyance, transfer, lease or assignment, or the entry into any
agreement to sell, convey, transfer, lease or assign, whether by law or
otherwise, of, on, in or affecting (i) all or part of the Property (including
any legal or beneficial direct or indirect interest therein), or (ii) any
direct or indirect interest in Borrower (including any profit interest).

 

UCC:  the
Uniform Commercial Code as in effect in the State or the state in which any of
the Cash Management Accounts are located, as the case may be.

 

U.S. Obligations: 
direct full faith and credit obligations of the United States of America
that are not subject to prepayment, call or early redemption.

 

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

 

Yield Maintenance Premium:  an
amount which, when added to the outstanding Principal, would be sufficient to
purchase U.S. Obligations which provide payments (a) on or prior to, but as
close as possible to, all successive scheduled payment dates under this
Agreement through the Stated Maturity Date and (b) in amounts equal to the
Monthly Debt Service Payment Amount required under this Agreement through the
Stated Maturity Date together with the outstanding principal balance of the
Note as of the Stated Maturity Date assuming all such Monthly Debt Service
Payments are made (including any servicing costs associated therewith).  In no event shall the Yield Maintenance
Premium be less than zero.

 

1.2                               Index of Other Definitions.  The
following terms are defined in the sections or Loan Documents indicated below:

 

“Approved
Annual Budget “ - 6.3.5

 

9

 

“Annual
Budget “ - 6.3.5

“Approved
Capital Budget” - 6.3.5

“Approved
Operating Budget” - 6.3.5

“Applicable
Taxes” - 2.2.3

“Award”
- 7.3.2

“Bankruptcy
Proceeding” - 4.7

“Borrower’s
Recourse Liabilities” - 10.1

“Capital
Reserve Subaccount” - 3.4

“Cash
Collateral Subaccount” - 3.9]

“Cash
Management Accounts” - 3.10

“Casualty”
- 7.2.1

“Casualty/Condemnation
Prepayment” - 2.3.2

“Casualty/Condemnation
Subaccount” - 3.7

“Clearing
Account” - 3.1

“Clearing
Account Agreement” - 1.1 (Definition of Loan Documents)

“Clearing
Bank” - 3.1

“Condemnation”
- 7.3.1

“Defeasance
Collateral Account” - 2.3.3

“Defeasance
Event” - 2.3.3

“Defeasance
Date” - 2.3.3

“Defeased
Note” - 2.3.3

“Deposit
Account” - 3.1

“Deposit
Account Agreement” - 1.1 (Definition of Loan Documents)

“Disclosure
Document” - 9.1.2

“Easements”
- 4.14

“Eligible
Account” - Deposit Account Agreement

“Endorsement”
- 5.26

“Environmental
Laws” - 4.21

“Equipment”
- Mortgage

“Event
of Default” - 8.1

“Exchange
Act” - 9.1.2

“GCM
Group” - 9.1.3

“Hazardous
Substances” -  4.21

“Improvements”
- Mortgage

“Indemnified
Liabilities” - 5.30

“Indemnified
Party” - 5.30

“Independent
Director” - Schedule 5

“Insurance
Premiums” - 7.1.2

“Insured
Casualty” - 7.2.2

“Issuer”
- 9.1.3

“Late
Payment Charge” - 2.5.3

“Lender’s
Consultant” - 5.7.1

“Liabilities”
- 9.1.3

“Licenses”
- 4.11

“Loan”
- 2.1

“Monthly
Debt Service Payment Amount” - 2.2.1

 

10

 

“Moody’s”
- 1.1 (Definition of Rating Agency)

“Mortgage”
- 1.1 (Definition of Loan Documents)

“New
Payment Date” - 2.2.4

“Note”
- 1.1 (Definition of Loan Documents)

“Notice”
- 6.1

“Operating
Expense Subaccount” - 3.6

“Partial
Defeasance” - 2.3.3

“Permitted
Indebtedness” - 5.22

“Permitted
Investments” - Deposit Account Agreement

“Permitted
Prepayment Date” - 2.3.4

“Policies”
- 7.1.2

“Principal”
- 2.1

“Proceeds”
- 7.2.2

“Proposed
Material Lease” - 5.10.2

“Provided
Information” - 9.1.1

“Qualified
Carrier” - 7.1.1

“Registration
Statement” - 9.1.3

“Remedial
Work” - 5.7.2

“Rent
Roll” - 4.16

“Required
Records” - 6.3.6

“Required
Repairs” - 3.2.1

“Required
Repairs Subaccount” - 3.2.2

“Restoration”
- 7.4.1

“Rollover
Reserve Subaccount” - 3.5

“S&P”
- 1.1 (Definition of Rating Agency)

“Secondary
Market Transaction” - 9.1.1

“Securities”
- 9.1.1

“Securities
Act” - 9.1.2

“Security
Deposit Account” - 3.8

“Security
Deposit Subaccount” - 3.8

“Significant
Casualty” - 7.2.2

“Special
Purpose Bankruptcy Remote Entity” - 5.13

“Springing
Recourse Event” - 10.1

“Subaccounts”
- 3.1

“Successor
Borrower” - 2.3.3

“Tax
and Insurance Subaccount” - 3.3

“Toxic
Mold” - 4.21

“Transfer
and Assumption” - 5.26

“Transferee
Borrower” - 5.26

“Undefeased
Note” - 2.3.3

“Underwriter
Group” - 9.1.3

“Underwriters”
- 9.1.3

 

1.3                               Principles of Construction. 
Unless otherwise specified, (i) all references to sections and schedules
are to those in this Agreement, (ii) the words “hereof,” “herein” and
“hereunder” and words of similar import refer to this Agreement as a whole and
not to any

 

11

 

particular
provision, (iii) all definitions are equally applicable to the singular and
plural forms of the terms defined, (iv) the word “including” means “including
but not limited to,” and (v) accounting terms not specifically defined herein
shall be construed in accordance with GAAP.

 

2.                                      GENERAL LOAN TERMS

 

2.1                               The
Loan. 
Lender is making a loan (the “Loan”) to Borrower on the date hereof, in the
original principal amount (the “Principal”) of $39,000,000.00, which shall mature on the
Stated Maturity Date.  Borrower
acknowledges receipt of the Loan, the proceeds of which are being and shall be
used to (i) repay and discharge existing loans relating to the Property, (ii)
fund certain of the Subaccounts, and (iii) pay transaction costs.  Any excess proceeds may be used for any
lawful purpose. No amount repaid in respect of the Loan may be reborrowed.

 

2.2                               Interest; Monthly Payments.

 

2.2.1                     Generally.  From and after the date hereof, interest on
the unpaid Principal shall accrue at the Interest Rate and be payable as
hereinafter provided.  On the date
hereof, Borrower shall pay interest on the unpaid Principal from the date
hereof through and including September 30, 2003.  On November 1, 2003 and each Payment Date thereafter through
and including October 1, 2008, the Principal and interest thereon at the
Interest Rate shall be payable in equal monthly installments of $230,953.76
(the “Monthly Debt
Service Payment Amount”); which is based on the Interest Rate
and a 300-month amortization schedule. 
The Monthly Debt Service Payment Amount due on any Payment Date shall
first be applied to the payment of interest accrued during the preceding
Interest Period and the remainder of such Monthly Debt Service Payment Amount
shall be applied to the reduction of the unpaid Principal.  All accrued and unpaid interest shall be due
and payable on the Maturity Date.  If
the Loan is repaid on any date other than on a Payment Date (whether prior to
or after the Stated Maturity Date), Borrower shall also pay interest that would
have accrued on such repaid Principal to but not including the next Payment
Date.

 

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

 

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

 

12

 

applicable
law.  Payments pursuant to this Section 2.2.3
shall be made within ten days after the date Lender makes written demand
therefor.

 

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

 

2.3                               Loan Repayment.

 

2.3.1                     Repayment.  Borrower shall repay the entire outstanding
principal balance of the Note in full on the Maturity Date, together with
interest thereon to (but excluding) the date of repayment and any other amounts
due and owing under the Loan Documents. 
Borrower shall have no right to prepay or defease all or any portion of
the Principal except in accordance with Section 2.3.2, Section 2.3.3,
and Section 2.4.  Except
during the continuance of an Event of Default, all proceeds of any repayment,
including any prepayments of the Loan, shall be applied by Lender as follows in
the following order of priority:  First,
accrued and unpaid interest at the Interest Rate; Second, to Principal; and
Third, to and any other amounts then due and owing under the Loan
Documents.  If prior to the Stated
Maturity Date the Debt is accelerated by reason of an Event of Default, then
Lender shall be entitled to receive, in addition to the unpaid Principal and
accrued interest and other sums due under the Loan Documents, an amount equal
to the Yield Maintenance Premium applicable to such Principal so
accelerated.  During the continuance of
an Event of Default, all proceeds of repayment, including any payment or
recovery on the Property (whether through foreclosure, deed-in-lieu of
foreclosure, or otherwise) shall, unless otherwise provided in the Loan
Documents, be applied in such order and in such manner as Lender shall elect in
Lender’s discretion.

 

2.3.2                     Mandatory Prepayments.  The
Loan is subject to mandatory prepayment in certain instances of Insured
Casualty or Condemnation (each a “Casualty/Condemnation Prepayment”), in the
manner and to the extent set forth in Section 7.4.2.  Each Casualty/Condemnation Prepayment, after
deducting Lender’s costs and expenses (including reasonable attorneys’ fees and
expenses) in connection with the settlement or collection of the Proceeds or
Award, shall be applied in the same manner as repayments under Section 2.3.1,
and if such Casualty/Condemnation Payment is made on any date other than a
Payment Date, then such Casualty/Condemnation Payment shall include interest
that would have accrued on the Principal prepaid to but not including the next
Payment Date.  Provided that no Event of
Default is continuing, any such mandatory prepayment under this Section 2.3.2
shall be without the payment of the Yield Maintenance Premium.  Notwithstanding anything to the contrary
contained herein, each Casualty/Condemnation Prepayment shall be applied in
inverse order of maturity and shall not extend or postpone the due dates of the
monthly installments due under the Note or this Agreement, or change the
amounts of such installments.

 

13

 

2.3.3                     Defeasance 

 

(a)                                Conditions to Defeasance. 
Provided no Event of Default shall be continuing, Borrower shall have
the right on any Payment Date after the Release Date and prior to the Permitted
Prepayment Date to voluntarily defease the entire amount of the Principal (a “Full Defeasance”) or
a portion of the Principal evidenced by the Note (a “Partial Defeasance”)
(any such Full Defeasance or Partial Defeasance, a “Defeasance”)  by providing Lender
with the Defeasance Collateral (a “Defeasance Event”), subject to the
satisfaction of the following conditions precedent:

 

(i)                                  Borrower shall give Lender not less than
twenty (20) days prior written notice specifying a Payment Date (the “Defeasance Date”) on
which the Defeasance Event is to occur.

 

(ii)                               Borrower shall pay to Lender (A) all payments
of Principal and interest due on the Loan to and including the Defeasance Date
and (B) all other sums, then due under the Note, this Agreement and the other
Loan Documents;

 

(iii)                            Borrower shall deposit the Defeasance
Collateral into the Defeasance Collateral Account and otherwise comply with the
provisions of subsections (b) and (c) of this Section 2.3.3;

 

(iv)                           Borrower shall execute and deliver to Lender
a Security Agreement in respect of the Defeasance Collateral Account and the
Defeasance Collateral;

 

(v)                              Borrower shall deliver to Lender an opinion
of counsel for Borrower that is standard in commercial lending transactions and
subject only to customary qualifications, assumptions and exceptions opining,
among other things, that (i) Lender has a legal and valid perfected first
priority security interest in the Defeasance Collateral Account and the
Defeasance Collateral, (ii) if a securitization has occurred, the REMIC Trust
formed pursuant to such securitization will not fail to maintain its status as
a “real estate mortgage investment conduit” within the meaning of
Section 860D of the Code as a result of a Defeasance Event pursuant to
this Section 2.3.3, (iii) the Defeasance Event will not result in a
deemed exchange for purposes of the Code and will not adversely affect the
status of the Note as indebtedness for federal income tax purposes, (iv)
delivery of the Defeasance Collateral and the grant of a security interest
therein to Lender shall not constitute an avoidable preference under
Section 547 of the Bankruptcy Code or applicable state law and (v) a
non-consolidation opinion with respect to the Successor Borrower;

 

(vi)                           In the case of a Partial Defeasance, the
execution and delivery by Borrowers of all necessary documents to amend and
restate the Note and issue two substitute notes: one having a principal balance
equal to the defeased portion of the original Note (the “Defeased Note”) and
the other having a principal balance equal to the undefeased portion of the
original Note (the “Undefeased
Note”).  The Defeased
Note and Undefeased Note shall have terms identical to the terms of the Note,
except for the principal balance and a pro rata allocation of the Monthly Debt
Service Payment Amount.  After a Partial
Defeasance, all references hereunder and in the other Loan Documents to “Note” shall be deemed
to mean the

 

14

 

Undefeased
Note, unless expressly provided to the contrary.  A Defeased Note cannot be the subject of any further Defeasance;

 

(vii)                        Borrower shall deliver to Lender a Rating
Comfort Letter as to the Defeasance Event;

 

(viii)                     Borrower shall deliver an Officer’s
Certificate certifying that the requirements set forth in this Section 2.3.3
have been satisfied;

 

(ix)                             Borrower shall deliver a certificate of a
“big four” or other nationally recognized public accounting firm acceptable to
Lender certifying that the Defeasance Collateral will generate monthly amounts
equal to or greater than the Scheduled Defeasance Payments;

 

(x)                                Borrower shall deliver such other
certificates, opinions, documents and instruments as Lender may reasonably
request; and

 

(xi)                             Borrower shall pay all costs and expenses of
Lender incurred in connection with the Defeasance Event, including Lender’s
reasonable attorneys’ fees and expenses and Rating Agency fees and expenses.

 

(b)                               Defeasance Collateral
Account.  On or before the date on which Borrower
delivers the Defeasance Collateral, Borrower shall open at any Eligible Institution
the defeasance collateral account (the “Defeasance Collateral Account”) which shall
at all times be an Eligible Account. 
The Defeasance Collateral Account shall contain only (i) Defeasance
Collateral, and (ii) cash from interest and principal paid on the Defeasance
Collateral.  All cash from interest and
principal payments paid on the Defeasance Collateral shall be paid over to
Lender on each Payment Date and applied first to accrued and unpaid interest and
then to Principal.  Any cash from interest
and principal paid on the Defeasance Collateral not needed to pay accrued and
unpaid interest or Principal shall be retained in the Defeasance Collateral
Account as additional collateral for the Loan. 
Borrower shall cause the Eligible Institution at which the Defeasance
Collateral is deposited to enter an agreement with Borrower and Lender,
satisfactory to Lender in its sole discretion, pursuant to which such Eligible
Institution shall agree to hold and distribute the Defeasance Collateral in
accordance with this Agreement.  The
Successor Borrower shall be the owner of the Defeasance Collateral Account and
shall report all income accrued on Defeasance Collateral for federal, state and
local income tax purposes in its income tax return.  Borrower shall prepay all cost and expenses associated with
opening and maintaining the Defeasance Collateral Account.  Lender shall not in any way be liable by
reason of any insufficiency in the Defeasance Collateral Account.

 

(c)                                Successor Borrower.  In
connection with a Defeasance Event under this Section 2.3.3,
Borrower shall, if required by the Rating Agencies or if Borrower elects to do
so, establish or designate a successor entity (the “Successor Borrower”)
which shall be a Single Purpose Bankruptcy Remote Entity and which shall be
approved by the Rating Agencies.  Any
such Successor Borrower may, at Borrower’s option, be an Affiliate of Borrower
unless the Rating Agencies shall require otherwise.  Borrower shall transfer and assign all obligations, rights and
duties under and to the Defeased Note, together with the Defeasance Collateral
to such 

 

15

 

Successor
Borrower.  Such Successor Borrower shall
assume the obligations under the Note and the Security Agreement and Borrower
shall be relieved of its obligations under such documents.  Borrower shall pay a minimum of $1,000 to
any such Successor Borrower as consideration for assuming the obligations under
the Note and the Security Agreement. 
Borrower shall pay all costs and expenses incurred by Lender, including
Lender’s attorney’s fees and expenses, incurred in connection therewith.

 

2.3.4                     Optional Prepayments. 
From and after the third Payment Date prior to the Stated Maturity Date
(the “Permitted
Prepayment Date”), Borrower shall have the right to prepay all
or any portion of the Principal, provided that Borrower gives Lender at least
15 days’ prior written notice thereof. 
If any such prepayment is not made on a Payment Date, Borrower shall
also pay interest that would have accrued on such prepaid Principal to, but not
including, the next Payment Date.  Any
such prepayment shall be made without payment of the Yield Maintenance Premium.

 

2.4                               Release of Property.

 

2.4.1                     Release
on Defeasance.  If Borrower has elected to defease the Note
and the requirements of Section 2.3.3 and this Section 2.4
have been satisfied, the Properties shall be released from the Lien of the
Mortgage and the Defeasance Collateral pledged pursuant to the Security
Agreement shall be the sole source of collateral securing the Notes.  In connection with the release of the Lien,
Borrower shall submit to Lender, not less than twenty (20) days prior to the
Defeasance Date (or such shorter time as is acceptable to Lender in its sole
discretion), a release of Lien (and related Loan Documents) for execution by
Lender.  Such release shall be in a form
appropriate in the jurisdiction in which the Properties are located and contain
standard provisions protecting the rights of the releasing lender.  In addition, Borrower shall provide all
other documentation Lender reasonably requires to be delivered by Borrower in
connection with such release, together with an Officer’s Certificate certifying
that such documentation (i) is in compliance with all Legal Requirements, and
(ii) will effect such release in accordance with the terms of this
Agreement.  Borrower shall pay all
costs, taxes and expenses associated with the release of the Lien of the
Mortgage, including Lender’s reasonable attorneys’ fees.

 

2.4.2                     Sale
of a Property.
      Borrower shall be permitted at any time
after the Release Date, to release any one (1) of the Projects (a “Partial Release”) from the Lien of the
respective Mortgage thereon upon a bona fide third-party sale of such property,
and Lender shall take such actions as are necessary to effectuate, pursuant to
this Section 2.4.2, the release of the Lien of the respective
Mortgage thereon (and related Loan Documents), upon satisfaction of each of the
following conditions to the reasonable satisfaction of the Lender:

 

(i)                              Lender
shall have received from the Borrower at least sixty (60) days prior written
notice (a “Partial Release Notice”) of the date proposed for such
Partial Release (the “Release Date”) together with a copy of the
applicable contract of sale (or an executed term sheet which states all of the
material terms of the sale (provided a fully executed contract substantively in
the form of the term sheet, is delivered to Lender prior to the closing of such
sale and Partial Release)) and all related documents,

 

16

 

which Release Date shall be a Payment Date
or, if not a Payment Date, Borrower shall pay interest on the Partial Release
Amount through the next Payment Date on the Release Date;

 

(ii)                           Lender
shall have the right, exercisable within thirty (30) days after the date of its
receipt of the Partial Release Notice, to require that Borrower defease the
Note secured by the Lien of the Mortgage encumbering the proposed Release
Project in accordance with the terms and conditions of Section 2.3.3,
in lieu of having a Partial Release effectuated under this Section 2.4.2
if Lender has not exercised such option in writing within such 30-day period,
it shall be assumed that the Borrower shall proceed with a Partial Release
pursuant to the terms of this Section 2.4.2;

 

(iii)                        Borrower
shall remit to the Lender on the Release Date an amount equal to, as
applicable, (i) the Partial Release Amount for the applicable Project (which
amount shall be determined by Lender and disclosed to Borrower within thirty
(30) days after the date of Lender’s receipt of the Partial Release Notice), or
(ii) the Yield Maintenance Premium for the partial defeasance, as applicable,
and any amounts due under Section 2.3;

 

(iv)                       the sale of
such Project is pursuant to an arms’ length agreement to a third party not
Affiliated with the Borrower or Guarantor;

 

(v)                          no sale
of any Project shall be permitted on or before the Release Date;

 

(vi)                       Borrower
shall pay to the Lender all sums then due and payable under the Note, this
Agreement, the Mortgage and the other Loan Documents;

 

(vii)                    concurrently
with such sale, the Borrower owning the Project being released shall dissolve
and liquidate;

 

(viii)                 after giving
effect to such Partial Release, each remaining Borrower shall remain a Special
Purpose Bankruptcy Remote Entity;

 

(ix)                         Lender
shall execute on the date of such Partial Release, a release of Lien and
Borrower shall execute any related Loan Documents in connection with such
Partial Release, each of which shall be prepared by Lender and in a form
appropriate in the jurisdiction in which the applicable Project is located, as
applicable;

 

(x)                            After
giving effect to such Partial Release (i.e., after deducting net operating
income and debt service attributable to the Project proposed to be released),
the Borrower shall have delivered an M.A.I. appraisal of the remaining Projects
encumbered by the Liens of the Mortgages, the results of which shall, as
determined by Lender, evidence a Loan to Value Ratio

 

17

 

that is no greater than the Loan to Value Ratio existing immediately
prior to the Partial Release;

 

(xi)                         After
giving effect to such Partial Release (i.e., after deducting net
operating income and debt service attributable to the Project proposed to be
released), the remaining Projects encumbered by the Lien of the Mortgages
(excluding the Released Project) shall be no less than the greater of (i) the
Debt Service Coverage Ratio for the Loan for all three (3) Projects for the
12-month period immediately preceding the Partial Release Date and (ii) the
Debt Service Coverage Ratio on the date hereof, which is 1.25:1.00;

 

(xii)                      the Lender
shall have received from the Borrower with respect to the matters referred to
in clauses (vii) and (viii), (x) statements of the Net Operating Income and
Debt Service (both on a consolidated basis and separately for the applicable
Project to be released for the applicable measuring period) and (y) based on the
foregoing statements of Net Operating Income and Debt Service, calculations of
the Debt Service Coverage Ratio for the twelve (12) month period preceding the
date of Partial Release Notice with and without giving effect to the proposed
Partial Release, accompanied by an officer’s certificate that such statements,
calculations and information are true, correct and complete in all material
respects;

 

(xiii)                   Borrower, at
their sole cost and expense, shall have delivered to the Lender (A) one or more
endorsements to the lender’s policies of title insurance delivered to Lender on
the date hereof in connection with the Mortgages insuring that, after giving
effect to such Partial Release, (x) the Liens created by the remaining
Mortgages and insured thereby are first priority Liens on the remaining
Projects, subject only to the Permitted Encumbrances applicable to such
Projects, and (y) that such policies are each in full force and effect and
unaffected by such Partial Release, and (B) a copy of the final closing settlement
statement for such sale;

 

(xiv)                  If the Loan, by
itself or together with other loans, has been the subject of a Secondary Market
Transaction, then Lender shall have received a Rating Comfort Letter from the
applicable Rating Agencies stating that the Partial Release does not result in
a downgrade of the Loan or the securities of which it is a part;

 

(xv)                     Borrower
shall pay all of the reasonable costs and expenses incurred by Lender in
connection with the sale and Partial Release of the Project and the release of
such Project from the lien of the applicable Loan Documents;

 

(xvi)                  no Event of
Default exists and is continuing at the time of the Partial Release Notice or
on the Release Date; and

 

18

 

(xvii)               Borrower and
Guarantor shall execute and deliver such documents as Lender may reasonably
requested to confirm the continued validity of the Loan Documents and the Liens
thereof, and shall have delivered to the Lender an officer’s certificate
confirming that, to Borrower’s knowledge, the remaining Borrowers and Guarantor
are not in default under, and have, as of the date of such Partial Release, no
offsets, counterclaims or defenses to the indebtedness due under the Loan
Documents, and to Borrower’s knowledge, the matters referred to in clause (xvi)
above are true and correct, and certifying that all conditions precedent for
such Partial Release contained in this Agreement have been satisfied.

 

2.4.3                     Release on Payment in Full.  Lender shall, upon the written
request and at the expense of Borrower, upon payment in full of the Debt in
accordance herewith, release the Lien of the Loan Documents.

 

2.5                               Payments
and Computations.

 

2.5.1                     Making
of Payments.  Each payment by Borrower shall be made in
funds settled through the New York Clearing House Interbank Payments System or
other funds immediately available to Lender by 12:00 p.m., New York City time,
on the date such payment is due, to Lender by deposit to such account as Lender
may designate by written notice to Borrower. 
Whenever any such payment shall be stated to be due on a day that is not
a Business Day, such payment shall be made on the first Business Day
thereafter.  All such payments shall be
made irrespective of, and without any deduction, set-off or counterclaim
whatsoever and are payable without relief from valuation and appraisement laws
and with all costs and charges incurred in the collection or enforcement
thereof, including attorneys’ fees and court costs.

 

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

 

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

 

2.6                               Fees.

 

2.6.1                     Origination Fees.  On
the date hereof, Borrower shall pay to Lender an origination fee of $-0-.

 

3.                                      CASH MANAGEMENT AND RESERVES

 

3.1                               Cash Management Arrangements. 
Borrower shall cause all Rents to be transmitted directly by
non-residential tenants of the Property into a trust account (the “Clearing

 

19

 

Account”) maintained by Borrower at a local bank
selected by Borrower, which shall at all times be an Eligible Institution (the
“Clearing Bank”)
as more fully described in the Clearing Account Agreement.  Without in any way limiting the foregoing,
all Rents received by Borrower or Manager shall be deposited into the Clearing
Account within one Business Day of receipt thereof.  Funds deposited into the Clearing Account shall be swept by the
Clearing Bank on a daily basis into Borrower’s operating account at the
Clearing Bank, unless a Cash Management Period is continuing, in which event
such funds shall be swept on a daily basis into an Eligible Account at the
Deposit Bank controlled by Lender (the “Deposit Account”) and applied and disbursed
in accordance with this Agreement. 
Funds in the Deposit Account shall be invested at Lender’s discretion
only in Permitted Investments.  Lender
will also establish subaccounts of the Deposit Account which shall at all times
be Eligible Accounts (and may be ledger or book entry accounts and not actual
accounts) (such subaccounts are referred to herein as “Subaccounts”).  The Deposit Account and any Subaccount will
be under the sole control and dominion of Lender, and Borrower shall have no
right of withdrawal therefrom.  Borrower
shall pay for all expenses of opening and maintaining all of the above
accounts.

 

3.2                               Required Repairs.

 

3.2.1                     Completion of Required Repairs. 
Borrower shall perform each item of the repairs and environmental
remedial work at the Property described on Schedule 1 (the “Required Repairs”),
and shall complete such Required Repairs in the following time frames: (i) all
items referenced on Schedule 1 as Code Issues and Deferred Maintenance
shall be completed by Borrower within three (3) months after the date hereof,
and (ii) all items referenced on Schedule 1 as ADA issues shall be
completed by Borrower within six (6) months after the date hereof.

 

3.2.2                     Required Repairs Reserves.  On the date hereof, Borrower
shall deposit with Lender the aggregate amount of $249,625.00 as being the
amount required to complete the Required Repairs and Lender shall cause such
amount to be transferred to a Subaccount which shall bear interest, which
interest earned shall become a part of such subaccount (the “Required Repairs Subaccount”).  Provided no Default or Event of Default
shall have occurred and is continuing, Lender shall disburse funds held in the
Required Repairs Subaccount to Borrower, within 15 days after the delivery by
Borrower to Lender of a request therefor (but not more often than once per
month), in increments of at least $5,000, accompanied by the following items
(which items shall be in form and substance reasonably satisfactory to Lender):
(i) an Officer’s Certificate (A) certifying that the Required Repairs or any
portion thereof which are the subject of the requested disbursement have been
substantially completed in a good and workmanlike manner and in material
accordance with all applicable Legal Requirements, (B) identifying each Person
that supplied materials or labor in connection with such Required Repairs or
any portion thereof and (C) stating that each such Person has been or, upon
receipt of the requested disbursement, will be paid in full with respect to the
portion of the Required Repairs which is the subject of the requested
disbursement; (ii) copies of appropriate Lien waivers or other evidence of
payment satisfactory to Lender; (iii) at Lender’s option, a title search for
the Property indicating that it is free from all Liens not previously approved
by Lender; (iv) a copy of each License required to be obtained with respect to
the portion of the Required Repairs which is the subject of the requested
disbursement; and (v) such other evidence as Lender shall reasonably request
that the Required Repairs which are the subject of the 

 

20

 

requested
disbursement have been completed and paid for. 
Provided no Default or Event of Default shall have occurred and is
continuing, upon Borrower’s completion of all Required Repairs in accordance
with this Section 3.2, Lender shall release any funds remaining in
the Required Repairs Subaccount, if any, to Borrower.

 

3.3                               Taxes and Insurance. 
Borrower shall pay to Lender on each Payment Date (i) one-twelfth of the
Taxes that Lender estimates will be payable during the next 12 months in order
to accumulate with Lender sufficient funds to pay all such Taxes at least 30
days prior to their respective due dates and (ii) one-twelfth of the Insurance
Premiums that Lender estimates will be payable for the renewal of the coverage
afforded by the Policies upon the expiration thereof in order to accumulate
with Lender sufficient funds to pay all such Insurance Premiums at least 30
days prior to the expiration of the Policies. 
Such amounts will be transferred by Lender to a Subaccount (the “Tax and Insurance Subaccount”).  Provided that no Default or Event of Default
has occurred and is continuing, Lender will (a) apply funds in the Tax and
Insurance Subaccount to payments of Taxes and Insurance Premiums required to be
made by Borrower pursuant to Sections 5.2 and 7.1, provided that
Borrower has promptly supplied Lender with notices of all Taxes and Insurance
Premiums due, or (b) reimburse Borrower for such amounts upon presentation of
evidence of payment; subject, however, to Borrower’s right to contest Taxes in
accordance with Section 5.2. 
In making any payment relating to Taxes and Insurance Premiums, Lender
may do so according to any bill, statement or estimate procured from the
appropriate public office (with respect to Taxes) or insurer or agent (with
respect to Insurance Premiums), without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax, assessment, sale,
forfeiture, tax lien or title or claim thereof.  If Lender determines in its reasonable judgment that the funds in
the Tax and Insurance Subaccount will be insufficient to pay (or in excess of)
the Taxes or Insurance Premiums next coming due, Lender may increase (or
decrease) the monthly contribution required to be made by Borrower to the Tax
and Insurance Subaccount.

 

3.4                               Capital Expense Reserves.  Borrower shall pay on the
date hereof and on each Payment Date to Lender an amount initially equal to $8,100.42
per month.  Lender will transfer such
amounts into a Subaccount, which shall bear interest, which interest earned
shall become a part of such subaccount (the “Capital Reserve Subaccount”).  Additionally, upon thirty (30) days’ prior
notice to Borrower, Lender may reassess the amount of the monthly payment
required under this Section 3.4 from time to time in its reasonable
discretion (based upon its then current underwriting standards).  Provided that no Default or Event of Default
has occurred and is continuing, Lender shall disburse funds held in the Capital
Reserve Subaccount to Borrower, within 15 days after the delivery by Borrower
to Lender of a request therefor (but not more often than once per month), in
increments of at least $5,000 provided that (i) such disbursement is for an
Approved Capital Expense; (ii) Lender shall have (if it desires) verified (by
an inspection conducted at Borrower’s reasonable expense) performance of the
work associated with such Approved Capital Expense; and (iii) the request for
disbursement is accompanied by (A) an Officer’s Certificate certifying (1) that
such funds will be used to pay or reimburse Borrower for Approved Capital
Expenses and a description thereof, (2) that all outstanding trade payables
(other than those to be paid from the requested disbursement or those
constituting Permitted Indebtedness) have been paid in full, (3) that the same
has not been the subject of a previous disbursement, and (4) that all previous
disbursements have been used to pay the previously identified Approved Capital
Expenses, and (B) lien waivers or other evidence of payment

 

21

 

satisfactory
to Lender, (C) at Lender’s option, a title search for the Property indicating
that the Property is free from all Liens, claims and other encumbrances not
previously approved by Lender and (D) such other evidence as Lender shall
reasonably request that the Approved Capital Expenditures at the Property to be
funded by the requested disbursement have been completed and are paid for or
will be paid upon such disbursement to Borrowers.  Any such disbursement of more than $10,000 to pay (rather than
reimburse) Approved Capital Expenses may, at Lender’s option, be made by joint
check payable to Borrower and the payee on such Approved Capital Expenses.

 

3.5                               Rollover Reserves. 
Borrower shall pay to Lender $55,101.92 on each Payment Date. Lender
will maintain all amounts so deposited by Borrower hereunder in a Subaccount,
which shall bear interest, which interest earned shall become a part of such
subaccount (the “Rollover
Reserve Subaccount”). 
Borrower shall also pay to Lender for transfer into the Rollover Reserve
Subaccount all payments received from tenants in connection with the early
termination or cancellation of any Leases, including fees, penalties and
commissions.   If Lender determines in
its reasonable judgment that the funds in the Rollover Reserve Subaccount will
be insufficient to pay (or in excess of) the amounts due or to become due for
Approved Leasing Expenses, Lender may increase (or decrease) the monthly
contribution required to be made by Borrower to the Rollover Reserve
Subaccount.  Provided that no Default or
Event of Default has occurred and is continuing, Lender shall disburse funds
held in the Rollover Reserve Subaccount to Borrower, within 15 days after the
delivery by Borrower to Lender of a request therefor (but not more often than
once per month), in increments of at least $5,000, provided (i) such
disbursement is for an Approved Leasing Expense; (ii) Lender shall have (if it
desires) verified (by an inspection conducted at Borrower’s reasonable expense)
performance of any construction work associated with such Approved Leasing
Expense; and (iii) the request for disbursement is accompanied by (A) an
Officer’s Certificate certifying (1) that such funds will be used only to pay
(or reimburse Borrower for) Approved Leasing Expenses and a description
thereof, (2) that all outstanding trade payables (other than those to be paid
from the requested disbursement or those constituting Permitted Indebtedness)
have been paid in full, (3) that the same has not been the subject of a
previous disbursement, and (4) that all previous disbursements have been used
only to pay (or reimburse Borrower for) the previously identified Approved
Leasing Expenses, and (B) reasonably detailed supporting documentation as to
the amount, necessity and purpose therefor. 
Any such disbursement of more than $10,000 to pay (rather than
reimburse) Approved Leasing Expenses may, at Lender’s option, be made by joint
check payable to Borrower and the payee of such Approved Leasing Expenses.

 

3.6                               Operating Expense Subaccount. 
During a Cash Management Period, Borrower shall pay to Lender on or
before each Payment Date the monthly amount set forth in the Approved Operating
Budget for the following month as being necessary for payment of Approved
Operating Expenses at the Property for such month, which amounts shall be
transferred into a Subaccount for the payment of Approved Operating Expenses
(the “Operating Expense
Subaccount”).  Provided
no Default or Event of Default has occurred and is continuing, Lender shall
disburse funds held in the Operating Expense Subaccount to Borrower, within 15
days after delivery by Borrower to Lender of a request therefor (but not more
often than once per month), in increments of at least $1,000, provided (i) such
disbursement is for an Approved Operating Expense; and (ii) such disbursement
is accompanied by (A) an Officer’s Certificate certifying (1) that such funds
will be used to pay Approved Operating Expenses and a

 

22

 

description
thereof, (2) that all outstanding trade payables (other than those to be paid
from the requested disbursement or those constituting Permitted Indebtedness)
have been paid in full, (3) that the same has not been the subject of a
previous disbursement, and (4) that all previous disbursements have been or
will be used to pay the previously identified Approved Operating Expenses, and
(B) reasonably detailed documentation satisfactory to Lender as to the amount,
necessity and purpose therefor.

 

3.7                               Casualty/Condemnation Subaccount. 
Borrower shall pay, or cause to be paid, to Lender all Proceeds or
Awards due to any Casualty or Condemnation to be transferred to a Subaccount
(the “Casualty/Condemnation
Subaccount”) in accordance with the provisions of Section 7.  All amounts in the Casualty/Condemnation
Subaccount shall disbursed in accordance with the provisions of Section 7.

 

3.8                               Security Deposits. 
Each Project Owner shall keep all of its respective security deposits
under Leases at its respective Project held in a separately designated account
under such Project Owner’s control at the Clearing Bank (and in the case of a
letter of credit, assigned with full power of attorney and executed sight
drafts to Lender) so that the security deposits shall not be commingled with
any other funds of the respective Project Owner (each such account, the “Security Deposit Account”).  During a Cash Management Period, each
Project Owner shall, upon Lender’s request, if permitted by applicable Legal
Requirements, turn over to Lender the security deposits (and any interest
theretofore earned thereon) under Leases, to be held by Lender in a Subaccount
(the “Security Deposit
Subaccount”) subject to the terms of the Leases.  Security deposits held in the Security
Deposit Subaccount will be released by Lender upon notice from the applicable
Project Owner together with such evidence as Lender may reasonably request that
such security deposit is required to be returned to a tenant pursuant to the
terms of a Lease or may be applied as Rent pursuant to the rights of such
Project Owner under the applicable Lease. 
Any letter of credit or other instrument that a Project Owner receives
in lieu of a cash security deposit under any Lease entered into after the date
hereof shall (i) be maintained in full force and effect in the full amount
unless replaced by a cash deposit as hereinabove described, and (ii) if
permitted pursuant to any Legal Requirements, name Lender as payee or mortgagee
thereunder (or at Lender’s option, be fully assignable to Lender).

 

3.9                               Cash Collateral Subaccount.

 

(a)                                  If a Cash Management Period shall have
commenced, then on the immediately succeeding Payment Date and on each Payment
Date thereafter during the continuance of such Cash Management Period, all
Available Cash shall be paid to Lender, which amounts shall be transferred by
Lender into a Subaccount (the “Cash Collateral Subaccount”) as cash collateral for the
Debt.  Any funds in the Cash Collateral
Account and not previously disbursed or applied shall be disbursed to Borrower
upon the termination of such Cash Management Period or as expressly permitted
in this Section 3.9 with regards to leasing commissions and tenant
improvement costs.  Lender shall have
the right, but not the obligation, at any time (i) during the continuance of an
Event of Default or (ii) subsequent to the second Calculation Date following
the commencement of a Cash Management Period (whether or not an Event of
Default is then continuing), in its sole and absolute discretion to apply all
sums then on deposit in the Cash Collateral Subaccount to the Debt, in such
order and in such manner as Lender shall elect in its sole and absolute
discretion, including to make a prepayment of Principal

 

23

 

(together
which the applicable Yield Maintenance Premium or Prepayment Premium applicable
thereto).

 

(b)                                 Notwithstanding the terms of Section 3.9(a),
if the event in clause (ii) of the definition of “Cash Management Period” is
the event which caused the commencement of the subject Cash Management Period,
then, and only then, will the Borrower be permitted to obtain disbursements (in
increments of at least $5,000) for the payment of Approved Leasing Expenses
within 15 days of its request therefore (but disbursement shall not be made
more often than once per month) from the funds remaining in the Cash Collateral
Account after the application by Lender of funds therein in accordance with Section 3.11
below, upon the satisfaction of the following conditions to the satisfaction of
Lender: (i) no Default or Event of Default has occurred and is continuing, (ii)
such disbursement is for an Approved Leasing Expense; (iii) Lender shall have
(if it desires) verified (by an inspection conducted at Borrower’s expense)
performance of any construction work associated with such Approved Leasing
Expense; and (iv) the request for disbursement is accompanied by: (A) an
Officer’s Certificate certifying (1) that such funds will be used only to pay
(or reimburse Borrower for) Approved Leasing Expenses and a description
thereof, (2) that all outstanding trade payables (other than those to be paid
from the requested disbursement or those constituting Permitted Indebtedness)
have been paid in full, (3)  that the
same has not been the subject of a previous disbursement, and (4) that all
previous disbursements have been used only to pay (or reimburse Borrower for)
the previously identified Approved Leasing Expenses, (B) reasonably detailed
supporting documentation as to the amount, necessity and purpose therefor, and
(C) copies of executed interim or final lien waivers if the disbursement is in
connection with tenant improvement expenses. 
Any such disbursement to pay (rather than reimburse) Approved Leasing
Expenses shall be made by joint check payable to Borrower and the payee of such
Approved Leasing Expenses.

 

3.10                        Grant of Security Interest; Application of Funds.  As
security for payment of the Debt and the performance by Borrower of all other
terms, conditions and provisions of the Loan Documents, Borrower hereby pledges
and assigns to Lender, and grants to Lender a security interest in, all
Borrower’s right, title and interest in and to all Rents and in and to all
payments to or monies held in the Clearing Account, the Deposit Account, all
Subaccounts created pursuant to this Agreement (collectively, the “Cash Management Accounts”).  Borrower hereby grants to Lender a
continuing security interest in, and agrees to hold in trust for the benefit of
Lender, all Rents in its possession prior to the (i) payment of such Rents to
Lender or (ii) deposit of such Rents into the Deposit Account.  Borrower shall not, without obtaining the
prior written consent of Lender, further pledge, assign or grant any security
interest in any Cash Management Account, or permit any Lien to attach thereto,
or any levy to be made thereon, or any UCC Financing Statements, except those
naming Lender as the secured party, to be filed with respect thereto.  This Agreement is, among other things,
intended by the parties to be a security agreement for purposes of the UCC.  Upon the occurrence and during the
continuance of an Event of Default, Lender may apply any sums in any Cash
Management Account in any order and in any manner as Lender shall elect in
Lender’s discretion without seeking the appointment of a receiver and without
adversely affecting the rights of Lender to foreclose the Lien of the Mortgage
or exercise its other rights under the Loan Documents.  Cash Management Accounts shall not
constitute trust funds and may be commingled with other monies held by Lender.  All interest which accrues on the funds in
any Cash Management Account (other than the Tax and

 

24

 

Insurance
Subaccount) shall accrue for the benefit of Borrower and shall be taxable to
Borrower and shall be added to and disbursed in the same manner and under the
same conditions as the principal sum on which said interest accrued.  Upon repayment in full of the Debt, all
remaining funds in the Subaccounts, if any, shall be promptly disbursed to
Borrower.

 

3.11                        Property Cash Flow Allocation.

 

(a)                                  During any Cash Management Period, all Rents
deposited into the Deposit Account during the immediately preceding Interest
Period shall be applied on each Payment Date as follows in the following order
of priority: (i) First, to make payments into the Tax and Insurance Subaccount
as required under Section 3.3; (ii) Second, to pay the monthly
portion of the fees charged by the Deposit Bank in accordance with the Deposit
Account Agreement; (iii) Third, to Lender to pay the Monthly Debt Service
Payment Amount due on such Payment Date (plus, if applicable, interest at the
Default Rate and all other amounts, other than those described under other
clauses of this Section 3.11(a), then due to Lender under the Loan
Documents); (iv) Fourth, to make payments into the Capital Reserve Subaccount as
required under Section 3.4; (v) Fifth, to make payments into the
Rollover Reserve Subaccount as required under Section 3.5; (vi)
Sixth, during the continuance of a Cash Management Period, to make payments for
Approved Operating Expenses as required under Section 3.6; (vii)
Seventh, after the consummation of a Secondary Market Transaction, to pay the
pro rata portion of the expenses described in Section 9.1.7; and (viii)
Lastly, payments to Borrowers of any remaining amounts.

 

(b)                                 The failure of Borrower to make all of the
payments required under clauses (i) through (vii) of Section 3.11(a)
in full on each Payment Date shall constitute an Event of Default under this
Agreement; provided, however, if adequate funds are available in the Deposit
Account for such payments, the failure by the Deposit Bank to allocate such
funds into the appropriate Subaccounts shall not constitute an Event of
Default.

 

(c)                                  Notwithstanding anything to the contrary
contained in this Section 3.11, after the occurrence of a Default
or an Event of Default, Lender may apply all Rents deposited into the Deposit
Account and other proceeds of repayment in such order and in such manner as
Lender shall elect.

 

4.                                      REPRESENTATIONS AND WARRANTIES

 

Borrower
represents and warrants to Lender as of the date hereof that, except to the
extent (if any) disclosed on Schedule 2 with reference to a specific
Section of this Article 4:

 

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

 

25

 

4.2                               Proceedings; Enforceability. 
Borrower has taken all necessary action to authorize the execution,
delivery and performance of the Loan Documents.  The Loan Documents have been duly executed and delivered by
Borrower and constitute legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms, subject
to applicable bankruptcy, insolvency and similar laws affecting rights of
creditors generally, and general principles of equity.  The Loan Documents are not subject to, and
Borrower has not asserted, any right of rescission, set-off, counterclaim or
defense, including the defense of usury. 
No exercise of any of the terms of the Loan Documents, or any right
thereunder, will render any Loan Document unenforceable.

 

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

 

4.4                               Litigation.  There are no actions, suits or other
proceedings at law or in equity by or before any Governmental Authority now, or
to Borrower’s knowledge, pending or threatened against or affecting Borrower,
the Manager or the Property, which, if adversely determined, might materially
adversely affect the condition (financial or otherwise) or business of
Borrower, Manager or the condition or ownership of the Property.

 

4.5                               Agreements.  Borrower is not a party to any agreement or
instrument or subject to any restriction which might adversely affect Borrower
or the Property, or Borrower’s business, properties, operations or condition,
financial or otherwise.  Borrower is not
in default in any material respect in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in any Permitted
Encumbrance or any other agreement or instrument to which it is a party or by
which it or the Property is bound.

 

4.6                               Title.  Borrower has good and indefeasible title in
fee to the real property located in Texas and good, marketable and indefeasible
title in fee to the real property located in Colorado and Arizona, and good
title to the balance of the Property, free and clear of all Liens except the
Permitted Encumbrances.  All transfer
taxes, deed stamps, intangible taxes or other amounts in the nature of transfer
taxes required to be paid by any Person under applicable Legal Requirements in
connection with the transfer of the Property to Borrower have been paid.  The Mortgage when properly recorded in the
appropriate records, together with any UCC Financing Statements required to be
filed in connection therewith, will create (i) a valid, perfected first
priority lien on the Borrower’s interest in the Property and (ii) valid and
perfected first priority

 

26

 

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

 

4.7                               No
Bankruptcy Filing.  Borrower is not contemplating either the
filing of a petition by it under any state or federal bankruptcy or insolvency
law or the liquidation of all or a major portion of its property (a “Bankruptcy Proceeding”),
and Borrower has no knowledge of any Person contemplating the filing of any
such petition against it.  In addition,
Borrower nor any principal nor Affiliate of either has been a party to, or the
subject of a Bankruptcy Proceeding for the past ten years.

 

4.8                               Full
and Accurate Disclosure.  No statement of fact made by Borrower in any
Loan Documents contains any untrue statement of a material fact or omits to
state any material fact necessary to make statements contained therein not
misleading.  There is no material fact
presently known to Borrower that has not been disclosed to Lender which adversely
affects, or, as far as Borrower can foresee, might adversely affect, the
Property or the business, operations or condition (financial or otherwise) of
Borrower.  All financial data, including
the statements of cash flow and income and operating expense, that have been
delivered to Lender in respect of Borrower and the Property (i) are true,
complete and correct in all material respects, (ii) accurately represent the
financial condition of Borrower and the Property as of the date of such
reports, and (iii) to the extent prepared by an independent certified public
accounting firm, have been prepared in accordance with GAAP consistently
applied throughout the periods covered, except as disclosed therein.  Borrower has no contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments, unrealized or
anticipated losses from any unfavorable commitments or any liabilities or
obligations not expressly permitted by this Agreement.  Since the date of such financial statements,
there has been no materially adverse change in the financial

 

27

 

condition,
operations or business of Borrower or the Property from that set forth in said
financial statements.

 

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

 

4.10                        No
Plan Assets.  As of the date hereof and throughout the
Term (i) Borrower is not and will not be an “employee benefit plan,” as defined
in Section 3(3) of ERISA, subject to Title I of ERISA, (ii) none of the
assets of Borrower constitutes or will constitute “plan assets” of one or more
such plans within the meaning of 29 C.F.R. Section 2510.3-101, (iii)
Borrower is not and will not be a “governmental plan” within the meaning of
Section 3(32) of ERISA, and (iv) transactions by or with Borrower are not
and will not be subject to state statutes regulating investment of, and
fiduciary obligations with respect to, governmental plans.

 

4.11                        Compliance.  Borrower and the Property and the use
thereof comply in all material respects with all applicable Legal Requirements
(including with respect to parking and applicable zoning and land use laws,
regulations and ordinances).  Borrower
is not in default or violation of any order, writ, injunction, decree or demand
of any Governmental Authority, the violation of which might materially
adversely affect the condition (financial or otherwise) or business of
Borrower.  The Property is used
exclusively for an office building and other appurtenant and related retail
uses.  In the event that all or any part
of the Improvements are destroyed or damaged, said Improvements can be legally
reconstructed to their condition prior to such damage or destruction, and
thereafter exist for the same use without violating any zoning or other
ordinances applicable thereto and without the necessity of obtaining any
variances or special permits.  No legal
proceedings are pending or, to the knowledge of Borrower, threatened with
respect to the zoning of the Property. 
Neither the zoning nor any other right to construct, use or operate the
Property is in any way dependent upon or related to any property other than the
Property. All certifications, permits, licenses and approvals, including
certificates of completion and occupancy permits required for the legal use,
occupancy and operation of the Property (collectively, the “Licenses”), have been
obtained and are in full force and effect. 
The use being made of the Property is in conformity with the certificate
of occupancy issued for the Property and all other restrictions, covenants and
conditions affecting the Property.

 

4.12                        Contracts.  There are no service, maintenance or repair
contracts affecting the Property that are not terminable on one month’s notice
or less without cause and without penalty or premium.  All service, maintenance or repair contracts affecting the
Property have been entered into at arms-length in the ordinary course of
Borrower’s business and provide for the payment of fees in amounts and upon
terms comparable to existing market rates.

 

4.13                        Federal Reserve Regulations;
Investment Company Act.  No part of the proceeds of the Loan will be
used for the purpose of purchasing or acquiring any “margin stock” within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
or

 

28

 

for
any other purpose that would be inconsistent with such Regulation U or any
other regulation of such Board of Governors, or for any purpose prohibited by
Legal Requirements or any Loan Document. 
Borrower is not (i) an “investment company” or a company “controlled” by
an “investment company,” within the meaning of the Investment Company Act of
1940, as amended; (ii) a “holding company” or a “subsidiary company” of a
“holding company” or an “affiliate” of either a “holding company” or a
“subsidiary company” within the meaning of the Public Utility Holding Company
Act of 1935, as amended; or (iii) subject to any other federal or state law or
regulation which purports to restrict or regulate its ability to borrow money.

 

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

 

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

 

4.16                        Leases.  The rent roll attached hereto as
Schedule 3 (the “Rent
Roll”) is true, complete and correct in all material respects,
and the Property is not subject to any Leases other than the Leases described
in the Rent Roll.  Except as set forth
on the Rent Roll: (i) each Lease is in full force and effect; (ii) the tenants
under the Leases have accepted possession of and are in occupancy of all of
their respective demised premises, have commenced the payment of rent under the
Leases, and there are no offsets, claims or defenses to the enforcement
thereof; (iii) all rents due and payable under the Leases have been paid and no
portion thereof has been paid for any period more than 30 days in advance; (iv)
the rent payable under each Lease is the amount of fixed rent set forth in the
Rent Roll, and there is no claim or basis for a claim by the tenant thereunder
for an adjustment to the rent; (v) no tenant has made any claim against the
landlord under any Lease which remains outstanding, there are no defaults on
the part of the landlord under any Lease, and no event has occurred which, with
the giving of notice or passage of time, or both, would constitute such a
default; (vi) to Borrower’s best knowledge, there is no present material
default by the tenant under any Lease; (vii) all security deposits under Leases
are as set forth on the Rent Roll and are held consistent with Section 3.8;
(viii) Borrower is the sole owner

 

29

 

of
the entire lessor’s interest in each Lease; (ix) each Lease is the valid,
binding and enforceable obligation of the Borrower and the applicable tenant
thereunder; (x) no Person has any possessory interest in, or right to occupy,
the Property except under the terms of the Lease; and (xi) each Lease is
subordinate to the Loan Documents, either pursuant to its terms or pursuant to
a subordination and attornment agreement. 
None of the Leases contains any option to purchase or right of first
refusal to purchase the Property or any part thereof.  Neither the Leases nor the Rents have been assigned or pledged
except to Lender, and no other Person has any interest therein except the
tenants thereunder.

 

4.17                        Fraudulent Transfer. 
Borrower has not entered into the Loan or any Loan Document with the
actual intent to hinder, delay, or defraud any creditor, and Borrower has
received reasonably equivalent value in exchange for its obligations under the
Loan Documents.  Giving effect to the
transactions contemplated by the Loan Documents, the fair saleable value of
Borrower’s assets exceeds and will, immediately following the execution and
delivery of the Loan Documents, exceed Borrower’s total liabilities, including
subordinated, unliquidated, disputed or contingent liabilities, including the
maximum amount of its contingent liabilities or its debts as such debts become
absolute and matured.  Borrower’s assets
do not and, immediately following the execution and delivery of the Loan
Documents will not, constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted.  Borrower does not intend to, and does not believe that it will,
incur debts and liabilities (including contingent liabilities and other
commitments) beyond its ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of obligations of
Borrower).

 

4.18                        Ownership of Borrower.  The
Board of Directors in each Borrower are listed on Schedule 4 attached
hereto, and the sole interest holders in each Borrower are listed on
Schedule 4 attached hereto, and such interest holders are the owners of
all of the issued and outstanding capital stock of Borrower, all of which capital
stock has been validly issued and fully paid and is nonassessable.  The stock of each Borrower is owned free and
clear of all Liens, warrants, options and rights to purchase.  Borrower has no obligation to any Person to
purchase, repurchase or issue any stock in it. 
The organizational chart attached hereto as Schedule 4 is complete
and accurate and illustrates all Persons who have a direct or indirect
ownership interest in each Borrower.

 

4.19                        Purchase Options. 
Neither the Property nor any part thereof is subject to any purchase
options or other similar rights in favor of third parties.

 

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

 

4.21                        Hazardous Substances.  To
Borrower’s knowledge (i) the Property is not in violation of any Legal
Requirement pertaining to or imposing liability or standards of conduct
concerning environmental regulation, contamination or clean-up, including the
Comprehensive Environmental Response, Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Emergency Planning and Community
Right-to-Know Act of 1986, the

 

30

 

Hazardous
Substances Transportation Act, the Solid Waste Disposal Act, the Clean Water
Act, the Clean Air Act, the Toxic Substance Control Act, the Safe Drinking
Water Act, the Occupational Safety and Health Act, any state super-lien and
environmental clean-up statutes (including with respect to Toxic Mold), any
local law requiring related permits and licenses and all amendments to and
regulations in respect of the foregoing laws (collectively, “Environmental Laws”);
(ii) the Property is not subject to any private or governmental Lien or
judicial or administrative notice or action or inquiry, investigation or claim
relating to hazardous, toxic and/or dangerous substances, toxic mold or fungus
of a type that may pose a risk to human health or the environment or would
negatively impact the value of the Property (“Toxic Mold”) or any other substances or
materials which are included under or regulated by Environmental Laws
(collectively, “Hazardous
Substances”); (iii) to Borrower’s knowledge, no Hazardous
Substances are or have been (including the period prior to Borrower’s
acquisition of the Property), discharged, generated, treated, disposed of or
stored on, incorporated in, or removed or transported from the Property other
than in compliance with all Environmental Laws; (iv) to Borrower’s knowledge,
no Hazardous Substances are present in, on or under any nearby real property
which could migrate to or otherwise affect the Property; (v) to Borrower’s
knowledge, no Toxic Mold is on or about the Property which requires
remediation; (vi) no underground storage tanks exist on the Property and the
Property has never been used as a landfill; and (vii) there have been no
environmental investigations, studies, audits, reviews or other analyses
conducted by or on behalf of Borrower which have not been provided to Lender.

 

4.22                        Name; Principal Place of
Business.  Borrower does not use and will not use any
trade name and has not done and will not do business under any name other than
its actual name set forth herein.  The
principal place of business of Borrower is its primary address for notices as set
forth in Section 6.1, and Borrower has no other place of business.

 

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

 

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

 

5.                                      COVENANTS

 

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

 

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

 

31

 

5.2                               Taxes
and Other Charges.  Borrower shall pay all Taxes and Other
Charges as the same become due and payable, and deliver to Lender receipts for
payment or other evidence satisfactory to Lender that the Taxes and Other
Charges have been so paid no later than 30 days before they would be delinquent
if not paid (provided, however, that Borrower need not pay such Taxes nor
furnish such receipts for payment of Taxes paid by Lender pursuant to Section 3.3).  Borrower shall not suffer and shall promptly
cause to be paid and discharged any Lien against the Property, and shall
promptly pay for all utility services provided to the Property.  After prior 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 of any Taxes or Other Charges, provided that (i) no
Default or Event of Default has occurred and is continuing, (ii) such
proceeding shall suspend the collection of the Taxes or such Other Charges,
(iii) such proceeding shall be permitted under and be conducted in accordance
with the provisions of any other instrument to which Borrower is subject and
shall not constitute a default thereunder, (iv) no part of or interest in the
Property will be in danger of being sold, forfeited, terminated, canceled or
lost, (v) Borrower shall have furnished such security as may be required in the
proceeding, or as may be requested by Lender, to insure the payment of any such
Taxes or Other Charges, together with all interest and penalties thereon, which
shall not be less than 125% of the Taxes and Other Charges being contested, and
(vi) Borrower shall promptly upon final determination thereof pay the amount of
such Taxes or Other Charges, together with all costs, interest and
penalties.  Lender may pay over any such
security or part thereof held by Lender to the claimant entitled thereto at any
time when, in the judgment of Lender, the entitlement of such claimant is
established.

 

5.3                               Access
to Property.  Borrower shall permit agents,
representatives, consultants and employees of Lender to inspect the Property or
any part thereof at reasonable hours upon reasonable advance notice.

 

5.4                               Repairs; Maintenance and Compliance; Alterations.

 

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

 

5.4.2                     Alterations.  Borrower may, without Lender’s consent,
perform alterations to the Improvements and Equipment which (i) do not
constitute a Material Alteration, (ii) do not adversely affect Borrower’s
financial condition or the value or Net Operating Income of the Property and
(iii) are in the ordinary course of Borrower’s business.  Borrower shall not perform any Material
Alteration without Lender’s prior written consent, which consent shall not be
unreasonably withheld or delayed; provided, however, that Lender may, in its
sole and

 

32

 

absolute
discretion, withhold consent to any alteration the cost of which is reasonably
estimated to exceed $1,000,000 or which is likely to result in a decrease of
Net Operating Income by 2.5% or more for a period of 30 days or longer.  Lender may, as a condition to giving its
consent to a Material Alteration, require that Borrower deliver to Lender security
for payment of the cost of such Material Alteration in an amount equal to 125%
of the cost of the Material Alteration as estimated by Lender.  Upon substantial completion of the Material
Alteration, Borrower shall provide evidence satisfactory to Lender that (i) the
Material Alteration was constructed in accordance with applicable Legal
Requirements and substantially in accordance with plans and specifications
approved by Lender (which approval shall not be unreasonably withheld or
delayed), (ii) all contractors, subcontractors, materialmen and professionals
who provided work, materials or services in connection with the Material
Alteration have been paid in full and have delivered unconditional releases of
lien and (iii) all material Licenses necessary for the use, operation and
occupancy of the Material Alteration (other than those which depend on the
performance of tenant improvement work) have been issued.  Borrower shall reimburse Lender upon demand
for all out-of-pocket costs and expenses (including the reasonable fees of any
architect, engineer or other professional engaged by Lender) incurred by Lender
in reviewing plans and specifications or in making any determinations necessary
to implement the provisions of this Section 5.4.2.

 

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

 

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

 

5.7                               Further Assurances. 
Borrower shall, at Borrower’s sole cost and expense, (i) execute and
deliver to Lender such documents, instruments, certificates, assignments and
other writings, and do such other acts reasonably necessary or desirable, to
evidence, preserve and/or protect the collateral at any time securing or
intended to secure the Debt and/or for the better and more effective carrying
out of the intents and purposes of the Loan Documents, as Lender may reasonably
require from time to time; and (ii) upon Lender’s request therefor given from
time to time after the occurrence of any Default or Event of Default pay for
(a) reports of UCC, federal tax lien, state tax lien, judgment and pending
litigation searches with respect to each Borrower and (b) searches of title to
the Property, each such search to be conducted by search firms reasonably
designated by Lender in each of the locations reasonably designated by Lender.

 

5.8                               Environmental Matters.

 

5.8.1                     Hazardous Substances.  So
long as Borrower owns or is in possession of the Property, Borrower shall (i)
keep the Property free from Hazardous Substances and in compliance with all
Environmental Laws, (ii) promptly notify Lender if Borrower shall become aware
that (A) any Hazardous Substance is on or near the Property, (B) the Property
is in violation of any Environmental Laws or (C) any condition on or near the
Property shall pose a threat to the health, safety or welfare of humans and
(iii) remove such Hazardous Substances

 

33

 

and/or
cure such violations and/or remove such threats, as applicable, as required by
law (or as shall be required by Lender in the case of removal which is not
required by law, but in response to the opinion of a licensed hydrogeologist,
licensed environmental engineer or other qualified environmental consulting
firm engaged by Lender (“Lender’s
Consultant”)), promptly after Borrower becomes aware of same, at
Borrower’s sole expense.  Nothing herein
shall prevent Borrower from recovering such expenses from any other party that
may be liable for such removal or cure.

 

5.8.2                     Environmental Monitoring.

 

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

 

(b)                        Upon Lender’s request, at any time and from
time to time, Borrower shall provide an inspection or audit of the Property
prepared by a licensed hydrogeologist, licensed environmental engineer or
qualified environmental consulting firm reasonably approved by Lender assessing
the presence or absence of Hazardous Substances on, in or near the Property,
and if Lender in its good faith judgment determines that reasonable cause
exists for the performance of such environmental inspection or audit, then the
cost and expense of such audit or inspection shall be paid by Borrower. Such
inspections and audit may include soil bearings and ground water
monitoring.  If Borrower fails to
provide any such inspection or audit within 30 days after such request, Lender
may order same, and Borrower hereby grants to Lender and its employees and
agents access to the Property and a license to undertake such inspection or
audit.

 

(c)                         If any environmental site assessment report
prepared in connection with such inspection or audit recommends that an
operations and maintenance plan be implemented for any Hazardous Substance,
whether such Hazardous Substance existed prior to the ownership of the Property
by Borrower, or presently exists or is reasonably suspected of existing,
Borrower shall cause such operations and maintenance plan to be prepared and

 

34

 

implemented
at its expense upon request of Lender, and with respect to any Toxic Mold,
Borrower shall take all action necessary to clean and disinfect any portions of
the Improvements affected by Toxic Mold in or about the Improvements, including
providing any necessary moisture control systems at the Property.  If any investigation, site monitoring,
containment, cleanup, removal, restoration or other work of any kind is
reasonably necessary under an applicable Environmental Law (“Remedial Work”),
Borrower shall commence all such Remedial Work within 30 days after written
demand by Lender and thereafter diligently prosecute to completion all such
Remedial Work within such period of time as may be required under applicable
law.  All Remedial Work shall be
performed by licensed contractors approved in advance by Lender and under the
supervision of a consulting engineer approved by Lender.  All costs of such Remedial Work shall be
paid by Borrower, including Lender’s reasonable attorneys’ fees and
disbursements incurred in connection with the monitoring or review of such
Remedial Work.  If Borrower does not
timely commence and diligently prosecute to completion the Remedial Work,
Lender may (but shall not be obligated to) cause such Remedial Work to be
performed at Borrower’s expense. 
Notwithstanding the foregoing, Borrower shall not be required to
commence such Remedial Work within the above specified time period: (x) if
prevented from doing so by any Governmental Authority, (y) if commencing such
Remedial Work within such time period would result in Borrower or such Remedial
Work violating any Environmental Law, or (z) if Borrower, at its expense and
after prior written notice to Lender, is contesting by appropriate legal,
administrative or other proceedings, conducted in good faith and with due
diligence, the need to perform Remedial Work. 
Borrower shall have the right to contest the need to perform such
Remedial Work, provided that, (1) Borrower is permitted by the applicable
Environmental Laws to delay performance of the Remedial Work pending such
proceedings, (2) neither the Property nor any part thereof or interest therein will
be sold, forfeited or lost if Borrower fails to promptly perform the Remedial
Work being contested, and if Borrower fails to prevail in contest, Borrower
would thereafter have the opportunity to perform such Remedial Work, (3) Lender
would not, by virtue of such permitted contest, be exposed to any risk of any
civil liability for which Borrower has not furnished additional security as
provided in clause (4) below, or to any risk of criminal liability, and neither
the Property nor any interest therein would be subject to the imposition of any
Lien for which Borrower has not furnished additional security as provided in
clause (4) below, as a result of the failure to perform such Remedial Work and
(4) Borrower shall have furnished to Lender additional security in respect of
the Remedial Work being contested and the loss or damage that may result from
Borrower’s failure to prevail in such contest in such amount as may be
reasonably requested by Lender but in no event less than one hundred
twenty-five percent (125%) of the cost of such Remedial Work as estimated by
Lender or Lender’s Consultant and any loss or damage that may result from
Borrower’s failure to prevail in such contest.

 

(d)                        Borrower shall not install or permit to be
installed on the Property any underground storage tank.

 

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

 

35

 

5.10                        Leases.

 

5.10.1              Generally. 
Upon request, Borrower shall furnish Lender with executed copies of all
Leases then in effect.  All renewals of
Leases and all proposed leases shall provide for rental rates and terms
comparable to existing local market rates and shall be arm’s length
transactions with bona fide, independent third-party tenants.

 

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

 

5.10.3              Minor Leases. 
Notwithstanding the provisions of Section 5.10.2 above,
provided that no Event of Default is continuing, renewals, amendments and
modifications of existing Leases and proposed leases, shall not be subject to
the prior approval of Lender provided (i) the proposed lease would be a Minor
Lease or the existing Lease as amended or modified or the renewal Lease is a
Minor Lease, (ii) the proposed lease shall be written substantially in
accordance with the standard form of Lease which shall have been approved by
Lender, subject to any commercially reasonable changes made in the course of
negotiation with the applicable tenant, (iii) the Lease as amended or modified
or the renewal Lease or series of leases or proposed lease or series of leases:
(a) shall provide for net effective rental rates comparable to existing local
market rates, (b) shall have an initial term (together with all renewal
options) of not less than three years or greater than ten years, (c) shall
provide for automatic self-operative subordination to the Mortgage and, at
Lender’s option, (x) attornment to Lender and (y) the unilateral right by
Lender, at the option of Lender, to subordinate the Lien of the Mortgage to the
Lease, and (d) shall not contain any option to purchase, any right of first
refusal to purchase, any right to terminate (except in the event of the
destruction or condemnation of substantially all of the Property), any
requirement for a non-disturbance or recognition agreement, or any other
provision which might adversely affect the rights of Lender under the Loan
Documents in any material respect. 
Borrower shall deliver to Lender copies of all Leases which are entered
into pursuant to the preceding sentence together with Borrower’s certification
that it has satisfied all of the conditions of the preceding sentence within ten
days after the execution of the Lease.

 

36

 

5.10.4              Additional Covenants with respect to
Leases.  Borrower (i) shall observe and perform the
material obligations imposed upon the lessor under the Leases and shall not do
or permit anything to impair the value of the Leases as security for the
Debt;  (ii) shall promptly send copies
to Lender of all notices of default that Borrower shall send or receive under
any Lease; (iii) shall enforce, in accordance with commercially reasonable
practices for properties similar to the Property, the terms, covenants and
conditions in the Leases to be observed or performed by the lessees, short of
termination thereof; (iv)  shall not collect
any of the Rents more than one month in advance (other than security deposits);
(v) shall not execute any other assignment of lessor’s interest in the Leases
or the Rents (except as contemplated by the Loan Documents); (vi) shall not
modify any Lease in a manner inconsistent with the Loan Documents; (vii) shall
not convey or transfer or suffer or permit a conveyance or transfer of the
Property so as to effect a merger of the estates and rights of, or a
termination or diminution of the obligations of, lessees under Leases; (viii)
shall not consent to any assignment of or subletting under any Material Lease
unless required in accordance with its terms without the prior consent of
Lender, which, with respect to a subletting, may not, so long as no Event of
Default is continuing,  be unreasonably
withheld or delayed; and (ix) shall not cancel or terminate any Lease or accept
a surrender thereof (except in the exercise of Borrower’s commercially
reasonable judgment in connection with a tenant default under a Minor Lease)
without the prior consent of Lender, which consent shall not, so long as no
Event of Default is continuing, be unreasonably withheld or delayed.

 

5.11                        Estoppel Statement. 
After request by Lender, Borrower shall within ten (10) days furnish
Lender with a statement addressed to Lender, its successors and assigns, duly
acknowledged and certified, setting forth (i) the unpaid Principal, (ii) the
Interest Rate, (iii) the date installments of interest and/or Principal were
last paid, (iv) any offsets or defenses to the payment of the Debt, and (v)
that the Loan Documents are valid, legal and binding obligations and have not
been modified or if modified, giving particulars of such modification,
provided, Lender shall only request such estoppel statements from Borrower as
needed by Lender in connection with its secondary market transactions.

 

5.12                        Property Management.

 

5.12.1              Management Agreement.  Borrower shall (i) cause the
Property to be managed pursuant to the Management Agreement; (ii) promptly
perform and observe all of the covenants required to be performed and observed
by it under the Management Agreement and do all things necessary to preserve
and to keep unimpaired its rights thereunder; (iii) promptly notify Lender of
any default under the Management Agreement of which it is aware; (iv) promptly
deliver to Lender a copy of each financial statement, business plan, capital
expenditure plan, and property improvement plan and any other notice, report
and estimate received by Borrower under the Management Agreement; and (v)
promptly enforce the performance and observance of all of the covenants
required to be performed and observed by Manager under the Management
Agreement.  Without Lender’s prior
written consent, Borrower shall not (a) surrender, terminate, cancel, extend or
renew the Management Agreement or otherwise replace the Manager or enter into
any other management agreement (except pursuant to Section 5.12.2);
(b) reduce or consent to the reduction of the term of the Management Agreement;
(c) increase or consent to the increase of the amount of any charges under the
Management Agreement; (d) otherwise modify, change, supplement, alter or amend
in any material respect, or waive or release any of its rights

 

37

 

and
remedies under, the Management Agreement; (e) suffer or permit the occurrence
and continuance of a default beyond any applicable cure period under the
Management Agreement (or any successor management agreement) if such default
permits the Manager to terminate the Management Agreement (or such successor
management agreement); or (f) suffer or permit the ownership, management or
control of the Manager to be transferred to a Person other than an Affiliate of
Borrower.

 

5.12.2              Termination of Manager.  If
(i) as of any Calculation Date, Borrower fails to maintain a Debt Service
Coverage Ratio of at least 1.20x or (ii) an Event of Default shall be
continuing, or (iii) Manager is in default under the Management Agreement, or
(iv) upon the gross negligence, malfeasance or willful misconduct of the
Manager, Borrower shall, at the request of Lender, terminate the Management
Agreement and replace Manager with a replacement manager acceptable to Lender
in Lender’s discretion and the applicable Rating Agencies on terms and
conditions satisfactory to Lender and the applicable Rating Agencies.  All calculations of the Debt Service
Coverage Ratio for purposes of this Section 5.12.2 shall be subject
to verification by Lender.  Borrower’s
failure to appoint an acceptable manager within thirty (30) days after Lender’s
request of Borrower to terminate the Management Agreement shall constitute an
immediate Event of Default.  Borrower
may from time to time appoint a successor manager to manage the Properties,
which successor manager and Management Agreement shall be approved in writing
by Lender in Lender’s discretion and the applicable Rating Agencies.

 

5.13                        Special
Purpose Bankruptcy Remote Entity.  Each Borrower shall at all
times be a Special Purpose Bankruptcy Remote Entity.  No Borrower shall directly or indirectly make any change,
amendment or modification to its organizational documents, or otherwise take
any action which could result in Borrower not being a Special Purpose
Bankruptcy Remote Entity.  A “Special Purpose Bankruptcy Remote
Entity” shall have the meaning set forth on Schedule 5
hereto.

 

5.14                        Assumption in Non-Consolidation
Opinion.  Each Borrower shall each conduct its
business so that the assumptions (with respect to each Person) made in that
certain substantive non-consolidation opinion letter dated the date hereof
delivered by Borrower’s counsel in connection with the Loan, shall be true and
correct in all material respects.

 

5.15                        Change
in Business or Operation of Property.  Borrower shall not purchase
or own any real property other than the Property and shall not enter into any
line of business other than the ownership and operation of the Property, or
make any material change in the scope or nature of its business objectives,
purposes or operations, or undertake or participate in activities other than
the continuance of its present business or otherwise cease to operate the
Property as an office building property with associated retail uses, or
terminate such business for any reason whatsoever (other than temporary
cessation in connection with renovations to the Property).

 

5.16                        Debt Cancellation. 
Borrower shall not cancel or otherwise forgive or release any claim or
debt (other than termination of Leases in accordance herewith) owed to Borrower
by any Person, except for adequate consideration and in the ordinary course of
Borrower’s business.

 

38

 

5.17                        Affiliate Transactions. 
Borrower shall not enter into, or be a party to, any transaction with an
Affiliate of Borrower except in the ordinary course of business and on terms
which are fully disclosed to Lender in advance and are no less favorable to
Borrower or such Affiliate than would be obtained in a comparable arm’s length
transaction with an unrelated third party.

 

5.18                        Zoning.  Borrower shall not initiate or consent to
any zoning reclassification of any portion of the Property or seek any variance
under any existing zoning ordinance or use or permit the use of any portion of
the Property in any manner that could result in such use becoming a non
conforming use under any zoning ordinance or any other applicable land use law,
rule or regulation, without the prior consent of Lender.

 

5.19                        No
Joint Assessment.  Borrower shall not suffer,
permit or initiate the joint assessment of the Property (i) with any other real
property constituting a tax lot separate from the Property, and (ii) with any
portion of the Property which may be deemed to constitute personal property, or
any other procedure whereby the lien of any taxes which may be levied against
such personal property shall be assessed or levied or charged to the Property.

 

5.20                        Principal Place of Business. 
Borrower shall not change its principal place of business or chief
executive office without first giving Lender 30 days’ prior notice.

 

5.21                        Change of Name, Identity or Structure. 
Borrower shall not change its name, identity (including its trade name
or names) or Borrower’s corporate, partnership or other structure without
notifying Lender of such change in writing at least thirty (30) days prior to
the effective date of such change and, in the case of a change in Borrower’s
structure, without first obtaining the prior written consent of Lender.  Borrower shall execute and deliver to Lender,
prior to or contemporaneously with the effective date of any such change, any
financing statement or financing statement change required by Lender to
establish or maintain the validity, perfection and priority of the security
interest granted herein.  At the request
of Lender, Borrower shall execute a certificate in form reasonably satisfactory
to Lender listing the trade names under which Borrower intends to operate the
Property, and representing and warranting that Borrower does business under no
other trade name with respect to the Property.

 

5.22                        Indebtedness. 
Borrower shall not directly or indirectly create, incur or assume any
indebtedness other than the Debt and unsecured trade payables incurred in the
ordinary course of business relating to the ownership and operation of the
Property which do not exceed, at any time, a maximum amount of 1% of the
original amount of the Principal and are paid within thirty (30) days of the
date incurred (collectively, “Permitted Indebtedness”).

 

5.23                        Licenses. 
Borrower shall not Transfer any License required for the operation of
the Property.

 

5.24                        Compliance with Restrictive Covenants, Etc. 
Borrower will not modify, waive in any material respect or release any
Easements, restrictive covenants or other Permitted Encumbrances, or suffer,
consent to or permit the foregoing, without Lender’s prior written consent,
which consent shall not be unreasonably withheld by Lender.

 

39

 

5.25                        ERISA.

 

(a)                         Borrower shall not engage in any transaction
which would cause any obligation, or action taken or to be taken, hereunder (or
the exercise by Lender of any of its rights under the Note, this Agreement or
the other Loan Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under ERISA.

 

(b)                        Borrower shall not maintain, sponsor,
contribute to or become obligated to contribute to, or suffer or permit any
ERISA Affiliate of Borrower to, maintain, sponsor, contribute to or become
obligated to contribute to, any Plan or any Welfare Plan or permit the assets
of Borrower to become “plan assets,” whether by operation of law or under
regulations promulgated under ERISA.

 

(c)                         Borrower shall deliver to Lender such
certifications or other evidence from time to time throughout the Term, as
requested by Lender in its sole discretion, that (A) Borrower is not and does
not maintain an “employee benefit plan” as defined in Section 3(3) of
ERISA, which is subject to Title I of ERISA, or a “governmental plan” within
the meaning of Section 3(3) of ERISA; (B) Borrower is not subject to state
statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (C) 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).

 

5.26                        Prohibited Transfers.

 

5.26.1              Generally. 
Borrower shall not directly or indirectly make, suffer or permit the
occurrence of any Transfer other than a Permitted Transfer.

 

5.26.2              Transfer and Assumption.

 

(a)                         Notwithstanding the foregoing, Borrower shall
have a one-time right to Transfer the Property to another party (the “Transferee Borrower”)
and have the Transferee Borrower assume all of Borrower’s obligations under the
Loan Documents, and have replacement guarantors and indemnitors assume all of
the obligations of the indemnitors and guarantors of the Loan Documents
(collectively, a “Transfer
and Assumption”). Borrower may make a written application to
Lender for Lender’s consent to the Transfer and Assumption, subject to the
conditions set forth in paragraphs (b) and (c) of this
Section 5.26.2.  Together with such
written application, Borrower will pay to Lender the reasonable review fee then
required by Lender.  Borrower also shall
pay on demand all of the reasonable costs and expenses incurred by Lender,
including reasonable attorneys’ fees and expenses, and including the fees and
expenses of Rating Agencies and other outside entities, in connection with
considering any proposed Transfer and Assumption, whether or not the same is
permitted or occurs.

 

40

 

(b)                        Lender’s consent, which may be withheld in
Lender’s reasonable discretion, to a Transfer and Assumption shall be subject
to the following conditions:

 

(i)                  No Default or Event of Default has occurred
and is continuing;

 

(ii)               Borrower has submitted to Lender true,
correct and complete copies of any and all information and documents of any
kind requested by Lender concerning the Property, Transferee Borrower,
replacement guarantors and indemnitors and Borrower;

 

(iii)            Evidence satisfactory to Lender has been
provided showing that the Transferee Borrower and such of its Affiliates as
shall be reasonably designated by Lender comply and will comply with
Section 5.13 hereof, as those provisions may be modified by Lender taking
into account the ownership structure of Transferee Borrower and its Affiliates;

 

(iv)           If the Loan, by itself or together with other loans, has been the
subject of a Secondary Market Transaction, then Lender shall have received a
Rating Comfort Letter from the applicable Rating Agencies;

 

(v)              If the Loan has not been the subject of a
Secondary Market Transaction, then Lender shall have determined in its
reasonable discretion (taking into consideration such factors as Lender may
determine, including the attributes of the loan pool in which the Loan might
reasonably be expected to be securitized) that no rating for any securities
that would be issued in connection with such securitization will be diminished,
qualified, or withheld by reason of the Transfer and Assumption;

 

(vi)           Borrower shall have paid all of Lender’s reasonable costs and expenses
in connection with considering the Transfer and Assumption, and shall have paid
the amount requested by Lender as a deposit against Lender’s costs and expenses
in connection with the effecting the Transfer and Assumption;

 

(vii)        Borrower, the Transferee Borrower, and the replacement guarantors and
indemnitors shall have indicated in writing in form and substance reasonably
satisfactory to Lender their readiness and ability to satisfy the conditions
set forth in subsection (c) below; and

 

(viii)     The identity, experience, and financial condition of the Transferee
Borrower and the replacement guarantors and indemnitors shall be reasonably
satisfactory to Lender.

 

(c)                         If Lender consents to the Transfer and
Assumption, the Transferee Borrower and/or Borrower as the case may be, shall
immediately deliver the following to Lender:

 

(i)                  Borrower shall deliver to Lender an
assumption fee in the amount of 1.00% of the then unpaid Principal;

 

41

 

(ii)               Borrower, Transferee Borrower and the
original and replacement guarantors and indemnitors shall execute and deliver
to Lender any and all documents required by Lender, in form and substance
required by Lender, in Lender’s sole discretion;

 

(iii)            Counsel to the Transferee Borrower and
replacement guarantors and indemnitors shall deliver to Lender opinions in form
and substance reasonably satisfactory to Lender as to such matters as Lender
shall require, which may include opinions as to substantially the same matters
and were required in connection with the origination of the Loan;

 

(iv)           Borrower shall cause to be delivered to Lender, an endorsement
(relating to the change in the identity of the vestee and execution and
delivery of the Transfer and Assumption documents) to the Title Insurance
Policies in form and substance reasonably acceptable to Lender, in Lender’s
reasonable discretion (the “Endorsement”); and

 

(v)              Borrower shall deliver to Lender a payment in
the amount of all remaining unpaid costs incurred by Lender in connection with
the Transfer and Assumption, including but not limited to, Lender’s reasonable
attorneys fees and expenses, all recording fees, and all fees payable to the
title company for the delivery to Lender of the Endorsement.

 

5.27                        Liens.  Without Lender’s prior written consent,
Borrower shall not create, incur, assume, permit or suffer to exist any Lien on
all or any portion of the Property or any direct or indirect legal or
beneficial ownership interest in Borrower, except Liens in favor of Lender and
Permitted Encumbrances, unless such Lien is bonded or discharged within 30 days
after Borrower first receives notice of such Lien.

 

5.28                        Dissolution.  Borrower shall not (i) engage in any
dissolution, liquidation or consolidation or merger with or into any other
business entity, (ii) engage in any business activity not related to the
ownership and operation of the Property or (iii) transfer, lease or sell, in
one transaction or any combination of transactions, all or substantially all of
the property or assets of Borrower except to the extent expressly permitted by
the Loan Documents.

 

5.29                        Expenses.  Borrower shall reimburse Lender upon receipt
of notice for all reasonable out-of-pocket costs and expenses (including
reasonable attorneys’ fees and disbursements) incurred by Lender in connection
with the Loan, including (i) the preparation, negotiation, execution and
delivery of the Loan Documents and the consummation of the transactions
contemplated thereby and all the costs of furnishing all opinions by counsel
for Borrower; (ii) Borrower’s and Lender’s ongoing performance under and
compliance with the Loan Documents, including confirming compliance with
environmental and insurance requirements; (iii) the negotiation, preparation,
execution, delivery and administration of any consents, amendments, waivers or
other modifications of or under any Loan Document and any other documents or
matters requested by Lender; (iv) filing and recording of any Loan Documents;
(v) title insurance, surveys, inspections and appraisals; (vi) the creation,
perfection or protection of Lender’s Liens in the Property and the Cash
Management Accounts (including fees and expenses for title and lien searches,
intangibles taxes, personal property taxes, 

 

42

 

Mortgage,
recording taxes, due diligence expenses, travel expenses, accounting firm fees,
costs of appraisals, environmental reports and Lender’s Consultant, surveys and
engineering reports); (vii) enforcing or preserving any rights in response to
third party claims or the prosecuting or defending of any action or proceeding
or other litigation, in each case against, under or affecting Borrower, the
Loan Documents, the Property, or any other security given for the Loan; (viii)
fees charged by Rating Agencies in connection with the Loan or any modification
thereof and (ix) enforcing any obligations of or collecting any payments due
from Borrower under any Loan Document or with respect to the Property or in
connection with any refinancing or restructuring of the Loan in the nature of a
“work-out”, or any insolvency or bankruptcy proceedings.  Any costs and expenses due and payable to
Lender hereunder which are not paid by Borrower within ten days after demand
may be paid from any amounts in the Deposit Account, with notice thereof to
Borrower.  The obligations and
liabilities of Borrower under this Section 5.29 shall survive the Term and
the exercise by Lender of any of its rights or remedies under the Loan
Documents, including the acquisition of the Property by foreclosure or a
conveyance in lieu of foreclosure.

 

5.30                        Indemnity.  Borrower shall defend, indemnify and hold
harmless Lender and each of its Affiliates and their respective successors and
assigns, including the directors, officers, partners, members, shareholders,
participants, employees, professionals and agents of any of the foregoing
(including any Servicer) and each other Person, if any, who Controls Lender,
its Affiliates or any of the foregoing (each, an “Indemnified Party”), from and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or
nature whatsoever (including the reasonable fees and disbursements of counsel
for an Indemnified Party in connection with any investigative, administrative
or judicial proceeding commenced or threatened, whether or not Lender shall be
designated a party thereto, court costs and costs of appeal at all appellate
levels, investigation and laboratory fees, consultant fees and litigation
expenses), that may be imposed on, incurred by, or asserted against any
Indemnified Party (collectively, the “Indemnified Liabilities”) in any manner,
relating to or arising out of or by reason of the Loan, including: (i) any
breach by Borrower of its obligations under, or any material misrepresentation
by Borrower contained in, any Loan Document; (ii) the use or intended use of
the proceeds of the Loan; (iii) any information provided by or on behalf of
Borrower, or contained in any documentation approved by Borrower; (iv)
ownership of the Mortgage, the Property or any interest therein, or receipt of
any Rents; (v) any accident, injury to or death of persons or loss of or damage
to property occurring in, on or about the Property or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(vi) any use, nonuse or condition in, on or about the Property or on adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(vii) performance of any labor or services or the furnishing of any materials
or other property in respect of the Property; (viii) the presence, disposal,
escape, seepage, leakage, spillage, discharge, emission, release, or threatened
release of any Hazardous Substance on, from or affecting the Property; (ix) any
personal injury (including wrongful death) or property damage (real or
personal) arising out of or related to such Hazardous Substance; (x) any
lawsuit brought or threatened, settlement reached, or government order relating
to such Hazardous Substance; (xi) any violation of the Environmental Laws which
is based upon or in any way related to such Hazardous Substance, including the
costs and expenses of any Remedial Work; (xii) any failure of the Property to
comply with any Legal Requirement; (xiii) any claim by brokers, finders or
similar persons claiming to be entitled to a commission in connection with any
Lease or other

 

43

 

transaction
involving the Property or any part thereof, or any liability asserted against
Lender with respect thereto; and (xiv) the claims of any lessee of any portion
of the Property or any Person acting through or under any lessee or otherwise
arising under or as a consequence of any Lease; provided, however, that
Borrower shall not have any obligation to any Indemnified Party hereunder to
the extent that it is finally judicially determined that such Indemnified
Liabilities arise from the gross negligence, illegal acts, fraud or willful
misconduct of such Indemnified Party. 
Any amounts payable to any Indemnified Party by reason of the
application of this paragraph shall be payable on demand and shall bear
interest at the Default Rate from the date loss or damage is sustained by any
Indemnified Party until paid.  The
obligations and liabilities of Borrower under this Section 5.30 shall
survive the Term and the exercise by Lender of any of its rights or remedies
under the Loan Documents, including the acquisition of the Property by
foreclosure or a conveyance in lieu of foreclosure.

 

6.                                      NOTICES
AND REPORTING

 

6.1                               Notices.  All notices, consents, approvals and
requests required or permitted hereunder or under any other Loan Document (a “Notice”) shall be
given in writing and shall be effective for all purposes if either hand
delivered with receipt acknowledged, or by a nationally recognized overnight
delivery service (such as Federal Express), or by certified or registered
United States mail, return receipt requested, postage prepaid, or by facsimile
and confirmed by facsimile answer back, in each case addressed as follows (or
to such other address or Person as a party shall designate from time to time by
notice to the other party):  If to
Lender: Greenwich Capital Financial Products Inc., 600 Steamboat Road,
Greenwich, Connecticut 06830, Attention: Mortgage Loan Department, Telecopier
(203) 618-2052, with a copy to: Brownstein Hyatt & Farber, P.C., 410 17th
Street, 22nd Floor, Denver, Colorado 80202, Attn:  Ana L. Tenzer, Esq., Telecopier: (303)
223-1111; if to Borrower: c/o AmeriVest Properties Inc., 1780 South Bellaire
Street, Suite 100, Denver, CO 80222, Attention: John Greenman, Telecopier:
(303) 296-7353, with a copy to: Jenkens & Gilchrist, 1445 Ross Avenue, Suite
3200, Dallas, TX 75202-2799, Attention: Stephen Voelker, Esq., Telecopier:
(214) 855-4300.  A notice shall be
deemed to have been given:  in the case
of hand delivery, at the time of delivery; in the case of registered or
certified mail, when delivered or the first attempted delivery on a Business
Day; in the case of overnight delivery, upon the first attempted delivery on a
Business Day; or in the case of facsimile, upon the confirmation of such
facsimile transmission.

 

6.2                               Borrower Notices and Deliveries.  Borrower
shall (a) give prompt written notice to Lender of: (i) any litigation,
governmental proceedings or claims or investigations pending or threatened
against Borrower which might materially adversely affect Borrower’s condition
(financial or otherwise) or business or the Property; (ii) any material adverse
change in Borrower’s condition, financial or otherwise, or of the occurrence of
any Default or Event of Default of which Borrower has knowledge; and (b)
furnish and provide to Lender: (i) any Securities and Exchange Commission or
other public filings, if any, of Borrower, Manager, or any Affiliate of any of
the foregoing within two (2) Business Days of such filing and (ii) all
instruments, documents, boundary surveys, footing or foundation surveys, certificates,
plans and specifications, appraisals, title and other insurance reports and
agreements, reasonably requested, from time to time, by Lender.  In addition, after request by Lender, as
reasonably needed by Lender in connection with its secondary market
transactions, Borrower shall furnish to Lender (x) within ten days, a
certificate addressed to Lender, its successors and assigns reaffirming all

 

44

 

representations
and warranties of Borrower set forth in the Loan Documents as of the date
requested by Lender or, to the extent of any changes to any such
representations and warranties, so stating such changes, and (y) within 30
days, tenant estoppel certificates addressed to Lender, its successors and assigns
from each tenant at the Property in form and substance reasonably satisfactory
to Lender, provided, Lender shall only request such estoppel statements from
Borrower as needed by Lender in connection with its secondary market
transactions.

 

6.3                               Financial Reporting.

 

6.3.1                     Bookkeeping.  Borrower shall keep on a calendar year
basis, in accordance with GAAP, proper and accurate books, records and accounts
reflecting all of the financial affairs of Borrower and all items of income and
expense and any services, Equipment or furnishings provided in connection with
the operation of the Property, whether such income or expense is realized by
Borrower, Manager or any Affiliate of Borrower.  Lender shall have the right from time to time during normal
business hours upon reasonable notice to examine such books, records and
accounts at the office of Borrower or other Person maintaining them, and to
make such copies or extracts thereof as Lender shall desire.  After an Event of Default, Borrower shall
pay any costs incurred by Lender to examine such books, records and accounts,
as Lender shall determine to be necessary or appropriate in the protection of
Lender’s interest.

 

6.3.2                     Annual Reports. 
Borrower shall furnish to Lender annually, within 120 days after each calendar
year, a complete copy of Borrower’s annual financial statements audited by a
“big four” accounting firm or another independent certified public accountant
(accompanied by an unqualified opinion from such accounting firm or other
independent certified public accountant) reasonably acceptable to Lender, each
in accordance with GAAP and containing balance sheets and statements of profit
and loss for Borrower and the Property in such detail as Lender may
request.  Each such statement (x) shall
be in form and substance reasonably satisfactory to Lender, (y) shall set forth
the financial condition and the income and expenses for the Property for the
immediately preceding calendar year, including statements of annual Net
Operating Income as well as (1) a list of tenants, if any, occupying more than
twenty percent of the rentable space of the Property, (2) a breakdown showing
(a) the year in which each Lease then in effect expires, (b) the percentage of
rentable space covered by such Lease, (c) the percentage of base rent with
respect to which Leases shall expire in each such year, expressed both on a per
year and a cumulative basis and (z) shall be accompanied by an Officer’s
Certificate certifying (1) that such statement is true, correct, complete and
accurate in all material respects and presents fairly the financial condition
of the Property and has been prepared in accordance with GAAP and (2) whether
there exists a Default or Event of Default, and if so, the nature thereof, the
period of time it has existed and the action then being taken to remedy it.

 

6.3.3                     Monthly/Quarterly Reports. 
Borrower shall furnish to Lender within 20 days after the end of each
calendar month or 45 days after the end of each calendar quarter (as indicated
below) the following items: (i) monthly and year-to-date operating statements,
noting Net Operating Income and other information necessary and sufficient
under GAAP to fairly represent the financial position and results of operation
of the Property during such calendar month, all in form satisfactory to Lender;
(ii) a balance sheet for such calendar month; (iii) a comparison of the
budgeted income and expenses and the actual income and expenses for each month
and year-to-date for the Property, together with a detailed explanation

 

45

 

of
any variances of 10% or more between budgeted and actual amounts for such
period and year-to-date; (iv) a statement of the actual Capital Expenses made
by Borrower during each calendar quarter as of the last day of such calendar
quarter; (v) a statement that Borrower has not incurred any indebtedness other
than indebtedness permitted hereunder; (vi) an aged receivables report and
(vii) rent rolls identifying the leased premises, names of all tenants, units
leased, monthly rental and all other charges payable under each Lease, date to
which paid, term of Lease, date of occupancy, date of expiration, material
special provisions, concessions or inducements granted to tenants, and a
year-by-year schedule showing by percentage the rentable area of the
Improvements and the total base rent attributable to Leases expiring each year)
and a delinquency report for the Property. 
Each such statement shall be accompanied by an Officer’s Certificate
certifying (1) that such items are true, correct, accurate in all material
respects, and complete and fairly present the financial condition and results
of the operations of Borrower and the Property in accordance with GAAP (subject
to normal year-end adjustments) and (2) whether there exists a Default or Event
of Default, and if so, the nature thereof, the period of time it has existed
and the action then being taken to remedy it.

 

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

 

6.3.5                     Annual
Budget.  Borrower shall prepare and submit (or shall
cause Manager to prepare and submit) to Lender within 30 days after a Cash
Management Period and by November 30th of each year thereafter during the
Term until such Cash Management Period has ended, for approval by Lender, which
approval shall not be unreasonably withheld or delayed, a proposed pro forma
budget for the Property for the succeeding calendar year (the “Annual Budget”, and
each Annual Budget approved by Lender is referred to herein as the “Approved Annual Budget”)),
and, promptly after preparation thereof, any revisions to such Annual
Budget.  The Annual Budget shall consist
of (i) an operating expense budget showing, on a month-by-month basis, in
reasonable detail, each line item of the Borrower’s anticipated operating income
and operating expenses (on a cash and accrual basis), including amounts
required to establish, maintain and/or increase any monthly payments required
hereunder (and once such Annual Budget has been approved by Lender, such
operating expense budget shall be referred to herein as the “Approved Operating Budget”),
and (ii) a Capital Expense budget showing, on a month-by-month basis, in
reasonable detail, each line item of anticipated Capital Expenses (and once
such Annual Budget has been approved by Lender, such Capital Expense budget
shall be referred to herein as the “Approved Capital Budget”).  Until such time that any Annual Budget has
been approved by Lender, the prior Approved Annual Budget shall apply for all
purposes hereunder (with such adjustments as reasonably determined by Lender
(including increases for any non-discretionary expenses)).

 

6.3.6                     Breach.  If Borrower fails to provide to Lender or
its designee any of the financial statements, certificates, reports or
information (the “Required
Records”) required by this Section 6.3.6 within 30 days
after the date upon which such Required Record is due, Borrower shall pay to
Lender, at Lender’s option and in its discretion, an amount equal to $5,000 for
each Required Record that is not delivered; provided Lender has given Borrower
at least 15 days prior notice of such failure. 
In addition, 30 days after Borrower’s failure to deliver any

 

46

 

Required
Records, Lender shall have the option, upon 15 days notice to Borrower to gain
access to Borrower’s books and records and prepare or have prepared at
Borrower’s expense, any Required Records not delivered by Borrower.

 

7.                                      INSURANCE; CASUALTY; AND CONDEMNATION

 

7.1                               Insurance.

 

7.1.1                     Coverage.  Borrower, at its sole cost, for the mutual
benefit of Borrower and Lender, shall obtain and maintain during the Term the
following policies of insurance:

 

(a)                         Property insurance insuring against loss or
damage customarily included under so called “all risk” or “special form”
policies including fire, lightning, flood, earthquake, vandalism, and malicious
mischief, boiler and machinery and, if available and subject to
subsection (j) below, coverage for damage or destruction caused acts of
“Terrorists” (or such policies shall have no exclusion from coverage with
respect thereto) and such other insurable hazards as, under good insurance
practices, from time to time are insured against for other property and
buildings similar to the premises in nature, use, location, height, and type of
construction.  Such insurance policy
shall also insure costs of demolition and increased cost of construction (which
insurance for demolition and increased cost of construction may contain a
sub-limit satisfactory to Lender).  Each
such insurance policy shall (i) be in an amount equal to the greatest of (A)
100% of the then replacement cost of the Improvements without deduction for
physical depreciation, (B) the unpaid Principal, and (C) such amount as is
necessary so that the insurer would not deem Borrower a co-insurer under such
policies, (ii) have deductibles no greater than the lesser of $10,000 or 5% of
Net Operating Income per occurrence, (iii) be paid quarterly in advance and
(iv) contain an agreed amount replacement cost endorsement with a waiver of
depreciation, and shall cover, without limitation, all tenant improvements and
betterments that Borrower is required to insure on a replacement cost
basis.  If the insurance required under
this subparagraph is not obtained by blanket insurance policies, the insurance
policy shall be endorsed to also provide guaranteed building replacement cost
to the Improvements and such tenant improvements in an amount to be subject to
the consent of Lender, which consent shall not be unreasonably withheld.  Lender shall be named Loss Payee on a
Standard Mortgagee Endorsement.

 

(b)                        Flood insurance if any part of the Property
is located in an area now or hereafter designated by the Federal Emergency
Management Agency as a Zone “A” & “V” Special Hazard Area, or such other
Special Hazard Area if Lender so requires in its sole discretion.  Such policy shall (i) be in an amount equal
to the greater of (A) 100% of the full replacement cost of the Improvements on
the Property (without any deduction for depreciation) (B) the maximum limit of
coverage available and (ii) have a maximum permissible deductible of $3,000.

 

(c)                         Public liability insurance, including (i)
“Commercial General Liability Insurance”, (ii) “Owned”, “Hired” and “Non Owned
Auto Liability”; and (iii) umbrella liability coverage for personal injury,
bodily injury, death, accident and property damage, such insurance providing in
combination no less than containing minimum limits per occurrence of

 

47

 

$1,000,000
and $2,000,000 in the aggregate for any policy year; together with at least
$26,000,000 excess and/or umbrella liability insurance for any and all claims
with no deductible.  The policies
described in this subsection shall also include coverage for elevators,
escalators, independent contractors, “Contractual Liability” (covering, to the
maximum extent permitted by law, Borrower’s obligation to indemnify Lender as
required under this Agreement and the other Loan Documents), “Products” and
“Completed Operations Liability” coverage.

 

(d)                        Rental loss and/or business interruption
insurance (i) with Lender being named as “Lender Loss Payee”, (ii) in an amount
equal to one hundred percent (100%) of the projected Rents from the Property
during the period of restoration; and (iii) containing an extended period of
indemnity endorsement which provides that after the physical loss to the
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 that the Property is
repaired or replaced and operations are resumed, whichever first occurs, and
notwithstanding that the policy may expire prior to the end of such period.  The amount of such insurance shall be
increased from time to time during the Term as and when the estimated or actual
Rents increase.

 

(e)                         Comprehensive boiler and machinery insurance
covering all mechanical and electrical equipment against physical damage, rent
loss and improvements loss and covering, without limitation, all tenant
improvements and betterments that Borrower is required to insure pursuant to
the lease on a replacement cost basis and in an amount equal to the greater of
(i) $2,000,000 and (ii) 100% of the full replacement cost of the Improvements
on such Property (without any deduction for depreciation).

 

(f)                           Worker’s compensation and disability
insurance with respect to any employees of Borrower, as required by any Legal
Requirement.

 

(g)                        During any period of repair or restoration,
builder’s “all-risk” insurance in an amount equal to not less than the full
insurable value of the Property, against such risks (including fire and
extended coverage and collapse of the Improvements to agreed limits) as Lender
may request, in form and substance acceptable to Lender.

 

(h)                        Coverage to compensate for the cost of
demolition and the increased cost of construction in an amount satisfactory to
Lender.

 

(i)                            Such other insurance (including environmental
liability insurance, earthquake insurance, mine subsidence insurance and
windstorm insurance) as may from time to time be reasonably required by Lender
in order to protect its interests.

 

(j)                            Notwithstanding anything in
subsection (a) above to the contrary, Borrower shall be required to obtain
and maintain coverage in its property insurance Policy (or by a separate
Policy) against loss or damage by terrorist acts provided that such coverage is
available.  Borrower shall obtain such
coverage from a carrier which otherwise satisfies the rating criteria specified
in Section 7.1.2 (a “Qualified
Carrier”) or in the event that such coverage is not available
from a Qualified Carrier, Borrower shall obtain such coverage from the highest
rated insurance company providing such coverage.  If such coverage with respect to

 

48

 

terrorist
acts is available as aforesaid, Borrower shall obtain and maintain such
coverage in an amount equal to 100% of the “Full Replacement Cost” of the Property.

 

7.1.2                     Policies.  All policies of insurance (the “Policies”) required
pursuant to Section 7.1.1 shall (i) be issued by companies approved by
Lender and licensed to do business in the State, with a claims paying ability
rating of “AA” or better by S&P (and the equivalent by any other Rating
Agency) and a rating of A:X or better in the current Best’s Insurance Reports;
(ii) name Lender and its successors and/or assigns as their interest may appear
as the mortgagee (in the case of property insurance) or an additional insured
(in the case of liability insurance); (iii) contain (in the case of property
insurance) a Non-Contributory Standard Mortgagee Clause and a Lender’s Loss
Payable Endorsement, or their equivalents, naming Lender as the person to which
all payments made by such insurance company shall be paid; (iv) contain a
waiver of subrogation against Lender; (v) be assigned and the originals thereof
delivered to Lender; (vi) contain such provisions as Lender deems reasonably
necessary or desirable to protect its interest, including (A) endorsements
providing that neither Borrower, Lender nor any other party shall be a
co-insurer under the Policies, (B) that Lender shall receive at least 30 days’
prior written notice of any modification, reduction or cancellation of any of
the Policies, (C) an agreement whereby the insurer waives any right to claim
any premiums and commissions against Lender, provided that the policy need not
waive the requirement that the premium be paid in order for a claim to be paid
to the insured and (D) providing that Lender is permitted to make payments to
effect the continuation of such policy upon notice of cancellation due to
non-payment of premiums; (vii) in the event any insurance policy (except for
general public and other liability and workers compensation insurance) shall
contain breach of warranty provisions, such policy shall provide that with
respect to the interest of Lender, such insurance policy shall not be
invalidated by and shall insure Lender regardless of (A) any act, failure to
act or negligence of or violation of warranties, declarations or conditions
contained in such policy by any named insured, (B) the occupancy or use of the
premises for purposes more hazardous than permitted by the terms thereof, or
(C) any foreclosure or other action or proceeding taken by Lender pursuant to
any provision of the Loan Documents; and (viii) be satisfactory in form and
substance to Lender and approved by Lender as to amounts, form, risk coverage,
deductibles, loss payees and insureds. 
Borrower shall pay the premiums for such Policies (the “Insurance Premiums”)
as the same become due and payable and furnish to Lender evidence of the
renewal of each of the Policies together with (unless such Insurance Premiums
have been paid by Lender pursuant to Section 3.3) receipts for or other
evidence of the payment of the Insurance Premiums reasonably satisfactory to
Lender.  If Borrower does not furnish
such evidence and receipts at least 30 days prior to the expiration of any
expiring Policy, then Lender may, but shall not be obligated to, procure such
insurance and pay the Insurance Premiums therefor, and Borrower shall reimburse
Lender for the cost of such Insurance Premiums promptly on demand, with
interest accruing at the Default Rate. 
Borrower shall deliver to Lender a certified copy of each Policy within
30 days after its effective date. 
Within 30 days after request by Lender, Borrower shall obtain such
increases in the amounts of coverage required hereunder as may be reasonably requested
by Lender, taking into consideration changes in the value of money over time,
changes in liability laws, changes in prudent customs and practices, and the
like.

 

49

 

7.2                               Casualty.

 

7.2.1                     Notice; Restoration.  If
the Property is damaged or destroyed, in whole or in part, by fire or other
casualty (a “Casualty”),
Borrower shall give prompt notice thereof to Lender.  Following the occurrence of a Casualty, Borrower, regardless of
whether insurance proceeds are available, shall promptly proceed to restore,
repair, replace or rebuild the Property in accordance with Legal Requirements
to be of at least equal value and of substantially the same character as prior
to such damage or destruction.

 

7.2.2                     Settlement of Proceeds.  If
a Casualty covered by any of the Policies (an “Insured Casualty”) occurs where the loss
does not exceed $250,000, provided no Default or Event of Default has occurred
and is continuing, Borrower may settle and adjust any claim without the prior
consent of Lender; provided such adjustment is carried out in a competent and
timely manner, and Borrower is hereby authorized to collect and receipt for the
insurance proceeds (the “Proceeds”).  In the event of an Insured Casualty where
the loss equals or exceeds $250,000 (a “Significant Casualty”), Lender may, in its
sole discretion, settle and adjust any claim without the consent of Borrower
and agree with the insurer(s) on the amount to be paid on the loss, and the
Proceeds shall be due and payable solely to Lender and held by Lender in the
Casualty/Condemnation Subaccount and disbursed in accordance herewith.  If Borrower or any party other than Lender
is a payee on any check representing Proceeds with respect to a Significant
Casualty, Borrower shall immediately endorse, and cause all such third parties
to endorse, such check payable to the order of Lender.  Borrower hereby irrevocably appoints Lender
as its attorney-in-fact, coupled with an interest, to endorse such check
payable to the order of Lender.  The
reasonable expenses incurred by Lender in the settlement, adjustment and
collection of the Proceeds shall become part of the Debt and shall be
reimbursed by Borrower to Lender upon demand. 
Notwithstanding anything to the contrary contained herein, if in
connection with a Casualty any insurance carrier makes a payment under a
property insurance Policy that Borrower proposes be treated as business or
rental interruption insurance, then, notwithstanding any designation (or lack
of designation) by the insurance carrier as to the purpose of such payment, as
between Lender and Borrower, such payment shall not be treated as business or
rental interruption insurance proceeds unless Borrower has demonstrated to
Lender’s satisfaction that the remaining net Proceeds that will be received
from the property insurance carriers are sufficient to pay 100% of the cost of
fully restoring the Improvements or, if such net Proceeds are to be applied to
repay the Debt in accordance with the terms hereof, that such remaining net
Proceeds will be sufficient to pay the Debt in full.

 

7.3                               Condemnation.

 

7.3.1                     Notice; Restoration.  Borrower shall promptly give Lender notice
of the actual or threatened commencement of any condemnation or eminent domain
proceeding affecting the Property (a “Condemnation”) and shall deliver to Lender
copies of any and all papers served in connection with such Condemnation.  Following the occurrence of a Condemnation,
Borrower, regardless of whether an Award is available, shall promptly proceed
to restore, repair, replace or rebuild the Property in accordance with Legal
Requirements to the extent practicable to be of at least equal value and of
substantially the same character (and to have the same utility) as prior to
such Condemnation.

 

7.3.2                     Collection of Award. 
Lender is hereby irrevocably appointed as Borrower’s attorney-in-fact,
coupled with an interest, with exclusive power to collect, receive

 

50

 

and
retain any award or payment in respect of a Condemnation (an “Award”) and to make
any compromise, adjustment or settlement in connection with such
Condemnation.  Notwithstanding any
Condemnation (or any transfer made in lieu of or in anticipation of such
Condemnation), Borrower shall continue to pay the Debt at the time and in the
manner provided for in the Loan Documents, and the Debt shall not be reduced
unless and until any Award shall have been actually received and applied by
Lender to the reasonable expenses of collecting the Award and to discharge of
the Debt. Lender shall not be limited to the interest paid on the Award by the
condemning authority but shall be entitled to receive out of the Award interest
at the rate or rates provided in the Note. 
If the Property is sold, through foreclosure or otherwise, prior to the
receipt by Lender of such Award, Lender shall have the right, whether or not a
deficiency judgment on the Note shall be recoverable or shall have been sought,
recovered or denied, to receive all or a portion of the Award sufficient to pay
the Debt.  Borrower shall cause any
Award that is payable to Borrower to be paid directly to Lender.  Lender shall hold such Award in the
Casualty/Condemnation Subaccount and disburse such Award in accordance with the
terms hereof.

 

7.4                               Application of Proceeds or Award.

 

7.4.1                     Application to Restoration.  If an Insured Casualty or
Condemnation occurs where (i) the loss is in an aggregate amount less than the
15% of the unpaid Principal, (ii) in the reasonable judgment of Lender, the
Property can be restored within six months, and prior to six months before the
Stated Maturity Date and prior to the expiration of the rental or business
interruption insurance with respect thereto, to the Property’s pre-existing
condition and utility as existed immediately prior to such Insured Casualty or
Condemnation and to an economic unit not less valuable and not less useful than
the same was immediately prior to the Insured Casualty or Condemnation, and
after such restoration will adequately secure the Debt and (iii) no Default or
Event of Default shall have occurred and be then continuing, then the Proceeds
or the Award, as the case may be (after reimbursement of any expenses incurred
by Lender), shall be applied to reimburse Borrower for the cost of restoring,
repairing, replacing or rebuilding the Property (the “Restoration”), in the
manner set forth herein.  Borrower shall
commence and diligently prosecute such Restoration.  Notwithstanding the foregoing, in no event shall Lender be
obligated to apply the Proceeds or Award to reimburse Borrower for the cost of
Restoration unless, in addition to satisfaction of the foregoing conditions,
both (x) Borrower shall pay (and if required by Lender, Borrower shall deposit
with Lender in advance) all costs of such Restoration in excess of the net
amount of the Proceeds or the Award made available pursuant to the terms
hereof; and (y) Lender shall have received evidence reasonably satisfactory to
it that during the period of the Restoration, the Rents will be at least equal
to the sum of the operating expenses, if any, and Debt Service, as reasonably
determined by Lender.

 

7.4.2                     Application to Debt. 
Except as provided in Section 7.4.1, any Proceeds and/or Award may,
at the option of Lender in its discretion, be applied to the payment of (i)
accrued but unpaid interest on the Note, (ii) the unpaid Principal and (iii)
other charges due under the Note and/or any of the other Loan Documents, or
applied to reimburse Borrower for the cost of any Restoration, in the manner set
forth in Section 7.4.3.  Any such
prepayment of the Loan shall be without any Yield Maintenance Premium, unless
an Event of Default has occurred and is continuing at the time the Proceeds are
received from the insurance company or the Award is received from the
condemning authority, as the case may be, in which event Borrower shall

 

51

 

pay
to Lender an additional amount equal to the Yield Maintenance Premium, if any,
that may be required with respect to the amount of the Proceeds or Award
applied to the unpaid Principal.

 

7.4.3                     Procedure for Application to
Restoration.  If Borrower is entitled to reimbursement out
of the Proceeds or an Award held by Lender, such Proceeds or Award shall be
disbursed from time to time from the Casualty/Condemnation Subaccount upon
Lender being furnished with (i) evidence satisfactory to Lender of the
estimated cost of completion of the Restoration, (ii) a fixed price or
guaranteed maximum cost construction contract for Restoration satisfactory to
Lender, (iii) prior to the commencement of Restoration, all immediately
available funds in addition to the Proceeds or Award that in Lender’s judgment
are required to complete the proposed Restoration, (iv) such architect’s
certificates, waivers of lien, contractor’s sworn statements, title insurance
endorsements, bonds, plats of survey, permits, approvals, licenses and such
other documents and items as Lender may reasonably require and approve in
Lender’s discretion, and (iv) all plans and specifications for such
Restoration, such plans and specifications to be approved by Lender prior to
commencement of any work.  Lender may,
at Borrower’s expense, retain a consultant to review and approve all requests
for disbursements, which approval shall also be a condition precedent to any
disbursement.  No payment made prior to
the final completion of the Restoration shall exceed 90% of the value of the
work performed from time to time; funds other than the Proceeds or Award shall
be disbursed prior to disbursement of such Proceeds or Award; and at all times,
the undisbursed balance of such Proceeds or Award 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, free and clear of all Liens or
claims for Lien.  Provided no Default or
Event of Default then exists, any surplus that remains out of the Proceeds held
by Lender after payment of such costs of Restoration shall be paid to
Borrower.  Any surplus that remains out
of the Award received by Lender after payment of such costs of Restoration
shall, in the discretion of Lender, be retained by Lender and applied to
payment of the Debt or returned to Borrower.

 

8.                                      DEFAULTS

 

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

 

(a)                         any portion of the Debt is not paid when due
or any other amount under Section 3.11(a)(i) through (vii) and (ix) is not
paid in full on each Payment Date (provided, however, if adequate funds are
available in the Deposit Account for such payments, the failure by the Deposit
Bank to allocate such funds into the appropriate Subaccounts shall not
constitute an Event of Default);

 

(b)                        any of the Taxes are not paid when due
(unless Lender is paying such Taxes pursuant to Section 3.3), subject to
Borrower’s right to contest Taxes in accordance with Section 5.2;

 

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

 

52

 

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

 

(e)                         any representation or warranty made by
Borrower or Guarantor or in any Loan Document, or in any report, certificate,
financial statement or other instrument, agreement or document furnished by
Borrower or Guarantor in connection with any Loan Document, shall be false or
misleading in any material respect as of the date the representation or
warranty was made;

 

(f)                           Borrower, 
or Guarantor shall make an assignment for the benefit of creditors, or
shall generally not be paying its debts as they become due;

 

(g)                        a receiver, liquidator or trustee shall be
appointed for Borrower,  or Guarantor;
or Borrower,  or Guarantor shall be
adjudicated a bankrupt or insolvent; or any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any
similar federal or state law, shall be filed by or against, consented to, or
acquiesced in by, Borrower,  or
Guarantor, as the case may be; or any proceeding for the dissolution or
liquidation of Borrower,  or Guarantor
shall be instituted; provided, however, if such appointment, adjudication,
petition or proceeding was involuntary and not consented to by Borrower,  or Guarantor, as the case may be, only upon
the same not being discharged, stayed or dismissed within 60 days;

 

(h)                        Borrower breaches any covenant contained in
Sections 5.12.1 (a) - (f), 5.13, 5.15, 5.22, 5.25 or 5.28;

 

(i)                            except as expressly permitted hereunder, the
actual or threatened alteration, improvement, demolition or removal of all or
any of portion of the Improvements without the prior written consent of Lender;

 

(j)                            an Event of Default as defined or described
elsewhere in this Agreement or in any other Loan Document occurs including,
without limitation, in the Parkway Mortgage, the Centerra Mortgage or the Black
Canyon Mortgage; or any other event shall occur or condition shall exist, if
the effect of such event or condition is to accelerate or to permit Lender to
accelerate the maturity of any portion of the Debt;

 

(k)                         a default occurs under any term, covenant or
provision set forth herein or in any other Loan Document which specifically
contains a notice requirement or grace period and such notice has been given
and such grace period has expired;

 

(l)                            any of the assumptions contained in any
substantive non-consolidation opinion, delivered to Lender by Borrower’s
counsel in connection with the Loan or otherwise hereunder, were not true and
correct as of the date of such opinion or thereafter became untrue or
incorrect;

 

(m)                      a default shall be continuing under any of
the other terms, covenants or conditions of this Agreement or any other Loan
Document not otherwise specified in this Section 8.1, for ten days after
notice to Borrower (and Guarantor, if applicable) from Lender, in the case of
any default which can be cured by the payment of a sum of money, or for 30 days
after notice from Lender in the case of any other default; provided, however,
that if such

 

53

 

non-monetary
default is susceptible of cure but cannot reasonably be cured within such
30-day period, and Borrower (or Guarantor, if applicable) shall have commenced
to cure such default within such 30-day period and thereafter diligently and
expeditiously proceeds to cure the same, such 30-day period shall be extended
for an additional period of time as is reasonably necessary for Borrower (or
Guarantor, if applicable) in the exercise of due diligence to cure such
default, such additional period not to exceed 60 days.

 

8.2                               Remedies.

 

8.2.1                     Acceleration. 
Upon the occurrence of an Event of Default (other than an Event of
Default described in paragraph (f) or (g) of Section 8.1) and at any time
and from time to time thereafter, in addition to any other rights or remedies
available to it pursuant to the Loan Documents or at law or in equity, Lender
may take such action, without notice or demand, that Lender deems advisable to
protect and enforce its rights against Borrower and in and to the Property;
including declaring the Debt to be immediately due and payable (including
unpaid interest), Default Rate interest, Late Payment Charges, Yield
Maintenance Premium and any other amounts owing by Borrower), without notice or
demand; and upon any Event of Default described in paragraph (f) or (g) of
Section 8.1, the Debt (including unpaid interest, Default Rate interest,
Late Payment Charges, Yield Maintenance Premium and any other amounts owing by
Borrower) shall immediately and automatically become due and payable, without
notice or demand, and Borrower hereby expressly waives any such notice or
demand, anything contained in any Loan Document to the contrary
notwithstanding.

 

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

 

8.2.3                     Severance.  Lender shall have the right from time to
time to sever the Note and the other Loan Documents into one or more separate
notes, mortgages and other

 

54

 

security
documents in such denominations and priorities of payment and liens as Lender
shall determine in its discretion for purposes of evidencing and enforcing its
rights and remedies.  Borrower shall
execute and deliver to Lender from time to time, promptly after the request of
Lender, a severance agreement and such other documents as Lender shall request
in order to effect the severance described in the preceding sentence, all in
form and substance reasonably satisfactory to Lender.  Borrower hereby absolutely and irrevocably appoints Lender as its
true and lawful attorney, coupled with an interest, in its name and stead to
make and execute all documents necessary or desirable to effect such severance,
Borrower ratifying all that such attorney shall do by virtue thereof.

 

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

 

8.2.5                     Lender’s Right to Perform.  If Borrower fails to perform
any covenant or obligation contained herein and such failure shall continue for
a period of ten (10) Business Days after Borrower’s receipt of written notice
thereof from Lender, without in any way limiting Lender’s right to exercise any
of its rights, powers or remedies as provided hereunder, or under any of the
other Loan Documents, Lender may, but shall have no obligation to, perform, or
cause performance of, such covenant or obligation, and all costs, expenses,
liabilities, penalties and fines of Lender incurred or paid in connection
therewith shall be payable by Borrower to Lender upon demand and if not paid
shall be added to the Debt ( and to the extent permitted under applicable laws,
secured by the Mortgage and other Loan Documents) and shall bear interest
thereafter at the Default Rate. 
Notwithstanding the foregoing, Lender shall have no obligation to send
notice to Borrower of any such failure.

 

9.                                      SPECIAL PROVISIONS

 

9.1                               Sale
of Note and Secondary Market Transaction.

 

9.1.1                     General; Borrower Cooperation. 
Lender shall have the right at any time and from time to time (i) to
sell or otherwise transfer the Loan or any portion thereof or the Loan
Documents or any interest therein to one or more investors, (ii) to sell
participation interests in the Loan to one or more investors or (iii) to
securitize the Loan or any portion thereof in a single asset securitization or
a pooled loan securitization of rated single or multi-class securities (the “Securities”) secured
by or evidencing ownership interests in the Note and the Mortgage (each such
sale, assignment, participation and/or securitization is referred to herein as
a “Secondary Market Transaction”).  In connection with any Secondary Market
Transaction, Borrower shall, at Borrower’s reasonable expense not to exceed
$15,000 (for purposes of this Section 9 only, the “Expenses Cap”), use
all reasonable efforts and cooperate fully and in good

 

55

 

faith
with Lender and otherwise assist Lender in satisfying the market standards to
which Lender customarily adheres or which may be reasonably required in the
marketplace or by the Rating Agencies in connection with any such Secondary
Market Transactions, including: (a) to (i) to provide such financial and other
information with respect to the Property, Borrower and its Affiliates, Manager
and any tenants of the Property not otherwise delivered under the terms hereof,
(ii)  provide business plans and budgets
relating to the Property and (iii) 
perform or permit or cause to be performed or permitted such site
inspection, appraisals, surveys, market studies, environmental reviews and
reports, engineering reports and other due diligence investigations of the
Property, as may be reasonably requested from time to time by Lender or the
Rating Agencies or as may be necessary or appropriate in connection with a
Secondary Market Transaction or Exchange Act requirements (the items provided
to Lender pursuant to this paragraph (a) being called the “Provided Information”),
together, if customary, with appropriate verification of and/or consents to the
Provided Information through letters of auditors or opinions of counsel of
independent attorneys acceptable to Lender and the Rating Agencies; (b) at
Borrower’s expense subject to the Expense Cap, cause counsel to render opinions
as to non-consolidation and any other opinion customary in securitization
transactions with respect to the Property, Borrower and its Affiliates, which
counsel and opinions shall be reasonably satisfactory to Lender and the Rating
Agencies; (c) make such representations and warranties as of the closing date
of any Secondary Market Transaction with respect to the Property, Borrower and
the Loan Documents as are customarily provided in such transactions and as may
be reasonably requested by Lender or the Rating Agencies and consistent with
the facts covered by such representations and warranties as they exist on the
date thereof, including the representations and warranties made in the Loan
Documents; (d) provide current certificates of good standing and qualification
with respect to Borrower from appropriate Governmental Authorities; and (e)
execute such amendments to the Loan Documents and Borrower’s organizational
documents, as may be requested by Lender or the Rating Agencies or otherwise to
effect a Secondary Market Transaction, provided that nothing contained in this
subsection (e) shall result in a material economic change in the
transaction.  Borrower shall pay all
reasonable third party costs and expenses incurred by Lender in connection with
a Secondary Market Transaction. 
Borrower’s cooperation obligations set forth herein shall continue until
the Loan has been paid in full.

 

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

 

56

 

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

 

9.1.4                     Borrower Indemnity Regarding Filings.  In
connection with filings under the Exchange Act, Borrower shall (i) indemnify
Lender, the GCM Group and the Underwriter Group for any Liabilities to which
Lender, the GCM Group or the Underwriter Group may become subject insofar as
the Liabilities arise out of or are based upon the omission or alleged omission
to state in the Provided Information a material fact required to be stated in
the Provided Information in order to make the statements in the Provided
Information, in light of the circumstances under which they were made not misleading
and (ii) reimburse Lender, the GCM Group or the Underwriter Group for any legal
or other expenses actually incurred by Lender, GCM Group or the Underwriter
Group in connection with defending or investigating the Liabilities.

 

9.1.5                     Indemnification Procedure.  Promptly after receipt by an
indemnified party under Section 9.1.3 or 9.1.4 of notice of the
commencement of any action for which a claim for indemnification is to be made
against Borrower, such indemnified party shall notify Borrower in writing of
such commencement, but the omission to so notify Borrower will not relieve
Borrower from any liability that it may have to any indemnified party hereunder

 

57

 

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

 

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

 

9.1.7                     Rating Surveillance. 
Lender will retain the Rating Agencies to provide rating surveillance
services on Securities.  The pro rata
expenses of such surveillance will be paid for by Borrower based on the
applicable percentage of such expenses determined by dividing the then
outstanding Principal by the then aggregate outstanding amount of the pool
created in the Secondary Market Transaction which includes the Loan.

 

9.1.8                     Severance
of Loan.  Lender shall have the right, at any time
(whether prior to, in connection with, or after any Secondary Market
Transaction), with respect to all or any portion of the Loan, to modify, split
and/or sever all or any portion of the Loan as hereinafter provided.  Without limiting the foregoing, Lender may
(i) cause the Note and the Mortgage to be split into a first and second
mortgage loan, (ii) create one more senior and subordinate notes (i.e., an A/B
or A/B/C structure), (iii) create multiple components of the Note or Notes (and
allocate or reallocate the principal balance of the Loan among such components)
or (iv) otherwise sever

 

58

 

the
Loan into two or more loans secured by mortgages and by a pledge of partnership
or membership interests (directly or indirectly) in Borrower (i.e., a senior
loan/mezzanine loan structure), in each such case, in whatever proportion and
whatever priority Lender determines; provided, however, in each such instance
the outstanding principal balance of all the Notes evidencing the Loan (or
components of such Notes) immediately after the effective date of such
modification equals the outstanding principal balance of the Loan immediately
prior to such modification and the weighted average of the interest rates for
all such Notes (or components of such Notes) immediately after the effective
date of such modification equals the interest rate of the original Note
immediately prior to such modification. 
If requested by Lender, Borrower (and Borrower’s constituent members, if
applicable, and Guarantor) shall execute within two (2) Business Days after
such request, such documentation as Lender may reasonably request to evidence
and/or effectuate any such modification or severance.

 

10.                               MISCELLANEOUS

 

10.1                        Exculpation.  Subject to the qualifications below, Lender
shall not enforce the liability and obligation of Borrower to perform and
observe the obligations contained in the Loan Documents by any action or
proceeding wherein a money judgment shall be sought against Borrower, except
that Lender may bring a foreclosure action, an action for specific performance
or any other appropriate action or proceeding to enable Lender to enforce and
realize upon its interest and rights under the Loan Documents, or in the
Property, the Rents or any other collateral given to Lender pursuant to the
Loan Documents; provided, however, that, except as specifically provided
herein, any judgment in any such action or proceeding shall be enforceable
against Borrower only to the extent of Borrower’s interest in the Property, in
the Rents and in any other collateral given to Lender, and Lender shall not sue
for, seek or demand any deficiency judgment against Borrower in any such action
or proceeding under or by reason of or under or in connection with any Loan
Document.  The provisions of this
Section shall not, however, (i) constitute a waiver, release or impairment
of any obligation evidenced or secured by any Loan Document; (ii) impair the
right of Lender to name Borrower as a party defendant in any action or suit for
foreclosure and sale under the Mortgage to the extent required by applicable
law or regulation; (iii) affect the validity or enforceability of any of the
Loan Documents or any guaranty made in connection with the Loan or any of the
rights and remedies of Lender thereunder; (iv) impair the right of Lender to
obtain the appointment of a receiver; (v) impair the enforcement of the
Assignment of Leases; (vi) constitute a prohibition against Lender to commence any
other appropriate action or proceeding in order for Lender to fully realize the
security granted by the Mortgage or to exercise its remedies against the
Property; or (vii) 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 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 (all such liability and
obligation of Borrower for any or all of the following being referred to herein
as “Borrower’s Recourse
Liabilities”): (a) fraud or intentional misrepresentation by
Borrower,  or Guarantor in connection
with obtaining the Loan; (b) waste of the Property or any portion thereof by
Borrower; (c) any Proceeds paid by reason of any Insured Casualty or any Award
received in connection with a Condemnation or other sums or payments
attributable to the Property not applied in accordance with the provisions of
the Loan Documents (except to the extent that Borrower did not have the legal
right, because of a bankruptcy, receivership or similar judicial proceeding, to
direct disbursement of such sums

 

59

 

or
payments); (d) all Rents of the Property received or collected by or on behalf
of the Borrower after an Event of Default and not applied to payment of
Principal and interest due under the Note (including any received or collected
by or on behalf of Borrower after an Event of Default, except to the extent
that Borrower did not have the legal right, because of a bankruptcy,
receivership or similar judicial proceeding to direct the disbursement of such
sums), and to the payment of actual and reasonable operating expenses of the
Property, as they become due or payable; (e) misappropriation of tenant
security deposits and rents collected in advance, or of funds held by Borrower
for the benefit of another party; (f) if Lender has waived the monthly
collection for real and personal property taxes and insurance premiums, then
the failure by Borrower to pay Taxes, (g) the breach of any representation,
warranty, covenant or indemnification in any Loan Document concerning
Environmental Laws or Hazardous Substances, including Sections 4.21 and 5.8,
and clauses (viii) through (xi) of Section 5.30; (h) Borrower’s failure to
pay transfer fees and charges due Lender under the Loan Documents in connection
with any subordinate financing or any transfer of all or any part of the
Premises, or any interest therein, from Borrower to Borrower’s transferee, or
transfer of beneficial interest in Borrower (if Borrower is not a natural
person or persons but is a corporation, partnership, trust or other legal
entity), (i) in the event Lender has waived the requirement for third party
property management, then any management fee taken by Borrower or any principal
of Borrower after an event of default, or (j) with respect to any Substantial
Lease (as defined below), in the event Lender (through foreclosure, deed in
lieu of foreclosure or otherwise) acquires the Property or any estate therein,
or portion thereof, and Lender thereafter becomes (A) liable to the tenant
under such Substantial Lease for any act or omission of Borrower or any prior
landlord, (B) subject to any offsets or defenses which such tenant might have
against Borrower or any prior landlord, (C) liable beyond Lender’s equity in
the Property, or (D) bound by any option or other right of such tenant to
purchase or sell all or any portion of the Property; provided, however, that
Borrower shall not have any personal liability under this clause (j) with respect to any Substantial
Lease to the extent that the tenant thereunder waived its rights with respect
to the foregoing matters listed in clauses (A) through (D) above, either in its
Substantial Lease or in a subordination, non-disturbance and attornment
agreement executed by tenant and Borrower with respect to such Substantial
Lease at any time prior to the date any such rights are exercised by such
tenant.  For purposes of this Section,
each of the following Leases (as the same may be amended or assigned after the
date hereof) shall be deemed to be a “Substantial
Lease”: that certain Lease dated March 14, 2002 between
SyChip Incorporated, as tenant, and AmeriVest Parkway Inc., as landlord.

 

Notwithstanding
anything to the contrary in this Agreement or any of the Loan Documents, (A)
Lender shall not be deemed to have waived any right which Lender may have under
Section 506(a), 506(b), 1111(b) or any other provisions of the U.S.
Bankruptcy Code to file a claim for the full amount of the Debt or to require
that all collateral shall continue to secure all of the Debt in accordance with
the Loan Documents, and (B) Lender’s agreement not to pursue personal liability
of Borrower as set forth above SHALL BECOME NULL AND VOID and shall be of no
further force and effect, and the Debt shall be fully recourse to Borrower in
the event that one or more of the following occurs (each, a “Springing Recourse Event”):
(i) an Event of Default described in Section 8.1(d) shall have occurred or
(ii) a breach of the covenants set forth in Section 5.13, or (iii) the
occurrence of any condition or event described in either Section 8.1(f) or
Section 8.1(g) and, with respect to such condition or event described in
Section 8.1(g), either Borrower, Guarantor or any Person owning an
interest (directly or indirectly) in Borrower, or

 

60

 

Guarantor
consents to, aids, solicits, supports, or otherwise cooperates or colludes to
cause such condition or event or fails to contest such condition or event.

 

10.2                        Brokers
and Financial Advisors.  Borrower hereby represents that it has dealt
with no financial advisors, brokers, underwriters, placement agents, agents or
finders in connection with the Loan other than Northmarq Capital Inc..  Borrower shall indemnify and hold Lender
harmless from and against any and all claims, liabilities, costs and expenses
(including attorneys’ fees, whether incurred in connection with enforcing this
indemnity or defending claims of third parties) of any kind in any way relating
to or arising from a claim by any Person that such Person acted on behalf of
Borrower in connection with the transactions contemplated herein.  The provisions of this Section 10.2
shall survive the expiration and termination of this Agreement and the
repayment of the Debt.

 

10.3                        Retention of Servicer. 
Lender reserves the right to retain the Servicer to act as its agent
hereunder with such powers as are specifically delegated to the Servicer by
Lender, whether pursuant to the terms of this Agreement, any pooling and
servicing agreement or similar agreement entered into as a result of a
Secondary Market Transaction, the Deposit Account Agreement or otherwise,
together with such other powers as are reasonably incidental thereto.  Borrower shall pay any reasonable fees and
expenses of the Servicer in connection with a release of the Property,
assumption or modification of the Loan, enforcement of the Loan Documents or
any other action taken by Servicer hereunder on behalf of Lender.

 

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

 

10.5                        Lender’s Discretion. 
Whenever pursuant to this Agreement or any other Loan Document, Lender
exercises any right given to it to approve or disapprove, or consent or
withhold consent, or any arrangement or term is to be satisfactory to Lender or
is to be in Lender’s discretion, the decision of Lender to approve or
disapprove, to consent or withhold consent, or to decide whether arrangements
or terms are satisfactory or not satisfactory, or acceptable or unacceptable or
in Lender’s discretion shall (except as is otherwise specifically herein
provided) be in the sole discretion of Lender and shall be final and
conclusive.

 

10.6                        Governing Law.

 

(a)                         THE PROCEEDS OF THE NOTE DELIVERED PURSUANT
HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE
HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION
EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN

 

61

 

SUCH
STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT
ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE
LIENS CREATED PURSUANT TO THE LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IT BEING
UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE
LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE ENFORCEABILITY
OF ALL LOAN DOCUMENTS AND THE DEBT, EXCEPT AS EXPRESSLY PROVIDED HEREIN WITH
RESPECT TO THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE
LIENS CREATED PURSUANT TO THE LOAN DOCUMENTS. 
TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY
AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER
JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE
NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK PURSUANT TO § 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS
LAW.

 

(b)                        ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST
LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK COUNTY, NEW YORK AND
BORROWER WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION
OR PROCEEDING.  BORROWER DOES HEREBY
DESIGNATE AND APPOINT CSC CORPORATION AT 1177 AVENUE OF THE AMERICAS, 17TH
FLOOR, NEW YORK, NEW YORK 10036-2721, AS ITS AUTHORIZED AGENT TO ACCEPT AND
ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN
ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK,
NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS
AND WRITTEN NOTICE OF SAID SERVICE OF BORROWER MAILED OR DELIVERED TO BORROWER
IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE
SERVICE OF PROCESS UPON BORROWER (UNLESS LOCAL LAW REQUIRES ANOTHER METHOD OF
SERVICE), IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK.  BORROWER (i) SHALL GIVE PROMPT NOTICE TO
LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (ii) MAY AT
ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN
OFFICE IN NEW YORK, NEW YORK (WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS
FOR SERVICE OF PROCESS), AND (iii) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE
IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS
DISSOLVED WITHOUT LEAVING A SUCCESSOR.

 

10.7                        Modification, Waiver in Writing.  No
modification, amendment, extension, discharge, termination or waiver of any
provision of this Agreement or of any other Loan Document, nor consent to any
departure by Borrower therefrom, shall in any event be effective

 

62

 

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

 

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

 

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

 

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

 

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

 

63

 

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

 

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

 

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

 

10.15                 Offsets, Counterclaims and Defenses. 
Borrower hereby waives the right to assert a counterclaim, other than a
compulsory counterclaim, in any action or proceeding brought against it by
Lender or its agents, including Servicer, or otherwise offset any obligations
to make payments required under the Loan Documents.  Any assignee of Lender’s interest in and to the Loan Documents
shall take the same free and clear of all offsets, counterclaims or defenses
which Borrower may otherwise have against any assignor of such documents, and
no such offset, counterclaim or defense shall be interposed or asserted by
Borrower in any action or proceeding brought by any such assignee upon such
documents, and any such right to interpose or assert any such offset,
counterclaim or defense in any such action or proceeding is hereby expressly
waived by Borrower.

 

10.16                 Publicity.  All news releases, publicity or advertising
by Borrower or its Affiliates through any media intended to reach the general
public, which refers to the Loan Documents, the Loan, Lender or any member of
the GCM Group, a Loan purchaser, the Servicer or the trustee in a Secondary
Market Transaction, shall be subject to the prior written approval of
Lender.  Lender shall have the right to
issue any of the foregoing without Borrower’s approval in connection with a
secondary market transaction.

 

10.17                 No
Usury. 
Borrower and Lender intend at all times to comply with applicable state
law or applicable United States federal law (to the extent that it permits
Lender to contract for, charge, take, reserve or receive a greater amount of
interest than under state law) and that this Section 10.17 shall control
every other agreement in the Loan Documents. 
If the applicable

 

64

 

law
(state or federal) is ever judicially interpreted so as to render usurious any
amount called for under the Note or any other Loan Document, or contracted for,
charged, taken, reserved or received with respect to the Debt, or if Lender’s
exercise of the option to accelerate the maturity of the Loan or any prepayment
by Borrower results in Borrower having paid any interest in excess of that
permitted by applicable law, then it is Borrower’s and Lender’s express intent
that all excess amounts theretofore collected by Lender shall be credited
against the unpaid Principal and all other Debt (or, if the Debt has been or
would thereby be paid in full, refunded to Borrower), and the provisions of the
Loan Documents immediately be deemed reformed and the amounts thereafter
collectible thereunder reduced, without the necessity of the execution of any
new document, so as to comply with applicable law, but so as to permit the
recovery of the fullest amount otherwise called for thereunder.  All sums paid or agreed to be paid to Lender
for the use, forbearance or detention of the Loan shall, to the extent
permitted by applicable law, be amortized, prorated, allocated, and spread
throughout the full stated term of the Loan until payment in full so that the
rate or amount of interest on account of the Debt does not exceed the maximum
lawful rate from time to time in effect and applicable to the Debt for so long
as the Debt is outstanding. 
Notwithstanding anything to the contrary contained in any Loan Document,
it is not the intention of Lender to accelerate the maturity of any interest
that has not accrued at the time of such acceleration or to collect unearned
interest at the time of such acceleration.

 

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

 

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

 

10.20                 Yield Maintenance Premium. 
Borrower acknowledges that (a) Lender is making the Loan in
consideration of the receipt by Lender of all interest and other benefits
intended to be conferred by the Loan Documents and (b) if payments of Principal
are made to Lender prior to the Stated Maturity Date, for any reason
whatsoever, whether voluntary, as a result of Lender’s acceleration of the Loan
after an Event of Default, by operation of law or otherwise, Lender will not
receive all such interest and other benefits and may, in addition, incur
costs.  For these reasons, and to induce
Lender to make the Loan, Borrower agrees that, except as expressly provided in
Section 7, all prepayments, if any, whether voluntary or involuntary, will
be accompanied by the Yield Maintenance Premium.  Such Yield Maintenance Premium shall be required whether payment
is made by Borrower, by a Person on behalf of Borrower, or by the purchaser at
any foreclosure sale, and may be included in any bid by Lender at such
sale.  Borrower further acknowledges
that (A) it is a knowledgeable real estate developer and/or investor; (B) it
fully understands the effect of the provisions of this Section 10.20, as
well as the other provisions of the Loan Documents; (C) the making of the Loan
by Lender at the Interest Rate and other terms set forth in the Loan Documents
are sufficient consideration for Borrower’s obligation to pay a Yield
Maintenance Premium (if required); and (D) Lender would not make

 

65

 

the
Loan on the terms set forth herein without the inclusion of such provisions.  Borrower also acknowledges that the
provisions of this Agreement limiting the right of prepayment and providing for
the payment of the Yield Maintenance Premium and other charges specified herein
were independently negotiated and bargained for, and constitute a specific
material part of the consideration given by Borrower to Lender for the making
of the Loan except as expressly permitted hereunder.

 

10.21                 Assignment.  The Loan, the Note, the Loan Documents
and/or Lender’s rights, title, obligations and interests therein may be
assigned by Lender and any of its successors and assigns to any Person at any
time in its discretion, in whole or in part, whether by operation of law
(pursuant to a merger or other successor in interest) or otherwise.  Upon such assignment, all references to
Lender in this Loan Agreement and in any Loan Document shall be deemed to refer
to such assignee or successor in interest and such assignee or successor in
interest shall thereafter stand in the place of Lender.  Borrower may not assign its rights, title,
interests or obligations under this Loan Agreement or under any of the Loan
Documents.

 

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

 

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

 

[Remainder of page intentionally left blank; signature page follows]

 

66

 

 

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

 

	
   

  	
  AMERIVEST CENTERRA INC., a Colorado corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  John
  B. Greenman

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  B. Greenman

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AMERIVEST PARKWAY INC., a Texas corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  John
  B. Greenman

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  B. Greenman

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  AMERIVEST BLACK CANYON INC., an Arizona corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  John
  B. Greenman

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John
  B. Greenman

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GREENWICH CAPITAL FINANCIAL PRODUCTS INC., a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Gary
  E. Swon

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Gary
  E. Swon

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Director

  	
   

  
																			

 

67

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